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Lincoln Educational Services Corporation Generates $4.6 Million In Operating Income During Third Quarter 2015

The following excerpt is from the company's SEC filing.

Total Revenue of $79 million

Net Income of $0.11 per share

$14.1 Million in Cash Generated from Operations

Transportation & Skilled Trades Segment Operating Income Grows 71% vs. Q3’14

Launches Plan to Focus Operations on Transportation & Skilled Trades Segment; Divest Healthcare & Other Professions Segment

WEST ORANGE, N.J., November 4, 2015 -- Lincoln Educational Services Corporation (Nasdaq:LINC) today reported financial results for the third quarter ended September 30, 2015.

“During the third quarter, our team continued to improve Lincoln’s operating performance throu gh the persistent implementation of our plan to return the Company to sustainable profitability while continuing to meet the needs of our students,” said Scott Shaw, President and Chief Executive Officer. “As a result of our efforts, both of the Company’s operating segments showed improved performance and Lincoln generated operating income company-wide for the first time in three quarters. The Transportation and Skilled Trades segment operating returns during the quarter were particularly strong and illustrate one of the key factors behind our determination that Lincoln’s best strategy to sustain profitability and maximize shareholder returns is by focusing exclusively on this segment. During the quarter we grew operating income from the Transportation and Skilled Trades segment by 71% and expanded the number of campuses that will be offering the Audi Advanced Certification Program. We will focus on continuing to build the Transportation and Skilled Trades momentum during the fourth quarter as well as implement the plan to divest our Healthcare and Other Professions segment

THIRD QUARTER RESULTS (CONTINUING OPERATIONS):

Revenue was $79.0 million for the third quarter compared with $84.0 million in 2014 quarter. This was a result of a 9.5% decline in average student population, which decreased to 12,815 from 14,153. The revenue decline from lower student population was partially offset by a 3.8% increase in average revenue per student primarily related to improved student retention and a shift in program mix.

Operating income for the quarter was $4.6 million compared to an operating loss of $39.5 million for the third quarter of 2014. Impairment of goodwill and long-lived assets was $0.2 million and $39.3 million for the quarter ended September 30, 2015 and 2014, respectively. The improvement excluding the impairment of goodwill and long lived-assets was driven by a $3.4 million reduction in educational services and facilities expense, and a $6.8 million decrease in selling, general and administrative expenses offset by a decrease in revenue.

The Company’s educational services and facilities expenses decreased during the third quarter

primarily due to a decrease of $2.0 million, or 7.9%, in instructional and books and tools expenses. Instructional savings were a result of a reduced instructor headcount and other related costs resulting from lower average student population. Similarly, the decrease in books and tools expense is also attributable to the decrease in average student population.

In addition,

facilities expenses decreased by $1.4 million, or 8.3%, primarily due to lower depreciation expense. Educational services and facilities expenses, as a percentage of revenue, decreased to 49.4% from 50.5%.

Selling, general and administrative expenses decreased by $6.8 million, or 16.2%, to $34.9 million compared with $41.7 million in the 2014 third quarter. Sales and marketing expenses decreased by $0.9 million, or 6.1%, related to the transition to a centralized call center as well as reduced travel costs and salary expense partially offset by increased marketing expense of $0.6 million. Administrative expense was lower by $5.3 million, or 22.8%, as a result of management restructuring resulting in lower salaries and benefit expenses. As a percentage of revenues, selling, general and administrative expense decreased to 44.8% in the third quarter of 2015 from 49.7% in the prior year.

The third quarter’s net income from continuing operations improved to $2.6 million, or $0.11 per share, compared to a net loss of $35.4 million, or $1.55 per share, for the third quarter of 2014.

The Company had $32.4 million of cash and cash equivalents at September 30, 2015 as compared to $12.3 million of cash and cash equivalents as of December 31, 2014.

As of September 30, 2015, total assets classified as assets held for sale were $44.8 million compared to $52.4 at June 30, 2015. The decrease in assets held for sale mainly relates to a property that was previously expected to be sold within one year and is no longer available for sale.

Segment Financial Performance

Transportation and Skilled Trades segment revenue for the 2015 third quarter

decreased to $49.7 million compared to $51.3 million for the 2014 third quarter, primarily driven by a decline in average student population. The revenue decline from lower population was partially offset by a 5.3% increase in average revenue per student due to improved student retention and a shift in program mix. Operating income improved to $10.6 million from $6.2 million driven by expense reductions in educational services and facilities as well as in selling, general and administrative expenses.

Healthcare and Other Professions segment revenue

decreased by $2.8 million, or 8.7%, to $29.1 million in the three months ending September 30, 2015 from $31.9 million in the comparable period primarily attributable to a decrease in average student...


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