Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of November 3, 2016,August 8, 2017, there were 24,857,89224,719,055 shares of the registrant’s common stock outstanding.

Business Activities –— Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”), “we”, “our” and “us”, as applicable) provide diversified career-oriented post-secondary education to recent high school graduates and working adults.  The Company, which currently operates 3028 schools in 15 states, and  offers programs in automotive technology, skilled trades (which include HVAC, welding and computerized numerical control and electronic systems technology, among other programs), healthcare services (which include nursing, dental assistant, medical administrative assistant and pharmacy technician, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and business and information technology (which includes information technology and criminal justice programs).  The schools operate under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences and associated brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company’s other campuses primarily attract students from their local communities and surrounding areas.  All of the campuses are nationally or regionally accredited and are eligible to participate in federal financial aid programs by the U.S. Department of Education (the “DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal student loans as well as other forms of financial aid.

In the first quarter of 2015, the Companywe reorganized itsour operations into three reportable business segments:  (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions (“HOPS”), and (c) Transitional which refers to businesses that have been or are currently being taught out.  InIn November 2015, the Company’s Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in the HOPS segment due to a strategic shift in the Company’s business strategy.  The Company underwent an exhaustive process to divest the HOPS schools which proved successful in attracting various purchasers but, ultimately, did not result in a transaction that our Board believed would enhance shareholder value. When the decision was first made by the Board of Directors to divest HOPS, 18 campuses were operating in this segment.  By the end of 2017, we will have strategically closed seven underperforming campuses leaving a total of eleven campuses remaining under HOPS.   The Company believes that the closures and planned closures of the aforementioned campuses has positioned this segment and the Company to be more profitable going forward as well as maximizing returns for the Company’s shareholders.

The combination of several factors, including the inability of the prospective buyer of the HOPS segment to close on the purchase, the improvements the Company has implemented in the HOPS operations, the closure of seven underperforming campuses and the change in federal government administration, resulted in the Board reevaluating its Healthcaredivestiture plan and Other Professionsthe determination that shareholder value would more likely be enhanced by continuing to operate our HOPS segment as revitalized.  Consequently, in the first quarter of 2017, the Board of Directors abandoned the plan to divest the HOPS segment and the Company intends to retain the HOPS segment.  The results of operations of the campuses included in the HOPS business segment are reflected as continuing operations in the consolidated financial statements.

Liquidity—For the last several years, the Company and the proprietary school sector have faced deteriorating earnings. Government regulations have negatively impacted earnings by making it more difficult for potential students to obtain loans, which, when coupled with the overall economic environment, have discouraged potential students from enrolling in post-secondary schools. In light of these factors, the Company has incurred significant operating losses as a result of lower student population.  Despite these events, the Company believes that its likely sources of cash should be sufficient to fund operations for the next twelve months.months and thereafter for the foreseeable future.  At SeptemberJune 30, 2016,2017, the Company’s sources of cash primarily included cash and cash equivalents of $45.8$13.4 million (of which $26.6$6.2 million is restricted). The Company is also continuing to take actions to improve cash flow by aligning its cost structure to its student population.

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements.  Certain information and footnote disclosures normally included in annual financial statements have been omitted or condensed pursuant to such regulations.  These statements, which should be read in conjunction with the December 31, 20152016 consolidated financial statements and related disclosures of the Company included in the Company’s Annual Report on Form 10-K filed withfor the SEC on March 10,fiscal year ended December 31, 2016, reflect all adjustments, consisting of normal recurring adjustments and impairments necessary to present fairly the consolidated financial position, results of operations and cash flows for such periods.  The results of operations for the three and ninesix months ended SeptemberJune 30, 20162017 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2016.2017.

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period.  On an ongoing basis, the Company evaluates the estimates and assumptions including those related to revenue recognition, bad debts, impairments, fixed assets, income taxes, benefit plans and certain accruals.  Actual results could materially differ from those estimates.

New Accounting Pronouncements – In August 2016, theThe Financial Accounting StandardStandards Board (“FASB”(the “FASB”) has issued Accounting Standards Update (“ASU”) No. 2016-15, Statement2017-09,” “Compensation—Stock Compensation (Topic 718) — Scope of Cash Flows (Topic 230): ClassificationModification Accounting.” ASU 2017-09 applies to entities that change the terms or conditions of Certain Cash Receiptsa share-based payment award. The FASB adopted ASU 2017-09 to provide clarity and Cash Payments. ASU No. 2016-15 amends ASC 230reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to add or clarifythe modification of the terms and conditions of a share-based payment award. The amendments provide guidance on determining which changes to the classificationterms and conditions of certain cash receipts and payments in the statement of cash flows. The new guidanceshare-based payment award require an entity to apply modification accounting under Topic 718. ASU 2017-09 is effective for the Companyall entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017,2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods within that fiscal year. Early application is permitted.for which financial statements have not yet been issued. The Company is currently evaluatingdoes not expect the impactadoption of ASU No. 2016-15, however it is not expected to2017-09 will have a material impact on the Company’sits consolidated financial statements.

In March 2016,2017, the FASB issued ASU No. 2016-09,2017-07, Improvements to Employee Share-Based Payment Accounting. “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.”ASU No. 2016-09 simplifies several aspects of2017-07 requires that an employer report the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefitservice cost component in the income statement. Further, tax benefits shouldsame line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be recognized regardless of whether the benefits reduce taxes payablepresented in the current period.  Understatement of comprehensive income separately from the previous U.S. GAAP, excess tax benefits are recognized in additional paid-in capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement. Also, under the previous U.S. GAAP, excess tax benefits are not recognized until the deduction reduces taxes payable.service cost component and outside a subtotal of operating income. The new guidanceASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the Company on January 1, 2017, with earlier application permitted in any interim or annual period. ASU No. 2016-09 is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or financial statement disclosures.

In November 2015,January 2017, the FASB issued guidanceASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.”  ASU 2017-04 provides amendments to Accounting Standards Code (“ASC”) No. 350, “Intangibles - Goodwill and Other,” which simplifieseliminate Step 2 from the balance sheet classificationgoodwill impairment test. Entities should perform their goodwill impairment tests by comparing the fair value of deferred taxes.a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The guidance requires that all deferred tax assetsamendments in this update are effective prospectively during interim and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This guidance is effective for public business entities for annual periods, and for interim periods within those periods beginning after December 15, 20162019, with early adoption permitted.  The Company early adopted this guidancethe provisions of ASU 2017-04 as of December 31, 2015.  It did not have a materialApril 1, 2017.  As fair values for our operating units exceed their carrying values, there has been no impact on our consolidated financial statements.

The new standard is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016. We do not plan to early adopt and, accordingly, we will adopt the new standard effective January 1, 2018. The Company’s assessment of the potential impact is substantially complete based on our review of current enrollment agreements and other revenue generating contracts. We believe the timing of recognizing revenue for tuition and student fees will not significantly change. The Company is closely reviewing its book revenue stream to determine whether the performance obligation of the Company is satisfied over time and revenue is recognized over the length of the student contract, which is the Company’s consolidated resultscurrent practice with respect to revenue recognition, or whether the performance obligation of operations, financial condition or financial statement disclosures.the Company is satisfied at the point in time and revenue is recognized when students’ books are delivered.  Additionally, we are currently assessing the impacts related to the accounting for contract assets separate from accounts receivable and are evaluating the point at which a student’s contract asset becomes a receivable.

In April 2015,November 2016, the FASB issued accountingASU No. 2016-18: “Statement of Cash Flows (Topic 230): Restricted Cash.” This guidance relatedwas issued to address the diversity that exists in the classification and presentation of debt issuance costschanges in restricted cash on the balance sheet as a direct reduction fromstatement of cash flows. The amendments will require that the carrying amountstatement of cash flows explain the debt liability, consistent with debt discounts, rather than as an asset.  Amortization of debt issuance costs will continue to be reported as interest expense.  Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an assetchange during the period in total cash, cash equivalents and amortized ratably over the term of the arrangement.  In August 2015, the FASB issued accounting guidance related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements which clarifies that companies may continue to present unamortized debt issuance costs associated with line of credit arrangements as an asset.  These pronouncementsrestricted cash. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those years, beginning after December 15, 2015, with earlyfiscal years. The amendments will be applied using a retrospective transition method to each period presented. The Company anticipates that the adoption permitted.  The guidance became effective for the Company on January 1, 2016 and didwill not have a material impact on the Company’s consolidated financial statements.

In January 2015,August 2016, the FASB issued ASU No. 2015-01, 2016-15, “Income Statement – Extraordinaryof Cash Flows (Topic 230): Classification of Certain Cash Receipts and Unusual Items. Cash PaymentsASU 2015-01 simplifies income statement classification by removing” to address eight specific cash flow issues with the conceptobjective of extraordinary items from U.S. GAAP. Underreducing the existing guidance, an entity is required to separately disclose extraordinary items, net of tax,diversity in the income statement after income from continuing operations if an event or transaction is of unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed.practice. The existing requirement to separately present items thatamendments are of unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The new guidance also requires similar separate presentation of items that are both unusual and infrequent. The guidance, effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company anticipates that the Company on January 1, 2016, with earlier application permitted as of the beginning of the fiscal year of adoption didwill not have a material impact on the Company’s consolidated financial statements.

In August 2014,February 2016, the FASB issued guidance requiring lessees to recognize a new standard – ASU No. 2014-15, Disclosureright-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of Uncertainties about an Entity’s Ability to Continue as a Going Concern - that will explicitly require management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. According to the new standard, substantial doubt about an entity’s ability to continue as a going concern exists if it is probable that the entityshort-term leases. Leases will be unable to meet its obligationsclassified as they become due within one year aftereither financing or operating, with classification affecting the datepattern of expense recognition in the entity’s financial statements are issued. In order to determine the specific disclosures, if any, that would be required, management will need to assess if substantial doubt exists, and, if so, whether its plans will alleviate such substantial doubt.of income. The new standard requires assessment each annual and interim period and will beguidance is effective for the Company on December 31, 2016 with earlier application permitted.  The Company does not believe this guidance will have any impact on its consolidated financial statements.

Stock-Based Compensation – The Company measures the value of stock options on the grant date at fair value, using the Black-Scholes option valuation model.  The Company amortizes the fair value of stock options, net of estimated forfeitures, utilizing straight-line amortization of compensation expense over the requisite service period of the grant.

The Company measures the value of service and performance-based restricted stock on the fair value of a share of common stock on the date of the grant. The Company amortizes the fair value of service-based restricted stock utilizing straight-line amortization of compensation expense over the requisite service period of the grant.

The Company amortizes the fair value of the performance-based restricted stock based on the determination of the probable outcome of the performance condition.  If the performance condition is expected to be met, then the Company amortizes the fair value of the number of shares expected to vest utilizing straight-line basis over the requisite performance period of the grant.  However, if the associated performance condition is not expected to be met, then the Company does not recognize the stock-based compensation expense.

Income Taxes – The Company accounts for income taxes in accordance with FASB Accounting Standards Code (“ASC”) Topic 740, “Income Taxes” (“ASC 740”). This statement requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.

In accordance with ASC 740, the Company assesses its deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable.  A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, the Company’s assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, the Company considered, among other things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company’s consolidated financial statements and/or tax returns.  Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on the Company’s consolidated financial position or results of operations.  Changes in, among other things, income tax legislation, statutory income tax rates, or future income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause the Company’s income tax provision to vary significantly among financial reporting periods.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.  During the three and ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, the Company did not have any interest and penalties expense associated with uncertain tax positions.

The weighted average number of common shares used to compute basic and diluted loss per share for the three and ninesix months ended SeptemberJune 30, 20162017 and 20152016 was as follows:

For the ninethree months ended SeptemberJune 30, 20162017 and 2015,2016, options to acquire 668,307537,718 and 47,015604,378 shares respectively, were excluded from the above table because the Company recordedreported a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the six months ended June 30, 2017 and 2016, options to acquire 583,848 and 412,286 shares were excluded from the above table because the Company reported a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the three and ninesix months ended SeptemberJune 30, 2016,2017, options to acquire 224,667 shares were excluded from the above table because they have an exercise price that is greater than the average market price of the Company’s common stock and, therefore, their impact on reported income (loss) per share would have been antidilutive. For the three and nine months ended September 30, 2015, options to acquire 540,567170,667 shares were excluded from the above table because they have an exercise price that is greater than the average market price of the Company’s common stock and, therefore, their impact on reported income (loss) per share would have been antidilutive.

The Company reviews long-lived assets for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.  There were no long-lived asset impairments during the six months ended June 30, 2017 and 2016.

The Company reviews goodwill and intangible assets for impairment when indicators of impairment exist.  Annually, or more frequently if necessary, the Company evaluates goodwill and intangible assets with indefinite lives for impairment, with any resulting impairment reflected as an operating expense.  The Company concluded that, as of SeptemberJune 30, 2017 and 2016, there werewas no indicatorsindicator of potential impairment and, accordingly, the Company did not test goodwill for impairment.

The Company concluded that as of September 30, 2015 there was an indicator of potential impairment as a result of a decrease in market capitalization and, accordingly, the Company tested goodwill for impairment.  The test indicated that one of the Company’s reporting units was impaired, which resulted in a pre-tax non-cash charge of $0.2 million for the three months ended September 30, 2015.

Intangible assets, which are included in other assets net in the accompanying Condensed Consolidated Balance Sheets,condensed consolidated balance sheets, consist of the following:

Amortization of intangible assets was less than $0.1 million for each of the three and ninesix months ended SeptemberJune 30, 20162017 and 2015.2016.

The following table summarizes the estimated future amortization expense:

Long-term debt and lease obligations consist of the following:

(a) On July 31, 2015, the Company entered into a credit agreement with three lenders, Alostar Bank of Commerce (“Alostar”), HPF Holdco, LLC and Rushing Creek 4, LLC, led by HPF Service, LLC, as administrative agent and collateral agent (the “Agent”), for an aggregate principal amount of $45 million (the “Term Loan”).  The July 31, 2015 credit agreement, along with subsequent amendments to the Credit Agreement dated December 31, 2015 and February 29, 2016, are collectively referred to as the “Credit Agreement.”  As of December 31, 2015 and prior to the effectivenessEach issuance of a second amendment to the Credit Agreement on February 29, 2016 (the “Second Amendment”), the Term Loan consisted of a $30 million term loan (the “Term Loan A”) from HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC, secured by a first priority lien in favor of the Agent on substantially all of the real and personal property owned by the Company, and a $15 million term loan (the “Term Loan B”) from Alostar secured by a $15.3 million cash collateral account. Pursuant to the Second Amendment, the Company received an additional $5 million term loan from Alostar with which the Company repaid $5 million of the principal amount of the Term Loan A.  Accordingly, upon the effectiveness of the Second Amendment, the aggregate term loans outstanding under the Credit Agreement remained at approximately $45 million, consisting of an approximate $25 million Term Loan A and a $20 million Term Loan B.  In addition, pursuant to the Second Amendment, the amount of cash collateral securing the Term Loan B was increased to $20.3 million.  At the Company’s request, a percentage of the cash collateral may be released to the Company at the Agent’s sole discretion and with the consent of Alostar upon the satisfaction of certain criteria as outlined in the Credit Agreement.  The Term Loan, which matures on July 31, 2019, replaced a previously existing $20 million revolving credit facility with Bank of America, N.A. and other lenders, which was due to expire on April 5, 2016.  The previously existing revolving credit facility was terminated concurrently with the effective date of the Credit Agreement on July 31, 2015 (the “Closing Date”).

Under the terms of the Credit Agreement, the Bank receives an unused facility fee on the average daily unused balance of Facility 1 at a rate per annum equal to 0.50%, which fee is payable quarterly in arrears.  In addition, the Company is required to maintain, on deposit with the Bank in one or more non-interest bearing accounts, a prior lender.  The L/Cminimum of $5 million in quarterly average aggregate balances.  If in any quarter the required average aggregate account balance is not maintained, the Company is required to pay the Bank a fee of $12,500 for that quarter.  Under the terms of the Credit Agreement, in the event that the Company terminates the Credit Facility or refinances with another lender within 18 months of closing, the Company shall be required to pay the Bank a breakage fee of $500,000.

In addition to the foregoing, the Credit Agreement contains customary representations, warranties and affirmative and negative covenants, including financial covenants that restrict capital expenditures, prohibit the incurrence of a net loss commencing on December 31, 2018 and require a minimum adjusted EBITDA and a minimum tangible net worth which is an annual covenant, as well as events of default customary for facilities of this type.  As of SeptemberJune 30, 2017, the Company is in compliance with all covenants.

As of June 30, 2017, the Company had $33 million outstanding under the Credit Facility (which includes the short term loan of $8 million); offset by $1.0 million of deferred finance fees.  As of December 31, 2016, the Company has $5.5had $44.3 million outstanding under the Prior Credit Facility; offset by $2.3 million of deferred finance fees, which were written-off.  As of June 30, 2017 and December 31, 2016, there were letters of credit in the aggregate principal amount of $6.2 million outstanding, respectively.  As of June 30, 2017, there are no revolving loans outstanding under the L/C Agreement.Facility 2.

Scheduled maturities of long-term debt and lease obligations at SeptemberJune 30, 20162017 are as follows:

The Company has two stock incentive plans:  a Long-Term Incentive Plan (the “LTIP”) and a Non-Employee Directors Restricted Stock Plan (the “Non-Employee Directors Plan”).

Under the LTIP, certain employees received awards of restricted shares of common stock based on service and performance.  The number of shares granted to each employee is based on the fair market value of a share of common stock on the date of grant.

On May 13, 2016 and January 16, 2017, performance-based restricted shares were granted to certain employees of the Company, which vest over two years on March 15, 2017 and March 15, 2018 based upon the attainment of a financial responsibility ratio during each fiscal year ending December 31, 2016 and 2017.  There is no vesting periodrestriction on the right to vote or the right to receive dividends onwith respect to any of thethese restricted shares.

On June 2, 2014 and December 18, 2014, performance-based restricted shares were granted to certain employees of the Company, which vest over three years based upon the attainment of (i) a specified operating income margin during any one or more of the fiscal years in the period beginning January 1, 2015 and ending December 31, 2017 and (ii) the attainment of earnings before interest, taxes, depreciation and amortization targets during each of the fiscal years ended December 31, 2015 through 2017.  There is no vesting periodrestriction on the right to vote or the right to receive dividends onwith respect to any of the restricted shares.

Pursuant to the Non-Employee Directors Plan, each non-employee director of the Company receives an annual award of restricted shares of common stock on the date of the Company’s annual meeting of shareholders.  The number of shares granted to each non-employee director is based on the fair market value of a share of common stock on that date.  The restricted shares vest on the first anniversary of the grant date; however, theredate.  There is no vesting period on the right to vote or the right to receive dividends onwith respect to these restricted shares.

For the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, the Company completed a net share settlement for 38,389184,231 and 49,07538,389 restricted shares, respectively, on behalf of certain employees whothat participate in the LTIP upon the vesting of the restricted shares pursuant to the terms of the LTIP.  The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 20162017 and/or 2015,2016, creating taxable income for the employees.   At the employees’ request, the Company will pay these taxes on behalf of the employees in exchange for the employees returning an equivalent value of restricted shares to the Company.  These transactions resulted in a decrease of $0.4 million and $0.1 million or less for each of the three and ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively, to equity on the Condensed Consolidated Balance Sheetscondensed consolidated balance sheets as the cash payment of the taxes effectively was a repurchase of the restricted shares granted in previous years.

The following is a summary of transactions pertaining to restricted stock:

The restricted stock expense for the three months ended SeptemberJune 30, 2017 and 2016 and 2015 was $0.4$0.3 million and $0.1$0.3 million, respectively.  The restricted stock expense for the ninesix months ended SeptemberJune 30, 2017 and 2016 and 2015 was $1.1$0.7 million and $0.9$0.7 million, respectively.  The unrecognized restricted stock expense as of SeptemberJune 30, 20162017 and December 31, 20152016 was $1.9$0.9 million and $1.3$1.5 million, respectively.  As of SeptemberJune 30, 2016,2017, outstanding restricted shares under the LTIP had aggregate intrinsic value of $2.8$1.9 million.

The fair value of the stock options used to compute stock-based compensation is the estimated present value at the date of grant using the Black-Scholes option pricing model.  The following is a summary of transactions pertaining to stock options:

As of SeptemberJune 30, 2016,2017, there was no unrecognized pre-tax compensation expense.

The following table presents a summary of stock options outstanding:

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to userecover the existing deferred tax assets.  A significant piece of objective negative evidence was the cumulative losses incurred by the Company in recent years.  On the basis of this evaluation the realization of the Company’s deferred tax assets was not deemed to be more likely than not and thus the Company maintained a full valuation allowance on its net deferred tax assets as of SeptemberJune 30, 2016.2017.

In the ordinary conduct of its business, the Company is subject to certain other lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although the Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it, the Company does not believe that any currently pending legal proceedings to which it is a party will have a material adverse effect on the Company’s business, financial condition, and results of operations or cash flows.

The for-profit education industry has been impacted by numerous regulatory changes, the changing economy and an onslaught of negative articles in the press.media attention. As a result of these actions, student populations have declined and operating costs have increased.  Over the past few years, the Company has closed over 10ten locations and exited its online business.  TheIn 2016, the Company reviewed how it has been structuredceased operations in Hartford, Connecticut; Fern Park, Florida; and Henderson (Green Valley), Nevada. In the fourth quarter of 2016, the Board of Directors approved plans to cease operations at our schools in Center City Philadelphia, Pennsylvania; Northeast Philadelphia, Pennsylvania; and West Palm Beach, Florida.  Each of these schools is expected to close in 2017.  In addition, in March 2017, the Board of Directors approved plans to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts which are expected to close in the firstfourth quarter of 2015 decided to change its organization to enable2017.  These schools, which were previously included in the Company to better allocate financialHealthcare and human resources to respond to its markets and withOther Professions segment, are now included in the goal of improving its profitability and competitive advantage.  Transitional segment.

In the past, the Companywe offered any combination of programs at any campus.  The Company has changed itsWe have shifted our focus to program offerings that create greater differentiation among campuses and attain excellence to attract more students and gain market share.  Also, strategically, the Companywe began offering continuing education training to select employers who hire itsour students and this is best achieved at campuses focused on their professions.profession.

As a result of the regulatory environment, market forces and strategic decisions, the Company now operatesWe currently operate in three reportable segments: a) Transportation and Skilled Trades b) Healthcare and Other Professions and c) Transitional which refers to businesses that have been or are currently being taught out.

Transportation and Skilled Trades – Transportation and Skilled Trades offers academic programs mainly in the career-oriented disciplines of transportation and skilled trades (e.g. automotive, diesel, HVAC, welding and manufacturing).

Transitional – Transitional refers to operations that were or are being phased out or closed and our campuses that are currently being taught out and consists of the Company’s Fern Park, Florida and Hartford, Connecticut campuses and certain programs at the West Palm Beach, Florida campus.  Each school employsout.  These schools are employing a gradual teach-out process that enables the schoolschools to continue to operate while current students complete their course of study.  The Fern Park, Florida and Hartford, ConnecticutThese schools are no longer enrolling new students.  TheDuring the year ended December 31, 2016, the Company announced the closings of our Northeast Philadelphia, Pennsylvania; Center City Philadelphia, Pennsylvania; and West Palm Beach, school is no longer enrolling new students for certain programs which was announced during the quarter ended September 30, 2016 and the teach-out of these programs isFlorida facilities.  These schools are expected to be completed infully taught out on August 31, 2017, August 31, 2017 and September 30, 2017, respectively.  In the first quarter of 2017.  The2016 we completed the teach-out of our Fern Park, Florida campus wascampus.  Also, in the fourth quarter of 2016, we completed the teach-out of our Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.  In addition, in March 2017, the Board of Directors approved a plan to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools are being taught out as of March 31, 2016.  On December 3, 2015, the Company announced it was teaching out the Hartford, Connecticut campus, where the teach-out isand expected to be completed byclosed in December 2016.2017.

The Company continually evaluates all campuses for profitability, earning potential, and customer satisfaction.  This evaluation takes several factors into consideration, including the campus’s geographic location, the programs offered at the campus, as well as skillsets required of our students by their potential employers.  The purpose of this evaluation is to ensure that our programs provide our students with the best possible opportunity to succeed in the marketplace with the goals of attracting more students to our programs and, ultimately, to provide the shareholders with the maximum return on their investment.  Campuses in the Transitional segment have been subject to this process and have been strategically identified for closure.

We evaluate segment performance based on operating results.  Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate,” which primarily includes unallocated corporate activity.

Summary financial information by reporting segment is as follows: