What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 140 added, 115 removed, 536 unchanged (32% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Accounts receivable, less allowance of $ 22,539 and $ 25,174 at March 31 , 2021 and December 31, 2020 , respectively

Accounts receivable, less allowance of $ 24,073 and $ 25,174 at June 30 , 2021 and December 31, 2020 , respectively

Prepaid income taxes

Prepaid expenses and other current assets

Total current assets

PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $ 176,757 and $ 176,300 at March 31 , 2021 and December 31, 2020 , respectively

PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $ 178,391 and $ 176,300 at June 30 , 2021 and December 31, 2020 , respectively

OTHER ASSETS:

Noncurrent receivables, less allowance of $ 3,701 and $ 3,465 at March 31 , 2021 and December 31, 2020 , respectively

Noncurrent receivables, less allowance of $ 4,048 and $ 3,465 at June 30 , 2021 and December 31, 2020 , respectively

Deferred income taxes, net

24 unchanged sentences

SERIES A CONVERTIBLE PREFERRED STOCK

Preferred stock, no par value - 10,000,000 shares authorized, Series A convertible preferred shares, 12,700 shares issued and outstanding at March 31 , 2021 and December 31, 2020

Preferred stock, no par value - 10,000,000 shares authorized, Series A convertible preferred shares, 12,700 shares issued and outstanding at June 30 , 2021 and December 31, 2020

STOCKHOLDERS’ EQUITY:

Common stock, no par value - authorized:

100,000,000 shares at March 31 , 2021 and December 31, 2020 ;

100,000,000 shares at June 30 , 2021 and December 31, 2020 ;

issued and outstanding:

26,895,970 shares at March 31 , 2021 and 26,476,329 shares at December 31, 2020

26,972,165 shares at June 30 , 2021 and 26,476,329 shares at December 31, 2020

Additional paid-in capital

Treasury stock at cost - 5,910,541 shares at March 31 , 2021 and December 31, 2020

Treasury stock at cost - 5,910,541 shares at June 30 , 2021 and December 31, 2020

Retained earnings

1 unchanged sentence

Total stockholders’ equity

TOTAL LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND EQUITY

TOTAL LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

See notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

COSTS AND EXPENSES:

1 unchanged sentence

Selling, general and administrative

(Gain) loss on disposition of assets

Total costs & expenses

6 unchanged sentences

INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

Net income (loss) per common share

Basic and diluted

Net income (loss) per common share

Weighted average number of common shares outstanding:

Basic and diluted

See notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

18 unchanged sentences

BALANCE - March 31, 2021

Preferred stock dividend

Employee pension plan adjustments

Derivative qualifying as cash flow hedge

Stock-based compensation expense

Restricted stock

Net share settlement for equity-based compensation

BALANCE - June 30, 2021

Stockholders' Equity

8 unchanged sentences

BALANCE - March 31, 2020

Employee pension plan adjustments

Derivative qualifying as cash flow hedge

Stock-based compensation expense

Restricted stock

Net share settlement for equity-based compensation

BALANCE - June 30, 2020

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Deferred income taxes

Loss on disposition of assets

Fixed asset donations

3 unchanged sentences

Accounts receivable

Prepaid income taxes and income taxes receivable

Prepaid income taxes and income taxes payable

Prepaid expenses and current assets

3 unchanged sentences

Accrued expenses

CARES Act student funds liability

CARES Act institutional funds liability

Unearned tuition

Income taxes payable

Other liabilities

Total adjustments

Net cash used in operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

Proceeds from insurance

Net cash used in investing activities

13 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

5 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2021 AND 2020

THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(In thousands, except share and per share amounts and unless otherwise stated)

10 unchanged sentences

(a) Transportation and Skilled Trades, and (b) Healthcare and Other Professions (“HOPS”).

Liquidity —As of March 31, 2021, the Company had cash and cash equivalents of $ 26.7 million and a net cash balance of $ 10.0 million calculated as cash and cash equivalents, less both the short-term and long-term portions of the Company’s Credit Facility (defined below).

As of March 31, 2021, the Company also can borrow an additional $ 21.0 million under its Credit Facility.

Liquidity —As of June 30, 2021, the Company had cash and cash equivalents of $ 33.0 million and a net cash balance of $ 16.7 million calculated as cash and cash equivalents, less both the short-term and long-term portions of the Company’s Credit Facility (defined below) and can borrow an additional $ 21.0 million under its Credit Facility.

As of December 31, 2020, the Company had a net cash balance of $ 20.8 million.

The Company believes that its likely sources of cash should be sufficient to fund operations for the next twelve months and thereafter for the foreseeable future.

The Company believes that its likely sources of cash will be sufficient to fund operations for the next twelve months and thereafter for the foreseeable future.

However, the circumstances relating to COVID-19 and its evolution are unpredictable and, if circumstances surrounding COVID-19 should evolve in a significantly adverse manner, it is possible our liquidity could be materially and adversely affected.

2 unchanged sentences

These financial statements, which should be read in conjunction with the December 31, 2020 audited consolidated financial statements and notes thereto and related disclosures of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, reflect all adjustments, consisting of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows for such periods.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2021.

The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2021.

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.

43 unchanged sentences

Measurement of Credit Losses on Financial Instruments ” and subsequently issued additional guidance that modified ASU 2016-13.

ASU 2016-13 and the subsequent modifications are identified as Accounting Standards Codification (“ASC”) Topic 326.

The ASU and the subsequent modifications are identified as Accounting Standards Codification (“ASC”) Topic 326.

The standard requires an entity to change its accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss” to a “current expected credit loss” model.

21 unchanged sentences

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 our income tax provision to vary significantly among financial reporting periods.

During the three months ended March 31, 2021 and 2020, the Company did no t recognize any interest and penalties expense associated with uncertain tax positions.

During the three and six months ended June 30, 2021 and 2020, the Company did no t recognize any interest and penalties expense associated with uncertain tax positions.

Derivative Instruments —The Company records the fair value of derivative instruments as either assets or liabilities on the balance sheet.

14 unchanged sentences

Basic income (loss) per common share has been computed by dividing net income (loss) allocated to common shareholders by the weighted-average number of common shares outstanding.

The basic and diluted net income amounts are the same for the three months ended March 31, 2021 as a result of the anti-dilutive impact of the potentially dilutive securities.

The basic and diluted net loss amounts are the same for the three months ended March 31, 2020 as a result of the net loss and anti-dilutive impact of the potentially dilutive securities.

The basic and diluted net income amounts are the same for the three and six months ended June 30, 2021 and three months ended June 30, 2020 as a result of the anti-dilutive impact of the potentially dilutive securities.

The basic and diluted net loss amounts are the same for the six months ended June 30, 2020 as a result of the net loss and anti-dilutive impact of the potentially dilutive securities.

The Company uses the more dilutive method of calculating the diluted income per share by applying the more dilutive of either (a) the treasury stock method, if-converted method, or (b) the two-class method in its diluted income (loss) per common share calculation.

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except share data)

13 unchanged sentences

Unvested restricted stock

Stock options

Dilutive shares outstanding

2 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except share data)

10 unchanged sentences

We have assessed the costs incurred to obtain a contract with a student and determined them to be immaterial.

Unearned tuition in the amount of $ 20.2 million and $ 23.5 million is recorded in the current liabilities section of the accompanying condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively.

The change in this contract liability balance during the three -month period ended March 31, 2021 is the result of payments received in advance of satisfying performance obligations, offset by revenue recognized during that period.

Revenue recognized for the three -month period ended March 31, 2021 that was included in the contract liability balance at the beginning of the year was $ 20.3 million.

Unearned tuition in the amount of $ 22.2 million and $ 23.5 million is recorded in the current liabilities section of the accompanying condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.

The change in this contract liability balance during the six-month period ended June 30, 2021 is the result of payments received in advance of satisfying performance obligations, offset by revenue recognized during that period.

Revenue recognized for the six-month period ended June 30, 2021 that was included in the contract liability balance at the beginning of the year was $ 22.4 million.

The following table depicts the timing of revenue recognition:

Three months ended March 31, 2021

Three months ended June 30, 2021

Six months ended June 30, 2021

Transportation

Trades Segment

Transportation

Trades Segment

Timing of Revenue Recognition

2 unchanged sentences

Total revenues

Three months ended March 31, 2020

Three months ended June 30, 2020

Six months ended June 30, 2020

Transportation

Trades Segment

Transportation

Trades Segment

Timing of Revenue Recognition

3 unchanged sentences

The Company determines if an arrangement is a lease at inception.

The Company considers any contract where there is an identified asset and the Company has the right to control the use of such asset in as a lease.

The Company considers any contract where there is an identified asset and the Company has the right to control the use of such asset as a lease.

An operating lease ROU asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

6 unchanged sentences

Lease expense for lease payments are recognized on a straight-line basis over the lease term for operating leases.

Our operating lease cost for each of the three months ended March 31, 2021 and 2020 was $ 3.7 million .

Our variable lease cost for the three months ended March 31, 2021 was less than $ 0.1 million .

The net change in the ROU asset and lease liability are included in other assets in the condensed consolidated cash flows for the three months ended March 31, 2021 and 2020.

Our operating lease cost for the three months ended June 30, 2021 and 2020 was $ 3.8 million and $ 3.7 million, respectively.

Our operating lease cost for the six months ended June 30, 2021 and 2020 was $ 7.6 million and $ 7.4 million, respectively.

Our variable lease cost for the three and six months ended June 30, 2021 was less than $ 0.1 million.

The net change in the ROU asset and lease liability are included in other assets in the condensed consolidated cash flows for the six months ended June 30, 2021 and 2020.

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:

Three Months Ended

Six Months Ended

Operating cash flow information:

3 unchanged sentences

Weighted-average remaining lease term and discount rate for our operating leases is as follows:

As of June 30,

Weighted-average remaining lease term

Weighted-average discount rate

Maturities of lease liabilities by fiscal year for our operating leases as of March 31, 2021 are as follows:

Maturities of lease liabilities by fiscal year for our operating leases as of June 30, 2021 are as follows:

Year ending December 31,

2021 (excluding the three months ended March 31, 2021)

2021 (excluding the six months ended June 30, 2021)

Total lease payments

3 unchanged sentences

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 three months ended March 31, 2021 and 2020, respectively.

There were no long-lived asset impairments during the six months ended June 30 , 2021 and 2020 .

The Company reviews goodwill for impairment when indicators of impairment exist.

Annually, or more frequently if necessary, the Company evaluates goodwill for impairment, with any resulting impairment reflected as an operating expense.

The Company has concluded that, as of March 31, 2021, there were no indicators of potential impairment and, accordingly, the Company did not test goodwill for impairment.

The carrying amount of goodwill at March 31, 2021 and 2020 is as follows:

The Company has concluded that, as of June 30 , 2021, there were no indicators of potential impairment and, accordingly, the Company did not test goodwill for impairment.

The carrying amount of goodwill at June 30 , 2021 and 2020 is as follows:

Balance as of January 1, 2021

Balance as of March 31 , 2021

Balance as of June 30 , 2021

Balance as of January 1, 2020

Balance as of March 31 , 2020

As of March 31, 2021 and 2020, the goodwill balance is related to the Transportation and Skilled Trades segment.

Balance as of June 30 , 2020

As of June 30 , 2021 and 2020, the goodwill balance is related to the Transportation and Skilled Trades segment.

