What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-08 · 281 added, 236 removed, 601 unchanged (46% of the section changed)

3 unchanged sentences

(In thousands, except share amounts)

September 30,

CURRENT ASSETS:

Cash and cash equivalents

Accounts receivable, less allowance of $ 25,987 and $ 26,837 at June 30, 2022 and December 31, 2021, respectively

Prepaid income taxes and income tax receivable

Accounts receivable, less allowance of $ 27,364 and $ 26,837 at September 30 , 2022 and December 31, 2021, respectively

Prepaid expenses and other current assets

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Total current assets

PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $ 148,132 and $ 153,335 at June 30 , 2022 and December 31,

2021 , respectively

PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $ 147,843 and $ 153,335 at September 30 , 2022 and

December 31, 2021 , respectively

OTHER ASSETS:

Noncurrent receivables, less allowance of $ 5,591 and $ 5,084 at June 30 , 2022 and December 31, 2021 , respectively

Noncurrent receivables, less allowance of $ 6,438 and $ 5,084 at September 30 , 2022 and December 31, 2021 , respectively

Deferred income taxes, net

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(In thousands, except share amounts)

September 30,

LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

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Preferred stock, no par value - 10,000,000 shares authorized, Series A convertible

preferred shares, 12,700 shares issued and outstanding at June 30 , 2022 and December 31, 2021

preferred shares, 12,700 shares issued and outstanding at September 30 , 2022 and December 31, 2021

STOCKHOLDERS’ EQUITY:

Common stock, no par value - authorized:

100,000,000 shares at June 30 , 2022 and December 31,

100,000,000 shares at September 30 , 2022 and

December 31, 2021 ;

issued and outstanding:

shares at June 30 , 2022

and 27,000,687 shares at December 31, 2021

26,255,580 shares at September 30 , 2022 and 27,000,687 shares

at December 31, 2021

Additional paid-in capital

Treasury stock at cost - 0 and 5,910,541 shares at June 30 , 2022 and December 31, 2021 , respectively

Treasury stock at cost - 0 and 5,910,541 shares at September 30 , 2022 and December 31, 2021 , respectively

Retained earnings

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

COSTS AND EXPENSES:

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Selling, general and administrative

(Gain) loss on disposition of assets

Loss (gain) on disposition of assets

Total costs & expenses

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Interest expense

INCOME (LOSS) BEFORE INCOME TAXES

PROVISION (BENEFIT) FOR INCOME TAXES

INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

PREFERRED STOCK DIVIDENDS

(LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS

INCOME AVAILABLE TO COMMON SHAREHOLDERS

Basic and diluted

Net (loss) income per common share

Net income per common share

Weighted average number of common shares outstanding:

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other comprehensive income (loss)

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BALANCE - June 30, 2022

Preferred stock dividends

Employee pension plan adjustments

Stock-based compensation expense

Restricted stock

Share repurchase

BALANCE - September 30, 2022

Stockholders’ Equity

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BALANCE - June 30, 2021

Preferred stock dividends

Employee pension plan adjustments

Derivative qualifying as cash flow hedge

Stock-based compensation expense

Restricted stock

BALANCE - September 30, 2021

See notes to unaudited condensed consolidated financial statements.

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(In thousands)

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Deferred income taxes

Gain on disposition of assets

(Gain) loss on disposition of assets

Fixed asset donations

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Total adjustments

Net cash (used in) provided by operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

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Payments on borrowings

Proceeds from borrowings

Dividend payment for preferred stock

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Net cash used in financing activities

NET DECREASE IN CASH AND CASH EQUIVALENTS

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS —Beginning of period

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(In thousands)

September 30,

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

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LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

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

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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 22 schools in 14 states, 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 and medical administrative assistant, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and

information technology.

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 22 schools in 14 states, 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 and medical administrative assistant, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology

and aesthetics) and information technology.

The schools operate under Lincoln Technical Institute, Lincoln College of Technology, 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 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” or the “Department”) 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.

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” or the “Department”) 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.

The Company’s business is organized into two

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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 six months ended June 30, 2022 are not necessarily indicative

of the results that may be expected for the full fiscal year ending December 31, 2022.

The results of operations for the nine months ended September 30, 2022 are not necessarily

indicative of the results that may be expected for the full fiscal year ending December 31, 2022.

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

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New Accounting

Pronouncements – In October 2021, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08 , “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”.

Pronouncements – In October 2021, the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”.

This amendment

introduces the requirement for an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with the requirements of FASB Accounting Standards Codification (“ASC”) “Topic 606,

introduced the requirement for an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with the requirements of FASB Accounting Standards Codification (“ASC”) “Topic 606,

Revenue from Contracts with Customers”, rather than at fair value.

The Company is currently assessing the impact that this ASU will have on its condensed consolidated financial statements and related disclosures.

The Company has evaluated the ASU and has determined that there is no impact on its condensed consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The ASU provides optional expedients and

exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

intended to help stakeholders during the global market-wide reference rate transition period.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These

amendments provided temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The ASU provided optional expedients and exceptions for applying generally accepted accounting principles to contract

modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

It was intended to help stakeholders during the global market-wide reference rate transition

In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848):

Scope” which clarifies that certain optional expedients and

exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

Scope” which clarified that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives

that are affected by the discounting transition.

The guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

has evaluated the ASU and has determined that there is no impact on its condensed consolidated financial statements and related disclosures.

The Company has evaluated the ASU and has determined that there is no impact on its condensed consolidated

financial statements and related disclosure s.

In August 2020, the FASB issued ASU 2020-06, “ Accounting for Convertible Instruments and Contracts

in an Entity’s Own Equity ”.

This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The ASU removes

This ASU simplified the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The ASU removed

separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature and hence most of the instruments will be accounted for as a single model (either debt or equity).

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to adopt the ASU’s guidance.

2020-06 is effective for the Company as a smaller reporting company for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

For convertible instruments that include a

down-round feature, entities may early adopt the amendments that apply to the down-round features if they have not yet adopted the amendments in ASU 2017-11.

The Company is currently assessing the impact that this ASU will have on its condensed

consolidated financial statements and related disclosures.

2020-06 is effective for the Company as a smaller reporting company for fiscal years beginning after December 15, 2023, and for interim periods within those fiscal years.

For convertible instruments that include

a down-round feature, entities may early adopt the amendments that apply to the down-round features if they have not yet adopted the amendments in ASU 2017-11.

The Company has evaluated the ASU and has determined that there is no impact on its

condensed consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “ Financial Instruments—Credit Losses (Topic 326):

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

The ASU and the subsequent modifications are identified as ASC Topic 326.

The ASU and the subsequent modifications were identified as ASC Topic 326.

The standard requires an entity to

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(Topic 815), and Leases (Topic 842) ”.

This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022,

This ASU deferred the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022,

including interim periods within those fiscal years.

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119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No.

2016-02, Leases (Topic 842) ” ASU 2020-02 adds a SEC paragraph pursuant to

the issuance of SEC Staff Accounting Bulletin No.

119 on loan losses to FASB Codification Topic 326 and also updates the SEC section of the Codification for the change in the effective date of Topic 842.

2016-02, Leases (Topic 842) ” ASU 2020-02 added a SEC paragraph pursuant

to the issuance of SEC Staff Accounting Bulletin No.

119 on loan losses to FASB Codification Topic 326 and also updated the SEC section of the Codification for the change in the effective date of Topic 842.

Early adoption is permitted.

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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 and six months ended June 30, 2022 and 2021, the Company did no t recognize any interest and penalties expense associated with uncertain tax positions.

On August 16, 2022, the Inflation Reduction Act was enacted and signed into law.

The act is a budget reconciliation package that includes

significant changes relating to tax, climate change, energy, and health care.

The tax provisions include, among other items, a corporate alternative minimum tax of 15%, an excise tax of 1% on corporate stock buy-backs, energy-related tax credits,

and additional IRS funding.

The Company does not expect the tax provisions of the act to have a material impact to our condensed consolidated financial statements.

During the three and nine months ended September 30, 2022 and 2021, the Company did no t recognize any interest or 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 condensed consolidated balance sheet.

The accounting for gains and losses resulting from changes in fair

value is dependent on the use of the derivative and whether it is designated and qualifies for hedge accounting.

The accounting for gains and losses resulting from changes in

fair value is dependent on the use of the derivative and whether it is designated and qualifies for hedge accounting.

All qualifying hedging activities are documented at the inception of the hedge and must meet the definition of highly effective in offsetting changes

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The Company classifies the cash flows from a cash flow hedge within the same category as the cash flows from the items being hedged.

NET (LOSS) INCOME PER COMMON SHARE

The Company presents basic and diluted (loss) income per common share using the two-class method which requires all outstanding Series A Preferred Stock and unvested restricted stock that contain rights to non-forfeitable dividends and

therefore participate in undistributed income with common shareholders to be included in computing (loss) income per common share.

Under the two-class method, net (loss) income is reduced by the amount of dividends declared in the period for each

class of common stock and participating security.

The remaining undistributed (loss) income is then allocated to common stock and participating securities, based on their respective rights to receive dividends.

Series A Preferred Stock and unvested

restricted stock contain non-forfeitable rights to dividends on an if-converted basis and on the same basis as common shares, respectively, and are considered participating securities.

The Series A Preferred Stock and unvested restricted stock are

not included in the computation of basic (loss) income per common share in periods in which we have a net loss, as the Series A Preferred Stock and unvested restricted stock are not contractually obligated to share in our net losses.

cumulative dividends on Series A Preferred Stock for the period decreases the income or increases the net loss allocated to common shareholders unless the dividend is paid in the period.

Basic (loss) income per common share has been computed by

dividing net (loss) income 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 and six months ended June 30, 2022 and 2021 as a result of the

anti-dilutive impact of the potentially dilutive securities.

The following is a reconciliation of the numerator and denominator of the diluted net (loss) income per share computations for the periods presented

NET INCOME PER COMMON SHARE

Company presents basic and diluted income per common share using the two-class method which requires all outstanding Series A Preferred Stock and unvested restricted stock that contain rights to non-forfeitable dividends and therefore participate

in undistributed income with common shareholders to be included in computing income per common share.

Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and

participating security.

The remaining undistributed income is then allocated to common stock and participating securities, based on their respective rights to receive dividends.

Series A Preferred Stock and unvested restricted stock contain

non-forfeitable rights to dividends on an if-converted basis and on the same basis as common shares, respectively, and are considered participating securities.

The Series A Preferred Stock and unvested restricted stock are not included in the

computation of basic income per common share in periods in which we have a net loss, as the Series A Preferred Stock and unvested restricted stock are not contractually obligated to share in our net losses.

However, the cumulative dividends on

Series A Preferred Stock for the period decreases the income or increases the net loss allocated to common shareholders unless the dividend is paid in the period.

Basic income per common share has been computed by dividing net income 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 and nine months ended September 30, 2022 and 2021 as a result of the 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 per common share calculation.

Potentially dilutive shares are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of restricted stock.

Potentially dilutive shares issuable upon conversion of the Series A

Preferred Stock are calculated using the if-converted method.

The following is a reconciliation of the numerator and denominator of the diluted net income per share computations for the periods presented below:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except share data)

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allocation to restricted stockholders

Net (loss) income allocated to common stockholders

Basic (loss) income per share:

Net income allocated to common stockholders

Basic income per share:

Weighted average common shares outstanding

Basic (loss) income per share

Diluted (loss) income per share:

Basic income per share

Diluted income per share:

Weighted average number of:

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Dilutive shares outstanding

Diluted (loss) income per share

Diluted income per share

The following table summarizes the potential weighted average shares of common stock that were excluded from the determination of our diluted shares

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except share data)

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million and $ 25.4 million is recorded in the current liabilities section of the accompanying condensed consolidated balance sheets as of

June 30, 2022 and December 31, 2021, respectively.

The change in this contract liability balance during the six-month period ended June 30, 2022 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, 2022 that was included in the contract liability balance at the beginning of the year was $ 24.4 million.

September 30, 2022 and December 31, 2021, respectively.

The change in this contract liability balance during the nine-month period ended September 30, 2022 is the result of payments received in advance of satisfying performance obligations, offset by

revenue recognized during that period.

Revenue recognized for the nine-month period ended September 30, 2022 that was included in the contract liability balance at the beginning of the year was $ 24.6 million.

The following table depicts the timing of revenue recognition:

Three months ended June 30, 2022

Six months ended June 30, 2022

Three months ended September 30, 2022

Nine months ended September 30, 2022

Transportation

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Total revenues

Three months ended June 30, 2021

Six months ended June 30, 2021

Three months ended September 30, 2021

Nine months ended September 30, 2021

Transportation

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Our leases have remaining lease terms of one year to 19 years .

Lease terms may include options to extend the lease term used in determining the

lease obligation when it is reasonably certain that the Company will exercise that option.

Lease terms may include options to extend the lease term

used in determining the lease obligation when it is reasonably certain that the Company will exercise that option.

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

See Note 13 which discusses the sale leaseback transaction relating to the Company’s Denver and Grand Prairie campuses which closed on October 29, 2021.

On June 30, 2022, the Company executed a lease for approximately 55,000 square feet of space that will be used as a new school, located in Atlanta, Georgia.

expected to commence in the third quarter of this year with the total payments due over the lease term on an undiscounted basis being $ 12.2

million over the 12-year lease term.

There was no involvement in the construction or design of the underlying asset on behalf of the

landlord and we are not deemed to be in control of the asset prior to the lease commencement date.

Our o perati ng lease cost for the three months ended June 30, 2022 and 2021 was $ 4.7 million and $ 3.8 million, respectively.

Our operating lease cost for the six months ended June 30, 2022 and 2021 was $ 9.3 million and $ 7.6 million, respectively.

lease cost for the three and six months ended June 30, 2022 was less than $ 0.1 million.

The net change in ROU asset and operating lease liability is included in other assets in the condensed consolidated cash flows for the six months ended June 30, 2022 and 2021.

On June 30, 2022, the Company executed a lease for approximately 55,000 square feet of space to serve as the Company’s new campus, in Atlanta, Georgia.

The lease commenced on August 2022 with total payments due over the lease term, on an undiscounted basis of $ 12.2 million over the 12-year lease term.

The lease contains two five-year renewal options that may be

exercised by the Company at the end of the initial lease term.

The Company had no involvement in the construction or design of the underlying asset and were not deemed to be in control of the asset prior to the lease commencement date.

three months ended September 30, 2022, the Company incurred approximately $ 0.1 million in capital expenditures, mostly relating to

architectural fees and approximately $ 0.1 million in rent.

Our o perati ng lease cost for the three months ended September 30, 2022 and 2021 was $ 4.8 million and $ 3.8 million, respectively.

Our operating lease cost for the nine months ended September 30,

2022 and 2021 was $ 14.1

million and $ 11.4 million, respectively.

Our variable lease cost for the three and nine months ended September 30, 2022 was less than $ 0.1 million.

The net change in ROU asset and operating lease liability is included in other assets in the condensed consolidated

cash flows for the nine months ended September 30, 2022 and 2021.

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

Three Months Ended

September 30,

Operating cash flow information:

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Lease liabilities arising from obtaining right-of-use assets

As of June 30, 2022, there was 1 new lease and 1 lease modification that resulted in noncash

re-measurement of the related ROU asset and operating lease liability of $ 6.7 million relating to one of our campuses.

This remeasurement does not include the

Atlanta, Georgia location since the lease commencement will occur in the third quarter of 2022.

During the nine months ended September

30, 2022, the Company entered into two new leases and one lease modification that resulted in noncash re-measurement of the related ROU asset and operating lease liability of $ 12.6 million.

This re-measurement includes the Atlanta, Georgia location, the lease of which commenced in August 2022.

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

As of June 30,

September 30,

Weighted-average remaining lease term

Weighted-average discount rate

Maturities of lease liabilities by fiscal year for our operating leases as of June 30, 2022 are as follows:

Maturities of lease liabilities by fiscal year for our operating leases as of September 30, 2022 are as follows:

Year ending December 31,

2022 (excluding the six months ended June 30, 2022)

2022 (excluding the nine months ended September 30, 2022)

Total lease payments

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is impaired, it will record a write-down of the carrying value of the asset and charge the impairment as an operating expense in the period in which the determination is made.

As of June 30, 2022 and 2021 there were no long-lived asset impairments.

As of September 30, 2022 and 2021 there were no long-lived asset impairments.

On December 31, 2021, as a result of impairment testing it was determined that there

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The impairment was the result of an assessment of

the current market value, obtained via 3rd party engagement, as compared to the current carrying value of the assets.

The carrying value for the Suffield, Connecticut property of approximately $ 2.9 million.

the current market value, obtained via third-party engagement, as compared to the current carrying value of the assets.

The carrying value for the Suffield, Connecticut property was approximately $ 2.9 million.

The fair value estimate provided indicated that the current value of the property was approximately $ 2.2 million.

As such, the aforementioned $ 0.7 million impairment was recorded

and the assets carrying value reduced.

This property was sold during the

second quarter of 2022 generating net proceeds of approximately $ 2.4 million and resulting in a gain on sale of asset of $ 0.2 million.

The carrying amount of goodwill at June 30 , 2022 and 2021 is as follows:

As such, the aforementioned $ 0.7 million impairment

was recorded and the assets carrying value reduced.

This property was

sold during the second quarter of 2022, generating net proceeds of approximately $ 2.4 million and resulting in a gain on sale of asset

of $ 0.2 million.

The carrying amount of goodwill at September 30 , 2022 and 2021 is as follows:

Balance as of January 1, 2022

Balance as of June 30 , 2022

Balance as of September 30 , 2022

Balance as of January 1, 2021

Balance as of June 30 , 2021

As of each of June 30 , 2022 and 2021, the goodwill balance of $ 14.5 million is related to the Transportation and Skilled Trades segment.

Balance as of September 30 , 2021

As of each of September 30 , 2022 and 2021, the goodwill balance of $ 14.5 million is related to the Transportation and Skilled Trades segment.

LONG-TERM DEBT

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(1) a $ 20 million senior secured term loan maturing on December 1, 2024 (the “Term

Loan”), with monthly interest and principal payments based on 120 -month amortization with the outstanding balance due on the maturity

Loan”), with monthly interest and principal payments based on a 120 -month amortization with the outstanding balance due on the maturity

(2) a $ 10 million senior secured delayed draw term loan maturing on December 1, 2024 (the “Delayed Draw Term Loan”), with monthly interest payments for the first 18

months and thereafter monthly payments of interest and principal based on 120 -month amortization and all balances due on the maturity

months and thereafter monthly payments of interest and principal based on a 120 -month amortization and all balances due on the maturity

(3) a $ 15 million senior secured committed revolving line of credit providing a sublimit of up to $ 10 million for standby letters of credit maturing on November 13, 2022 (the “Revolving Loan”), with monthly payments of interest only;

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At the closing of the Credit Facility, the Company entered into a swap transaction with the Lender for 100 % of the principal balance of the Term Loan maturing on the same date as the Term Loan.

Under the terms of the Credit Facility accrued interest on each loan is payable monthly in arrears with the Term Loan and the Delayed Draw Term Loan bearing interest at a floating interest rate based on the then one-month London Interbank Offered Rate (“LIBOR”) plus 3.50 % and subject to a LIBOR interest rate floor of 0.25 % if there is no

Under the terms of the Credit Facility accrued interest on each loan was payable monthly in arrears with the Term Loan and the Delayed Draw Term Loan bearing interest at a floating interest rate based on the then one-month London Interbank Offered Rate (“LIBOR”) plus 3.50 % and subject to a LIBOR interest rate floor of 0.25 % if there was no

swap agreement.

Revolving Loans bear interest at a floating interest rate based on the then LIBOR plus an indicative spread determined by the Company’s leverage as defined in the Credit Agreement or, if the borrowing of a Revolving Loan is to be

repaid within 30 days of such borrowing, the Revolving Loan will accrue interest at the Lender’s prime rate plus 0.50 % with a floor of 4.0 %.

Credit Loans will bear interest at a floating interest rate based on the Lender’s prime rate of interest.

Letters of credit issued under the Revolving Loan reduce, on a dollar-for-dollar basis, the availability of borrowings under the Revolving

Letters of credit are charged an annual fee equal to (i) an applicable margin determined by the leverage ratio of the Company less (ii) 0.25 %,

Revolving Loans bore interest at a floating interest rate based on the then LIBOR plus an indicative spread determined by the Company’s leverage as defined in the Credit Agreement or, if the borrowing of a Revolving Loan was to be

repaid within 30 days of such borrowing, the Revolving Loan accrued interest at the Lender’s prime rate plus 0.50 % with a floor of 4.0 %.

Credit Loans bore interest at a floating interest rate based on the Lender’s prime rate of interest.

Letters of credit issued under the Revolving Loan reduced, on a dollar-for-dollar basis, the availability of borrowings under the Revolving Loan.

Letters of credit were charged an annual fee equal to (i) an applicable margin determined by the leverage ratio of the Company less (ii) 0.25 %,

paid quarterly in arrears, in addition to the Lender’s customary fees for issuance, amendment and other standard fees.

Borrowings under the Line of Credit Loan are secured by cash collateral.

The Lender receives an unused facility fee of 0.50 % per annum payable quarterly in arrears on the unused portions of the Revolving Loan and the Line of Credit Loan.

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.

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 to increase the amount of permitted cash dividends that the Company can pay on its Series A Preferred Stock.

Borrowings under the Line of Credit Loan were secured by cash collateral.

The Lender received an unused facility fee of 0.50 % per annum payable quarterly in arrears on the unused portions of the Revolving Loan and the Line of Credit Loan.

In addition to the foregoing, the Credit Agreement contained customary representations, warranties, and affirmative and negative covenants

(including financial covenants that (i) restricted capital expenditures, (ii) restricted leverage, (iii) required maintaining minimum tangible net worth, (iv) required maintaining a minimum fixed charge coverage ratio and (v) required the

maintenance of a minimum of $ 5 million in quarterly average aggregate balances on deposit with the Lender, which, if not maintained,

would result in the assessment of a quarterly fee of $ 12,500 ), as well as events of default customary for facilities of this type.

Credit Agreement also limited the payment of cash dividends during the first 24-month s 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 24-month period to

increase the amount of permitted cash dividends that the Company can pay on its Series A Preferred Stock.

As further discussed below, the Credit Facility was secured by a first priority lien in favor of the Lender on substantially all of the personal

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Prior to the consummation of the transaction, Lincoln obtained consent from the Lender to enter into the sale of this property.

As of June 30, 2022, and December 31, 2021, the Company had zero debt outstanding under the Credit Facility for both periods and was in compliance with all debt covenants.

As of June 30, 2022, and December 31, 2021, letters of credit in the

aggregate outstanding principal amount of $ 4.0 million and $ 4.0 million, respectively, were outstanding under the Credit Facility.

On August 5, 2022, the Company entered into a third amendment to its Credit Agreement its lender (the “Third

Amendment”), in order to extend the maturity date of the revolving loan thereunder through November 14, 2023.

The foregoing description of the Third Amendment is not complete and is qualified in its entirety by reference to the Third Amendment

which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Pursuant to certain amendments and modifications to the Credit Agreement and other loan documents, the Term Loan and the Delayed Draw Term Loan were paid off in full

and on January 21, 2021, the Line of Credit expired by the terms, conditions and provisions of the Credit Agreement and the Credit Agreement was extended and would have matured on November 14, 2023.

As of September 30, 2022, and December 31, 2021, the Company had zero debt outstanding under the Credit Facility for both periods and was in compliance with all debt covenants.

As of September 30, 2022, and

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

Subsequent to the end of the quarter, on November 4, 2022, the Company agreed with its Lender to terminate the Credit Agreement and the remaining Revolving Loan.

Lender has agreed to allow the Company’s existing letters of credit to remain outstanding provided that they are cash collateralized.

STOCKHOLDERS’ EQUITY

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Directors pursuant to a certificate of amendment to the Company’s amended and restated certificate of incorporation (the “Charter Amendment”).

The liquidation preference associated with the Series A Preferred Stock was $ 1,000 per share at December 31, 2021.

The liquidation preference associated with the Series A Preferred Stock was $ 1,000 per share as of December 31, 2021.

Upon issuance each share of Series A Preferred Stock was convertible at $ 2.36 per share of common stock (as may be adjusted pursuant to the Charter Amendment, the “Conversion Price”) into 423,729 shares of common stock (the number of shares into which the Series A Preferred Stock is convertible at any time, the “Conversion Shares”).

The Company incurred issuance

costs of $ 0.7 million as part of this transaction.

Company incurred issuance costs of $ 0.7 million as part of this transaction.

The description below provides a summary of certain material terms of the Series A Preferred Stock:

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re-measure the Series A Preferred Stock and does not accrete changes in the redemption value.

As of June 30, 2022, and December 31, 2021, we paid $ 0.6

As of September 30, 2022, and December 31, 2021, we paid $ 0.9

million and $ 1.2 million, respectively, in cash dividends on the outstanding shares of Series A Preferred Stock rather than increasing

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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 six months ended June 30, 2022 and 2021, the Company completed a net share settlement for 268,654 and 154,973 restricted shares, respectively, on behalf

For the nine months ended September 30, 2022 and 2021, the Company completed a net share settlement for 268,654 and 154,973 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.

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restricted shares to the Company.

These transactions resulted in a decrease of $ 2.0 million and less than $ 1.0 million for each of the three and six months ended June 30, 2022 and 2021, respectively, to equity on the condensed consolidated balance

These transactions resulted in a decrease of $ 2.0 million and less than $ 1.0 million for each of the three and nine months ended September 30, 2022 and 2021, 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.

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Nonvested restricted stock outstanding at December 31, 2021

Nonvested restricted stock outstanding at June 30 , 2022

The restricted stock expense for the three months ended June 30, 2022 and 2021 was $ 0.5 million and $ 0.8 million, respectively.

Nonvested restricted stock outstanding at September 30 , 2022

The restricted stock expense for the three months ended September 30, 2022 and 2021 was $ 0.6 million and $ 0.8 million, respectively.

The restricted stock expense for

the six months ended June 30, 2022 and 2021 was $ 1.7 million and $ 1.3 million, respectively.

The unrecognized restricted stock expense as of June 30, 2022 and December 31, 2021 was $ 7.5 million and $ 4.4 million, respectively.

As of June 30, 2022, outstanding

restricted shares under the Prior Plan had aggregate intrinsic value of $ 9.8 million.

the nine months ended September 30, 2022 and 2021 was $ 2.4 million and $ 2.1 million, respectively.

The unrecognized restricted stock expense as of September 30, 2022 and December 31, 2021 was $ 8.0 million and $ 4.4 million, respectively.

As of September

30, 2022, outstanding restricted shares under the Prior Plan had aggregate intrinsic value of $ 8.4 million.

Stock Options

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

Exercise Price

Average Exercise

Price Per Share

Intrinsic Value

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Granted/Vested

Outstanding at June 30 , 2022

Vested as of June 30 , 2022

Exercisable as of June 30 , 2022

As of June 30 , 2022 , there was no unrecognized pre-tax compensation expense.

Outstanding at September 30 , 2022

Vested as of September 30 , 2022

Exercisable as of September 30 , 2022

As of September 30 , 2022 , there was no unrecognized pre-tax compensation expense.

Share Repurchase

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The Company retains the right to limit, terminate or extend the share repurchase program at any time without prior

During the quarter ended June 30, 2022, the Company repurchased 414,963 shares at a cost of approximately $ 2.5 million.

These shares were subsequently canceled and

recorded as a reduction of common stock In addition, the Board of Directors authorized the cancellation of 5,910,541 shares of

treasury stock, which reduced treasury stock and common stock by $ 82.9 million.

The provision for income taxes for the three months ended June 30, 2022 and 2021 was

During the three

months ended September 30, 2022, the Company repurchased 668,440 shares of its common stock at an aggregate cost of

approximately $ 4.2 million.

During the nine months ended September 30, 2022, the Company repurchased 1,083,403 shares of its common stock at an aggregate cost of approximately $ 6.7 million.

These shares were subsequently canceled and recorded as a reduction of common stock.

The income tax provision for the three months ended September 30, 2022 and 2021 was

$ 1.3 million, or 26.8 %

of pre-tax income, and approximately $ 0.7 million, or 23.1 % of pre-tax income, respectively.

The benefit for income taxes for the six months ended June 30, 2022 was $ 0.5 million compared to a provision of $ 2.0 million for the six months

ended June 30, 2021.

The provision for the three months ended June 30, 2022 and 2021 was due primarily to a pre-tax income position.

The benefit for the six months ended June 30, 2022 was due primarily to a pre-tax book loss and a discrete

item relating to restricted stock vesting, while the provision in the prior year was due primarily to a pre-tax income position.

The effective tax rate for the six months ended June 30 , 2022 was 28.2 %.

of pre-tax income, compared to $ 1.6 million, or 29.6 % of pre-tax income, respectively.

The income tax provision for the nine months ended September 30, 2022 and 2021 was approximately $ 0.8 million, or 15.7 % of pre-tax income, and approximately $ 3.6 million, or 25.0 % of pre-tax

income, respectively.

The decrease in effective tax rate was due to a higher discrete benefit relating to restricted stock vesting.

COMMITMENTS AND CONTINGENCIES

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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.

In December 2021, we received a letter from the Consumer Financial

Protection Bureau (“CFPB”) stating that the CFPB is assessing whether we are subject to CFPB’s supervisory authority based on our activities related to certain extensions of credit to our students and requesting certain information.

states that the CFPB has the authority to supervise certain entities in the private education loan market and certain other consumer financial products and services.

We have provided the requested information to the CFPB and are waiting for the

CFPB to respond.

On June 7, 2022, the Massachusetts Office of the Attorney General (“AGO”) issued a civil investigative demand (“CID”) to Lincoln Technical Institute

in Somerville, Massachusetts.

The CID states that it is intended to investigate possible unfair or deceptive methods, acts, or practices in violation of state law and that it relates to allegations that the institution violated law by engaging in

unfair or deceptive practices in connection with their policies regarding fee refunds and associated disclosures to students and prospective students.

The CID has requested that the institution provide to the AGO a list of documentation generally

from the period from January 1, 2020 to the present.

We have provided documents requested by the CID and are cooperating with the investigation.

We operate our business in two reportable segments:

(a) the Transportation and Skilled Trades

and (b) the Healthcare and Other Professions segment.

(a) the Transportation and Skilled Trades segment;

Healthcare and Other Professions segment.

Our reportable segments have been determined based on a method by which we now evaluate performance and allocate resources.

Each reportable segment represents a group of

post-secondary education providers that offer a variety of degree and non-degree academic programs.

These segments are organized by key market segments to enhance operational alignment within each segment to more effectively execute our strategic

Each of the Company’s schools is a reporting unit and an operating segment.

Each reportable segment represents a group of post-secondary education providers

that offer a variety of degree and non-degree academic programs.

These segments are organized by key market segments to enhance operational alignment within each segment to more effectively execute our strategic plan.

Each of the Company’s

schools is a reporting unit and an operating segment.

Our operating segments are described below.

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Summary financial information by reporting segment is as follows:

For the Three Months Ended June 30,

Operating income

For the Three Months Ended September 30,

Operating income (Loss)

Transportation and Skilled Trades

Healthcare and Other Professions

Months Ended June 30,

Operating Income

Months Ended September 30,

Operating income (Loss)

Transportation and Skilled Trades

Healthcare and Other Professions

September 30,

December 31, 2021

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest Expense

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Derivative qualifying as cash flow

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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 .

Institutions are required to use at least half of the HEERF funds for emergency grants to students for expenses related

to disruptions in campus operations (e.g., food, housing, etc.).

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 which the Company has done.

The Company was also permitted to defer payment of FICA payroll taxes through January 1, 2021 and did so but, pursuant to requirements of the deferment, repaid 50% of the deferred

payments by January 3, 2022, and will need to repay the remaining 50% by January 3, 2023.

As of June 30, 2022, the Company had deferred payments of $ 2.3

million included in accrued expenses in the condensed consolidated balance sheet.

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 .

Institutions are required to use at least half of the HEERF funds for emergency grants to students for expenses

related to disruptions in campus operations (e.g., food, housing, etc.).

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 which the Company has done.

The Company was also permitted to defer payment of FICA payroll taxes through January 1, 2021 and did so but, pursuant to requirements of the deferment, repaid 50% of the

deferred payments by January 3, 2022, and will need to repay the remaining 50% by January 3, 2023.

As of September 30, 2022, the Company had deferred payments of $ 2.3 million included in accrued expenses in the condensed consolidated balance sheet.

In December 2020, the Consolidated Appropriations Act, 2021 was enacted which included the Coronavirus Response and Relief Supplemental

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million to our schools from the funds made available under CRRSAA and ARPA.

As of June 30, 2022, the Company has drawn down and distributed to our students $ 14.8 million of these allocated funds.

As of September 30, 2022, the Company has drawn down and distributed to our students $ 14.8 million of these allocated funds.

The remainder of the funds are on hold by the DOE and will be distributed to the students upon release.

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.

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.

Property Sale

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On September 24, 2021, Nashville Acquisition, LLC, a subsidiary of

the Company (“Nashville Acquisition”), entered into a Contract for the Purchase of Real Estate (the “Nashville Contract”) to sell the property located at 524 Gallatin Road, Nashville, Tennessee, at which the Company operates its Nashville campus,

to SLC Development, LLC, a subsidiary of Southern Land Company (“SLC”), for an aggregate sale price of $ 34.5 million, subject to

the Company (“Nashville Acquisition”), entered into a Contract for the Purchase of Real Estate (the “Nashville Contract”) to sell the property located at 524 Gallatin Avenue, Nashville, Tennessee 37206, at which the Company operates its Nashville

campus, to SLC Development, LLC, a subsidiary of Southern Land Company (“SLC”), for an aggregate sale price of $ 34.5 million, subject to

customary adjustments at closing.

The Company intends to relocate its Nashville campus to a more efficient and technologically advanced facility in the Nashville metropolitan area but has not yet determined a location.

During the due diligence period, SLC has the right to terminate the

Nashville Contract for any reason at its discretion;

therefore, there can be no assurance that the sale will be consummated on a timely basis or at all.

Upon closing, Nashville Acquisition would be permitted to occupy the property and continue to

operate the Nashville campus on a rent-free basis for a leaseback period of 12 months , and, thereafter, will have the option to extend

the leaseback period for one 90-day term and three additional 30-day terms pursuant to a lease agreement currently being negotiated by the

The parties have since agreed to an extension of the term of the due diligence period for up to an additional 12 months .

extension was necessary to provide additional time for SLC to obtain approval from the appropriate regulating bodies for proposed zoning changes.

During this time, non-refundable payments will be made to the Company by SLC totaling $ 1.1 million over the next twelve months.

We currently expect this transaction to close within the next fifteen months or earlier if due diligence is completed prior to the expiration of the 12-month period.

The Nashville property is included in assets held for sale in the condensed consolidated balance sheet as of June 30, 2022.

The Company and SLC have agreed to an extension of the due

diligence period under the Nashville Contract.

Consequently, this transaction is expected to close during the second quarter of 2023.

During this time, non-refundable payments will be made to the Company by SLC totaling $ 1.1 million in the aggregate through March 2023.

The payments will be applied towards the purchase price assuming a closing does occur.

As of September

30, 2022, the Company has received approximately $ 0.2 million in non-refundable payments from SLC.

The Nashville, Tennessee property is

currently classified as assets held for sale in the condensed consolidated balance sheet as of September 30, 2022.

Sale Leaseback

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the parties entered into a triple-net lease agreement for each of the properties pursuant to which the properties are being leased back to Lincoln Technical Institute, Inc.

for a twenty-year term at an initial annual base rent, payable quarterly in advance, of approximately $ 2.6 million for the first year with annual 2.00 % increases thereafter and includes four subsequent five-year renewal

options in which the base rent is reset at the commencement of each renewal term at then current fair market rent for the first year of each renewal term with annual 2.00 % increases thereafter in each such renewal term.

for a twenty-year term at an initial annual base rent, payable quarterly in advance, of approximately $ 2.6

million for the first year with annual 2.00 % increases thereafter and includes four subsequent five-year renewal options in which the base rent is reset at

the commencement of each renewal term at then current fair market rent for the first year of each renewal term with annual 2.00 %

increases thereafter in each such renewal term.

The lease, in each case, provides Lincoln with a right of first offer should LNT wish to sell the property.

The Company has provided a guaranty of the financial

and other obligations of Lincoln Technical Institute, Inc.

The Company has provided a guaranty of the financial and other obligations of Lincoln

Technical Institute, Inc.

under each lease.

The Company evaluated factors in ASC Topic 606, Revenue Recognition , to conclude that the transaction qualified as a sale.

This included analyzing the right of first offer clause to determine

whether it represents a repurchase agreement that would preclude the transaction from being accounted for as a successful sale.

The Company evaluated factors in ASC Topic 606, Revenue

Recognition , to conclude that the transaction qualified as a sale.

This included analyzing the right of first offer clause to determine whether it represents a repurchase

agreement that would preclude the transaction from being accounted for as a successful sale.

At the consummation of the sale, the Company recognized a gain on sale of assets of $ 22.5 million.

Additionally, the Company evaluated factors in ASC Topic 842, Leases , and concluded that the newly created leases met the definition an operating lease.

Additionally, the Company evaluated factors in ASC Topic 842, Leases , and concluded that the newly created leases met the definition of an operating lease.

The Company also recorded ROU Asset and lease liabilities of $ 40.1 million.

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outstanding term loan of $ 16.2 million and swap termination fee of $ 0.5 million.

On November 3, 2022, the Board of Directors approved a plan to close the Somerville, Massachusetts campus.

The owner of the Somerville property has exercised an option to

terminate the l ease on December 8, 2023 and t he Company has since determined not to pursue relocating the campus in this geographic region.

For the nine months ended September 30, 2022, campus revenues were $ 5.3 million, representing 2.1 % of total

revenues, with an operating loss of $ 0.2 million.

The Company has developed a plan to deliver instruction for the approximately 300 students at the Somerville campus, which will be reported in the Transitional Segment beginning in the fourth quarter.

Total costs to close the campus

including the teach-out will be approximately $ 2.0 million and should be completed by the end of 2023.

Additionally, subsequent to the end of the quarter, on November 4, 2022, the Company agreed with its Lender to terminate the Credit Agreement and the remaining Revolving

The Lender has agreed to allow the Company’s existing letters of credit to remain outstanding provided that they are cash collateralized.

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