QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New Jersey | 57-1150621 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
200 Executive Drive, Suite 340 | 07052 |
West Orange, NJ | (Zip Code) |
(Address of principal executive offices) |
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | (Do not check if a smaller reporting company) | Smaller reporting company |
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September 30, | December 31, | |||||||||||||||
2008 | 2007 | March 31, 2009 | December 31, 2008 | |||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash | $ | 6,145 | $ | 3,502 | ||||||||||||
Accounts receivable, less allowance of $13,269 and $11,244 at September 30, 2008 and December 31, 2007, respectively | 25,447 | 23,286 | ||||||||||||||
Cash and cash equivalents | $ | 15,220 | $ | 15,234 | ||||||||||||
Restricted cash | 389 | 383 | ||||||||||||||
Accounts receivable, less allowance of $16,524 and $13,914 at March 31, 2009 and December 31, 2008, respectively | 25,268 | 22,857 | ||||||||||||||
Inventories | 3,710 | 2,540 | 3,354 | 3,374 | ||||||||||||
Deferred income taxes, net | 5,086 | 4,575 | 6,253 | 5,627 | ||||||||||||
Due from federal programs | 158 | 6,087 | - | 828 | ||||||||||||
Prepaid expenses and other current assets | 2,569 | 3,771 | 7,994 | 2,958 | ||||||||||||
Total current assets | 43,115 | 43,761 | 58,478 | 51,261 | ||||||||||||
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $82,717 and $82,931 at September 30, 2008 and December 31, 2007, respectively | 107,517 | 106,564 | ||||||||||||||
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $86,495 and $83,345 at March 31, 2009 and December 31, 2008, respectively | 142,093 | 108,567 | ||||||||||||||
OTHER ASSETS: | ||||||||||||||||
Noncurrent accounts receivable, less allowance of $367 and $159 at September 30, 2008 and December 31, 2007, respectively | 3,306 | 1,608 | ||||||||||||||
Noncurrent accounts receivable, less allowance of $844 and $824 at March 31, 2009 and December 31, 2008, respectively | 3,377 | 3,326 | ||||||||||||||
Deferred finance charges | 681 | 827 | 582 | 632 | ||||||||||||
Pension plan assets, net | 1,694 | 1,696 | ||||||||||||||
Deferred income taxes, net | 5,893 | 5,500 | 5,588 | 7,080 | ||||||||||||
Goodwill | 82,714 | 82,714 | 113,089 | 91,460 | ||||||||||||
Other assets, net | 3,428 | 3,513 | 9,411 | 5,716 | ||||||||||||
Total other assets | 97,716 | 95,858 | 132,047 | 108,214 | ||||||||||||
TOTAL ASSETS | $ | 248,348 | $ | 246,183 | ||||||||||||
TOTAL | $ | 332,618 | $ | 268,042 |
September 30, | December 31, | |||||||||||||||
2008 | 2007 | March 31, 2009 | December 31, 2008 | |||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Current portion of long-term debt and lease obligations | $ | 147 | $ | 204 | $ | 10,667 | $ | 130 | ||||||||
Unearned tuition | 35,638 | 34,810 | 43,331 | 38,806 | ||||||||||||
Accounts payable | 13,655 | 13,721 | 15,492 | 12,349 | ||||||||||||
Accrued expenses | 15,778 | 10,079 | 14,950 | 16,239 | ||||||||||||
Advanced payments from federal funds | 173 | - | ||||||||||||||
Income taxes payable | 308 | 1,460 | 1,558 | 3,263 | ||||||||||||
Other short-term liabilities | 481 | 1,439 | 804 | 314 | ||||||||||||
Total current liabilities | 66,007 | 61,713 | 86,975 | 71,101 | ||||||||||||
NONCURRENT LIABILITIES: | ||||||||||||||||
Long-term debt and lease obligations, net of current portion | 10,075 | 15,174 | 37,388 | 10,044 | ||||||||||||
Pension plan liabilities, net | 3,951 | 4,335 | ||||||||||||||
Accrued rent | 6,068 | 5,972 | ||||||||||||||
Other long-term liabilities | 6,882 | 6,829 | 1,959 | 1,641 | ||||||||||||
Total liabilities | 82,964 | 83,716 | 136,341 | 93,093 | ||||||||||||
COMMITMENTS AND CONTINGENCIES (Note 10) | ||||||||||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||||||||
STOCKHOLDERS' EQUITY: | ||||||||||||||||
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2008 and December 31, 2007 | - | - | ||||||||||||||
Common stock, no par value - authorized 100,000,000 shares at September 30, 2008 and December 31, 2007, issued 26,034,225 shares at September 30, 2008 and 25,888,348 shares at December 31, 2007, outstanding 25,434,225 shares at September 30, 2008 and 25,888,348 shares at December 31, 2008 | 120,453 | 120,379 | ||||||||||||||
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at March 31, 2009 and December 31, 2008 | - | - | ||||||||||||||
Common stock, no par value - authorized 100,000,000 shares at March 31, 2009 and December 31, 2008, issued and outstanding 27,244,657 shares at March 31, 2009 and26,088,261 shares at December 31, 2008 | 135,580 | 120,597 | ||||||||||||||
Additional paid-in capital | 14,838 | 12,378 | 15,362 | 15,119 | ||||||||||||
Deferred compensation | (3,901 | ) | (3,228 | ) | (3,340 | ) | (3,619 | ) | ||||||||
Treasury stock at cost - 600,000 shares at September 30, 2008 and no shares at December 31, 2007 | (6,375 | ) | - | |||||||||||||
Treasury stock at cost - 615,000 shares at March 31, 2009 and December 31, 2008 | (6,584 | ) | (6,584 | ) | ||||||||||||
Retained earnings | 42,455 | 35,024 | 61,042 | 55,219 | ||||||||||||
Accumulated other comprehensive loss | (2,086 | ) | (2,086 | ) | (5,783 | ) | (5,783 | ) | ||||||||
Total stockholders' equity | 165,384 | 162,467 | 196,277 | 174,949 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 248,348 | $ | 246,183 | ||||||||||||
TOTAL | $ | 332,618 | $ | 268,042 |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2009 | 2008 | |||||||||||||||||||
REVENUES | $ | 100,481 | $ | 86,566 | $ | 269,584 | $ | 237,480 | $ | 118,599 | $ | 84,047 | ||||||||||||
COSTS AND EXPENSES: | ||||||||||||||||||||||||
Educational services and facilities | 41,554 | 37,053 | 114,109 | 104,540 | 48,299 | 36,629 | ||||||||||||||||||
Selling, general and administrative | 48,485 | 41,434 | 141,058 | 124,075 | 59,612 | 46,132 | ||||||||||||||||||
Loss (gain) on disposal of assets | 51 | - | 91 | (15 | ) | |||||||||||||||||||
Total costs and expenses | 90,090 | 78,487 | 255,258 | 228,600 | ||||||||||||||||||||
(Gain) loss on sale of assets | (2 | ) | 37 | |||||||||||||||||||||
Total costs & expenses | 107,909 | 82,798 | ||||||||||||||||||||||
OPERATING INCOME | 10,391 | 8,079 | 14,326 | 8,880 | 10,690 | 1,249 | ||||||||||||||||||
OTHER: | ||||||||||||||||||||||||
Interest income | 33 | 66 | 96 | 149 | 2 | 45 | ||||||||||||||||||
Interest expense | (579 | ) | (686 | ) | (1,665 | ) | (1,840 | ) | (1,006 | ) | (504 | ) | ||||||||||||
Other income | - | 26 | - | 26 | 8 | - | ||||||||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 9,845 | 7,485 | 12,757 | 7,215 | ||||||||||||||||||||
INCOME BEFORE INCOME TAXES | 9,694 | 790 | ||||||||||||||||||||||
PROVISION FOR INCOME TAXES | 4,139 | 3,115 | 5,326 | 3,008 | 3,871 | 306 | ||||||||||||||||||
INCOME FROM CONTINUING OPERATIONS | 5,706 | 4,370 | 7,431 | 4,207 | ||||||||||||||||||||
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES | - | (2,331 | ) | - | (5,487 | ) | ||||||||||||||||||
NET INCOME (LOSS) | $ | 5,706 | $ | 2,039 | $ | 7,431 | $ | (1,280 | ) | |||||||||||||||
NET INCOME | $ | 5,823 | $ | 484 | ||||||||||||||||||||
Basic | ||||||||||||||||||||||||
Earnings per share from continuing operations | $ | 0.23 | $ | 0.17 | $ | 0.29 | $ | 0.17 | ||||||||||||||||
Loss per share from discontinued operations | - | (0.09 | ) | - | (0.22 | ) | ||||||||||||||||||
Net income (loss) per share | $ | 0.23 | $ | 0.08 | $ | 0.29 | $ | (0.05 | ) | |||||||||||||||
Net income per share | $ | 0.23 | $ | 0.02 | ||||||||||||||||||||
Diluted | ||||||||||||||||||||||||
Earnings per share from continuing operations | $ | 0.22 | $ | 0.17 | $ | 0.29 | $ | 0.16 | ||||||||||||||||
Loss per share from discontinued operations | - | (0.09 | ) | - | (0.21 | ) | ||||||||||||||||||
Net income (loss) per share | $ | 0.22 | $ | 0.08 | $ | 0.29 | $ | (0.05 | ) | |||||||||||||||
Net income per share | $ | 0.22 | $ | 0.02 | ||||||||||||||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||||||||||
Basic | 25,088 | 25,503 | 25,362 | 25,482 | 25,704 | 25,660 | ||||||||||||||||||
Diluted | 25,810 | 26,050 | 26,039 | 26,029 | 26,452 | 26,249 |
Accumulated | Common Stock | Additional Paid-in | Deferred | Treasury | Retained | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Other | Shares | Amount | Capital | Compensation | Stock | Earnings | Loss | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Deferred | Treasury | Retained | Comprehensive | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Compensation | Stock | Earnings | Loss | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE - January 1, 2008 | 25,888,348 | $ | 120,379 | $ | 12,378 | $ | (3,228 | ) | $ | - | $ | 35,024 | $ | (2,086 | ) | $ | 162,467 | |||||||||||||||||||||||||||||||||||||||||||||||
BALANCE - January 1, 2009 | 26,088,261 | $ | 120,597 | $ | 15,119 | $ | (3,619 | ) | $ | (6,584 | ) | $ | 55,219 | $ | (5,783 | ) | $ | 174,949 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | 7,431 | - | 7,431 | - | - | - | - | - | 5,823 | - | 5,823 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock | 123,477 | - | 1,487 | (673 | ) | - | - | - | 814 | - | - | - | 279 | - | - | - | 279 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock options | - | - | 957 | - | - | - | - | 957 | - | - | 258 | - | - | - | - | 258 | ||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock purchases | - | - | - | - | (6,375 | ) | - | - | (6,375 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit of options exercised | - | - | 16 | - | - | - | - | 16 | - | - | 40 | - | - | - | - | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||
Sale of common stock, | 1,150,000 | 14,932 | - | - | - | - | - | 14,932 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
net of expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net share settlement for equity-based compensation | (3,871 | ) | - | (55 | ) | - | - | - | - | (55 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 22,400 | 74 | - | - | - | - | - | 74 | 10,267 | 51 | - | - | - | - | - | 51 | ||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE - September 30, 2008 | 26,034,225 | $ | 120,453 | $ | 14,838 | $ | (3,901 | ) | $ | (6,375 | ) | $ | 42,455 | $ | (2,086 | ) | $ | 165,384 | ||||||||||||||||||||||||||||||||||||||||||||||
BALANCE - March 31, 2009 | 27,244,657 | $ | 135,580 | $ | 15,362 | $ | (3,340 | ) | $ | (6,584 | ) | $ | 61,042 | $ | (5,783 | ) | $ | 196,277 |
Nine Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income (loss) | $ | 7,431 | $ | (1,280 | ) | |||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
Net income | $ | 5,823 | $ | 484 | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 13,377 | 11,734 | 5,249 | 4,370 | ||||||||||||
Amortization of deferred finance charges | 146 | 143 | 50 | 48 | ||||||||||||
Deferred income taxes | (904 | ) | (2,416 | ) | (498 | ) | (493 | ) | ||||||||
Loss (gain) on disposal of assets | 91 | (15 | ) | |||||||||||||
Impairment of goodwill and long-lived assets | - | 3,099 | ||||||||||||||
Fixed asset donations | - | (26 | ) | |||||||||||||
(Gain) loss on disposition of assets | (2 | ) | 37 | |||||||||||||
Provision for doubtful accounts | 15,855 | 12,639 | 7,248 | 4,030 | ||||||||||||
Stock-based compensation expense | 1,771 | 1,349 | 537 | 558 | ||||||||||||
Tax benefit associated with exercise of stock options | (16 | ) | - | (40 | ) | (2 | ) | |||||||||
Deferred rent | 341 | 451 | 94 | 110 | ||||||||||||
(Increase) decrease in assets: | ||||||||||||||||
(Increase) decrease in assets, net of acquisitions: | ||||||||||||||||
Accounts receivable | (19,714 | ) | (13,247 | ) | (6,813 | ) | (1,219 | ) | ||||||||
Inventories | (1,170 | ) | (256 | ) | 155 | (42 | ) | |||||||||
Prepaid expenses and other current assets | 354 | (941 | ) | |||||||||||||
Prepaid expenses and current assets | (47 | ) | (400 | ) | ||||||||||||
Due from federal programs | 5,929 | - | 1,001 | 6,192 | ||||||||||||
Other assets | 2 | (250 | ) | (449 | ) | 247 | ||||||||||
Increase (decrease) in liabilities: | ||||||||||||||||
Increase (decrease) in liabilities, net of acquisitions: | ||||||||||||||||
Accounts payable | 2,377 | 1,321 | (2,287 | ) | 1,723 | |||||||||||
Other liabilities | (1,211 | ) | 1,800 | 53 | (487 | ) | ||||||||||
Income taxes | (1,136 | ) | (8,529 | ) | ||||||||||||
Income taxes payable/prepaid | (1,665 | ) | (4,539 | ) | ||||||||||||
Accrued expenses | 5,652 | 1,919 | (4,370 | ) | 604 | |||||||||||
Unearned tuition | 828 | 1,455 | (1,746 | ) | (3,674 | ) | ||||||||||
Total adjustments | 22,572 | 10,230 | (3,530 | ) | 7,063 | |||||||||||
Net cash provided by operating activities | 30,003 | 8,950 | 2,293 | 7,547 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Restricted cash | - | (612 | ) | 356 | - | |||||||||||
Capital expenditures | (15,919 | ) | (16,391 | ) | (2,483 | ) | (7,440 | ) | ||||||||
Proceeds from sale of property and equipment | 19 | - | ||||||||||||||
Acquisitions, net of cash acquired | (24,933 | ) | - | |||||||||||||
Net cash used in investing activities | (15,919 | ) | (17,003 | ) | (27,041 | ) | (7,440 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from borrowings | 23,000 | 21,500 | 40,000 | 7,000 | ||||||||||||
Payments on borrowings | (28,000 | ) | (16,500 | ) | (30,000 | ) | (5,000 | ) | ||||||||
Proceeds from exercise of stock options | 74 | 145 | 51 | 62 | ||||||||||||
Tax benefit associated with exercise of stock options | 16 | 68 | 40 | 2 | ||||||||||||
Principal payments of capital lease obligations | (156 | ) | (84 | ) | ||||||||||||
Purchase of treasury stock | (6,375 | ) | - | |||||||||||||
Net cash (used in) provided by financing activities | (11,441 | ) | 5,129 | |||||||||||||
NET INCREASE (DECREASE) IN CASH | 2,643 | (2,924 | ) | |||||||||||||
CASH—Beginning of period | 3,502 | 6,461 | ||||||||||||||
CASH—End of period | $ | 6,145 | $ | 3,537 | ||||||||||||
Net share settlement for equity-based compensation | (55 | ) | - | |||||||||||||
Principal payments under capital lease obligations | (234 | ) | (53 | ) | ||||||||||||
Proceeds from issuance of common stock, net of issuance costs | 14,932 | - | ||||||||||||||
Net cash provided by financing activities | 24,734 | 2,011 | ||||||||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (14 | ) | 2,118 | |||||||||||||
CASH AND CASH EQUIVALENTS—Beginning of year | 15,234 | 3,502 | ||||||||||||||
CASH AND CASH EQUIVALENTS—End of year | $ | 15,220 | $ | 5,620 |
Nine Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Cash paid during the year for: | ||||||||||||||||
Interest | $ | 1,571 | $ | 1,770 | $ | 533 | $ | 484 | ||||||||
Income taxes | $ | 7,754 | $ | 9,898 | $ | 6,617 | $ | 5,641 | ||||||||
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES: | ||||||||||||||||
Fixed assets acquired in capital lease transactions | $ | - | $ | 652 | ||||||||||||
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Fixed assets acquired in noncash transactions | $ | 1,505 | $ | 1,814 | $ | 302 | $ | 1,969 |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
2. RECENT ACCOUNTING PRONOUNCEMENTS |
Three Months Ended | Nine Months Ended | |||||||
September 30, 2007 | September 30, 2007 | |||||||
Revenues | $ | 727 | $ | 4,230 | ||||
Operating expenses | (4,775 | ) | (13,760 | ) | ||||
(4,048 | ) | (9,530 | ) | |||||
Benefit for income taxes | (1,717 | ) | (4,043 | ) | ||||
Loss from discontinued operations | $ | (2,331 | ) | $ | (5,487 | ) |
3. WEIGHTED AVERAGE COMMON SHARES |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2009 | 2008 | |||||||||||||||||||
Basic shares outstanding | 25,087,946 | 25,503,417 | 25,361,821 | 25,481,986 | 25,704,345 | 25,659,964 | ||||||||||||||||||
Dilutive effect of stock options | 721,765 | 546,549 | 677,530 | 547,302 | 747,775 | 589,315 | ||||||||||||||||||
Diluted shares outstanding | 25,809,711 | 26,049,966 | 26,039,351 | 26,029,288 | 26,452,120 | 26,249,279 |
4. BUSINESS ACQUISITIONS On January 20, 2009, the Company completed the acquisition of six of the seven schools comprising Baran Institute of Technology, Inc. (“BAR”), for approximately $24.9 million in cash, net of cash acquired, subject to further customary post closing adjustments. BAR consists of seven schools serving approximately 1,800 students as of March 31, 2009 and offers associate and diploma programs in the fields of automotive, skilled trades, health sciences and culinary arts. The six schools the Company acquired on January 20, 2009 are Baran Institute of Technology in East Windsor, Connecticut (“BIT”), Connecticut Culinary Institute in Hartford, Connecticut (“CCIH”), Connecticut Culinary Institute in Suffield, Connecticut (“CCIS”), Americare School of Nursing in Fern Park, Florida (“ASNF”), Americare School of Nursing in St. Petersburg, Florida (“ASNS”), and Engine City Technical Institute in South Plainfield, New Jersey (“ECTI”), see Note 13. The Company also acquired the membership interests of Hartford Urban Ventures, LLC and certain assets and assumed certain liabilities of Educational Properties, LLC, which provide support services to BAR. In connection with these acquisitions, the Company recorded a charge of approximately $0.7 million for the three months ended March 31, 2009 to reflect the expenses related to the acquisitions. On December 1, 2008, the Company acquired all of the rights, title and interest in the assets of Briarwood College (“BRI”) for approximately $10.6 million, net of cash acquired. Briarwood is regionally accredited by the New England Association of Schools and Colleges, and currently offers two bachelor’s degree programs to approximately 600 students as of March 31, 2009 from Connecticut and surrounding states. The consolidated financial statements include the results of operations from the respective acquisition dates. The purchase price has been preliminarily allocated to identifiable net assets with the excess of the purchase price over the estimated fair value of the net assets acquired recorded as goodwill. The allocation may be revised when the Company receives final information including appraisals, valuations and other analyses related to certain intangible assets. The following table summarizes the estimated fair value of assets acquired and liabilities related to acquisitions:
(1) Current assets, excluding cash acquired for BAR includes estimated amounts due from the seller in accordance with the stock purchase agreement. 5. GOODWILL AND OTHER INTANGIBLE ASSETS |
Goodwill balance as of December 31, 2008 | $ | 91,460 | ||
Goodwill adjustments (1) | 48 | |||
Goodwill acquired pursuant to business acquisition-BAR | 21,581 | |||
Goodwill balance as of March 31, 2009 | $ | 113,089 |
September 30, 2008 | December 31, 2007 | At March 31, 2009 | At December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Amortization Period (years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Amortization Period (years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||||||||||||||||||||
Student contracts | 1 | $ | 2,215 | $ | 2,215 | $ | - | $ | 2,215 | $ | 2,212 | $ | 3 | 2 | $ | 3,363 | $ | 2,384 | $ | 979 | $ | 2,563 | $ | 2,230 | $ | 333 | |||||||||||||||||||||||||||||
Trade name | Indefinite | 1,688 | - | 1,688 | 1,270 | - | 1,270 | ||||||||||||||||||||||||||||||||||||||||||||||||
Trade name | Indefinite | 1,270 | - | 1,270 | 1,270 | - | 1,270 | 6 | 297 | 10 | 287 | - | - | - | |||||||||||||||||||||||||||||||||||||||||
Accreditation | Indefinite | 307 | - | 307 | 307 | - | 307 | Indefinite | 1,307 | - | 1,307 | 1,307 | - | 1,307 | |||||||||||||||||||||||||||||||||||||||||
Curriculum | 10 | 700 | 261 | 439 | 700 | 208 | 492 | 10 | 2,700 | 363 | 2,337 | 2,000 | 289 | 1,711 | |||||||||||||||||||||||||||||||||||||||||
Non-compete | 5 | 201 | 95 | 106 | 201 | 65 | 136 | 3 | 1,701 | 220 | 1,481 | 201 | 105 | 96 | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 4,693 | $ | 2,571 | $ | 2,122 | $ | 4,693 | $ | 2,485 | $ | 2,208 | $ | 11,056 | $ | 2,977 | $ | 8,079 | $ | 7,341 | $ | 2,624 | $ | 4,717 |
Year Ending December 31, | ||||
2009 | $ | 1,176 | ||
2010 | 1,309 | |||
2011 | 836 | |||
2012 | 341 | |||
2013 | 303 | |||
Thereafter | 1,119 | |||
$ | 5,084 |
Year Ending December 31, | ||||
2008 | $ | 28 | ||
2009 | 110 | |||
2010 | 110 | |||
2011 | 86 | |||
2012 | 70 | |||
Thereafter | 142 | |||
$ | 546 |
March 31, 2009 | December 31, 2008 | |||||||
Credit agreement (a) | $ | 10,000 | $ | - | ||||
Finance obligation (b) | 9,672 | 9,672 | ||||||
Notes payable (with rates ranging from 7.8% to 10.2%) | 554 | - | ||||||
Capital lease - property (c) | 27,353 | - | ||||||
Capital leases-equipment (with rates ranging from 8.4% to 8.7%) | 476 | 502 | ||||||
48,055 | 10,174 | |||||||
Less current maturities | (10,667 | ) | (130 | ) | ||||
$ | 37,388 | $ | 10,044 |
(b) The Company completed a sale and a leaseback of several facilities on December 28, 2001. The Company retained a continuing involvement in the lease and as a result it is prohibited from utilizing sale-leaseback accounting. Accordingly, the Company has treated this transaction as a finance lease. The lease expiration date is December 31, 2016. (c) As part of the acquisition of BAR the Company assumed real estate capital leases related to ASNF and CCIH. These leases bear interest at 8% and expire in 2032 and 2031, respectively. 7. EQUITY |
March 31, 2009 | ||||
Expected volatility | 51.95 | % | ||
Expected dividend yield | 0 | % | ||
Expected life (term) | 6 Years | |||
Risk-free interest rate | 2.29 | % | ||
Weighted-average exercise price during the year | $ | 14.36 |
Shares | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||
Outstanding as of December 31, 2007 | 1,512,163 | $ | 9.65 | ||||||||||
Granted | 145,500 | 11.97 | |||||||||||
Cancelled | (74,000 | ) | 15.81 | ||||||||||
Exercised | (22,400 | ) | 3.34 | $ | 219 | ||||||||
Outstanding as of September 30, 2008 | 1,561,263 | 9.67 | 5.39 years | 7,564 | |||||||||
Exercisable as of September 30, 2008 | 1,146,625 | 8.15 | 4.39 years | 7,242 |
Shares | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Term | Aggregate intrinsic Value (in thousands) | ||||||||||
Outstanding December 31, 2008 | 1,474,215 | $ | 9.98 | 5.25 years | 6,808 | ||||||||
Granted | 27,000 | 14.36 | |||||||||||
Canceled | (13,000 | ) | 13.10 | ||||||||||
Exercised | (10,267 | ) | 4.98 | 48 | |||||||||
Outstanding March 31, 2009 | 1,477,948 | 10.07 | 5.08 years | 12,727 | |||||||||
Exercisable as of March 31, 2009 | 1,227,237 | 9.21 | 4.44 years | 11,627 |
At March 31, 2009 | ||||||||||||||||||||||
Stock Options Outstanding | Stock Options Exercisable | |||||||||||||||||||||
Range of Exercise Prices | Shares | Contractual Weighted Average life (years) | Weighted Average Price | Shares | Weighted Exercise Price | |||||||||||||||||
$ | 3.10 | 620,407 | 2.78 | $ | 3.10 | 620,407 | $ | 3.10 | ||||||||||||||
$ | 4.00-$13.99 | 290,333 | 8.23 | 11.81 | 143,182 | 11.66 | ||||||||||||||||
$ | 14.00-$19.99 | 449,708 | 6.13 | 15.22 | 368,548 | 14.98 | ||||||||||||||||
$ | 20.00-$25.00 | 117,500 | 5.36 | 22.88 | 95,100 | 23.08 | ||||||||||||||||
1,477,948 | 5.08 | 10.07 | 1,227,237 | 9.21 |
September 30, 2008 | ||||||||||||||||||||||
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 | 0.72 | $ | 1.55 | 50,898 | $ | 1.55 | ||||||||||||||
3.10 | �� | 630,157 | 3.28 | 3.10 | 630,157 | 3.10 | ||||||||||||||||
4.00-13.99 | 333,500 | 8.60 | 11.47 | 78,678 | 9.88 | |||||||||||||||||
14.00-19.99 | 429,208 | 6.40 | 15.26 | 299,492 | 15.09 | |||||||||||||||||
20.00-25.00 | 117,500 | 5.86 | 22.88 | 87,400 | 23.10 | |||||||||||||||||
1,561,263 | 5.39 | 9.67 | 1,146,625 | 8.15 |
8. INCOME TAXES |
9. CONTINGENCIES |
10. PENSION PLAN |
12. OTHER ASSETS The Company acquired 100% of the membership units of Hartford Urban Ventures, LLC, which has a 5% ownership interest in CCI/85 Sigourney, LLC. The Company leases from CCI/85 Sigourney, LLC, under a capital lease, the CCI facility located at 85 Sigourney Street, Hartford, Connecticut. The investment of $0.3 million is included in other assets in the condensed consolidated balance sheet at March 31, 2009. 13. SUBSEQUENT EVENT |
Three Months Ended | Nine Months Ended | |||||||
September 30, 2007 | September 30, 2007 | |||||||
Revenues | $ | 727 | $ | 4,230 | ||||
Operating expenses | (4,775 | ) | (13,760 | ) | ||||
(4,048 | ) | (9,530 | ) | |||||
Benefit for income taxes | (1,717 | ) | (4,043 | ) | ||||
Loss from discontinued operations | $ | (2,331 | ) | $ | (5,487 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2009 | 2008 | |||||||||||||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Educational services and facilities | 41.4 | % | 42.8 | % | 42.3 | % | 44.0 | % | 40.7 | % | 43.6 | % | ||||||||||||
Selling, general and administrative | 48.3 | % | 47.9 | % | 52.3 | % | 52.2 | % | 50.3 | % | 54.9 | % | ||||||||||||
Total costs and expenses | 89.7 | % | 90.7 | % | 94.6 | % | 96.2 | % | 91.0 | % | 98.5 | % | ||||||||||||
Operating income | 10.3 | % | 9.3 | % | 5.4 | % | 3.8 | % | 9.0 | % | 1.5 | % | ||||||||||||
Interest expense, net | (0.5 | %) | (0.7 | %) | (0.6 | %) | (0.7 | %) | -0.8 | % | -0.5 | % | ||||||||||||
Income from continuing operations before income taxes | 9.8 | % | 8.6 | % | 4.8 | % | 3.1 | % | 8.2 | % | 1.0 | % | ||||||||||||
Provision (benefit) for income taxes | 4.1 | % | 3.6 | % | 2.0 | % | 1.3 | % | ||||||||||||||||
Provision for income taxes | 3.3 | % | 0.4 | % | ||||||||||||||||||||
Income from continuing operations | 5.7 | % | 5.0 | % | 2.8 | % | 1.8 | % | 4.9 | % | 0.6 | % |
Three Months Ended March 31, | ||||||||||||||||
Nine Months Ended September 30, | 2009 | 2008 | ||||||||||||||
2008 | 2007 | (In thousands) | ||||||||||||||
Net cash provided by operating activities | $ | 30,003 | $ | 8,950 | $ | 2,293 | $ | 7,547 | ||||||||
Net cash used in investing activities | $ | (15,919 | ) | $ | (17,003 | ) | $ | (27,041 | ) | $ | (7,440 | ) | ||||
Net cash (used in) provided by financing activities | $ | (11,441 | ) | $ | 5,129 | |||||||||||
Net cash provided by financing activities | $ | 24,734 | $ | 2,011 |
At September 30, | At December 31, | |||||||||||||||
2008 | 2007 | March 31, 2009 | December 31, 2008 | |||||||||||||
Credit agreement | $ | - | $ | 5,000 | $ | 10,000 | $ | - | ||||||||
Finance obligation | 9,672 | 9,672 | 9,672 | 9,672 | ||||||||||||
Automobile loans | - | 16 | ||||||||||||||
Capital leases (with rates ranging from 2.9% to 8.5%) | 550 | 690 | ||||||||||||||
Notes payable (with rates ranging from 7.8% to 10.2%) | 554 | - | ||||||||||||||
Capital lease - property | 27,353 | - | ||||||||||||||
Capital leases-equipment (with rates ranging from 8.4% to 8.7%) | 476 | 502 | ||||||||||||||
Subtotal | 10,222 | 15,378 | 48,055 | 10,174 | ||||||||||||
Less current maturities | (147 | ) | (204 | ) | (10,667 | ) | (130 | ) | ||||||||
Total long-term debt | $ | 10,075 | $ | 15,174 | $ | 37,388 | $ | 10,044 |
Payments Due by Period | Payments Due by Period | |||||||||||||||||||||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 4-5 years | After 5 years | Total | Less than 1 year | 2-3 years | 4-5 years | After 5 years | |||||||||||||||||||||||||||||||
Credit agreement | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 10,000 | $ | 10,000 | $ | - | $ | - | $ | - | ||||||||||||||||||||
Capital leases (including interest) | 720 | 67 | 322 | 331 | - | 62,170 | 2,554 | 5,143 | 5,059 | 49,414 | ||||||||||||||||||||||||||||||
Notes payable (including interest) | 602 | 358 | 231 | 13 | - | |||||||||||||||||||||||||||||||||||
Operating leases | 125,581 | 16,294 | 27,163 | 24,527 | 57,597 | 144,893 | 17,917 | 32,344 | 29,210 | 65,422 | ||||||||||||||||||||||||||||||
Rent on finance obligation | 11,511 | 1,381 | 2,763 | 2,763 | 4,604 | 11,169 | 1,426 | 2,852 | 2,852 | 4,039 | ||||||||||||||||||||||||||||||
Total contractual cash obligations | $ | 137,812 | $ | 17,742 | $ | 30,248 | $ | 27,621 | $ | 62,201 | $ | 228,834 | $ | 32,255 | $ | 40,570 | $ | 37,134 | $ | 118,875 |
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 | Amendment to Amended and Restated Employment Agreement, dated as of January 14, 2009, between the Company and David F. Carney (8). | |
10.4 | Separation and Release Agreement, dated as of October 15, 2007, between the Company and Lawrence E. Brown (4). | |
Amended and Restated Employment Agreement, dated as of February 1, 2007, between the Company and Scott M. Shaw (3). | ||
Amendment to Amended and Restated Employment Agreement, dated as of January 14, 2009, between the company and Scott M. Shaw (8). | ||
10.7 | Amended and Restated Employment Agreement, dated as of February 1, 2007, between the Company and Cesar Ribeiro (3). | |
Amendment to Amended and Restated Employment Agreement, dated as of January 14, 2009, between the company and Cesar Ribeiro (8). | ||
10.9 | Amended and Restated Employment Agreement, dated as of February 1, 2007, between the Company and Shaun E. McAlmont (3). | |
Amendment to Amended and Restated Employment Agreement, dated as of January 14, 2009, between the company and Shaun E. McAlmont (8). | ||
10.11 | Lincoln Educational Services Corporation 2005 Long Term Incentive Plan (1). | |
Lincoln Educational Services Corporation 2005 Non Employee Directors Restricted Stock Plan (1). | ||
Lincoln Educational Services Corporation 2005 Deferred Compensation Plan (1). | ||
Lincoln Technical Institute Management Stock Option Plan, effective January 1, 2002 (1). | ||
Form of Stock Option Agreement, dated January 1, 2002, between Lincoln Technical Institute, Inc. and certain participants (1). |
10.16 | ||
Form of Stock Option Agreement under our 2005 Long Term Incentive Plan (7). | ||
Form of Restricted Stock Agreement under our 2005 Long Term Incentive Plan (7). | ||
Management Stock Subscription Agreement, dated January 1, 2002, among Lincoln Technical Institute, Inc. and certain management investors (1). | ||
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). | ||
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). | ||
10.21 | Stock Purchase Agreement, dated as of January 20, 2009, among Lincoln Technical Institute, Inc., NN Acquisition, LLC, Brad Baran, Barbara Baran, UGP Education Partners, LLC, UGPE Partners Inc. and Merion Investment Partners, L.P (8). | |
10.22 | Stock Purchase Agreement, dated as of January 20, 2009, among Lincoln Technical Institute, Inc., NN Acquisition, LLC, Brad Baran, Barbara Baran, UGP Education Partners, LLC, Merion Investment Partners, L.P. and, for certain limited purposes only, UGPE Partners Inc (8). | |
Certification of | ||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification of |
(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). |
(7) | Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2007. |
(8) | Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2008. |
* | Filed herewith. |
LINCOLN EDUCATIONAL SERVICES CORPORATION | ||||
Date: | May 8, 2009 | By: | /s/ Cesar Ribeiro | |
Cesar Ribeiro | ||||
Chief Financial Officer | ||||
(Duly Authorized Officer, Principal Accounting and Financial Officer) |