LONG-TERM DEBT

29 unchanged sentences

In addition to the foregoing, the Credit Agreement contains customary representations, warranties and affirmative and negative covenants (including financial covenants that (i) restrict capital expenditures, (ii) restrict leverage, (iii) require maintaining minimum tangible net worth, (iv) require maintaining a minimum fixed charge coverage ratio and (v) require the maintenance of a minimum of $ 5 million in quarterly average aggregate balances on deposit with the Lender, which, if not maintained, will result in the assessment of a quarterly fee of $ 12,500 ), as well as events of default customary for facilities of this type.

As of March 31, 2021, the Company was in compliance with all debt covenants.

As of June 30, 2021, the Company was in compliance with all debt covenants.

The Credit Agreement also limited the payment of cash dividends during the first twenty-four months of the agreement to $ 1.7 million but an amendment to the Credit Agreement entered into on November 10, 2020 raised the cash dividend limit to $ 2.3 million in such twenty-four-month period.

As of March 31, 2021 and December 31, 2020, the Company had $ 17.3 million and $ 17.8 million , respectively, outstanding under the Credit Facility offset by $ 0.6 million and $ 0.6 million of deferred finance fees, respectively.

As of March 31, 2021 and December 31, 2020, letters of credit in the aggregate outstanding principal amount of $ 4.0 million were outstanding under the Credit Facility.

Scheduled maturities of long-term debt at March 31, 2021 are as follows:

As of June 30 , 2021 and December 31, 2020, the Company had $ 16.8 million and $ 17.8 million , respectively, outstanding under the Credit Facility offset by $ 0.5 million and $ 0.6 million of deferred finance fees, respectively.

As of June 30 , 2021 and December 31, 2020, letters of credit in the aggregate outstanding principal amount of $ 4.0 million were outstanding under the Credit Facility.

Scheduled maturities of long-term debt at June 30 , 2021 are as follows:

Year ending December 31,

2021 (excluding the six months ended June 30, 2021)

STOCKHOLDERS’ EQUITY

20 unchanged sentences

As a result, the Company is not required to re-measure the Series A Preferred Stock and does not accrete changes in the redemption value.

As of March 31, 2021 and December 31, 2020, we paid a $ 0.3 million and $ 1.4 million, respectively, cash dividend on the outstanding shares of Series A Preferred Stock rather than increasing the number of Conversion Shares.

As of June 30, 2021 and December 31, 2020, we paid a $ 0.6 million and $ 1.4 million, respectively, cash dividend on the outstanding shares of Series A Preferred Stock rather than increasing the number of Conversion Shares.

Dividends are included in the consolidated balance sheets within additional paid-in-capital when the Company maintains an accumulated deficit.

19 unchanged sentences

Restricted Stock

The Company currently has three stock incentive plans:

a Long-Term Incentive Plan (the “LTIP”), a Non-Employee Directors Restricted Stock Plan (the “Non-Employee Directors Plan”) and the Lincoln Educational Services Corporation 2020 Incentive Compensation Plan (the “2020 Plan”).

The Company currently issues restricted stock awards under the Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan (the “2020 Plan”).

As more fully described below, the Company continues to maintain the Lincoln Educational Services Corporation 2005 Long Term Incentive Plan, as amended and amended and restated (the “Prior Plan”) only with respect to awards made thereunder, but, as no shares remain available under the Prior Plan, the Company no longer makes grants under such plan.

On March 26, 2020, the Board adopted the 2020 Plan to provide an incentive to certain directors, officers, employees and consultants of the Company to align their interests in the Company’s success with those of its shareholders through the grant of equity-based awards.

4 unchanged sentences

Subject to adjustment as described in the 2020 Plan, the aggregate number of shares of common stock available for issuance under the 2020 Plan is 2,000,000 shares.

As of March 31, 2021 , a total of 98,614 restricted shares of common stock have been issued to non-employee directors which vest on the first anniversary of the grant date.

On August 7, 2020, two non-employee directors were appointed to the Company’s Board of Directors and 17,096 restricted shares of common stock were granted to each non-employee of these individuals.

These shares vest on June 16, 2021.

On May 6, 2021, 76,195 restricted shares of common stock were issued to non-employee directors which vest on the first anniversary of the grant date.

On June 16, 2020, 111,376 restricted shares of common stock were issued to non-employee directors which are fully vested on June 16, 2021.

On August 7, 2020, two non-employee directors were appointed to the Company’s Board of Directors and 17,096 restricted shares of common stock were granted to each of those individuals.

These shares vested on June 16, 2021.

Also on August 7, 2020, a non-employee director retired from his position on the Company’s Board of Directors and 12,762 restricted shares of common stock held by him which were unvested were accelerated to vest effective August 7, 2020.

On February 25, 2021, performance-based restricted shares were granted to certain employees of the Company.

The shares vest ratably on the first , second and third anniversary dates based upon the attainment of a financial target during each fiscal years ending December 31, 2021, 2022 and 2023, respectively, except in extraordinary circumstances.

The shares vest ratably on the first , second and third anniversary dates of the grant based upon the attainment of a financial target during each of the fiscal years ending December 31, 2021, 2022 and 2023, respectively, except in extraordinary circumstances.

There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares.

For the three months ended March 31, 2021, the Company recorded expense of $ 0.1 million as the expectation of attainment of the target is probable.

For the three and six months ended June 30 , 2021, the Company recorded expense of $ 0.3 million and $ 0.4 million, respectively, as the expectation of attainment of the target is probable.

On February 20, 2020, performance-based restricted shares were granted to certain employees of the Company.

The shares vest 20 % , 30 % and 50 % on the first , second and third anniversary dates, respectively, based upon the attainment of a financial target during each fiscal years ending December 31, 2020, 2021 and 2022, respectively, except in extraordinary circumstances.

There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares.

For each of the three months ended March 31, 2021 and 2020, the Company recorded expense of $ 0.1 million as the expectation of attainment of the target is probable.

Under the LTIP, certain employees have 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 amount of the award and the fair market value of a share of common stock on the date of grant.

The 2020 Plan makes it clear that there will be no new grants under the LTIP effective as of the date of shareholder approval, June 16, 2020.

The 2020 Plan also states that the shares available under the 2020 Plan will be two million shares plus the number of shares remaining available under the LTIP.

As no shares remain available under the LTIP there can be no additional grants under the LTIP.

Outstanding grants under the LTIP remain in effect according to their terms.

Therefore, those grants are subject to the particular award agreement relating thereto and to the LTIP to the extent that the prior plan provides rules relating to those grants.

The LTIP remains in effect only to that extent.

On February 28, 2019, restricted shares were granted to certain employees of the Company, which shares ratably vest over three years .

The shares vest 20 % , 30 % and 50 % on the first, second and third anniversary dates of the grant, respectively, based upon the attainment of a financial target during each fiscal years ending December 31, 2020, 2021 and 2022, respectively, except in extraordinary circumstances.

There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares.

For each of the three months ended March 31, 2021 and 2020 , the Company recorded expense of $ 0.1 million in connection with this grant.

Non-Employee Directors Plan

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.

For the three months ended June 30, 2021 and 2020, the Company recorded expense of $ 0.2 million and $ 0.2 million, respectively, as the expectation of attainment of the target is probable.

For the six months ended June 30, 2021 and 2020, the Company recorded expense of $ 0.4 million and $ 0.2 million, respectively, as the expectation of attainment of the target is probable.

Under the Prior Plan, certain employees received awards of restricted shares of common stock based on service and performance.

The number of shares granted to each employee was based on the amount of the award and the fair market value of a share of common stock on the date of grant.

The 2020 Plan provides that there will be no new grants under the Prior Plan effective as of the date of shareholder approval, June 16, 2020, of the 2020 Plan.

The 2020 Plan also states that the shares available under the 2020 Plan will be two million shares plus the number of shares remaining available under the Prior Plan.

As no shares remain available under the Prior Plan, there can be no additional grants thereunder.

Outstanding grants under the Prior Plan remain in effect according to their terms.

Therefore, those grants are subject to the particular award agreement relating thereto and to the Prior Plan to the extent that the plan addresses those grants.

The Prior Plan remains in effect only to that extent.

On February 28, 2019, restricted shares were granted to certain employees of the Company under the Prior Plan , which shares ratably vest over three years .

There is no restriction on the right to vote or the right to receive dividends with respect to any of such restricted shares.

For the three months ended March 31, 2021 and 2020, the Company completed a net share settlement for 154,973 and 58,451 restricted shares, respectively, on behalf of certain employees that participate in the LTIP upon the vesting of the restricted shares pursuant to the terms of the LTIP.

For each of the three months ended June 30 , 2021 and 2020 , the Company recorded expense of $ 0.1 million in connection with that grant.

For the six months ended June 30, 2021 and 2020, the Company recorded expense of $ 0.2 million and $ 0.3 million, respectively, in connection with that grant.

For the three months ended March 31 , 2021 and 2020 and six months ended June 30, 2021 and 2020, the Company completed a net share settlement for 154,973 and 58,451 restricted shares, respectively, on behalf of certain employees who participate in the Prior Plan upon the vesting of the restricted shares pursuant to the terms of the Prior Plan .

The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 2021 and/or 2020, 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 $ 1.0 million and $ 0.2 million for each of the three months ended March 31, 2021 and 2020, respectively, to equity on the condensed consolidated balance sheets as the cash payment of the taxes effectively was a repurchase of the restricted shares granted in previous years.

At the employees’ request, the Company will pay those taxes on behalf of the employees in exchange for the employees’ returning an equivalent value of restricted shares to the Company.

Those transactions resulted in a decrease of $ 1.0 million and $ 0.2 million for each of the three months ended March 31 , 2021 and 2020 and six months ended June 30, 2021 and 2020, respectively, to equity on the condensed 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:

2 unchanged sentences

Nonvested restricted stock outstanding at December 31, 2020

Nonvested restricted stock outstanding at March 31 , 2021

The restricted stock expense for the three months ended March 31, 2021 and 2020 was $ 0.5 million and $ 0.3 million, respectively.

The unrecognized restricted stock expense as of March 31, 2021 and December 31, 2020 was $ 6.6 million and $ 3.2 million, respectively.

As of March 31, 2021 , outstanding restricted shares under the LTIP had aggregate intrinsic value of $ 11.3 million.

Nonvested restricted stock outstanding at June 30 , 2021

The restricted stock expense for the three months ended June 30 , 2021 and 2020 was $ 0.8 million and $ 0.3 million, respectively.

The restricted stock expense for the six months ended June 30, 2021 and 2020 was $ 1.3 million and $ 0.6 million, respectively.

The unrecognized restricted stock expense as of June 30, 2021 and December 31, 2020 was $ 6.7 million and $ 3.2 million, respectively.

As of June 30 , 2021 , outstanding restricted shares under the Prior Plan had aggregate intrinsic value of $ 13.4 million.

Stock Options

6 unchanged sentences

Granted/Vested

Outstanding at March 31 , 2021

Vested as of March 31 , 2021

Exercisable as of March 31 , 2021

As of March 31, 2021 , there was no unrecognized pre-tax compensation expense.

The provision for income taxes for the three months ended March 31, 2021 and 2020 was $ 1.2 million , or 21.7 % of pretax income, and approximately $ 0.1 million , or 2.9 % of pretax loss, respectively.

The increase quarter over quarter was due to the reversal of a full valuation allowance at December 31, 2020, resulting in an effective tax rate of 21.7 % in the current quarter.

Outstanding at June 30 , 2021

Vested as of June 30 , 2021

Exercisable as of June 30 , 2021

As of June 30 , 2021 , there was no unrecognized pre-tax compensation expense.

The provision for income taxes for the three months ended June 30, 2021 and 2020 was $ 0.7 million, or 23.1 % of pretax income, and approximately $ 0.1 million, or 6.0 % of pretax income, respectively.

The provision for income taxes for the six months ended June 30, 2021 and 2020 was $ 2.0 million, or 22.2 % of pretax income, and approximately $ 0.1 million, or 11.5 % of pretax loss, respectively.

The increase for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was due to the reversal of a full valuation allowance at December 31, 2020, resulting in an effective tax rate of 22.2 % for the six months ended June 30, 2021.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

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.

Information regarding certain specific legal proceedings in which the Company is involved is contained in Part I, Item 3, and in Note 15 to the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Unless otherwise indicated in this report, all proceedings discussed in the earlier report which are not indicated therein as having been concluded, remain outstanding as of March 31, 2021.

Information regarding certain specific legal proceedings in which the Company is involved is contained in Part II, Item 1 hereof as well as in Part I, Item 3, and in Note 15 to the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Unless otherwise indicated in this report, all proceedings discussed in the earlier report which are not indicated therein as having been concluded, remain outstanding as of June 30, 2021.

We operate our business in two reportable segments:

10 unchanged sentences

dental assistant, medical assistant, practical nursing, culinary arts and cosmetology).

The Company also utilizes the Transitional segment when and if it closes a school.

The Company also utilizes the Transitional segment on a limited basis solely when and if it closes a school.

We evaluate segment performance based on operating results.

1 unchanged sentence

Summary financial information by reporting segment is as follows:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Operating Income (Loss)

1 unchanged sentence

Healthcare and Other Professions

March 31, 2021

For the Six Months Ended June 30,

Operating Income (Loss)

Transportation and Skilled Trades

Healthcare and Other Professions

June 30, 2021

December 31, 2020

2 unchanged sentences

The carrying amount and estimated fair value of the Company’s financial instrument assets and liabilities, which are not measured at fair value on the Condensed Consolidated Balance Sheet, are listed in the table below:

March 31, 2021

June 30, 2021

Quoted Prices in

15 unchanged sentences

for Identical

Significant Other

Observable Inputs

Significant Other Observable Inputs

Financial Assets:

6 unchanged sentences

Credit facility

As of March 31, 2021 and December 31, 2020, we estimated the fair value of the Credit Facility based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.

As of June 30, 2021 and December 31, 2020, we estimated the fair value of the Credit Facility based on a present value analysis utilizing aggregate market yields obtained from independent pricing sources for similar financial instruments.

The carrying amounts reported on the Consolidated Balance Sheets for Cash and cash equivalents, Restricted cash and Noncurrent restricted cash approximate fair value because they are highly liquid.

12 unchanged sentences

The following summarizes the fair value of the outstanding derivative:

March 31, 2021

June 30, 2021

December 31, 2020

8 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

Interest Expense

2 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Interest expense

Interest Rate Swap

Six Months Ended

Derivative qualifying as cash flow hedge

Interest rate swap income (loss)

COVID-19 PANDEMIC AND CARES ACT

The Company began seeing the impact of the global COVID-19 pandemic on its business in early March 2020 and some effects of the pandemic have continued.

The spread of COVID-19 has had an unprecedented impact on higher educational institutions across the country, including our schools, and has led to the closure of campuses and the transition of academic programs from in-person to online delivery.

The impact for the Company was primarily related to transitioning classes from in-person, hands-on learning to online, remote learning which resulted in, among other things, additional expenses.

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In accordance with phased re-opening as applied on a state-by-state basis, all of our schools have now re-opened and the majority of the students who were on leave of absence or have deferred their programs returned to school to finish their programs.

The Company has considered the impact of COVID-19 on the assumptions and estimates used to prepare its consolidated financial statements and has determined that there were no material adverse impacts on the Company’s results of operations and financial position at June 30, 2021.

The Company expects to continue to be impacted by COVID-19 as the situation remains dynamic and evolving and subject to rapid and possibly material change.

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The law requires institutions receiving funds to continue to the greatest extent practicable to pay its employees and contractors during the period of any disruptions or closures related to the COVID-19 emergency.

Other than as disclosed below, the CARES Act had no material impact on the Company’s income tax provision for the year ended December 31, 2020 or the six months ended June 30, 2021.

The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

The DOE has allocated funds to each institution of higher education based on a formula contained in the CARES Act.

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The DOE allocated $ 27.4 million to our schools distributed in two equal installments and required them to be utilized by April 30, 2021 and May 14, 2021, respectively.

As of March 31, 2021, the Company had distributed the full $ 13.7 million of its first installment as emergency grants to students and has utilized the full $ 13.7 million of its second installment, of which $ 5.7 million remains to be drawn down by the Company in the second quarter.

Proceeds from the second installment for permitted expenses were utilized to either offset original expenses incurred or to reduce student accounts receivable driving a decrease in bad debt expense, both uses resulted in a decrease in our selling general and administrative expenses .

As of June 30, 2021, the Company had distributed the full $ 13.7 million of its first installment as emergency grants to students and has utilized the full $ 13.7 million of its second installment .

Proceeds from the second installment for permitted expenses were primarily utilized to either offset original expenses incurred or to reduce student accounts receivable driving a decrease in bad debt expense, both uses resulted in a decrease in our selling general and administrative expenses .

On March 19, 2021, the Department of Education released guidance clarifying previous guidance on permitted institutional uses of funds received from the HEERF.

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The Company will have to repay 50% of the deferred payments by January 3, 2022, and the remaining 50% by January 3, 2023.

As of March 31, 2021, the Company had deferred payments of $ 4.5 million.

As of June 30, 2021, the Company had deferred payments of $ 4.5 million.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law.

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Failure to comply with requirements for the usage and reporting of these funds could result in requirements to repay some or all of the allocated funds and in other sanctions.

As of March 31, 2021, the Company has not drawn down any of these allocated funds.

SUBSEQUENT EVENTS

As previously disclosed in Lincoln’s Annual Report on Form 10-K, Lincoln is subject to an extensive regulatory scheme which includes, without limitation, the Borrower Defense to Repayment regulations;

see the Company’s disclosures in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 under the captions “Regulatory Environment – Borrower Defense to Repayment Regulations” and “Risk Factors—We could be subject to liabilities, letter of credit requirements and other sanctions under the DOE’s Borrower Defense to Repayment Regulations.” On April 29, 2021, Lincoln received communication from the DOE indicating that the DOE was in receipt of a number of borrower defense applications containing allegations concerning Lincoln and requiring the DOE to undertake a fact-finding process pursuant to DOE regulations.

Among other things, the communication outlines a process by which the DOE will provide to Lincoln each application allowing Lincoln the opportunity to submit responses to the applications.

Further, the communication outlines certain information requests, relating to the period between 2007 and 2013, in connection with the DOE’s preliminary review of the borrower defense applications.

Based upon publicly available information, it appears that the DOE has undertaken similar reviews of other educational institutions which have also been the subject of various borrower defense applications.

The DOE’s communication does not specify a precise number of applications that are the subject of the review nor the aggregate dollar amount of the loans that could be at issue and which the DOE could seek to recover from Lincoln.

Given the very recent receipt of the communication, the limited information contained therein and the early stage of Lincoln’s internal review, management is not able to predict the outcome of the DOE’s review at this time.

Lincoln is assessing the requests made in the DOE communication and expects to timely respond to the inquiries.

Additionally, while the Company has not yet begun to receive any borrower defense applications from the DOE, it expects to thoroughly review and respond to each application.

As of June 30, 2021, the Company has not drawn down any of these allocated funds.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements