0001140361-16-085194.txt : 20161107 0001140361-16-085194.hdr.sgml : 20161107 20161107172936 ACCESSION NUMBER: 0001140361-16-085194 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20160930 FILED AS OF DATE: 20161107 DATE AS OF CHANGE: 20161107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN EDUCATIONAL SERVICES CORP CENTRAL INDEX KEY: 0001286613 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 571150621 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-51371 FILM NUMBER: 161979317 BUSINESS ADDRESS: STREET 1: 200 EXECUTIVE DRIVE CITY: WEST ORANGE STATE: NJ ZIP: 07052 BUSINESS PHONE: 9737369340 MAIL ADDRESS: STREET 1: 200 EXECUTIVE DRIVE CITY: WEST ORANGE STATE: NJ ZIP: 07052 10-Q 1 form10q.htm LINCOLN EDUCATIONAL SERVICES CORPORATION 10-Q 9-30-2016
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
Form 10-Q

(Mark One)
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

or
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____ to _____

Commission File Number 000-51371
 
LINCOLN EDUCATIONAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)

New Jersey
  
57-1150621
(State or other jurisdiction of incorporation or organization)
  
(IRS Employer Identification No.)

200 Executive Drive, Suite 340
West Orange, NJ
  
07052
(Zip Code)
(Address of principal executive offices)
  
 
(973) 736-9340
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

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

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

 
Large accelerated filer ☐
Accelerated filer ☐
      
 
Non-accelerated filer ☐    (Do not check if a smaller reporting company)
Smaller reporting company ☒
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒
 
As of November 3, 2016, there were 24,857,892 shares of the registrant’s common stock outstanding.

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016
 
PART I.
FINANCIAL INFORMATION
  
Item 1.
1
 
1
 
3
 
4
 
5
 
6
 
8
Item 2.
21
Item 3.
38
Item 4.
38
PART II.
OTHER INFORMATION
38
Item 1.
38
Item 6.
39
 
40
 
PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 
   
September 30,
2016
    
December 31,
2015
  
   
(Unaudited)
        
ASSETS
            
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
19,240
    
$
38,420
  
Restricted cash
    
6,282
      
7,362
  
Accounts receivable, less allowance of $8,407 and $9,297 at September 30, 2016 and December 31, 2015, respectively
    
13,741
      
9,917
  
Inventories
    
1,146
      
1,182
  
Prepaid income taxes and income taxes receivable
    
274
      
349
  
Assets held for sale
    
48,297
      
45,258
  
Prepaid expenses and other current assets
    
2,181
      
2,601
  
Total current assets
    
91,161
      
105,089
  
                 
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $126,877 and $122,037 at September 30, 2016 and December 31, 2015, respectively
    
57,956
      
66,508
  
                 
OTHER ASSETS:
                
Noncurrent restricted cash
    
20,281
      
15,259
  
Noncurrent receivables, less allowance of $742 and $821 at September 30, 2016 and December 31, 2015, respectively
    
5,437
      
5,168
  
Goodwill
    
14,536
      
14,536
  
Other assets, net
    
1,023
      
1,190
  
Total other assets
    
41,277
      
36,153
  
TOTAL
  
$
190,394
    
$
207,750
  

See notes to unaudited condensed consolidated financial statements.
 
1
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Continued)
 
   
September 30,
2016
    
December 31,
2015
  
   
(Unaudited)
        
LIABILITIES AND STOCKHOLDERS' EQUITY
            
CURRENT LIABILITIES:
            
Current portion of term loan
  
$
10,000
    
$
10,000
  
Current portion of  capital lease obligations
    
-
      
114
  
Current portion of finance obligation
    
1,678
      
-
  
Unearned tuition
    
19,859
      
22,094
  
Accounts payable
    
17,137
      
12,863
  
Accrued expenses
    
11,828
      
12,263
  
Liabilities held for sale
    
15,958
      
13,426
  
Other short-term liabilities
    
157
      
686
  
Total current liabilities
    
76,617
      
71,446
  
                 
NONCURRENT LIABILITIES:
                
Long-term loan
    
31,734
      
32,124
  
Long-term capital lease obligations
    
-
      
3,785
  
Long-term finance obligation
    
-
      
9,672
  
Pension plan liabilities
    
5,476
      
5,549
  
Accrued rent
    
3,602
      
4,177
  
Total liabilities
    
117,429
      
126,753
  
                 
COMMITMENTS AND CONTINGENCIES
                
                 
STOCKHOLDERS' EQUITY:
                
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2016 and December 31, 2015
    
-
      
-
  
Common stock, no par value - authorized: 100,000,000 shares at September 30, 2016 and December 31, 2015; issued and outstanding: 30,768,433 shares at September 30, 2016 and 29,727,555 shares at December 31, 2015
    
141,377
      
141,377
  
Additional paid-in capital
    
28,271
      
27,292
  
Treasury stock at cost - 5,910,541 shares at September 30, 2016 and December 31, 2015
    
(82,860
)
    
(82,860
)
(Accumulated deficit) retained earnings
    
(7,417
)
    
2,260
  
Accumulated other comprehensive loss
    
(6,406
)
    
(7,072
)
Total stockholders' equity
    
72,965
      
80,997
  
TOTAL
  
$
190,394
    
$
207,750
  
 
See notes to unaudited condensed consolidated financial statements.
 
2
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2016
    
2015
    
2016
    
2015
  
                         
REVENUE
  
$
49,803
    
$
54,033
    
$
138,444
    
$
150,569
  
COSTS AND EXPENSES:
                                
Educational services and facilities
    
24,398
      
25,000
      
70,975
      
72,330
  
Selling, general and administrative
    
24,361
      
22,718
      
76,090
      
81,024
  
Loss (gain) on sale of assets
    
1
      
227
      
(394
)
    
192
  
Impairment of goodwill and long-lived assets
    
-
      
216
      
-
      
216
  
Total costs & expenses
    
48,760
      
48,161
      
146,671
      
153,762
  
OPERATING INCOME (LOSS)
    
1,043
      
5,872
      
(8,227
)
    
(3,193
)
OTHER:
                                
Interest income
    
69
      
19
      
141
      
40
  
Interest expense
    
(1,478
)
    
(2,085
)
    
(4,572
)
    
(5,114
)
Other income
    
1,678
      
199
      
5,109
      
781
  
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
1,312
      
4,005
      
(7,549
)
    
(7,486
)
PROVISION FOR INCOME TAXES
    
50
      
50
      
150
      
150
  
INCOME (LOSS) FROM CONTINUING OPERATIONS
    
1,262
      
3,955
      
(7,699
)
    
(7,636
)
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES
    
(1,733
)
    
(1,374
)
    
(1,978
)
    
(4,271
)
NET (LOSS) INCOME
  
$
(471
)
  
$
2,581
    
$
(9,677
)
  
$
(11,907
)
Basic
                                
Income (loss) per share from continuing operations
  
$
0.05
    
$
0.17
    
$
(0.33
)
  
$
(0.33
)
Loss per share from discontinued operations
    
(0.07
)
    
(0.06
)
    
(0.08
)
    
(0.18
)
Net (loss) income per share
  
$
(0.02
)
  
$
0.11
    
$
(0.41
)
  
$
(0.51
)
Diluted
                                
Income (loss) per share from continuing operations
  
$
0.05
    
$
0.17
    
$
(0.33
)
  
$
(0.33
)
Loss per share from discontinued operations
    
(0.07
)
    
(0.06
)
    
(0.08
)
    
(0.18
)
Net (loss) income per share
  
$
(0.02
)
  
$
0.11
    
$
(0.41
)
  
$
(0.51
)
Weighted average number of common shares outstanding:
                                
Basic
    
23,499
      
23,230
      
23,433
      
23,140
  
Diluted
    
24,680
      
23,270
      
23,433
      
23,140
  
 
See notes to unaudited condensed consolidated financial statements.
 
3
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2016
    
2015
    
2016
    
2015
  
Net (loss) income
  
$
(471
)
  
$
2,581
    
$
(9,677
)
  
$
(11,907
)
Other comprehensive income
                                
     Employee pension plan adjustments
    
222
      
231
      
666
      
694
  
Comprehensive (loss) income
  
$
(249
)
  
$
2,812
    
$
(9,011
)
  
$
(11,213
)

See notes to unaudited condensed consolidated financial statements.
 
4
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
 
               
Additional
          
Retained
Earnings
    
Accumulated
Other
        
   
Common Stock
    
Paid-in
    
Treasury
    
(Accumulated
    
Comprehensive
        
   
Shares
    
Amount
    
Capital
    
Stock
    
Deficit)
    
Loss
    
Total
  
BALANCE - January 1, 2016
    
29,727,555
    
$
141,377
    
$
27,292
    
$
(82,860
)
  
$
2,260
    
$
(7,072
)
    
80,997
  
Net loss
    
-
      
-
      
-
      
-
      
(9,677
)
    
-
      
(9,677
)
Employee pension plan adjustments
    
-
      
-
      
-
      
-
      
-
      
666
      
666
  
Stock-based compensation expense Restricted stock
    
1,079,267
      
-
      
1,086
      
-
      
-
      
-
      
1,086
  
Net share settlement for equity-based compensation
    
(38,389
)
    
-
      
(107
)
    
-
      
-
      
-
      
(107
)
BALANCE - September 30, 2016
    
30,768,433
    
$
141,377
    
$
28,271
    
$
(82,860
)
  
$
(7,417
)
  
$
(6,406
)
  
$
72,965
  

               
Additional
          
Retained
Earnings
    
Accumulated
Other
        
   
Common Stock
    
Paid-in
    
Treasury
    
(Accumulated
    
Comprehensive
        
   
Shares
    
Amount
    
Capital
    
Stock
    
Deficit)
    
Loss
    
Total
  
BALANCE - January 1, 2015
    
29,933,086
    
$
141,377
    
$
26,350
    
$
(82,860
)
  
$
5,610
    
$
(7,467
)
  
$
83,010
  
Net loss
    
-
      
-
      
-
      
-
      
(11,907
)
    
-
      
(11,907
)
Employee pension plan adjustments, net of taxes
    
-
      
-
      
-
      
-
      
-
      
694
      
694
  
Stock-based compensation expense Restricted stock
    
(106,269
)
    
-
      
852
      
-
      
-
      
-
      
852
  
Stock options
    
-
      
-
      
33
      
-
      
-
      
-
      
33
  
Net share settlement for equity-based compensation
    
(49,075
)
    
-
      
(104
)
    
-
      
-
      
-
      
(104
)
BALANCE - September 30, 2015
    
29,777,742
    
$
141,377
    
$
27,131
    
$
(82,860
)
  
$
(6,297
)
  
$
(6,773
)
  
$
72,578
  

See notes to unaudited condensed consolidated financial statements.
 
5
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
   
Nine Months Ended
September 30,
  
   
2016
    
2015
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net loss
  
$
(9,677
)
  
$
(11,907
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
                
Depreciation and amortization
    
8,590
      
10,727
  
Amortization of deferred finance charges
    
704
      
356
  
(Gain) loss on disposition of assets
    
(402
)
    
188
  
Impairment of goodwill and long-lived assets
    
-
      
216
  
Gain on capital lease termination
    
(5,032
)
    
-
  
Fixed asset donation
    
(123
)
    
(20
)
Provision for doubtful accounts
    
10,116
      
10,886
  
Stock-based compensation expense
    
1,086
      
885
  
Deferred rent
    
(358
)
    
(505
)
(Increase) decrease in assets:
                
Accounts receivable
    
(17,430
)
    
(14,216
)
Inventories
    
24
      
(135
)
Prepaid income taxes and income taxes receivable
    
75
      
184
  
Prepaid expenses and current assets
    
763
      
1,128
  
Other assets, net
    
(1,401
)
    
(1,382
)
Increase (decrease) in liabilities:
                
Accounts payable
    
3,843
      
3,326
  
Accrued expenses
    
1,611
      
1,274
  
Unearned tuition
    
(1,966
)
    
1,034
  
Other liabilities
    
64
      
453
  
Total adjustments
    
164
      
14,399
  
Net cash (used in) provided by operating activities
    
(9,513
)
    
2,492
  
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Capital expenditures
    
(2,155
)
    
(1,606
)
Restricted cash
    
1,080
      
-
  
Proceeds from sale of property and equipment
    
432
      
447
  
Net cash used in investing activities
    
(643
)
    
(1,159
)
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Payments on borrowings
    
(386
)
    
(38,850
)
Reclassifications of payments of borrowings from restricted cash
    
-
      
30,000
  
Reclassifications of proceeds of borrowings from restricted cash
    
(5,022
)
    
(22,612
)
Payment of deferred finance fees
    
(645
)
    
(2,794
)
Proceeds from borrowings
    
-
      
53,500
  
Net share settlement for equity-based compensation
    
(107
)
    
(104
)
Principal payments under capital lease obligations
    
(2,864
)
    
(350
)
Net cash (used in) provided by financing activities
    
(9,024
)
    
18,790
  
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
(19,180
)
    
20,123
  
CASH AND CASH EQUIVALENTS—Beginning of period
    
38,420
      
12,299
  
CASH AND CASH EQUIVALENTS—End of period
  
$
19,240
    
$
32,422
  

See notes to unaudited condensed consolidated financial statements.
 
6
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
(Continued)
 
   
Nine Months Ended
September 30,
  
   
2016
    
2015
  
             
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
            
Cash paid during the year for:
            
Interest
  
$
4,020
    
$
5,162
  
Income taxes
  
$
122
    
$
79
  
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
                
Liabilities accrued for or noncash purchases of fixed assets
  
$
2,033
    
$
757
  
 
See notes to unaudited condensed consolidated financial statements.
 
7
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands, except share and per share amounts and unless otherwise stated)
(Unaudited)

1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activities – Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”) provide diversified career-oriented post-secondary education to recent high school graduates and working adults. The Company currently operates 30 schools in 15 states and  offers programs in automotive technology, skilled trades (which include HVAC, welding and computerized numerical control and electronic systems technology, among other programs), healthcare services (which include nursing, dental assistant, medical administrative assistant and pharmacy technician, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and business and information technology (which includes information technology and criminal justice programs).  The schools operate under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company’s other campuses primarily attract students from their local communities and surrounding areas.  All of the campuses are nationally or regionally accredited and are eligible to participate in federal financial aid programs by the U.S. Department of Education (the “DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal student loans as well as other forms of financial aid.

In the first quarter of 2015, the Company reorganized its operations into three reportable business segments: (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions, and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November, 2015, the Company’s Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in its Healthcare and Other Professions business segment and, then, in December, 2015, the Board of Directors approved a plan to cease operations of the remaining school in this segment located in Hartford, Connecticut. The Hartford school is scheduled to close in the fourth quarter of 2016 and is included in the Transitional segment as of September 30, 2016.  In the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017.  As a result, operations related to these programs have been included in the Transitional segment as of September 30, 2016.  Divestiture of the Healthcare and Other Professions business segment marks a shift in the Company’s business strategy intended to enable the Company to focus its energy and resources predominantly on Transportation and Skilled Trades though some other programs will continue to be available at some campuses.  The results of operations of the 17 campuses included in the Healthcare and Other Professions segment that are being divested are reflected as discontinued operations in the condensed consolidated financial statements. 

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

In addition to the current sources of capital that will provide short term liquidity, the Company plans to sell approximately $32.3 million in assets net of liabilities, which are currently classified as held for sale and are expected to be sold within one year from the date of classification of which up to $10 million will be required to pay down debt.

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements.  Certain information and footnote disclosures normally included in annual financial statements have been omitted or condensed pursuant to such regulations.  These statements, which should be read in conjunction with the December 31, 2015 consolidated financial statements and related disclosures of the Company included in the Annual Report on Form 10-K filed with the SEC on March 10, 2016, reflect all adjustments, consisting of normal recurring adjustments and impairments necessary to present fairly the consolidated financial position, results of operations and cash flows for such periods.  The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2016.
 
8
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.

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

New Accounting Pronouncements – In August 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is effective for the Company beginning after December 15, 2017, including interim periods within that fiscal year. Early application is permitted. The Company is currently evaluating the impact of ASU No. 2016-15, however it is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement. Further, tax benefits should be recognized regardless of whether the benefits reduce taxes payable in the current period.  Under the previous U.S. GAAP, excess tax benefits are recognized in additional paid-in capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement. Also, under the previous U.S. GAAP, excess tax benefits are not recognized until the deduction reduces taxes payable. The new guidance is effective for the Company on January 1, 2017, with earlier application permitted in any interim or annual period. ASU No. 2016-09 is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or financial statement disclosures.

In February 2016, the FASB issued ASU Topic 842, Leases requires a lessee to record a right-of-use asset and a lease liability for all leases with a lease term greater than 12 months. The main difference between previous U.S. GAAP and ASU Topic 842 is the recognition under ASU 842 of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The new guidance, effective for the Company on January 1, 2019, with earlier application permitted, is being evaluated to determine if it will have a material impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued guidance which simplifies the balance sheet classification of deferred taxes. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This guidance is effective for public business entities for annual periods, and for interim periods within those periods, beginning after December 15, 2016 with early adoption permitted. The Company early adopted this guidance as of December 31, 2015.  It did not have a material impact on the Company’s consolidated results of operations, financial condition or financial statement disclosures.

In April 2015, the FASB issued accounting guidance related to the presentation of debt issuance costs in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts, rather than as an asset.  Amortization of debt issuance costs will continue to be reported as interest expense.  Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an asset and amortized ratably over the term of the arrangement.  In August 2015, the FASB issued accounting guidance related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements which clarifies that companies may continue to present unamortized debt issuance costs associated with line of credit arrangements as an asset.  These pronouncements are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted.  The guidance became effective for the Company on January 1, 2016 and did not have a material impact on the Company’s consolidated financial statements.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items. ASU 2015-01 simplifies income statement classification by removing the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is of unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed. The existing requirement to separately present items that are of unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The new guidance also requires similar separate presentation of items that are both unusual and infrequent. The guidance, effective for the Company on January 1, 2016, with earlier application permitted as of the beginning of the fiscal year of adoption, did not have a material impact on the Company’s consolidated financial statements.
 
9
In August 2014, the FASB issued a new standard – ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern - that will explicitly require management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. According to the new standard, substantial doubt about an entity’s ability to continue as a going concern exists if it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the entity’s financial statements are issued. In order to determine the specific disclosures, if any, that would be required, management will need to assess if substantial doubt exists, and, if so, whether its plans will alleviate such substantial doubt. The new standard requires assessment each annual and interim period and will be effective for the Company on December 31, 2016 with earlier application permitted.  The Company does not believe this guidance will have any impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, a new standard related to revenue recognition, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will replace most of the existing revenue recognition standards in GAAP.  In July 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  In August 2015, the FASB issued ASU 2015-14 which defers the effective date of revenue standard ASU 2014-09 by one year for all entities and permits early adoptions on a limited basis.  The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. The Company is assessing the potential impact of the new standard on financial reporting and has not yet selected a transition method.

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

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

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

Income Taxes – The Company accounts for income taxes in accordance with FASB Accounting Standards Code (“ASC”) Topic 740, “Income Taxes” (“ASC 740”). This statement requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
In accordance with ASC 740, the Company assesses its deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable.  A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, the Company’s assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, the Company considered, among other things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company’s consolidated financial statements and/or tax returns.  Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on the Company’s consolidated financial position or results of operations.  Changes in, among other things, income tax legislation, statutory income tax rates, or future income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause the Company’s income tax provision to vary significantly among financial reporting periods.
 
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.  During the three and nine months ended September 30, 2016 and 2015, the Company did not have any interest and penalties expense associated with uncertain tax positions.
 
10
Reclassification – During the quarter ended September 30, 2016, the Board of Directors approved a plan for the Company to teach-out certain programs in the West Palm Beach, Florida campus which are included in the Transitional segment.  In 2016, the Company reclassified related amounts reflected in the 2015 Condensed Consolidated Balance Sheet.
 
2.
WEIGHTED AVERAGE COMMON SHARES

The weighted average number of common shares used to compute basic and diluted loss per share for the three and nine months ended September 30, 2016 and 2015 was as follows:

   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2016
    
2015
    
2016
    
2015
  
Basic shares outstanding
    
23,498,904
      
23,230,438
      
23,433,015
      
23,140,006
  
Dilutive effect of stock options
    
1,181,073
      
39,197
      
-
      
-
  
Diluted shares outstanding
    
24,679,977
      
23,269,635
      
23,433,015
      
23,140,006
  

For the nine months ended September 30, 2016 and 2015, options to acquire 668,307 and 47,015 shares, respectively, were excluded from the above table because the Company recorded a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the three and nine months ended September 30, 2016, options to acquire 224,667 shares were excluded from the above table because they have an exercise price that is greater than the average market price of the Company’s common stock and, therefore, their impact on reported income (loss) per share would have been antidilutive. For the three and nine months ended September 30, 2015, options to acquire 540,567 shares were excluded from the above table because they have an exercise price that is greater than the average market price of the Company’s common stock and, therefore, their impact on reported income (loss) per share would have been antidilutive.

In 2013, and 2014, the Company issued performance shares that vest when certain performance conditions are satisfied.  As of September 30, 2016, these performance conditions were not met for most of these shares.  As a result, the Company has determined that most of these shares are contingently issuable.  Accordingly, 998,827 shares of outstanding performance shares have been excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2016, and 152,837 shares have been excluded for the three and nine months ended September 30, 2015.  Refer to Note 6 for more information on performance shares.

3.
DISCONTINUED OPERATIONS

On November 3, 2015, the Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in its Healthcare and Other Professions segment.  The planned divestiture of the Company’s Healthcare and Other Professions segment constitutes a strategic shift for the Company.  The results of operations of these campuses are reflected as discontinued operations in the condensed consolidated financial statements.  Implementation of the plan will result in the Company’s operations being focused solely on the Transportation and Skilled Trades segment.

The results of operations at these 17 campuses for the three and nine months ended September 30, 2016 and September 30, 2015 were as follows:

   
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
   
2016
    
2015
    
2016
    
2015
  
Revenue
  
$
24,464
    
$
25,013
    
$
74,547
    
$
77,590
  
                                 
Loss before income tax
    
(1,733
)
    
(1,374
)
    
(1,978
)
    
(4,271
)
Income tax benefit
    
-
      
-
      
-
      
-
  
Net loss from discontinued operations
  
$
(1,733
)
  
$
(1,374
)
  
$
(1,978
)
  
$
(4,271
)

On December 3, 2015, the Board of Directors approved a plan to cease operations at the Hartford, Connecticut school which is scheduled to close in the fourth quarter of 2016 and is included in the Transitional segment.

On July 1, 2016, New England Institute of Technology at Palm Beach, Inc. (“NEIT”), a wholly-owned subsidiary of the Company, entered into a purchase and sale agreement (the “WPB Sale Agreement”) with School Property Development Metrocentre, LLC (“SPD”), pursuant to which NEIT agreed to sell to SPD the real property owned by NEIT located at 2400 and 2410 Metrocentre Boulevard East, West Palm Beach, Florida, including the improvements and other personal property located thereon  (the “WPB Property”) for a cash purchase price of approximately $15.9 million.
 
11
In the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus, which is expected to be completed in the first quarter of 2017.  As a result, operations related to these programs have been included in the Transitional segment as of September 30, 2016. The remaining assets and liabilities at the West Palm Beach, Florida campus remain in classified as held for sale in the Condensed Consolidated Balance Sheet as of September 30, 2016. The remaining operations at the West Palm Beach, Florida campus remain in classified as discontinued operations in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2016.

On September 1, 2016, the Company received notification of termination of the WPB Sale Agreement from SPD pursuant to the terms of the WPB Sale Agreement.

4.
GOODWILL AND LONG-LIVED ASSETS

The Company reviews long-lived assets for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

As of September 30, 2016 and 2015, long-lived assets were tested at certain campuses as a result of certain financial indicators such as the Company’s history of losses, current respective period losses, as well as future projected losses at these campuses.  The Company concluded that there was sufficient evidence to conclude that there was no impairment of long-lived assets as of September 30, 2016 and 2015.

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

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

The carrying amount of goodwill at September 30, 2016 and 2015 is as follows:

   
Gross
Goodwill
Balance
    
Accumulated
Impairment
Losses
    
Net
Goodwill
Balance
  
Balance as of January 1, 2016
  
$
108,417
    
$
(93,881
)
  
$
14,536
  
Adjustments
    
-
      
-
      
-
  
Balance as of September 30, 2016
  
$
108,417
    
$
(93,881
)
  
$
14,536
  
 
   
Gross
Goodwill
Balance
    
Accumulated
Impairment
 Losses
    
Net
Goodwill
Balance
  
Balance as of January 1, 2015
  
$
115,872
    
$
(93,665
)
  
$
22,207
  
Adjustments
    
-
      
(216
)
    
(216
)
Balance as of September 30, 2015
  
$
115,872
    
$
(93,881
)
  
$
21,991
  
 
12
Intangible assets, which are included in other assets, net in the accompanying Condensed Consolidated Balance Sheets, consist of the following:

   
Trade Name
    
Curriculum
    
Total
  
Gross carrying amount at December 31, 2015
  
$
310
    
$
160
    
$
470
  
Adjustments
    
-
      
-
      
-
  
Gross carrying amount at September 30, 2016
    
310
      
160
      
470
  
                         
Accumulated amortization at December 31, 2015
    
308
      
112
      
420
  
Amortization
    
2
      
11
      
13
  
Accumulated amortization at September 30, 2016
    
310
      
123
      
433
  
                         
Net carrying amount at September 30, 2016
  
$
-
    
$
37
    
$
37
  
                         
Weighted average amortization period (years)
    
7
      
10
          

Amortization of intangible assets was less than $0.1 million for each of the three and nine months ended September 30, 2016 and 2015.

The following table summarizes the estimated future amortization expense:

Year Ending December 31,
      
Remainder of 2016
  
$
4
  
2017
    
16
  
2018
    
17
  
   
$
37
  

5.
LONG-TERM DEBT AND LEASE OBLIGATIONS

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

   
September 30,
2016
    
December 31,
2015
  
Term loan (a)
  
$
41,734
    
$
42,124
  
Finance obligation (b)
    
1,678
      
9,672
  
Capital lease-property (with a rate of 8.0%) (c)
    
-
      
3,899
  
     
43,412
      
55,695
  
Less current maturities
    
(11,678
)
    
(10,114
)
   
$
31,734
    
$
45,581
  
 
13
(a) On July 31, 2015, the Company entered into a credit agreement with three lenders, Alostar Bank of Commerce (“Alostar”), HPF Holdco, LLC and Rushing Creek 4, LLC, led by HPF Service, LLC, as administrative agent and collateral agent (the “Agent”), for an aggregate principal amount of $45 million (the “Term Loan”).  The July 31, 2015 credit agreement, along with subsequent amendments to the Credit Agreement dated December 31, 2015 and February 29, 2016, are collectively referred to as the “Credit Agreement.”  As of December 31, 2015 and prior to the effectiveness of a second amendment to the Credit Agreement on February 29, 2016 (the “Second Amendment”), the Term Loan consisted of a $30 million term loan (the “Term Loan A”) from HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC, secured by a first priority lien in favor of the Agent on substantially all of the real and personal property owned by the Company, and a $15 million term loan (the “Term Loan B”) from Alostar secured by a $15.3 million cash collateral account. Pursuant to the Second Amendment, the Company received an additional $5 million term loan from Alostar with which the Company repaid $5 million of the principal amount of the Term Loan A.  Accordingly, upon the effectiveness of the Second Amendment, the aggregate term loans outstanding under the Credit Agreement remained at approximately $45 million, consisting of an approximate $25 million Term Loan A and a $20 million Term Loan B.  In addition, pursuant to the Second Amendment, the amount of cash collateral securing the Term Loan B was increased to $20.3 million.  At the Company’s request, a percentage of the cash collateral may be released to the Company at the Agent’s sole discretion and with the consent of Alostar upon the satisfaction of certain criteria as outlined in the Credit Agreement.  The Term Loan, which matures on July 31, 2019, replaced a previously existing $20 million revolving credit facility with Bank of America, N.A. and other lenders, which was due to expire on April 5, 2016.  The previously existing revolving credit facility was terminated concurrently with the effective date of the Credit Agreement on July 31, 2015 (the “Closing Date”).

A portion of the proceeds of the Term Loan was used by the Company to (i) repay approximately $6.3 million in outstanding principal, accrued interest and fees due under the previously existing revolving credit facility, (ii) fund the $20.3 million cash collateral account securing the portion of the Term Loan provided by Alostar, (iii) fund approximately $7.4 million in a cash collateral account securing the letters of credit issued under the previously existing revolving credit facility that remain outstanding after the termination of that facility and (iv) pay transaction expenses in connection with the Term Loan and the termination of the previously existing revolving credit facility.  The remaining proceeds of the Term Loan of approximately $11 million may be used by the Company to finance capital expenditures and for general corporate purposes consistent with the terms of the Credit Agreement.

Interest will accrue on the Term Loan at a per annum rate equal to the greater of (i) 11% or (ii) 90-day LIBOR plus 9%  determined monthly by the Agent and will be payable monthly in arrears.  The principal balance of the Term Loan will be repaid in equal monthly installments, commencing on August 1, 2017, determined as the quotient of (i) 10% of the outstanding principal balance of the Term Loan as of July 2, 2017 divided by (ii) 12.  A final installment of principal and all accrued and unpaid interest will be due on the maturity date of the Term Loan.

The Term Loan may be prepaid, in whole or in part, at any time, subject to the payment of a prepayment premium equal to (i) 5% of the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date and (ii) 3% of the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date.  In the event of any sale or other disposition of a school or real property by the Company permitted under the Term Loan, the net proceeds of such sale or disposition must be used to prepay the Loan in an amount determined pursuant to the Credit Agreement, subject to the applicable prepayment premium; provided, however, that no prepayment premium will be due with respect to up to $15 million of aggregate repayments of the Term Loan made during the first year that the Term Loan is outstanding.  A portion of the net cash proceeds of any disposition of a school in an amount determined pursuant to the terms of the Term Loan, must be deposited and held as cash collateral in a deposit account controlled by the Agent until the conditions for release set forth in the Term Loan are satisfied.  In connection with the assets which are currently classified as held for sale and are expected to be sold within one year, the Company is required to classify $10 million as short term debt due to the Term Loan prepayment minimum required with respect to any such disposition.

The Term Loan contains customary representations, warranties and covenants such as minimum financial responsibility composite score, cohort default rate, and other financial covenants, including minimum liquidity, maximum capital expenditures, maximum 90/10 ratio and minimum EBITDA (as defined in the Term Loan), as well as affirmative and negative covenants and events of default customary for facilities of this type.  The Company was in compliance with all covenants as of September 30, 2016.  Subsequent to the 2015 fiscal year end, pursuant to the Second Amendment, the financial covenants were adjusted and, at the Company’s election, will be adjusted for fiscal year 2017 and for each subsequent fiscal year until the maturity of the Term Loan at either the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Credit Agreement as of the Closing Date or the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Second Amendment.  In the event that the Company elects to re-set the financial covenants at the 2016 covenant levels contained in the Second Amendment, the Company will be required to prepay on or before January 15, 2017, without prepayment penalty, amounts outstanding under the Term Loan up to $4 million.

The Credit Agreement contains events of default, the occurrence and continuation of which provide the Company’s lenders with the right to exercise remedies against the Company and the collateral securing the Term Loan, including the Company’s cash. These events of default include, among other things, the Company’s failure to pay any amounts due under the Term Loan, a breach of covenants under the Credit Agreement, the Company’s insolvency and the insolvency of its subsidiaries, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness, and a final judgment against the Company in an amount greater than $1 million.
 
14
Also, in connection with the Term Loan, the Company paid to the Agent a commitment fee of $1 million on the Closing Date and is required to pay to the Agent other customary fees for facilities of this type. Total fees for the Term Loan were $2.8 million during fiscal year 2015. During the first quarter of 2016, in connection with the effectiveness of the Second Amendment, the Company paid loan modification fees of $0.5 million.  These deferred finance fees are netted against the Term Loan on the Condensed Consolidated Balance Sheets and amortized to interest expense on the Condensed Consolidated Statement of Operations.

As of September 30, 2016 and December 31, 2015, the Company had $44.3 million and $44.7 million outstanding under the Term Loan; offset by $2.5 million and $2.5 million of deferred finance fees, respectively.

(b) The Company completed a sale and a leaseback of four facilities on December 28, 2001. The Company retained a continuing involvement in the lease and, as a result, the Company was prohibited from utilizing sale-leaseback accounting. Accordingly, the Company had treated this transaction as a finance lease. In January 2016, the lease was amended to cure certain provisions related to continuing involvement and, as a consequence, achieved sales treatment.  In the first quarter of 2016, the lease was converted to an operating lease and rent payments are included in educational, services and facilities expense in the Condensed Consolidated Statement of Operations.  In addition, the finance obligation, net of land and buildings, is being amortized straight-line through December 31, 2016.

(c) In 2009, the Company assumed a real estate capital lease for a property located in Fern Park, Florida having a term continuing through October 31, 2032.  On February 27, 2015, the Company’s Board of Directors approved a plan to cease operations of its school located at the Fern Park, Florida property, which school closed in the first quarter of 2016.  In connection with the closure of the Fern Park, Florida school, on February 12, 2016, the Company paid a $2.8 million lease termination fee to the landlord of the Fern Park, Florida property in connection with the amendment and early termination of the 2009 lease agreement.  The amended lease agreement subsequently expired on April 10, 2016.

(d)  On April 12, 2016, the Company entered into a credit agreement (the “L/C Agreement”) with Sterling National Bank (“Sterling”) under which Sterling has agreed to issue letters of credit from time to time at 100% margin against available funds in a cash collateral account maintained by the Company at Sterling.  The maximum availability under the L/C Agreement is $9.5 million.  The Company will pay Sterling a letter of credit fee equal to 1.75% on the daily amount available to be drawn under each outstanding letter of credit, which fee is payable in quarterly installments in arrears.  The L/C Agreement matures on April 1, 2017 and replaces a letter of credit facility with a prior lender.  The L/C Agreement contains representations, warranties, affirmative and negative covenants and events of default customary for facilities of this type. As of September 30, 2016 the Company has $5.5 million of letters of credit outstanding under the L/C Agreement.

Scheduled maturities of long-term debt and lease obligations at September 30, 2016 are as follows:
 
Year ending December 31,
      
2016
  
$
10,000
  
2017
    
3,173
  
2018
    
3,462
  
2019
    
27,632
  
   
$
44,267
  

The finance obligation of $1.7 million is excluded from the scheduled maturities schedule as it is a non-cash liability.

6.
STOCKHOLDERS’ EQUITY

Restricted Stock

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

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

On May 13, 2016, performance-based shares were granted which vest over two years on March 15, 2017 and March 15, 2018 based upon the attainment of a financial responsibility ratio during each fiscal year ending December 31, 2016 and 2017.  There is no vesting period on the right to vote or the right to receive dividends on any of the restricted shares.
 
15
On June 2, 2014 and December 18, 2014, performance-based shares were granted which vest over three years based upon the attainment of (i) a specified operating income margin during any one or more of the fiscal years in the period beginning January 1, 2015 and ending December 31, 2017 and (ii) the attainment of earnings before interest, taxes, depreciation and amortization targets during each of the fiscal years ended December 31, 2015 through 2017.  There is no vesting period on the right to vote or the right to receive dividends on any of the restricted shares.

On April 29, 2013, performance-based shares were granted which vest over four years based upon the attainment of (i) a specified operating income margin during any one or more of the fiscal years in the period beginning January 1, 2013 and ending December 31, 2016 and (ii) the attainment of earnings before interest, taxes, depreciation and amortization targets during each of the fiscal years ended December 31, 2013 through 2016.  There is no vesting period on the right to vote or the right to receive dividends on any of the restricted shares.

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

For the nine months ended September 30, 2016 and 2015, the Company completed a net share settlement for 38,389 and 49,075 restricted shares, respectively, on behalf of certain employees who participate in the LTIP upon the vesting of the restricted shares pursuant to the terms of the LTIP.  The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 2016 and/or 2015, creating taxable income for the employees.   At the employees’ request, the Company will pay these taxes on behalf of the employees in exchange for the employees returning an equivalent value of restricted shares to the Company.  These transactions resulted in a decrease of $0.1 million or less for each of the three and nine months ended September 30, 2016 and 2015, 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:

   
Shares
    
Weighted
Average Grant
Date Fair Value
Per Share
  
Nonvested restricted stock outstanding at December 31, 2015
    
450,494
    
$
3.69
  
Granted
    
1,105,487
      
1.67
  
Canceled
    
(26,200
)
    
5.63
  
Vested
    
(244,029
)
    
3.05
  
                 
Nonvested restricted stock outstanding at September 30, 2016
    
1,285,752
      
2.03
  

The restricted stock expense for the three months ended September 30, 2016 and 2015 was $0.4 million and $0.1 million, respectively.  The restricted stock expense for the nine months ended September 30, 2016 and 2015 was $1.1 million and $0.9 million, respectively. The unrecognized restricted stock expense as of September 30, 2016 and December 31, 2015 was $1.9 million and $1.3 million, respectively.  As of September 30, 2016, outstanding restricted shares under the LTIP had aggregate intrinsic value of $2.8 million.
 
16
Stock Options

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

   
Shares
    
Weighted
Average
Exercise Price
Per Share
  
Weighted
Average
Remaining
Contractual
Term
  
Aggregate
Intrinsic Value
(in thousands)
  
Outstanding at December 31, 2015
    
246,167
    
$
12.52
  
 3.98 years
  
$
-
  
Canceled
    
(21,500
)
    
15.63
        
-
  
                           
Outstanding at September 30, 2016
    
224,667
      
12.23
  
 3.48 years
    
-
  
                           
Vested or expected to vest
    
224,667
      
12.23
  
 3.48 years
    
-
  
                           
Exercisable as of September 30, 2016
    
224,667
      
12.23
  
 3.48 years
    
-
  
 
As of September 30, 2016, there was no unrecognized pre-tax compensation expense.

The following table presents a summary of stock options outstanding:

     
At September 30, 2016
  
     
Stock Options Outstanding
    
Stock Options Exercisable
  
Range of Exercise Prices
    
Shares
    
Contractual
Weighted
Average Life
(years)
    
Weighted
Average Price
    
Shares
    
Weighted
 Average Exercise
Price
  
$
4.00-$13.99
      
165,167
      
3.60
    
$
9.46
      
165,167
    
$
9.46
  
$
14.00-$19.99
      
28,500
      
2.40
      
19.12
      
28,500
      
19.12
  
$
20.00-$25.00
      
31,000
      
3.85
      
20.62
      
31,000
      
20.62
  
                                             
         
224,667
      
3.48
      
12.23
      
224,667
      
12.23
  

7.
INCOME TAXES

The provision for income taxes for the three months ended September 30, 2016 and 2015 was $0.1 million, or 3.8% of pretax income, and $0.1 million, or 1.2% of pretax income, respectively.  The provision for income taxes for the nine months ended September 30, 2016 and 2015 was $0.2 million, or 2.0% of pretax loss, and $0.2 million, or 2.0% of pretax loss, respectively.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.  A significant piece of objective negative evidence was the cumulative losses incurred by the Company in recent years.  On the basis of this evaluation the realization of the Company’s deferred tax assets was not deemed to be more likely than not and thus the Company maintained a valuation allowance on its net deferred tax assets as of September 30, 2016.

8.
CONTINGENCIES

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

On December 15, 2015, the Company received an administrative subpoena from the Attorney General of the State of Maryland. Pursuant to the subpoena, Maryland’s Attorney General has requested from the Company documents and detailed information relating to its Columbia, Maryland campus.  The Company has responded to this request and intends to continue cooperating with the Maryland Attorney General’s Office.
 
17
9.
SEGMENTS

The for-profit education industry has been impacted by numerous regulatory changes, the changing economy and an onslaught of negative articles in the press. As a result of these actions, student populations have declined and operating costs have increased.  Over the past few years, the Company has closed over 10 locations and exited its online business.  The Company reviewed how it has been structured and in the first quarter of 2015 decided to change its organization to enable the Company to better allocate financial and human resources to respond to its markets and with the goal of improving its profitability and competitive advantage.  In the past, the Company offered any combination of programs at any campus.  The Company has changed its focus to program offerings that create greater differentiation and attain excellence to attract more students and gain market share.  Also strategically, the Company began offering continuing education training to employers who hire its students and this is best achieved at campuses focused on their professions.

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

The Company’s 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 the Company’s strategic plan.  Each of the Company’s schools is a reporting unit and an operating segment.  The Company’s operating segments have been aggregated into three reportable segments because, in the Company’s judgment, the reporting units have similar services, types of customers, regulatory environment and economic characteristics.

On November 3, 2015 the Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in the Healthcare and Other Professions business segment.  Then, in December 2015, the Board of Directors approved a plan to cease operations of the remaining school in this segment located in Hartford, Connecticut, which is scheduled to close in the fourth quarter of 2016.  The divestiture of the Company’s Healthcare and Other Professions business segment marks a strategic shift in business strategy.  The results of operations of these 17 campuses are reflected as discontinued operations in the consolidated financial statements.  The Hartford, Connecticut campus, which was previously included in the Healthcare and Other Professions segment is now included in the Transitional segment.  Implementation of the plan would result in the Company’s operations focused solely on the Transportation and Skilled Trades segment.  During the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017. The operations related to these programs have been included in the Transitional segment as of September 30, 2016.

The Company’s two continuing operations reporting segments are described below.

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

Transitional – Transitional refers to operations that were or are being taught out and consists of the Company’s Fern Park, Florida and Hartford, Connecticut campuses and certain programs at the West Palm Beach, Florida campus.  Each school employs a gradual teach-out process that enables the school to continue to operate while current students complete their course of study. The Fern Park, Florida and Hartford, Connecticut schools are no longer enrolling new students.  The West Palm Beach school is no longer enrolling new students for certain programs which was announced during the quarter ended September 30, 2016 and the teach-out of these programs is expected to be completed in the first quarter of 2017.  The Fern Park, Florida campus was taught out as of March 31, 2016.  On December 3, 2015, the Company announced it was teaching out the Hartford, Connecticut campus, where the teach-out is expected to be completed by December 2016.

The Company evaluates segment performance based on operating results.  Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate,” which primarily includes unallocated corporate activity.
 
18
Summary financial information by reporting segment is as follows:

   
For the Three Months Ended September 30,
  
   
Revenue
    
Operating Income (Loss)
  
   
2016
    
% of
Total
    
2015
    
% of
Total
    
2016
    
2015
  
Transportation and Skilled Trades
  
$
47,939
      
96.3
%
  
$
49,697
      
92.0
%
  
$
6,122
    
$
10,588
  
Transitional
    
1,864
      
3.7
%
    
4,336
      
8.0
%
    
(1,359
)
    
(1,312
)
Corporate
    
-
      
0.0
%
    
-
      
0.0
%
    
(3,720
)
    
(3,404
)
Total
  
$
49,803
      
100.0
%
  
$
54,033
      
100.0
%
  
$
1,043
    
$
5,872
  
 
   
For the Nine Months Ended September 30,
  
   
Revenue
    
Operating (Loss) Income
  
   
2016
    
% of
Total
    
2015
    
% of
Total
    
2016
    
2015
  
Transportation and Skilled Trades
  
$
131,242
      
94.8
%
  
$
136,988
      
91.0
%
  
$
11,920
    
$
18,333
  
Transitional
    
7,202
      
5.2
%
    
13,581
      
9.0
%
    
(5,579
)
    
(4,916
)
Corporate
    
-
      
0.0
%
    
-
      
0.0
%
    
(14,568
)
    
(16,610
)
Total
  
$
138,444
      
100.0
%
  
$
150,569
      
100.0
%
  
$
(8,227
)
  
$
(3,193
)
 
   
Total Assets
  
   
September 30, 2016
    
December 31, 2015
  
Transportation and Skilled Trades
  
$
87,056
    
$
90,045
  
Transitional
    
1,298
      
2,448
  
Corporate
    
53,743
      
69,999
  
Discontinued Operations
    
48,297
      
45,258
  
Total
  
$
190,394
    
$
207,750
  
 
19
10.
FAIR VALUE

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

   
At September 30, 2016
  
   
Carrying
Amount
    
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
    
Significant Other
Observable Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
    
Total
  
Financial Assets:
                              
Cash and cash equivalents
  
$
19,240
    
$
19,240
    
$
-
    
$
-
    
$
19,240
  
Restricted cash
    
6,282
      
6,282
      
-
      
-
      
6,282
  
Prepaid expenses and other current assets
    
2,181
      
-
      
2,181
      
-
      
2,181
  
Noncurrent restricted cash
    
20,281
      
20,281
      
-
      
-
      
20,281
  
                                         
Financial Liabilities:
                                        
Accrued expenses
  
$
11,828
    
$
-
    
$
11,828
    
$
-
    
$
11,828
  
Other short term liabilities
    
157
      
-
      
157
      
-
      
157
  
Term loan
    
41,734
      
-
      
38,517
      
-
      
38,517
  

The fair value of the Term loan is estimated 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 Condensed Consolidated Balance Sheets for Cash and cash equivalents, Restricted cash and Noncurrent restricted cash approximate fair value because they are highly liquid.

The carrying amounts reported on the Condensed Consolidated Balance Sheets for Prepaid expenses and other current assets, Accrued expenses and Other short term liabilities approximate fair value due to the short-term nature of these items.

11.
RELATED PARTY

The Company has an agreement with MATCO Tools, whereby MATCO will provide the Company, on an advance commission basis, credits in MATCO-branded tools, tool storage, equipment, and diagnostics products. The CEO of the parent company of MATCO is considered an immediate family member of one of the Company’s board members.  The Company’s payable balances from this third party was immaterial at September 30, 2016 and 2015. Management believes that such transactions are at arm’s length and on similar terms as would have been obtained from unaffiliated third parties.

12.
SUBSEQUENT EVENTS

On November 1, 2016, the Board of Directors approved a plan for the Company to teach-out the Green Valley, Nevada and Center City, Philadelphia campuses.  The teach-out of the Green Valley, Nevada campus is expected to be completed in the fourth quarter of 2016.  The teach-out of the Center City, Philadelphia campus is expected to be completed by the second quarter of 2017. As of September 30, 2016, both the Green Valley, Nevada and the Center City, Philadelphia campuses financial results were included in discontinued operations on the statement of operations and held for sale on the statement of financial position.
 
20
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion may contain forward-looking statements regarding the Company, our business, prospects and our results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements.  Factors that could cause or contribute to such differences include, but are not limited to, those described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission (the “SEC”) and in our other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise.  Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that advise interested parties of the risks and factors that may affect our business.

The interim financial statements and related notes thereto filed in this Form 10-Q and the discussions contained herein should be read in conjunction with the annual financial statements and notes included in our Form 10-K for the year ended December 31, 2015, as filed with the SEC, which includes audited consolidated financial statements for our three fiscal years ended December 31, 2015.

General

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 30 schools in 15 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, medical administrative assistant and pharmacy technician, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and business and information technology (which includes information technology and criminal justice programs).  The schools operate under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company’s other campuses primarily attract students from their local communities and surrounding areas.  All of the campuses are nationally or regionally accredited and are eligible to participate in federal financial aid programs by the U.S. Department of Education and applicable state education agencies and accrediting commissions which allow students to apply for and access federal student loans as well as other forms of financial aid.

In the first quarter of 2015, we reorganized our operations into three reportable business segments:  (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions, and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November, 2015, the Board of Directors of the Company approved a plan for the Company to divest 17 of 18 of the schools included in its Healthcare and Other Professions business segment.  Then, in December 2015, the Board of Directors approved a plan to cease operations of the remaining school in the Healthcare and Other Professions segment, which is located in Hartford, Connecticut, and which is scheduled to close in the fourth quarter of 2016 and has been included in the Transitional segment as of September 30, 2016.  Implementation of the plan would result in the Company’s operations focused solely on the Transportation and Skilled Trades segment.  This divestiture marks a shift in our business strategy intended to enable us to focus energy and resources predominantly on Transportation and Skilled Trades though some other programs will continue to be available at some campuses.  The results of operations of the 17 campuses slated for divestiture are reflected as discontinued operations in the condensed consolidated financial statements.

On July 1, 2016, New England Institute of Technology at Palm Beach, Inc. (“NEIT”), a wholly-owned subsidiary of the Company, entered into a purchase and sale agreement (the “WPB Sale Agreement”) with School Property Development Metrocentre, LLC (“SPD”), pursuant to which NEIT agreed to sell to SPD the real property owned by NEIT located at 2400 and 2410 Metrocentre Boulevard East, West Palm Beach, Florida, including the improvements and other personal property located thereon  (the “WPB Property”) for a cash purchase price of approximately $15.9 million.

As a result of the WPB Sale Agreement, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017.  The operations related to these programs have been included in the Transitional segment as of September 30, 2016.

On September 1, 2016, the Company received notification of termination of the WPB Sale Agreement from SPD pursuant to the terms of the WPB Sale Agreement.
 
21
As of September 30, 2016, we had 12,855 students enrolled at 30 campuses (7,863 students enrolled at 13 campuses that are included in continuing operations).

Discontinued Operations

The results of operations at the 17 campuses slated for divestiture, as discussed above, for the three and nine months ended September 30, 2016 and 2015 were as follows (in thousands):

   
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
   
2016
    
2015
    
2016
    
2015
  
Revenue
  
$
24,464
    
$
25,013
    
$
74,547
    
$
77,590
  
                                 
Loss before income tax
    
(1,733
)
    
(1,374
)
    
(1,978
)
    
(4,271
)
Income tax benefit
    
-
      
-
      
-
      
-
  
Net loss from discontinued operations
  
$
(1,733
)
  
$
(1,374
)
  
$
(1,978
)
  
$
(4,271
)
 
Critical Accounting Policies and Estimates

Our discussions of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the period.  On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, bad debts, impairments, income taxes, benefit plans and certain accruals.  Actual results could differ from those estimates.  The critical accounting policies discussed herein are not intended to be a comprehensive list of all of our accounting policies.  In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not result in significant management judgment in the application of such principles.  We believe that the following accounting policies are most critical to us in that they represent the primary areas where financial information is subject to the application of management’s estimates, assumptions and judgment in the preparation of our consolidated financial statements.

Revenue Recognition.  Revenues are derived primarily from programs taught at the Company’s schools.  Tuition revenues, textbook sales and one-time fees, such as nonrefundable application fees and course material fees, are recognized on a straight-line basis over the length of the applicable program as the student proceeds through the program, which is the period of time from a student’s start date through his or her graduation date, including internships or externships that take place prior to graduation, and the Company completes the performance of teaching the student which entitles the Company to the revenue.   Other revenues, such as tool sales and contract training revenues are recognized as services are performed or goods are delivered. On an individual student basis, tuition earned in excess of cash received is recorded as accounts receivable, and cash received in excess of tuition earned is recorded as unearned tuition.

The Company evaluates whether collectability of revenue is reasonably assured prior to the student attending class and reassesses collectability of tuition and fees when a student withdraws from a course.  The Company calculates the amount to be returned under Title IV and its stated refund policy to determine eligible charges.  If there is a balance due from the student after this calculation, the Company expects payment from the student and the Company has a process to pursue uncollected accounts whereby, based upon the student’s financial means and ability to pay, a payment plan is established with the student to ensure that collectability is reasonably assured.  The Company continuously monitors its historical collections to identify potential trends that may impact our determination that collectability of receivables for withdrawn students is realizable.  If a student withdraws from a program prior to a specified date, any paid but unearned tuition is refunded. Refunds are calculated and paid in accordance with federal, state and accrediting agency standards. Generally, the amount to be refunded to a student is calculated based upon the period of time the student has attended classes and the amount of tuition and fees paid by the student as of his or her withdrawal date. These refunds typically reduce deferred tuition revenue and cash on our consolidated balance sheets as the Company generally does not recognize tuition revenue in its consolidated statements of income (loss) until the related refund provisions have lapsed. Based on the application of its refund policies, the Company may be entitled to incremental revenue on the day the student withdraws from one of its schools. Prior to the year-ended December 31, 2015, the Company recorded this incremental revenue, any related student receivable and any estimate of the amount it did not expect to collect as bad debt expense during the quarter a student withdrew based on its analysis of the collectability of such amounts on an aggregate student portfolio basis, for which the Company had significant historical experience. Beginning in the three months ended December 31 2015, the Company recorded revenue for students who withdraw from one of its schools when payment is received because collectability on an individual student basis is not reasonably assured. The Company determined incremental revenue recognized for students who withdrew during the nine-months ended September 30, 2015 to be an immaterial error which was corrected during the fourth quarter of 2015. This resulted in a reduction of net revenues by $0.3 million and bad debt expense by $0.2 million, which resulted in an increase to the loss from continuing operations of $0.1 million for the year ended December 31, 2015. Additionally, this correction reduced net student receivables from continuing operations by $0.1 million.  Prior year amounts, including quarterly financial results were not restated because the effects were not material.
 
22
Allowance for uncollectible accounts.  Based upon our experience and judgment, we establish an allowance for uncollectible accounts with respect to tuition receivables.  We use an internal group of collectors, augmented by third-party collectors as deemed appropriate, in our collection efforts.  In establishing our allowance for uncollectible accounts, we consider, among other things, current and expected economic conditions, a student’s status (in-school or out-of-school), whether or not a student is currently making payments and overall collection history.  Changes in trends in any of these areas may impact the allowance for uncollectible accounts.  The receivables balances of withdrawn students with delinquent obligations are reserved based on our collection history.  Although we believe that our reserves are adequate, if the financial condition of our students deteriorates, resulting in an impairment of their ability to make payments, additional allowances may be necessary, which will result in increased selling, general and administrative expenses in the period such determination is made.

Our bad debt expense as a percentage of revenue for the three months ended September 30, 2016 and 2015 was 4.4% and 4.1%, respectively.  Our bad debt expense as a percentage of revenue for the nine months ended September 30, 2016 and 2015 was 4.8% and 4.9%, respectively.  A 1% increase in our bad debt expense as a percentage of revenues for each of the three months ended September 30, 2016 and 2015 would have resulted in an increase in bad debt expense of $0.5 million and $0.5 million, respectively.  A 1% increase in our bad debt expense as a percentage of revenues for each of the nine months ended September 30, 2016 and 2015 would have resulted in an increase in bad debt expense of $1.4 million and $1.5 million, respectively.

We do not believe that there is any direct correlation between tuition increases, the credit we extend to students and our loan commitments.  Our loan commitments to our students are made on a student-by-student basis and are predominantly a function of the specific student’s financial condition.   We only extend credit to the extent there is a financing gap between the tuition charged for the program and the amount of grants, cash, loans and parental loans that each student receives.  Each student’s funding requirements are unique.  Factors that determine the amount of aid available to a student are student status (whether they are dependent or independent students), Pell Grants awarded, Plus Loans awarded or denied to parents and family contributions. As a result, it is extremely difficult to predict the number of students that will need us to extend credit to them. Our tuition increases have ranged historically from 2% to 5% annually and have not meaningfully impacted overall funding requirements.

Because a substantial portion of our revenue is derived from Title IV programs, any legislative or regulatory action that significantly reduces the funding available under Title IV programs or the ability of our students or schools to participate in Title IV programs could have a material effect on the realizability of our receivables.

Goodwill.  We test our goodwill for impairment annually, or whenever events or changes in circumstances indicate an impairment may have occurred, by comparing its fair value to its carrying value. Impairment may result from, among other things, deterioration in the performance of the acquired business, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of the acquired business, and a variety of other circumstances. If we determine that impairment has occurred, we are required to record a write-down of the carrying value and charge the impairment as an operating expense in the period the determination is made. In evaluating the recoverability of the carrying value of goodwill and other indefinite-lived intangible assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the acquired assets. Changes in strategy or market conditions could significantly impact these judgments in the future and require an adjustment to the recorded balances.

There was no goodwill impairment for the three or nine months ended September 30, 2016.

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

Long-lived assets.  We review the carrying value of our long-lived assets and identifiable intangibles for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We evaluate long-lived assets for impairment by examining estimated future cash flows. These cash flows are evaluated by using weighted probability techniques as well as comparisons of past performance against projections. Assets may also be evaluated by identifying independent market values. If we determine that an asset’s carrying value is impaired, we 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.
 
23
There was no long-lived asset impairment during the three and nine months ended September 30, 2016 and 2015.

Bonus costs.  We accrue the estimated cost of our bonus programs using current financial information as compared to target financial achievements and key performance objectives.  Although our recorded liability for bonuses is based on our best estimate of the obligation, actual results could differ and require adjustment of the recorded balance.

Income taxes. We account for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Code (“ASC”) Topic 740, “Income Taxes” (“ASC 740”). This statement requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
 
In accordance with ASC 740, we assess our deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable.  A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, our assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, we considered, among other things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in our consolidated financial statements and/or tax returns.  Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated financial position or results of operations.  Changes in, among other things, income tax legislation, statutory income tax rates, or future income levels could materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods.  On the basis of this evaluation the realization of our deferred tax assets was not deemed to be more likely than not and thus we have provided a valuation allowance on our net deferred tax assets.
 
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.  During the three and nine months ended September 30, 2016 and 2015, there were no interest and penalties expense associated with uncertain tax positions.

Effect of Inflation

Inflation has not had a material effect on our operations.
 
24
Results of Continuing Operations

Certain reported amounts in our analysis have been rounded for presentation purposes.  The following table sets forth selected consolidated statements of continuing operations data as a percentage of revenues for each of the periods indicated:
 
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
   
2016
    
2015
    
2016
    
2015
  
Revenue
    
100.0
%
    
100.0
%
    
100.0
%
    
100.0
%
Costs and expenses:
                                
Educational services and facilities
    
49.0
%
    
46.3
%
    
51.3
%
    
48.0
%
Selling, general and administrative
    
48.9
%
    
42.0
%
    
55.0
%
    
53.8
%
Gain on sale of assets
    
0.0
%
    
0.4
%
    
-0.3
%
    
0.1
%
Impairment of goodwill and long-lived assets
    
0.0
%
    
0.4
%
    
0.0
%
    
0.1
%
Total costs and expenses
    
97.9
%
    
89.1
%
    
105.9
%
    
102.1
%
Operating Income (loss)
    
2.1
%
    
10.9
%
    
-5.9
%
    
-2.1
%
Interest expense, net
    
-2.9
%
    
-3.9
%
    
-3.3
%
    
-3.4
%
Other income
    
3.4
%
    
0.4
%
    
3.7
%
    
0.5
%
Income (loss) from continuing operations before income taxes
    
2.6
%
    
7.4
%
    
-5.5
%
    
-5.0
%
Provision for income taxes
    
0.1
%
    
0.1
%
    
0.1
%
    
0.1
%
Income (loss) from continuing operations
    
2.5
%
    
7.3
%
    
-5.6
%
    
-5.1
%

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Consolidated Results of Operations

Revenue.   Revenue decreased by $4.2 million, or 7.8%, to $49.8 million for the three months ended September 30, 2016 from $54.0 million in the prior comparable period of 2015.  The decrease was a result of starting 2016 with approximately 800 fewer students than we had on January 1, 2015 which led to an 8.1% decline in average student population to approximately 7,400 as of September 30, 2016 from 8,100 as of September 30 in the prior year.  The Transitional segment accounted for approximately 58% of the revenue decline and about 51% of the average population decline.

Student start results decreased by 10.5% to approximately 3,100 from 3,500 for the three months ended September 30, 2016 as compared to the prior year comparable period.  Excluding the Transitional segment, student starts were slightly down.  The decline in student starts was mainly a result of the underperformance of one campus.  Excluding this campus and the Transitional segment our starts for the quarter would have grown over the prior year comparable period.

We continue to face certain challenges in growing our student population levels including the impact Department of Education (“DOE”) incentive compensation regulations have on compensation practices for our admissions representatives, a low national unemployment rate and increased competition from peers and community colleges.  We remain focused on our strategy to fully divest our Healthcare and Other Professions segment and continue to form partnership relationships to increase student population.

Educational services and facilities expense.   Our educational services and facilities expense decreased by $0.6 million, or 2.4%, to $24.4 million for the three months ended September 30, 2016 from $25.0 million in the prior year comparable quarter.

The decrease in expense was partially due to lower instructional expenses of $0.8 million, or 7.1%, as a result of a reduction in the number of instructors and other related costs resulting from lower average student population, partially offset by a $0.5 million, or 14.3% increase in books and tools expense incurred from the purchase of laptops which were provided to newly enrolled students in certain programs to enhance and expand the student overall learning experience.

Our facilities expense decreased by $0.4, or 3.6% resulting from the following factors.  First is a reduction in facilities costs due to the closure of our Fern Park, Florida campus during the first quarter of 2016 and over a 300,000 square foot reduction in the Hartford, Connecticut campus, which is scheduled to be taught-out by year-end.  These savings were largely offset by increased rent expense which was the result of a modification of leases for three of our campuses, which were previously accounted for as finance obligations under which rent payments were previously included in interest expense and additional depreciation expense in 2016 as a result of the reclassification of two facilities out of held for sale as of December 31, 2015.

Our educational expenses contain a high fixed cost component and are not as scalable as some of our other expenses.  As our student population decreases, we typically experience a reduction in average class size and therefore, are not always able to align these expenses with the corresponding decrease in population.  Educational services and facilities expenses, as a percentage of revenue, increased to 49.0% from 46.3% in the prior year quarter.
 
25
Selling, general and administrative expense.    Our selling, general and administrative expense increased by $1.6 million, or 7.2%, to $24.4 million for the three months ended September 30, 2016 from $22.7 million in the comparable quarter of 2015.

Administrative expense increased by $1.1 million, or 9.1%, primarily as a result of approximately $0.9 million in closing costs associated with the teach-out of certain programs at our West Palm Beach, Florida campus which was reclassified back to continuing operations during the third quarter of 2016.

Sales and marketing expense increased by $0.8 million, or 9.2%, primarily as a result of an increase in marketing expense in a strategic effort to reach more potential students, expand brand awareness and increase enrollments.

As a percentage of revenues, selling, general and administrative expense increased to 48.9% for the quarter ended September 30, 2016 from 42.0% for the quarter ended September 30, 2015.

Net interest expense.    For the three months ended September 30, 2016, our net interest expense decreased by $0.6 million.  This decrease was primarily caused by the transition of our finance obligation at three of our campuses to operating leases coupled with the lease termination agreements for our Fern Park, Florida and Hartford, Connecticut facilities which were previously accounted for as capital leases.

Income taxes.    Our provision for income taxes was $0.1 million, or 3.8% of pretax income, in the third quarter of 2016, compared to $0.1 million, or 1.2% of pretax income, in the prior year period. No federal or state income tax benefit was recognized for the current period loss due to the recognition of a full valuation allowance.  Income tax expense resulted from various minimal state tax expenses.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Consolidated Results of Operations

Revenue.   Revenue decreased by $12.1 million, or 8.1%, to $138.4 million for the nine months ended September 30, 2016 from $150.6 million in the comparable period of 2015.  The decrease was a result of starting 2016 with approximately 800 fewer students than we had on January 1, 2015. This led to a 10.2% decline in average student population to approximately 7,100 as of September 30, 2016 from 7,900 as of September 30 in the prior year.

Student start results decreased by 8.2% to approximately 6,800 from 7,400 for the nine months ended September 30, 2016 as compared to the prior year comparable period. The decline in student starts was mainly a result of the underperformance of one campus. Excluding this campus and the Transitional segment our starts for the quarter would have grown over the prior year comparable period.

Partially offsetting the decrease in revenue was an increase of 2.4% in average revenue per student for the nine months ended September 30, 2016 due to a shift in program mix.

We continue to face certain challenges in growing our student population levels, including the impact that DOE incentive compensation regulations have on compensation practices for our admissions representatives, a low national unemployment rate and increased competition from peers and community colleges.  We remain focused on our strategy to fully divest our Healthcare and Other Professions segment and continue to form partnership relationships to increase student population.

Educational services and facilities expense.   Our educational services and facilities expense decreased by $1.4 million, or 1.9%, to $71.0 million for the nine months ended September 30, 2016 from $72.3 million in the prior year comparable nine month period.

The decrease in expense was primarily due to a $2.5 million, or 7.5%, reduction in our instructional expenses as a result of a reduction in the number of instructors and other related costs resulting from lower average student population, partially offset by an increase of $0.8 million in books and tools expense resulting from the purchase of laptops which were provided to newly enrolled students in certain programs to enhance and expand their overall learning experience.

Our facilities expense increased by $0.3 million, or 1.0% resulting from increased rent expense resulting from the modification of leases for three of our campuses which were previously accounted for as finance obligations under which rent payments were previously included in interest expense and the conversion of the lease for our Hartford, Connecticut campus from a capital lease to an operating lease during the quarter ended March 31, 2016.
 
26
Our educational expenses contain a high fixed cost component and are not as scalable as some of our other expenses.  As our student population decreases, we typically experience a reduction in average class size and, therefore, are not always able to align these expenses with the corresponding decrease in population.  Educational services and facilities expenses, as a percentage of revenue, increased to 51.3% from 48.0%.

Selling, general and administrative expense.    Our selling, general and administrative expense decreased by $4.9 million, or 6.1%, to $76.1 million for the nine months ended September 30, 2016 from $81.0 million in the prior year comparable nine month period.

Administrative expense was lower by $3.4 million, or 7.6%, as a result of (a) a $2.8 million reduction in salaries and benefit costs mainly due to lower workman’s compensation and  healthcare claims, which was partially offset by approximately $0.7 million in severance paid during the first quarter of 2016; (b) cost savings of $1.0 million in relation to the completion of the teach-out at our Fern Park, Florida campus; and (c) a $0.8 decrease in bad debt expense which as a percentage of revenue was 4.8% for the nine months ended September 30, 2016, compared to 4.9% for the same period in 2015.  The improvement in bad debt expense was mainly the result of improved historical collection rates and shift in student mix.  These cost savings were partially offset by $1.2 million in additional costs associated with the reclassification of certain programs at our West Palm Beach, Florida campus to continuing operations during the third quarter of 2016.

Sales and marketing expenses decreased by $0.9 million, or 3.0%, as a result of a reduction of $1.0 million in sales expense partially offset by a $0.1 million increase in marketing expense. The reduction in sales expense was mainly attributable to (a) a reduction in the number of admissions representatives dedicated to the destination schools as a result of our implementation of a centralized call center reducing travel and salary expense; and (b) suspended sales efforts at the Fern Park, Florida and Hartford, Connecticut campuses.  The increase in marketing expense is largely the result of additional spending in a strategic effort to reach more potential students, expand brand awareness and increase enrollments.  The increased spending in marketing expenses was partially offset by cost savings as a result of suspended marketing efforts at the Fern Park, Florida and Hartford, Connecticut campuses.  The Fern Park, Florida campus completed its teach out process as of March 31, 2016 and the Hartford, Connecticut campus is on schedule to be fully taught out by December 31, 2016.

Student services expense decreased by $0.6 million, or 9.2%, as a result of aligning support services with lower levels of population.

As a percentage of revenues, selling, general and administrative expense increased to 55.0% for the nine months ended September 30, 2016 from 53.8% for the prior year comparable period.

Net interest expense.    For the nine months ended September 30, 2016, our net interest expense decreased by $0.6 million.  This decrease was primarily caused by the transition of our finance obligation at three of our campuses to operating leases coupled with the lease termination agreements for our Fern Park, Florida and Hartford, Connecticut facilities which were previously accounted for as capital leases

Income taxes.    Our provision for income taxes was $0.2 million, or 2.0% of pretax loss, for the nine months ended September 30, 2016, compared to $0.2 million, or 2.0% of pretax loss, in the prior year period. No federal or state income tax benefit was recognized for the current period loss due to the recognition of a full valuation allowance.  Income tax expense resulted from various minimal state tax expenses.

Segment Results of Operations

The for-profit education industry has been impacted by numerous regulatory changes, the changing economy and an onslaught of negative media attention. As a result of these actions, student populations have declined and operating costs have increased.  Over the past few years, the Company has closed over ten locations and exited its online business.  On November 3, 2015, the Company’s Board of Directors approved a plan to divest 17 of the 18 schools included in the Company’s Healthcare and Other Professions business segment.  The 17 campuses associated with this decision are reported in discontinued operations on the condensed consolidated statements of operations.   On December 3, 2015, our Board of Directors approved a plan to cease operations at the remaining school in this segment, located in Hartford, Connecticut, which is scheduled to be taught out in the fourth quarter of 2016.   The Company reviewed how it is structured and changed its organization, including reorganizing its Group Presidents to oversee each of the reporting segments.  By aggregating the remaining 14 operating segments (Fern Park, Florida campus was fully taught out as of March 31, 2016) into two reporting segments, the Company is better able to allocate financial and human resources to respond to its markets with the goal of improving its profitability and competitive advantage.

In the past, we offered any combination of programs at any campus.  We have changed our focus to program offerings that create greater differentiation and attain excellence to attract more students and gain market share.  Also strategically, we began offering continuing education training to employers who hire our students and this is best achieved at campuses focused on their profession.
 
27
As a result of the regulatory environment, market forces and strategic decisions, we now operate in two reportable segments: a) Transportation and Skilled Trades and b) Transitional.

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 plan.  Each of the Company’s schools is a reporting unit and an operating segment.  Our operating segments have been aggregated into two reportable segments because, in our judgment, the reporting units have similar services, types of customers, regulatory environment and economic characteristics.  Our reporting segments are described below.

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

Transitional – Transitional refers to operations that are being taught out and consists of our campuses that are currently being taught out.  These schools are employing a gradual teach-out process that enables the schools to continue to operate while current students complete their course of study.  These schools are no longer enrolling new students.  In the first quarter of 2015, we announced that we are teaching out our campus in Fern Park, Florida and in December 2015, we announced that we are teaching out our campus in Hartford Connecticut.  The teach-out at our Fern Park, Florida campus has been completed as of March 31, 2016 and the teach-out of our Hartford Connecticut campus is expected to be completed in December 2016. In addition, during the quarter ended September 30, 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017.  As a result, operations related to these programs have been included in the Transitional segment as of September 30, 2016.

We evaluate segment performance based on operating results.  Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate,” which primarily includes unallocated corporate activity.
 
28
The following table present results for our two reportable segments:
 
   
Three Months Ended September 30,
  
   
2016
    
2015
    
% Change
  
Revenue:
                  
Transportation and Skilled Trades
  
$
47,939
    
$
49,697
      
-3.5
%
Transitional
    
1,864
      
4,336
      
-57.0
%
Total
  
$
49,803
    
$
54,033
      
-7.8
%
                         
Operating Income (Loss):
                        
Transportation and Skilled Trades
  
$
6,122
    
$
10,588
      
-42.2
%
Transitional
    
(1,359
)
    
(1,312
)
    
-3.6
%
Corporate
    
(3,720
)
    
(3,404
)
    
-9.3
%
Total
  
$
1,043
    
$
5,872
      
82.2
%
                         
Starts:
                        
Transportation and Skilled Trades
    
3,090
      
3,158
      
-2.2
%
Transitional
    
9
      
305
      
-97.0
%
Total
    
3,099
      
3,463
      
-10.5
%
                         
Average Population:
                        
Transportation and Skilled Trades
    
7,128
      
7,446
      
-4.3
%
Transitional
    
296
      
633
      
-53.2
%
Total
    
7,424
      
8,079
      
-8.1
%
                         
End of Period Population:
                        
Transportation and Skilled Trades
    
7,667
      
7,852
      
-2.4
%
Transitional
    
196
      
646
      
-69.7
%
Total
    
7,863
      
8,498
      
-7.5
%
 
Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Transportation and Skilled Trades
Revenue was lower by $1.8 million, or 3.5%, to $47.9 million in the three months ended September 30, 2016, as compared to $49.7 million in the prior year comparable period, primarily driven by a 4.3% decline in average population which decreased to approximately 7,100 from 7,400 in the prior year comparable period.  This decrease in average population was a result of starting 2016 with approximately 600 fewer students than we had on January 1, 2015.

Student start results decreased by 2.2% to approximately 3,100 from 3,200 for the three months ended September 30, 2016 as compared to the prior year comparable period.  The decline in student starts are mainly a result of the underperformance of one campus.  Excluding this campus our starts for the quarter would have grown over the prior year comparable period.

 Operating income was $6.1 million compared to $10.6 million, a decrease of $4.5 million, or 42.2%, due to several factors:
 
·
Educational services and facilities expense increased by $1.4 million, comprised of (a) a $0.8 million, or 9.0%, increase in facilities expense, primarily due to increased depreciation expense as a result of the reclassification of one campus out of held for sale as of December 31, 2015; and (b) $0.8 million in increased books and tools expenses resulting from the purchase of laptops which were provided to newly enrolled students in certain programs to enhance and expand their overall learning experience.
·
Selling, general and administrative expenses increased by $1.6 million, primarily comprised of a $1.0 million increase in marketing expense coupled with a $0.4 million increase in sales expense.  The increase in marketing expense was largely the result of additional spending in a strategic effort to reach more potential students, expand brand awareness and increase enrollments. The increase in sales expense was a result of hiring additional personnel at the campus level to help with recruiting efforts at the high school level.
 
29
Transitional
 
This segment consists of the Fern Park, Florida campus, Hartford, Connecticut campus and certain programs at our West Palm Beach, Florida campus.  During the quarter ended September 30, 2016 management made the strategic decision to teach-out certain programs at our West Palm Beach, Florida campus which resulted in operations related to these programs being included in the Transitional segment as of September 30, 2016.  The teach-out of these programs is expected to be completed in the first quarter of 2017. The Fern Park, Florida campus has fully taught out all of its existing students and was officially closed as of March 31, 2016 and the Hartford, Connecticut campus has ceased student enrollment and is currently teaching out the remaining students through December 2016.

Revenue decreased by $2.5 million, or 57.0%, to $1.9 million for the three months ended September 30, 2016 from $4.3 million, in the prior year comparable period.  This decrease is mainly attributable to the closure of the Fern Park, Florida campus and the suspension of new student enrollment at our Hartford, Connecticut location which took effect in the fourth quarter of 2015.

Operating loss remained essentially flat at $1.3 million.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the Company.  Corporate and Other costs increased by $0.3 million, or 9.3%, to $3.7 for the three months ended September 30, 2016 from $3.4 million for the comparable prior year quarter.
 
The following table present results for our two reportable segments:
 
   
Nine Months Ended September 30,
  
   
2016
    
2015
    
% Change
  
Revenue:
                  
Transportation and Skilled Trades
  
$
131,242
    
$
136,988
      
-4.2
%
Transitional
    
7,202
      
13,581
      
-47.0
%
Total
  
$
138,444
    
$
150,569
      
-8.1
%
                         
Operating Income (Loss):
                        
Transportation and Skilled Trades
  
$
11,920
    
$
18,333
      
-35.0
%
Transitional
    
(5,579
)
    
(4,916
)
    
-13.5
%
Corporate
    
(14,568
)
    
(16,610
)
    
12.3
%
Total
  
$
(8,227
)
  
$
(3,193
)
    
-157.7
%
                         
Starts:
                        
Transportation and Skilled Trades
    
6,686
      
6,875
      
-2.7
%
Transitional
    
129
      
549
      
-76.5
%
Total
    
6,815
      
7,424
      
-8.2
%
                         
Average Population:
                        
Transportation and Skilled Trades
    
6,723
      
7,216
      
-6.8
%
Transitional
    
379
      
694
      
-45.5
%
Total
    
7,102
      
7,910
      
-10.2
%
                         
End of Period Population:
                        
Transportation and Skilled Trades
    
7,667
      
7,852
      
-2.4
%
Transitional
    
196
      
646
      
-69.7
%
Total
    
7,863
      
8,498
      
-7.5
%
 
30
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Transportation and Skilled Trades
Revenue decreased by $5.7 million, or 4.2%, to $131.2 million in the nine months ended September 30, 2016, as compared to $137.0 million in the prior year comparable period, primarily driven by a 6.8% decline in average population which decreased to approximately 6,700 from 7,200 in the prior year comparable period.  The decrease in average population was a result of starting 2016 with approximately 600 fewer students than we had on January 1, 2015.

Student start results decreased by 2.7% to approximately 6,700 from 6,900 for the nine months ended September 30, 2016 as compared to the prior year comparable period.  The decline in student starts are mainly a result of the underperformance of one campus.  Excluding this campus our starts for the quarter would have grown over the prior year comparable period.

The revenue decline from a lower population was slightly offset by a 2.7% increase in average revenue per student due to a shift in program mix.

Operating income was $11.9 million compared to $18.3 million, a decrease of $6.4 million, or 35.0%, driven by the following main factors:
 
·
Educational services and facilities expense increased by $1.9 million, comprised of a $1.6 million, or 6.5%, increase in facilities expense, primarily due to (a) $0.6 million in increased depreciation expense as a result of the reclassification of one campus out of held for sale as of December 31, 2015; (b) $0.9 million in increased rent expense resulting from the modification of leases at three of our campuses, which were previously accounted for as finance obligations under which rent payments were previously included in interest expense; and (c) a $1.3 million, or 18.6% increase in books and tools expenses resulting from the purchase of laptops provided to newly enrolled students in certain programs to enhance and expand their overall learning experience.   Partially offsetting the above increases was a $1.0 million, or 3.4%, decrease in instructional expense as a result of realigning our cost structure to meet our population.
·
Selling, general and administrative expenses decreased by $1.0 million primarily comprised of a $1.6 million decrease in administrative expenses which was primarily the result of a decrease in salaries and benefits and lower bad debt expense.  The improvement in bad debt expense was mainly the result of improved historical collection rates and a shift in student mix.

Transitional
This segment consists of the Fern Park, Florida campus, Hartford, Connecticut campus and certain programs at our West Palm Beach, Florida campus.  During the third quarter of 2016, management made the strategic decision to teach-out certain programs at our West Palm Beach, Florida campus which resulted in operations related to these programs being included in the Transitional segment as of September 30, 2016. The teach-out of these programs is expected to be completed in the first quarter of 2017. The Fern Park, Florida campus has fully taught out all of its existing students and was officially closed as of March 31, 2016 and the Hartford, Connecticut campus has ceased student enrollment and is currently teaching out the remaining students through December 2016.

Revenue decreased by $6.4 million, or 47.0%, to $7.2 million for the nine months ended September 30, 2016 from $13.6 million, in the prior year comparable period.  This decrease is mainly attributable to the closing of our Fern Park, Florida campus and the suspension of new student enrollment at our Hartford, Connecticut location which took effect in the fourth quarter of 2015.

Operating loss increased by $0.7 million, or 13.5%, to $5.6 million from $4.9 million.

Corporate and Other
This category includes unallocated expenses incurred on behalf of the Company.  Corporate and Other costs decreased by $2.0 million, or 12.3%, to $14.6 for the nine months ended September 30, 2016 from $16.6 million for the nine months ended September 30, 2015.  This decrease was primarily a result of cost management efforts by the Company to meet its long term strategic goals and objectives.
 
31
LIQUIDITY AND CAPITAL RESOURCES
 
Our primary capital requirements are for facilities expansion and maintenance, and the development of new programs. Our principal sources of liquidity have been cash (used in) provided by operating activities and borrowings under our term loan facility. The following chart summarizes the principal elements of our cash flow:

   
Nine Months Ended
September 30,
  
   
2016
    
2015
  
Net cash (used in) provided by operating activities
  
$
(9,513
)
  
$
2,492
  
Net cash used in investing activities
    
(643
)
    
(1,159
)
Net cash (used in) provided by financing activities
    
(9,024
)
    
18,790
  


As of September 30, 2016, we had cash and cash equivalents of $45.8 million, including restricted cash of $26.6 million representing a decrease of approximately $15.2 as compared to $61 million of cash, cash equivalents and restricted cash as of December 31, 2015.  This decrease is primarily the result of a net loss during the year; $8.5 million of campus closing costs; $0.7 million loan modification fee paid to our lender in relation to an amendment of our Term Loan; and $0.7 million in severance paid during the nine months ended September 30, 2016.  In addition, the decrease in our cash position is reflective of the seasonality of the industry, the reduction in revenue, and the timing of Title IV funds received.

For the last several years, we and the proprietary school sector generally have faced deteriorating earnings growth. Government regulations have negatively impacted earnings by making it more difficult for potential students to obtain loans, which when coupled with the overall economic environment have discouraged potential students from enrolling in our schools. In light of these factors, we have incurred significant operating losses as a result of lower student population.  Despite these events, we believe that our likely sources of cash should be sufficient to fund operations for the next twelve months.  As of September 30, 2016, our available sources of cash primarily include cash and cash equivalents of $19.2 million.

To fund our business plans, including any anticipated future losses, purchase commitments, capital expenditures and principal and interest payments on borrowings, we leveraged our owned real estate that is not classified as held for sale.  We are also continuing to take actions to improve cash flow by aligning our cost structure to our student population.

Our primary source of cash is tuition collected from our students. The majority of students enrolled at our schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses. The largest of these programs are Title IV Programs which represented approximately 80% of our cash receipts relating to revenues in 2015. Students must apply for a new loan for each academic period. Federal regulations dictate the timing of disbursements of funds under Title IV Programs and loan funds are generally provided by lenders in two disbursements for each academic year. The first disbursement is usually received approximately 31 days after the start of a student's academic year and the second disbursement is typically received at the beginning of the sixteenth week from the start of the student's academic year. Certain types of grants and other funding are not subject to a 30-day delay.  In certain instances, if a student withdraws from a program prior to a specified date, any paid but unearned tuition or prorated Title IV financial aid is refunded according to federal, state and accrediting agency standards.

As a result of the significance of the Title IV funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV funds that our students are eligible to receive or any impact on our ability to be able to receive Title IV funds would have a significant impact on our operations and our financial condition.  See “Risk Factors” in Item 1A, included in our Annual Report on Form 10-K for the year ended December 31, 2015.

Operating Activities

Net cash used in operating activities was $9.5 million for the nine months ended September 30, 2016 compared to cash provided by operating activities of $2.5 million for the comparable period of 2015.  For the nine months ended September 30, 2016, changes in our operating assets and liabilities resulted in cash outflows of $14.4 million and were primarily attributable to changes in deferred revenue, accounts receivable, and accounts payable and accrued expenses. The decrease in deferred revenue resulted in a cash outflow of $2.0 million and was primarily attributable to the timing of student starts, the number of students in school and the status of students in relation to the completion of their program at September 30, 2016 compared to December 31, 2015. The decrease in receivables resulted in a cash outflow of $17.4 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students. The increase in accounts payable and accrued expenses resulted in a cash inflow of $5.5 million. This increase was primarily attributable to the timing of invoices.
 
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For the nine months ended September 30, 2015, changes in our operating assets and liabilities resulted in cash outflows of $8.3 million and were primarily attributable to changes in deferred revenue, accounts receivable, and accounts payable and accrued expenses. The increase in deferred revenue resulted in a cash inflow of $1.0 million. The increase was primarily attributable to the timing of student starts, the number of students in school and the status of students in relation to the completion of their program at September 31, 2015 compared to December 31, 2014. The decrease in receivables resulted in a cash outflow of $14.2 million and was primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students. The increase in accounts payable and accrued expenses resulted in a cash inflow of $4.6 million. The increase was primarily attributable to the timing of invoices.

Investing Activities

Net cash used in investing activities was $0.6 million and $1.2 million for the nine months ended September 30, 2016 and 2015, respectively. Our primary use of cash in investing activities was capital expenditures associated with investments in training technology, classroom furniture, and new program build outs. The use of cash for capital expenditures was partially offset by a reclassification of restricted cash to unrestricted cash during the quarter ended September 30, 2016.

We currently lease a majority of our campuses. We own our campuses in Grand Prairie, Texas; West Palm Beach, Florida; Nashville, Tennessee; Suffield, Connecticut; and Denver, Colorado.  We have 17 schools that are held for sale.

Capital expenditures are expected to approximate 2% of revenues in 2016.  We expect to fund future capital expenditures with cash generated from operating activities and cash borrowed under our term loan.

Financing Activities

Net cash used in financing activities was $9.0 million for the nine months ended September 30, 2016 as compared to cash provided from financing activities of $18.8 million for the nine months ended September 30, 2015. The decrease of $27.8 million was due to $2.9 million in lease termination payments resulting from the termination of our lease agreement for our Fern Park, Florida campus; a decrease in net borrowing of $22.0 million for the nine months ended September 30, 2016 as compared to the nine months September 30, 2015; and the reclassification of $5.0 million to restricted cash.

Credit Agreement

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

A portion of the proceeds of the Term Loan was used by the Company to (i) repay approximately $6.3 million in outstanding principal, accrued interest and fees due under the previously existing revolving credit facility, (ii) fund the $20.3 million cash collateral account securing the portion of the Term Loan provided by Alostar, (iii) fund approximately $7.4 million in a cash collateral account securing the letters of credit issued under the previously existing revolving credit facility that remain outstanding after the termination of that facility and (iv) pay transaction expenses in connection with the Term Loan and the termination of the previously existing revolving credit facility.  The remaining proceeds of the Term Loan of approximately $11.0 million may be used by the Company to finance capital expenditures and for general corporate purposes consistent with the terms of the Credit Agreement.

Interest will accrue on the Term Loan at a per annum rate equal to the greater of (i) 11% or (ii) 90-day LIBOR plus 9%  determined monthly by the Agent and will be payable monthly in arrears.  The principal balance of the Term Loan will be repaid in equal monthly installments, commencing on August 1, 2017, determined as the quotient of (i) 10% of the outstanding principal balance of the Term Loan as of July 2, 2017 divided by (ii) 12.  A final installment of principal and all accrued and unpaid interest will be due on the maturity date of the Term Loan.
 
33
The Term Loan may be prepaid, in whole or in part, at any time, subject to the payment of a prepayment premium equal to (i) 5% of the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date and (ii) 3% of the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date.  In the event of any sale or other disposition of a school or real property by the Company permitted under the Term Loan, the net proceeds of such sale or disposition must be used to prepay the Loan in an amount determined pursuant to the Credit Agreement, subject to the applicable prepayment premium; provided, however, that no prepayment premium will be due with respect to up to $15 million of aggregate repayments of the Term Loan made during the first year that the Term Loan is outstanding.  A portion of the net cash proceeds of any disposition of a school in an amount determined pursuant to the terms of the Term Loan, must be deposited and held as cash collateral in a deposit account controlled by the Agent until the conditions for release set forth in the Term Loan are satisfied.  In connection with the assets which are currently classified as held for sale and are expected to be sold within one year, the Company is required to classify $10 million as short term debt due to the Term Loan prepayment minimum required with respect to any such disposition.

The Term Loan contains customary representations, warranties and covenants such as minimum financial responsibility composite score, cohort default rate, and other financial covenants, including minimum liquidity, maximum capital expenditures, maximum 90/10 ratio and minimum EBITDA (as defined in the Term Loan), as well as affirmative and negative covenants and events of default customary for facilities of this type.  Pursuant to the Second Amendment, the financial covenants were adjusted and, at the Company’s election, will be adjusted for fiscal year 2017 and for each subsequent fiscal year until the maturity of the Term Loan at either the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Credit Agreement as of the Closing Date or the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Second Amendment.  In the event that the Company elects to re-set the financial covenants at the 2016 covenant levels contained in the Second Amendment, the Company will be required to prepay on or before January 15, 2017, without prepayment penalty, amounts outstanding under the Term Loan up to $4 million.  The Company was in compliance with all financial covenants as of September 30, 2016.

The Credit Agreement contains events of default, the occurrence and continuation of which provide the Company’s lenders with the right to exercise remedies against the Company and the collateral securing the Term Loan, including the Company’s cash. These events of default include, among other things, the Company’s failure to pay any amounts due under the Term Loan, a breach of covenants under the Credit Agreement, the Company’s insolvency and the insolvency of its subsidiaries, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness, and a final judgment against the Company in an amount greater than $1 million.

Also, in connection with the Term Loan, the Company paid to the Agent a commitment fee of $1 million on the Closing Date and is required to pay to the Agent other customary fees for facilities of this type. Total fees for the Term Loan were $2.8 million during the fiscal year 2015, which are included in deferred finance charges on the Condensed Consolidated Balance Sheet.  During the first quarter of 2016, in connection with the effectiveness of the Second Amendment, the Company paid to the Agent a loan modification fee of $0.5 million.

Letter of Credit Agreement

On April 12, 2016, the Company entered into a credit agreement (the “L/C Agreement”) with Sterling National Bank (“Sterling”) under which Sterling has agreed to issue letters of credit from time to time at 100% margin against available funds in a cash collateral account maintained by the Company at Sterling.  The maximum availability under the L/C Agreement is $9.5 million.  The Company will pay Sterling a letter of credit fee equal to 1.75% on the daily amount available to be drawn under each outstanding letter of credit, which fee is payable in quarterly installments in arrears.  The L/C Agreement matures on April 1, 2017 and replaces a letter of credit facility with a prior lender.  The L/C Agreement contains representations, warranties, affirmative and negative covenants and events of default customary for facilities of this type. As of September 30, 2016 there were $5.5 million letters of credit outstanding under the L/C Agreement.
 
34
The following table sets forth our long-term debt (in thousands):

   
September 30,
2016
    
December 31,
2015
  
Term loan
  
$
41,734
    
$
42,124
  
Finance obligation
    
1,678
      
9,672
  
Capital lease-property (with a rate of 8.0%)
    
-
      
3,899
  
     
43,412
      
55,695
  
Less current maturities
    
(11,678
)
    
(10,114
)
   
$
31,734
    
$
45,581
  

As of September 30, 2016, we had outstanding loan commitments to our students of $36.3 million, as compared to $33.4 million at December 31, 2015.  Loan commitments, net of interest that would be due on the loans through maturity, were $27.3 million at September 30, 2016, as compared to $24.8 million at December 31, 2015.  Loan commitments decreased as a result of lower population and fewer campuses.

Contractual Obligations

Long-term Debt.  As of September 30, 2016, our current portion of long-term debt and our long-term debt consisted of borrowings under our Term Loan.

Lease Commitments.  We lease offices, educational facilities and equipment for varying periods through the year 2030 at base annual rentals (excluding taxes, insurance, and other expenses under certain leases).

The following table contains supplemental information regarding our total contractual obligations as of September 30, 2016 (in thousands):

   
Payments Due by Period
  
   
Total
    
Less than
1 year
    
1-3 years
    
3-5 years
    
More than
5 years
  
Term Loan (including interest)
  
$
54,579
    
$
14,952
    
$
39,627
    
$
-
    
$
-
  
Operating leases
    
101,388
      
21,161
      
36,499
      
21,873
      
21,855
  
Total contractual cash obligations
  
$
155,967
    
$
36,113
    
$
76,126
    
$
21,873
    
$
21,855
  

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2016, except for surety bonds.  As of September 30, 2016, we posted surety bonds in the total amount of approximately $14.9 million which are partially backed by letters of credit.  Cash collateralized letters of credit of $6.2 million are primarily comprised of letters of credit for the DOE and security deposits in connection with certain of our real estate leases. These off-balance sheet arrangements do not adversely impact our liquidity or capital resources.

Regulatory Update

Cohort Default Rates

In September 2016, the DOE released the final cohort default rates for the 2013 federal fiscal year.  These are the most recent final rates published by the DOE.  The rates for our existing institutions for the 2013 federal fiscal year range from 10.5% to 15.4%.  None of our institutions had a cohort default rate equal to or greater than 30% for the 2013 federal fiscal year.
 
Accreditation

As previously disclosed, accreditation by an accrediting agency recognized by the DOE is required for one of Lincoln’s institutions to be certified to participate in Title IV Programs. As of September 30, 2016, one of our institutions comprised of 13 campuses are accredited by the Accrediting Council for Independent Colleges and Schools, or ACICS.  However, on September 22, 2016, a senior DOE official issued a decision terminating the DOE’s recognition of ACICS as a nationally recognized accrediting agency and denying ACICS’s petition for DOE recognition. ACICS has appealed the decision to the DOE Secretary.  If unsuccessful in this appeal, ACICS may appeal further to Federal court; however, unless otherwise directed by the court, such appeal would not stay the decision of the DOE Secretary.  This institution is classified as held for sale and discontinued operations in the condensed consolidating financial statements as of September 30, 2016.
 
35
Lincoln’s current Program Participation Agreement for the institution in question is valid through June 30, 2020, however, if ACICS is unsuccessful in its appeals and loses its DOE recognition, the DOE may (but is not required to) provisionally certify our ACICS-accredited institution and its campuses to continue participating in the Title IV programs for a period of up to 18 months and require the institution to apply for and obtain accreditation from another DOE-recognized accrediting body.  In such event, the DOE could also impose conditions on our institution as part of the provisional certification. If such circumstances occur, our efforts to obtain accreditation of our ACICS-accredited institution from another DOE-recognized accrediting body could be unsuccessful and could result in the loss of the institution’s eligibility to participate in the Title IV programs which could require us to close the institution and its campuses and could have a material adverse effect on our business and results of operations. Even if such circumstances do not occur, the loss of DOE recognition of ACICS could result in, among other things, a loss of state authorization (and, in turn, Title IV eligibility), programmatic accreditation, and/or authorization to participate in certain state or federal financial aid programs and cause a decline in enrollments which could have a material adverse effect on our business and results of operations.  Additionally, loss of accreditation of the institution could result in a default under the Company’s credit agreement.  In addition, we have begun the process of obtaining accreditation by another nationally recognized accrediting agency.
 
Gainful Employment

As previously disclosed, the DOE has issued final regulations on gainful employment requiring each educational program to achieve threshold rates in at least one of two debt measure categories related to an annual debt to annual earnings ratio and an annual debt to discretionary income ratio. The final regulations became effective on July 1, 2015 and, in October 2016, the DOE issued the first draft gainful employment rates for each of our programs for the 2015 debt measure year.  For the 2015 debt measure year, 60 of Lincoln’s programs achieved passing rates, 13 programs had rates that are in a category called the “zone,” and 5 programs had failing rates.  The draft rates are subject to appeal and other adjustments and, therefore, may be subject to change before the DOE issues the final rates which are expected in early 2017.

Each of our programs with failing final rates will lose its Title IV eligibility if it also receives a failing rate for either of the 2016 or 2017 debt measure year.   The gainful employment rates for the 2016 debt measure year are expected to be issued in late 2017. Our programs with rates in the zone are not subject to loss of Title IV eligibility unless they accumulate a combination of zone and failing rates for four consecutive years (or failing rates for two out of any three consecutive years) however, each program with a failing gainful employment rate will be required to provide warnings to prospective and currently enrolled students in those particular programs notifying them that, among other things, the program has not passed the gainful employment standards and could lose Title IV eligibility which could cause those students to lose access to Title IV funds and be required to find other means of paying for the program. Issuance of such warnings to those students could significantly impact enrollment which could have a material adverse effect on our business and results of operations.  Moreover, the potential for one or more of these programs to lose their Title IV eligibility could trigger a requirement to submit a letter of credit or other financial protection to the DOE under the new Borrower Defense to Repayment Regulations that take effect on July 1, 2017.  See “Borrower Defense to Repayment Regulations” below. The ongoing implementation of the gainful employment regulations could require us to eliminate certain educational programs, could result in the loss of our students’ access to Title IV program funds for the affected programs, and could significantly impact the rate at which students enroll in our programs which could have a material adverse effect on our business and results of operations.
 
36
Borrower Defense to Repayment Regulations

On November 1, 2016, the DOE published regulations regarding, among other things, a borrower’s ability to allege acts or omissions by an institution as a defense to the repayment of certain Title IV loans and the consequences to the borrower, the DOE, and the institution.  The regulations which become effective on July 1, 2017 include a variety of requirements for implementing additional administrative policies and procedures, including the following: establishing expanded standards of financial responsibility which could in a requirement that we submit to the DOE a substantial letter of credit or other form of financial protection, requiring institutions to make disclosures to current and prospective students regarding the existence of certain circumstances whereby the institution is required to provide additional forms of financial protection to the DOE and/or where the institution has a loan repayment below DOE thresholds.   We are still in the process of evaluating the impact of these new and complex regulations on our business which will pose a significant administrative burden and could result in additional risks to our business.

Program Review

On April 26, 2013, the DOE notified our Union, New Jersey campus that an on-site program review was scheduled to begin on May 20, 2013. The program review assessed the institution’s administration of Title IV programs in which the campus participated for the 2011-2012 and 2012-2013 award years.  On September 30, 2016, the DOE issued a Program Review Report that required our Union campus to respond to information requests made in such report.  Our Union campus is in process of responding to the Program Review Report.

Seasonality and Outlook

Seasonality

Our revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in total student population. Student population varies as a result of new student enrollments, graduations and student attrition. Historically, our schools have had lower student populations in our first and second quarters and we have experienced larger class starts in the third quarter and higher student attrition in the first half of the year. Our second half growth is largely dependent on a successful high school recruiting season. We recruit our high school students several months ahead of their scheduled start dates, and thus, while we have visibility on the number of students who have expressed interest in attending our schools, we cannot predict with certainty the actual number of new student enrollments and the related impact on revenue. Our expenses, however, typically do not vary significantly over the course of the year with changes in our student population and revenue. During the first half of the year, we make significant investments in marketing, staff, programs and facilities to meet our second half of the year targets and, as a result, such expenses do not fluctuate significantly on a quarterly basis. To the extent new student enrollments, and related revenue, in the second half of the year fall short of our estimates, our operating results could be negatively impacted. We expect quarterly fluctuations in operating results to continue as a result of seasonal enrollment patterns. Such patterns may change as a result of new school openings, new program introductions, and increased enrollments of adult students and/or acquisitions.

Outlook

Similar to many companies in the proprietary education sector, we have experienced significant deterioration in student enrollments over the last several years. This can be attributed to many factors including the economic environment and numerous regulatory changes such as changes to admissions advisor compensation policies, elimination of the ability-to-benefit (“ATB”), changes to the 90/10 Rule and cohort default rates, gainful employment and modifications to Title IV amounts and eligibility. While the industry has not returned to growth the trends are far more stable as declines have slowed.
 
37
As the economy continues to improve and the unemployment rate continues to decline our student enrollment is negatively impacted due to a portion of our potential student base entering the workforce prematurely without obtaining any post-secondary training. Offsetting this short term decline in available students is the fact that an increasing number of the “baby boom” generation are retiring from the workforce.  The retirement of baby boomers coupled with a growing economy has resulted in additional employers looking to us to help solve their workforce needs.  With schools in 15 states, we are a very attractive employment solution for large regional and national employers.

To fund our business plans, including any anticipated future losses, purchase commitments, capital expenditures, principal and interest payments on borrowings and to satisfy the DOE financial responsibility standards, we have entered into a new Credit Agreement described above and continue to have the ability to sell our assets that are classified as held for sale. We are also continuing to take actions to improve cash flow by aligning our cost structure to our student population.

On November 3, 2015, our Board of Directors approved a plan for us to divest our Healthcare and Other Professions business segment.  Implementation of the plan results in our operations focused solely on the Transportation and Skilled Trades business segment.  Due to the Board’s decision to divest the Healthcare and Other Professions business segment, this segment was classified as discontinued operations and asset and liabilities classified as held for sale.
                                           
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks as part of our on-going business operations.  On July 31, 2015, the Company repaid in full and terminated a previously existing revolving line of credit with the proceeds of a new $45 million Term Loan.  Our obligations under the Term Loan are secured by a lien on substantially all of our assets and our subsidiaries and any assets that we or our subsidiaries may acquire in the future. Outstanding borrowings bear interest at the rate of 11.0% as of September 30, 2016.  As of September 30, 2016, we had $44.3 million outstanding under the Term Loan. 

Based on our outstanding debt balance as of September 30, 2016, a change of one percent in the interest rate would have caused a change in our interest expense of approximately $0.4 million, or $0.02 per basic share, on an annual basis.  Changes in interest rates could have an impact however on our operations, which are greatly dependent on students’ ability to obtain financing. Any increase in interest rates could greatly impact our ability to attract students and have an adverse impact on the results of our operations. The remainder of our interest rate risk is associated with miscellaneous capital equipment leases, which is not significant.

Item 4.
CONTROLS AND PROCEDURES

(a)   Evaluation of disclosure controls and procedures.  Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of the end of the quarterly period covered by this report, have concluded that our disclosure controls and procedures are adequate and effective to reasonably ensure that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s Rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting.  There were no changes made during our most recently completed fiscal quarter in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.
LEGAL PROCEEDINGS

In the ordinary conduct of our business, we are subject to periodic lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters.  Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding to which we are a party will have a material adverse effect on our business, financial condition, results of operations or cash flows.
 
38
On December 15, 2015, the Company received an administrative subpoena from the Attorney General of the State of Maryland. Pursuant to the subpoena, Maryland’s Attorney General has requested from the Company documents and detailed information relating to its Columbia, Maryland campus.  The Company has responded to this request and intends to continue cooperating with the Maryland Attorney General’s Office.

Item 6.
EXHIBITS

Exhibit
Number
 
Description
   
10.1(1)
Purchase and Sale Agreement dated July 1, 2016 between New England Institute of Technology at Palm Beach, Inc. and School Property Development Metrocentre, LLC
   
10.2(2)
Employment Agreement dated August 23, 2016 between the Company and Scott M. Shaw
   
10.3(3)
Employment Agreement dated August 23, 2016 between the Company and Brian K. Meyers
   
31.1 *
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 *
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32 *
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101**
The following financial statements from Lincoln Educational Services Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statement of Changes in Stockholders’ Equity, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.
 
(1)
Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2016.

(2)
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 25, 2016.

(3)
Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 25, 2016.

*
Filed herewith.

**
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
LINCOLN EDUCATIONAL SERVICES CORPORATION
       
Date: November 7, 2016
By:
/s/ Brian Meyers
  
 
Brian Meyers
  
 
Executive Vice President, Chief Financial Officer and Treasurer
 
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Exhibit Index

10.1(1)
Purchase and Sale Agreement dated July 1, 2016 between New England Institute of Technology at Palm Beach, Inc. and School Property Development Metrocentre, LLC
   
10.2(2)
Employment Agreement dated August 23, 2016 between the Company and Scott M. Shaw
   
10.3(3)
Employment Agreement dated August 23, 2016 between the Company and Brian K. Meyers
   
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101**
The following financial statements from Lincoln Educational Services Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statement of Changes in Stockholders’ Equity, and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.
 
(1)
Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2016.

(2)
Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 25, 2016.

(3)
Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 25, 2016.

*
Filed herewith.

**
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

 
41
 EX-31.1 2 ex31_1.htm EXHIBIT 31.1
EXHIBIT 31.1
 
CERTIFICATION
 
I, Scott Shaw, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Lincoln Educational Services Corporation;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:
November 7, 2016  
 
/s/ Scott Shaw
    
Scott Shaw 
Chief Executive Officer
 
 
 EX-31.2 3 ex31_2.htm EXHIBIT 31.2
EXHIBIT 31.2
 
CERTIFICATION
 
I, Brian Meyers, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Lincoln Educational Services Corporation;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  November 7, 2016
 
/s/ Brian Meyers
    
Brian Meyers
Chief Financial Officer

 
 EX-32 4 ex32.htm EXHIBIT 32
EXHIBIT 32
 
CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002
 
Each of the undersigned, Scott Shaw, Chief Executive Officer of Lincoln Educational Services Corporation (the “Company”), and Brian Meyers, Chief Financial Officer of the Company, has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016 (the “Report”).
 
Each of the undersigned hereby certifies that, to his respective knowledge:
 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:
November 7, 2016
  
 
/s/ Scott Shaw
  
Scott Shaw
  
Chief Executive Officer
 
/s/ Brian Meyers
  
Brian Meyers
Chief Financial Officer
 
 
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The July 31, 2015 credit agreement, along with subsequent amendments to the Credit Agreement dated December 31, 2015 and February 29, 2016, are collectively referred to as the &#8220;Credit Agreement.&#8221;&#160; As of December 31, 2015 and prior to the effectiveness of a second amendment to the Credit Agreement on February 29, 2016 (the &#8220;Second Amendment&#8221;), the Term Loan consisted of a $30 million term loan (the &#8220;Term Loan A&#8221;) from HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC, secured by a first priority lien in favor of the Agent on substantially all of the real and personal property owned by the Company, and a $15 million term loan (the &#8220;Term Loan B&#8221;) from Alostar secured by a $15.3 million cash collateral account. Pursuant to the Second Amendment, the Company received an additional $5 million term loan from Alostar with which the Company repaid $5 million of the principal amount of the Term Loan A.&#160; Accordingly, upon the effectiveness of the Second Amendment, the aggregate term loans outstanding under the Credit Agreement remained at approximately $45 million, consisting of an approximate $25 million Term Loan A and a $20 million Term Loan B.&#160; In addition, pursuant to the Second Amendment, the amount of cash collateral securing the Term Loan B was increased to $20.3 million.&#160; At the Company&#8217;s request, a percentage of the cash collateral may be released to the Company at the Agent&#8217;s sole discretion and with the consent of Alostar upon the satisfaction of certain criteria as outlined in the Credit Agreement.&#160; The Term Loan, which matures on July 31, 2019, replaced a previously existing $20 million revolving credit facility with Bank of America, N.A. and other lenders, which was due to expire on April 5, 2016.&#160; 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The remaining proceeds of the Term Loan of approximately $11 million may be used by the Company to finance capital expenditures and for general corporate purposes consistent with the terms of the Credit Agreement.</div><div><br /></div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">Interest will accrue on the Term Loan at a per annum rate equal to the greater of (i) 11% or (ii) 90-day LIBOR plus 9%&#160; determined monthly by the Agent and will be payable monthly in arrears.&#160; The principal balance of the Term Loan will be repaid in equal monthly installments, commencing on August 1, 2017, determined as the quotient of (i) 10% of the outstanding principal balance of the Term Loan as of July 2, 2017 divided by (ii) 12.&#160; A final installment of principal and all accrued and unpaid interest will be due on the maturity date of the Term Loan.</div><div><br /></div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">The Term Loan may be prepaid, in whole or in part, at any time, subject to the payment of a prepayment premium equal to (i) 5% of the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date and (ii) 3% of the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date.&#160; In the event of any sale or other disposition of a school or real property by the Company permitted under the Term Loan, the net proceeds of such sale or disposition must be used to prepay the Loan in an amount determined pursuant to the Credit Agreement, subject to the applicable prepayment premium; provided, however, that no prepayment premium will be due with respect to up to $15 million of aggregate repayments of the Term Loan made during the first year that the Term Loan is outstanding.&#160; A portion of the net cash proceeds of any disposition of a school in an amount determined pursuant to the terms of the Term Loan, must be deposited and held as cash collateral in a deposit account controlled by the Agent until the conditions for release set forth in the Term Loan are satisfied.&#160; In connection with the assets which are currently classified as held for sale and are expected to be sold within one year, the Company is required to classify $10 million as short term debt due to the Term Loan prepayment minimum required with respect to any such disposition.</div><div><br /></div><div style="font-size: 10pt; 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During the first quarter of 2016, in connection with the effectiveness of the Second Amendment, the Company paid loan modification fees of $0.5 million.&#160; These deferred finance fees are netted against the Term Loan on the Condensed Consolidated Balance Sheets and amortized to interest expense on the Condensed Consolidated Statement of Operations.</div><div><br /></div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">As of September 30, 2016 and December 31, 2015, the Company had $44.3 million and $44.7 million outstanding under the Term Loan; offset by $2.5 million and $2.5 million of deferred finance fees, respectively.</div><div><br /></div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">(b) The Company completed a sale and a leaseback of four facilities on December 28, 2001. 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For the three and nine months ended September 30, 2016, options to acquire 224,667 shares were excluded from the above table because they have an exercise price that is greater than the average market price of the Company&#8217;s common stock and, therefore, their impact on reported income (loss) per share would have been antidilutive. 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margin-left: 7.2pt; text-indent: -7.2pt;">Remainder of 2016</div></td><td valign="bottom" style="width: 1%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;"><div style="font-size: 10pt; font-family: 'Times New Roman';">$</div></td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;"><div style="font-size: 10pt; font-family: 'Times New Roman';">4</div></td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td></tr><tr><td valign="bottom" style="width: 58%; vertical-align: bottom; background-color: #ffffff;"><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">2017</div></td><td valign="bottom" style="width: 1%; vertical-align: bottom; background-color: #ffffff;">&#160;</td><td valign="bottom" style="width: 1%; 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This statement requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.</div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">In accordance with ASC 740, the Company assesses its deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable.&#160; A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. 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ASU No. 2016-15 amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is effective for the Company beginning after December 15, 2017, including interim periods within that fiscal year. Early application is permitted. The Company is currently evaluating the impact of ASU No. 2016-15, however it is not expected to have a material impact on the Company&#8217;s consolidated financial statements.</div><div><br /></div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: justify;">In March 2016, the FASB issued ASU No. 2016-09, <font style="font-size: 10pt; font-family: 'Times New Roman'; font-style: italic;">Improvements to Employee Share-Based Payment Accounting. </font>ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences. 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Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is of unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed. The existing requirement to separately present items that are of unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The new guidance also requires similar separate presentation of items that are both unusual and infrequent. The guidance, effective for the Company on January 1, 2016, with earlier application permitted as of the beginning of the fiscal year of adoption, did not have a material impact on the Company&#8217;s consolidated financial statements.</div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">&#160;</div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">In August 2014, the FASB issued a new standard &#8211; ASU No. 2014-15, <font style="font-size: 10pt; font-family: 'Times New Roman'; font-style: italic;">Disclosure of Uncertainties about an Entity&#8217;s Ability to Continue as a Going Concern </font>- that will explicitly require management to evaluate whether there is substantial doubt about an entity&#8217;s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. 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The Company </font>currently operates 30 schools in 15 states and&#160; offers programs in automotive technology, skilled trades (which include HVAC, welding and computerized numerical control and electronic systems technology, among other programs), healthcare services (which include nursing, dental assistant, medical administrative assistant and pharmacy technician, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and business and information technology (which includes information technology and criminal justice programs).&#160; The schools operate under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences brand names.&#160; Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.&#160; Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. 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ASU No. 2016-15 amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is effective for the Company beginning after December 15, 2017, including interim periods within that fiscal year. Early application is permitted. The Company is currently evaluating the impact of ASU No. 2016-15, however it is not expected to have a material impact on the Company&#8217;s consolidated financial statements.</div><div><br /></div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: justify;">In March 2016, the FASB issued ASU No. 2016-09, <font style="font-size: 10pt; font-family: 'Times New Roman'; font-style: italic;">Improvements to Employee Share-Based Payment Accounting. </font>ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences. 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Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is of unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed. The existing requirement to separately present items that are of unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The new guidance also requires similar separate presentation of items that are both unusual and infrequent. 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vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;">&#160;</td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;">&#160;</td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td></tr><tr><td valign="bottom" style="width: 55%; 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vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;">&#160;</td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;">&#160;</td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td></tr><tr><td valign="bottom" style="width: 55%; vertical-align: bottom; padding-bottom: 4px; 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vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;">&#160;</td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;">&#160;</td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td></tr><tr><td valign="bottom" style="width: 55%; vertical-align: bottom; padding-bottom: 4px; 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vertical-align: bottom; background-color: #cceeff;"><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Nonvested restricted stock outstanding at December 31, 2015</div></td><td valign="bottom" style="width: 1%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; text-align: right; background-color: #cceeff;"><div style="font-size: 10pt; font-family: 'Times New Roman';">450,494</div></td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; text-align: left; background-color: #cceeff;"><div style="font-size: 10pt; 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vertical-align: bottom; padding-bottom: 2px; background-color: #ffffff;">&#160;</td><td valign="bottom" style="width: 1%; vertical-align: bottom; border-bottom: #000000 2px solid; text-align: left; background-color: #ffffff;">&#160;</td><td valign="bottom" style="width: 9%; vertical-align: bottom; border-bottom: #000000 2px solid; text-align: right; background-color: #ffffff;"><div style="font-size: 10pt; font-family: 'Times New Roman';">-</div></td><td nowrap="nowrap" valign="bottom" style="width: 1%; vertical-align: bottom; padding-bottom: 2px; text-align: left; background-color: #ffffff;">&#160;</td></tr><tr><td valign="bottom" style="width: 44%; vertical-align: bottom; padding-bottom: 4px; background-color: #cceeff;"><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Balance as of September 30, 2016</div></td><td valign="bottom" style="width: 1%; vertical-align: bottom; padding-bottom: 4px; background-color: #cceeff;">&#160;</td><td valign="bottom" style="width: 1%; 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font-size: 10pt;"><div><table cellpadding="0" cellspacing="0" class="DSPFListTable" style="font-size: 10pt; font-family: 'Times New Roman'; width: 100%;"><tr style="vertical-align: top;"><td style="width: 36pt; vertical-align: top; align: right;"><div style="font-size: 10pt; font-family: 'Times New Roman'; font-weight: bold; text-align: left;">9.</div></td><td style="width: auto; vertical-align: top; align: left;"><div style="font-size: 10pt; font-family: 'Times New Roman'; font-weight: bold; text-align: left;">SEGMENTS</div></td></tr></table></div><div><br /></div><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;">The for-profit education industry has been impacted by numerous regulatory changes, the changing economy and an onslaught of negative articles in the press. 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Actual results could materially differ from those estimates.</div></div> 23140006 23433015 23269635 24679977 23433015 23498904 23230438 23140006 -358000 -505000 22612000 5022000 0 216000 1000000 0.05 0.03 0.1 4000000 3 44267000 5000000 1 1678000 0 0 9672000 <div style="font-family: 'Times New Roman'; font-size: 10pt;"><div style="font-size: 10pt; font-family: 'Times New Roman'; text-align: left;"><font style="font-size: 10pt; font-family: 'Times New Roman'; font-weight: bold; font-style: italic;">Business Activities</font><font style="font-size: 10pt; font-family: 'Times New Roman';"> &#8211; Lincoln Educational Services Corporation and its subsidiaries (collectively, the &#8220;Company&#8221;) provide diversified career-oriented post-secondary education to recent high school graduates and working adults. The Company </font>currently operates 30 schools in 15 states and&#160; offers programs in automotive technology, skilled trades (which include HVAC, welding and computerized numerical control and electronic systems technology, among other programs), healthcare services (which include nursing, dental assistant, medical administrative assistant and pharmacy technician, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and business and information technology (which includes information technology and criminal justice programs).&#160; The schools operate under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences brand names.&#160; Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.&#160; Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company&#8217;s other campuses primarily attract students from their local communities and surrounding areas.&#160; 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 &#8220;DOE&#8221;) 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.</div><div style="text-align: left;"><br /></div><div><font style="font-size: 10pt; font-family: 'Times New Roman';">In the first quarter of 2015, the Company reorganized its operations into three reportable business segments: (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions, and (c) Transitional which refers to businesses that have been or are currently being taught out.&#160; I</font>n November, 2015, the Company&#8217;s Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in its Healthcare and Other Professions business segment and, then, in December, 2015, the Board of Directors approved a plan to cease operations of the remaining school in this segment located in Hartford, Connecticut. The Hartford school is scheduled to close in the fourth quarter of 2016 and is included in the Transitional segment as of September 30, 2016.&#160; In the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017.&#160; As a result, operations related to these programs have been included in the Transitional segment as of September 30, 2016.&#160; Divestiture of the Healthcare and Other Professions business segment marks a shift in the Company&#8217;s business strategy intended to enable the Company to focus its energy and resources predominantly on Transportation and Skilled Trades though some other programs will continue to be available at some campuses.&#160; The results of operations of the 17 campuses included in the Healthcare and Other Professions segment that are being divested are reflected as discontinued operations in the condensed consolidated financial statements.</div></div> 10000000 18 30 18 5 17 17 45800000 100000 100000 100000 100000 2 P1Y P1Y 0 1 0 0 0 0 2181000 0 2181000 2181000 20281000 0 20281000 20281000 0 0 6282000 6282000 6282000 0 157000 157000 0 0 157000 10 0.09 0 0.037 0.963 1 1 1 0 0.91 0 1 0.08 0.948 0 0.052 0.92 In 2009, the Company assumed a real estate capital lease for a property located in Fern Park, Florida having a term continuing through October 31, 2032. On February 27, 2015, the Company's Board of Directors approved a plan to cease operations of its school located at the Fern Park, Florida property, which school closed in the first quarter of 2016. In connection with the closure of the Fern Park, Florida school, on February 12, 2016, the Company paid a $2.8 million lease termination fee to the landlord of the Fern Park, Florida property in connection with the amendment and early termination of the 2009 lease agreement. The amended lease agreement subsequently expired on April 10, 2016. The Company completed a sale and a leaseback of several facilities on December 28, 2001. The Company retained a continuing involvement in the lease and, as a result, it is prohibited from utilizing sale-leaseback accounting. Accordingly, the Company had treated this transaction as a finance lease. In January 2016, the lease was amended to cure certain provisions related to continuing involvement and, as a consequence, achieved sales treatment. In the first quarter of 2016, the lease was converted to an operating lease and rent payments are included in educational, services and facilities expense in the Condensed Consolidated Statement of Operations. In addition, the finance obligation, net of land and buildings, is being amortized straight-line through December 31, 2016. On July 31, 2015, the Company entered into a credit agreement with three lenders, Alostar Bank of Commerce ("Alostar"), HPF Holdco, LLC and Rushing Creek 4, LLC, led by HPF Service, LLC, as administrative agent and collateral agent (the "Agent"), for an aggregate principal amount of $45 million (the "Term Loan"). The July 31, 2015 credit agreement, along with subsequent amendments to the Credit Agreement dated December 31, 2015 and February 29, 2016, are collectively referred to as the "Credit Agreement." As of December 31, 2015 and prior to the effectiveness of a second amendment to the Credit Agreement on February 29, 2016 (the "Second Amendment"), the Term Loan consisted of a $30 million term loan (the "Term Loan A") from HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC, secured by a first priority lien in favor of the Agent on substantially all of the real and personal property owned by the Company, and a $15 million term loan (the "Term Loan B") from Alostar secured by a $15.3 million cash collateral account. Pursuant to the Second Amendment, the Company received an additional $5 million term loan from Alostar with which the Company repaid $5 million of the principal amount of the Term Loan A. Accordingly, upon the effectiveness of the Second Amendment, the aggregate term loans outstanding under the Credit Agreement remained at approximately $45 million, consisting of an approximate $25 million Term Loan A and a $20 million Term Loan B. In addition, pursuant to the Second Amendment, the amount of cash collateral securing the Term Loan B was increased to $20.3 million. At the Company's request, a percentage of the cash collateral may be released to the Company at the Agent's sole discretion and with the consent of Alostar upon the satisfaction of certain criteria as outlined in the Credit Agreement. The Term Loan, which matures on July 31, 2019, replaced a previously existing $20 million revolving credit facility with Bank of America, N.A. and other lenders, which was due to expire on April 5, 2016. The previously existing revolving credit facility was terminated concurrently with the effective date of the Credit Agreement on July 31, 2015 (the "Closing Date"). A portion of the proceeds of the Term Loan was used by the Company to (i) repay approximately $6.3 million in outstanding principal, accrued interest and fees due under the previously existing revolving credit facility, (ii) fund the $20.3 million cash collateral account securing the portion of the Term Loan provided by Alostar, (iii) fund approximately $7.4 million in a cash collateral account securing the letters of credit issued under the previously existing revolving credit facility that remain outstanding after the termination of that facility and (iv) pay transaction expenses in connection with the Term Loan and the termination of the previously existing revolving credit facility. The remaining proceeds of the Term Loan of approximately $11 million may be used by the Company to finance capital expenditures and for general corporate purposes consistent with the terms of the Credit Agreement. Interest will accrue on the Term Loan at a per annum rate equal to the greater of (i) 11% or (ii) 90-day LIBOR plus 9% determined monthly by the Agent and will be payable monthly in arrears. The principal balance of the Term Loan will be repaid in equal monthly installments, commencing on August 1, 2017, determined as the quotient of (i) 10% of the outstanding principal balance of the Term Loan as of July 2, 2017 divided by (ii) 12. A final installment of principal and all accrued and unpaid interest will be due on the maturity date of the Term Loan. The Term Loan may be prepaid, in whole or in part, at any time, subject to the payment of a prepayment premium equal to (i) 5% of the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date and (ii) 3% of the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date. In the event of any sale or other disposition of a school or real property by the Company permitted under the Term Loan, the net proceeds of such sale or disposition must be used to prepay the Loan in an amount determined pursuant to the Credit Agreement, subject to the applicable prepayment premium; provided, however, that no prepayment premium will be due with respect to up to $15 million of aggregate repayments of the Term Loan made during the first year that the Term Loan is outstanding. A portion of the net cash proceeds of any disposition of a school in an amount determined pursuant to the terms of the Term Loan, must be deposited and held as cash collateral in a deposit account controlled by the Agent until the conditions for release set forth in the Term Loan are satisfied. In connection with the assets which are currently classified as held for sale and are expected to be sold within one year, the Company is required to classify $10 million as short term debt due to the Term Loan prepayment minimum required with respect to any such disposition. The Term Loan contains customary representations, warranties and covenants such as minimum financial responsibility composite score, cohort default rate, and other financial covenants, including minimum liquidity, maximum capital expenditures, maximum 90/10 ratio and minimum EBITDA (as defined in the Term Loan), as well as affirmative and negative covenants and events of default customary for facilities of this type. The Company was in compliance with all covenants as of September 30, 2016. Subsequent to the 2015 fiscal year end, pursuant to the Second Amendment, the financial covenants were adjusted and, at the Company's election, will be adjusted for fiscal year 2017 and for each subsequent fiscal year until the maturity of the Term Loan at either the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Credit Agreement as of the Closing Date or the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Second Amendment. In the event that the Company elects to re-set the financial covenants at the 2016 covenant levels contained in the Second Amendment, the Company will be required to prepay on or before January 15, 2017, without prepayment penalty, amounts outstanding under the Term Loan up to $4 million. The Credit Agreement contains events of default, the occurrence and continuation of which provide the Company's lenders with the right to exercise remedies against the Company and the collateral securing the Term Loan, including the Company's cash. These events of default include, among other things, the Company's failure to pay any amounts due under the Term Loan, a breach of covenants under the Credit Agreement, the Company's insolvency and the insolvency of its subsidiaries, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness, and a final judgment against the Company in an amount greater than $1 million. Also, in connection with the Term Loan, the Company paid to the Agent a commitment fee of $1 million on the Closing Date and is required to pay to the Agent other customary fees for facilities of this type. Total fees for the Term Loan were $2.8 million during fiscal year 2015. During the first quarter of 2016, in connection with the effectiveness of the Second Amendment, the Company paid loan modification fees of $0.5 million. These deferred finance fees are netted against the Term Loan on the Condensed Consolidated Balance Sheet and amortized to interest expense on the Condensed Consolidated Statement of Operations. As of September 30, 2016 and December 31, 2015, the Company had $44.3 million and $44.7 million outstanding under the Term Loan; offset by $2.5 million and $2.5 million of deferred finance fees, respectively. 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Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding Weighted Average Price (in dollars per share) Summary of estimated future amortization expense Sale and a leaseback of several facilities, Date REVENUE Revenue, Net Schedule of Finite-Lived Intangible Assets [Table] Summary of transactions pertaining to option plans Summary of transactions pertaining to restricted stock Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table] Weighted average numbers of common shares used to compute basic and diluted loss per share Schedule of Weighted Average Number of Shares [Table Text Block] Summary of finite-lived intangible assets Schedule of Finite-Lived Intangible Assets [Table Text Block] Schedule of Revenues from External Customers and Long-Lived Assets [Table] Results of operations at campuses Disposal Groups, Including Discontinued Operations [Table Text Block] Long-term debt and lease obligations Schedule of Long-term Debt Instruments [Table Text Block] Changes in carrying amount of goodwill Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table] Summary financial information by reporting segment Schedule of Share-based Compensation Arrangements by Share-based Payment Award [Table] Schedule of Segment Reporting Information, by Segment [Table] Summary of options outstanding SEGMENTS Segments [Domain] SEGMENTS [Abstract] Summary financial information by reporting segment [Abstract] Segment Reporting Information [Line Items] Discontinued Operations [Member] Operating Activities [Domain] Selling, general and administrative Stock-based compensation expense Canceled (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value Vesting period of performance-based shares Weighted Average Grant Date Fair Value [Abstract] Stock-based compensation expense Share-based Compensation [Abstract] Granted (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value Shares [Abstract] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Weighted Average Exercise Price Per Share [Abstract] Granted (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period Canceled (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period Nonvested restricted stock outstanding, ending balance (in dollars per share) Nonvested restricted stock outstanding, beginning balance (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments 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Number of Shares Outstanding, Diluted [Abstract] Basic (in shares) Basic shares outstanding (in shares) Amount of the current period expense charged against operations as an adjustment to the balance of deferred rent. Deferred Rent Expense Deferred rent Cash paid during the year for: [Abstract] Cash paid during the year for: The net cash outflow from cash and cash items that are not available for withdrawal or usage. Repayments Of Restricted Cash Financing Activities Reclassifications of proceeds of borrowings from restricted cash The aggregate amount of write-downs for impairments of goodwill and long-lived assets recognized during the period for continuing and discontinued operations. Impairment of Goodwill and Long Lived Assets Impairment of goodwill and long-lived assets A contractual arrangement with a lender under which borrowings can be made up to a specific amount at any point in time, and under which borrowings outstanding may be either short-term or long-term, depending upon the particulars. Term Loan Agreement [Member] Term Loan Agreement [Member] Financial obligation represents to an outstanding debt that a party must still repay - and if they do not pay, they default on the debt. Finance Obligation [Member] Finance Obligation [Member] Refers to revolving credit facility with Bank of America and other lenders. Bank of America And Other Lenders [Member] Bank of America and Other Lenders [Member] Refers to entity. Alostar Bank Of Commerce [Member] Alostar Bank of Commerce [Member] Refers to entities under term loan agreement. HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group LLC [Member] HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC [Member] Represents lease of property which represents ownership and is reflected on the entity's balance sheet as an asset. Capital Lease Property [Member] Capital Lease-Property (rate of 8.0%) [Member] Judgment amount required against the Company to cause a breach of covenant in regards to the Term Loan. Judgment amount to cause breach of covenant The Loan may be prepaid in whole or in part at any time, subject to the payment of a prepayment premium equal to the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date. Percentage Of Principal Amount Prepaid But Not Including In The Second Anniversary Percentage of principal amount prepaid but not including in the second anniversary The Loan may be prepaid in whole or in part at any time, subject to the payment of a prepayment premium equal to the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date. Percentage Of Principal Amount Prepaid But Not Including In The Third Anniversary Percentage of principal amount prepaid but not including in the third anniversary Refers to percentage of principal balance of the Loan will be repaid in equal monthly installments. Percentage Of Outstanding Principal Balance Of Loan Percentage of outstanding principal balance of loan Refers to the maximum amount required for repayment under second amendment agreement. Debt Instrument Maximum Amount Required for Repayment Term loan maximum amount required for repayment Represents number of lenders led by bank. Number of Lenders Led by Bank Number of lenders Amount of long-term debt and capital lease obligations including current maturities and excluding non-cash financing obligation liability. Long-term Debt and Capital Lease Obligations, Including Current Maturities, Excluding Non-Cash Financing Obligation Liability Long term debt and capital lease obligations Additional Face (par) amount of debt instrument at time of issuance. Debt Instrument Additional Face Amount Outstanding term loan additional amount Refers to percentage of margin against available funds in a cash collateral account maintained by the Borrowers at the Bank. Percentage of margin against available funds in cash collateral account A contractual arrangement with a lender under which borrowings can be made up to a specific amount at any point in time, and under which borrowings outstanding may be either short-term or long-term, depending upon the particulars related to term loan A. Term Loan A [Member] Refers to landlord information of Fern Park. Fern Park [Member] Fern Park [Member] A contractual arrangement with a lender under which borrowings can be made up to a specific amount at any point in time, and under which borrowings outstanding may be either short-term or long-term, depending upon the particulars related to term loan B. Term Loan B [Member] Amount of finance lease obligation due within one year or the normal operating cycle, if longer. Current portion of finance obligation Current portion of finance obligation Long-term finance obligation Long-term finance obligation Disclosure of accounting policy for business activities. Any activity that is engaged in for the primary purpose of making a profit. Business activities can include things like operations, marketing, production and administration. Business Activities [Policy Text Block] Business Activities Contracts conveying rights, but not obligations, to buy or sell a specific quantity of stock at a specified price during a specified period (an American option) or at a specified date (a European option). Stock Option 2 [Member] Stock Option 2 [Member] Contracts conveying rights, but not obligations, to buy or sell a specific quantity of stock at a specified price during a specified period (an American option) or at a specified date (a European option). Stock Option 1 [Member] Stock Option 1 [Member] Liquidity [Abstract] Refers to amount required for repayment of debt from assets held for sale. Disposal Group, Including Discontinued Operation Amount Required For Debt Repayment Amount required to pay down debt Represents the number of schools. Number of Schools Number of schools Business Activities [Abstract] Business Activities [Abstract] Refers to the number of campuses treated as destination schools. Number of Campuses Treated as destination Schools Number of campuses treated as destination schools Refers to the number of schools that were approved to divest. Number of Schools Approved to Divest Number of schools approved to divest Sector of the economy consisting of companies engaged in healthcare and other professions-related business activities. Healthcare and Other Professions Business Segment [Member] Healthcare and Other Professions Business Segment [Member] Refers to the value of cash, cash equivalents and restricted cash. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents Refers to entity. West Palm Beach Property [Member] West Palm Beach Property [Member] Type of estimate of range of exercise prices, one including but not limited to, upper and lower bound amounts, maximum and minimum amounts, and point estimates. Range 3 [Member] $ 20.00-$25.00 [Member] Type of estimate of range of exercise prices, one including but not limited to, upper and lower bound amounts, maximum and minimum amounts, and point estimates. Range 1 [Member] $ 4.00-$13.99 [Member] Stock Options [Abstract] Stock Options [Abstract] Represents the amount of equity decrease during the reporting period for payment of certain taxes on behalf of employees. Decrease in Equity Due to Payment of Tax for Employee Decrease in equity due to payment of tax for employee Represents number of stock incentive plans. Number of Stock Incentive Plans Number of stock incentive plans Summary of Transactions Pertaining to Stock Options [Abstract] Summary of transactions pertaining to stock options [Abstract] Type of estimate of range of exercise prices, one including but not limited to, upper and lower bound amounts, maximum and minimum amounts, and point estimates. Range 2 [Member] $ 14.00-$19.99 [Member] Summary of Stock Options Outstanding [Abstract] Summary of stock options outstanding [Abstract] Share Based Compensation Arrangement By Share Based Payment Award Stock Options Outstanding [Abstract] Stock Options Outstanding [Abstract] Share Based Compensation Arrangement By Share Based Payment Award Stock Options Exercisable [Abstract] Stock Options Exercisable [Abstract] Represents the stock incentive plan of the entity. Long Term Incentive Plan [Member] LTIP [Member] Represents specified operating income margin period for the employees right to become exercisable. Specified Operating Income Margin Period Specified operating income margin period Share Based Compensation Shares Authorized Under Stock Option Plans Exercise Price Range [Abstract] Range of Exercise Prices [Abstract] Share Based Compensation Arrangement By Share Based Payment Award Weighted Average Remaining Contractual Term [Abstract] Weighted Average Remaining Contractual Term [Abstract] Share Based Compensation Arrangement By Share Based Payment Award Aggregate Intrinsic Value [Abstract] Aggregate Intrinsic Value [Abstract] Amount of aggregate intrinsic value of the shares canceled. Share Based Compensation Arrangement By Share Based Payment Award Options Forfeitures and Expirations In Period Total Intrinsic Value Canceled Represents the number of reporting units impaired. Number of reporting units impaired Curriculum is the set of courses, and their content, offered at a school or university. Curriculum [Member] Curriculum [Member] The aggregate expense write-off against earnings to allocate the cost of finite lived intangible assets (nonphysical assets not used in production). Finite Lived Intangible Asset Written Off Adjustments Document and Entity Information [Abstract] Fair value portion asset related to consideration paid in advance for costs that provide economic benefits in future periods, and amount of other assets that are expected to be realized or consumed within one year or the normal operating cycle, if longer. Prepaid expenses and other current assets, Fair Value Disclosure Prepaid expenses and other current assets Fair value portion of cash and equivalents whose use in whole or in part is restricted for the long-term, generally by contractual agreements or regulatory requirements. Noncurrent restricted cash, Fair Value Disclosure Noncurrent restricted cash Fair value portion of cash and cash equivalent items which are restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. Excludes compensating balance arrangements that are not agreements which legally restrict the use of cash amounts shown on the balance sheet. This element is for unclassified presentations; for classified presentations there is a separate and distinct element. Restricted Cash and Cash Equivalents, Fair Value Disclosure Restricted cash Fair value portion of other short-term liabilities. Other Short-Term Liabilities, Fair Value Disclosure Other short-term liabilities Represents the number of locations closed and online business exited. Number of locations closed Represents the percentage of total revenue earned in the segment. Percentage of total revenue Percentage of Total Revenue Transportation and Skilled Trades offers academic programs mainly in the career-oriented disciplines of transportation and skilled trades. Transportation and Skilled Trades [Member] Transitional includes the campus that is currently being taught. This school employs a gradual teach-out process, enabling them to continue to operate while current students complete their course of study, however they no longer enroll new students. Transitional [Member] EX-101.PRE 10 linc-20160930_pre.xml XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE XML 11 R1.htm IDEA: XBRL DOCUMENT v3.5.0.2
Document and Entity Information - shares
 9 Months Ended
Sep. 30, 2016
Nov. 03, 2016
Document and Entity Information [Abstract]    
Entity Registrant Name LINCOLN EDUCATIONAL SERVICES CORP  
Entity Central Index Key 0001286613  
Current Fiscal Year End Date --12-31  
Entity Well-known Seasoned Issuer No  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   24,857,892
Document Fiscal Year Focus 2016  
Document Fiscal Period Focus Q3  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2016  
XML 12 R2.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2016
Dec. 31, 2015
CURRENT ASSETS:    
Cash and cash equivalents $ 19,240 $ 38,420
Restricted cash 6,282 7,362
Accounts receivable, less allowance of $8,407 and $9,297 at September 30, 2016 and December 31, 2015, respectively 13,741 9,917
Inventories 1,146 1,182
Prepaid income taxes and income taxes receivable 274 349
Assets held for sale 48,297 45,258
Prepaid expenses and other current assets 2,181 2,601
Total current assets 91,161 105,089
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $126,877 and $122,037 at September 30, 2016 and December 31, 2015, respectively 57,956 66,508
OTHER ASSETS:    
Noncurrent restricted cash 20,281 15,259
Noncurrent receivables, less allowance of $742 and $821 at September 30, 2016 and December 31, 2015, respectively 5,437 5,168
Goodwill 14,536 14,536
Other assets, net 1,023 1,190
Total other assets 41,277 36,153
TOTAL 190,394 207,750
CURRENT LIABILITIES:    
Current portion of term loan 10,000 10,000
Current portion of capital lease obligations 0 114
Current portion of finance obligation 1,678 0
Unearned tuition 19,859 22,094
Accounts payable 17,137 12,863
Accrued expenses 11,828 12,263
Liabilities held for sale 15,958 13,426
Other short-term liabilities 157 686
Total current liabilities 76,617 71,446
NONCURRENT LIABILITIES:    
Long-term term loan 31,734 32,124
Long-term capital lease obligations 0 3,785
Long-term finance obligation 0 9,672
Pension plan liabilities 5,476 5,549
Accrued rent 3,602 4,177
Total liabilities 117,429 126,753
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:    
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2016 and December 31, 2015 0 0
Common stock, no par value - authorized: 100,000,000 shares at September 30, 2016 and December 31, 2015; issued and outstanding: 30,768,433 shares at September 30, 2016 and 29,727,555 shares at December 31, 2015 141,377 141,377
Additional paid-in capital 28,271 27,292
Treasury stock at cost - 5,910,541 shares at September 30, 2016 and December 31, 2015 (82,860) (82,860)
(Accumulated deficit) retained earnings (7,417) 2,260
Accumulated other comprehensive loss (6,406) (7,072)
Total stockholders' equity 72,965 80,997
TOTAL $ 190,394 $ 207,750
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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2016
Dec. 31, 2015
CURRENT ASSETS:    
Accounts receivable, allowance $ 8,407 $ 9,297
PROPERTY, EQUIPMENT AND FACILITIES - accumulated depreciation and amortization 126,877 122,037
OTHER ASSETS :    
Noncurrent receivables, allowance $ 742 $ 821
STOCKHOLDERS' EQUITY:    
Preferred stock, par value (in dollars per share) $ 0 $ 0
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0 $ 0
Common stock, shares authorized (in shares) 100,000,000 100,000,000
Common stock, shares issued (in shares) 30,768,433 29,727,555
Common stock, shares outstanding (in shares) 30,768,433 29,727,555
Treasury stock, shares (in shares) 5,910,541 5,910,541
XML 14 R4.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]        
REVENUE $ 49,803 $ 54,033 $ 138,444 $ 150,569
COSTS AND EXPENSES:        
Educational services and facilities 24,398 25,000 70,975 72,330
Selling, general and administrative 24,361 22,718 76,090 81,024
Loss (gain) on sale of assets 1 227 (394) 192
Impairment of goodwill and long-lived assets 0 216 0 216
Total costs & expenses 48,760 48,161 146,671 153,762
OPERATING INCOME (LOSS) 1,043 5,872 (8,227) (3,193)
OTHER:        
Interest income 69 19 141 40
Interest expense (1,478) (2,085) (4,572) (5,114)
Other income 1,678 199 5,109 781
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,312 4,005 (7,549) (7,486)
PROVISION FOR INCOME TAXES 50 50 150 150
INCOME (LOSS) FROM CONTINUING OPERATIONS 1,262 3,955 (7,699) (7,636)
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES (1,733) (1,374) (1,978) (4,271)
NET (LOSS) INCOME $ (471) $ 2,581 $ (9,677) $ (11,907)
Basic        
Income (loss) per share from continuing operations (in dollars per share) $ 0.05 $ 0.17 $ (0.33) $ (0.33)
Loss per share from discontinued operations (in dollars per share) (0.07) (0.06) (0.08) (0.18)
Net (loss) income per share (in dollars per share) (0.02) 0.11 (0.41) (0.51)
Diluted        
Income (loss) per share from continuing operations (in dollars per share) 0.05 0.17 (0.33) (0.33)
Loss per share from discontinued operations (in dollars per share) (0.07) (0.06) (0.08) (0.18)
Net (loss) income per share (in dollars per share) $ (0.02) $ 0.11 $ (0.41) $ (0.51)
Weighted average number of common shares outstanding:        
Basic (in shares) 23,498,904 23,230,438 23,433,015 23,140,006
Diluted (in shares) 24,679,977 23,269,635 23,433,015 23,140,006
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) [Abstract]        
Net (loss) income $ (471) $ 2,581 $ (9,677) $ (11,907)
Other comprehensive income        
Employee pension plan adjustments 222 231 666 694
Comprehensive (loss) income $ (249) $ 2,812 $ (9,011) $ (11,213)
XML 16 R6.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Treasury Stock [Member]
Retained Earnings (Accumulated Deficit) [Member]
Accumulated Other Comprehensive Loss [Member]
Total
BALANCE at Dec. 31, 2014 $ 141,377 $ 26,350 $ (82,860) $ 5,610 $ (7,467) $ 83,010
BALANCE (in shares) at Dec. 31, 2014 29,933,086          
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss $ 0 0 0 (11,907) 0 (11,907)
Employee pension plan adjustments, net of taxes 0 0 0 0 694 694
Stock-based compensation expense            
Restricted stock $ 0 852 0 0 0 852
Restricted stock (in shares) (106,269)          
Stock options $ 0 33 0 0 0 33
Net share settlement for equity-based compensation $ 0 (104) 0 0 0 (104)
Net share settlement for equity-based compensation (in shares) (49,075)          
BALANCE at Sep. 30, 2015 $ 141,377 27,131 (82,860) (6,297) (6,773) 72,578
BALANCE (in shares) at Sep. 30, 2015 29,777,742          
BALANCE at Dec. 31, 2015 $ 141,377 27,292 (82,860) 2,260 (7,072) $ 80,997
BALANCE (in shares) at Dec. 31, 2015 29,727,555         29,727,555
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss $ 0 0 0 (9,677) 0 $ (9,677)
Employee pension plan adjustments, net of taxes 0 0 0 0 666 666
Stock-based compensation expense            
Restricted stock $ 0 1,086 0 0 0 1,086
Restricted stock (in shares) 1,079,267          
Net share settlement for equity-based compensation $ 0 (107) 0 0 0 (107)
Net share settlement for equity-based compensation (in shares) (38,389)          
BALANCE at Sep. 30, 2016 $ 141,377 $ 28,271 $ (82,860) $ (7,417) $ (6,406) $ 72,965
BALANCE (in shares) at Sep. 30, 2016 30,768,433         30,768,433
XML 17 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (9,677) $ (11,907)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Depreciation and amortization 8,590 10,727
Amortization of deferred finance charges 704 356
(Gain) loss on disposition of assets (402) 188
Impairment of goodwill and long-lived assets 0 216
Gain on capital lease termination (5,032) 0
Fixed asset donation (123) (20)
Provision for doubtful accounts 10,116 10,886
Stock-based compensation expense 1,086 885
Deferred rent (358) (505)
(Increase) decrease in assets:    
Accounts receivable (17,430) (14,216)
Inventories 24 (135)
Prepaid income taxes and income taxes receivable 75 184
Prepaid expenses and current assets 763 1,128
Other assets, net (1,401) (1,382)
Increase (decrease) in liabilities:    
Accounts payable 3,843 3,326
Accrued expenses 1,611 1,274
Unearned tuition (1,966) 1,034
Other liabilities 64 453
Total adjustments 164 14,399
Net cash (used in) provided by operating activities (9,513) 2,492
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (2,155) (1,606)
Restricted cash 1,080 0
Proceeds from sale of property and equipment 432 447
Net cash used in investing activities (643) (1,159)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments on borrowings (386) (38,850)
Reclassifications of payments of borrowings from restricted cash 0 30,000
Reclassifications of proceeds of borrowings from restricted cash (5,022) (22,612)
Payment of deferred finance fees (645) (2,794)
Proceeds from borrowings 0 53,500
Net share settlement for equity-based compensation (107) (104)
Principal payments under capital lease obligations (2,864) (350)
Net cash (used in) provided by financing activities (9,024) 18,790
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (19,180) 20,123
CASH AND CASH EQUIVALENTS-Beginning of period 38,420 12,299
CASH AND CASH EQUIVALENTS-End of period 19,240 32,422
Cash paid during the year for:    
Interest 4,020 5,162
Income taxes 122 79
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:    
Liabilities accrued for or noncash purchases of fixed assets $ 2,033 $ 757
XML 18 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2016
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activities – Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”) provide diversified career-oriented post-secondary education to recent high school graduates and working adults. The Company currently operates 30 schools in 15 states and  offers programs in automotive technology, skilled trades (which include HVAC, welding and computerized numerical control and electronic systems technology, among other programs), healthcare services (which include nursing, dental assistant, medical administrative assistant and pharmacy technician, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and business and information technology (which includes information technology and criminal justice programs).  The schools operate under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company’s other campuses primarily attract students from their local communities and surrounding areas.  All of the campuses are nationally or regionally accredited and are eligible to participate in federal financial aid programs by the U.S. Department of Education (the “DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal student loans as well as other forms of financial aid.

In the first quarter of 2015, the Company reorganized its operations into three reportable business segments: (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions, and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November, 2015, the Company’s Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in its Healthcare and Other Professions business segment and, then, in December, 2015, the Board of Directors approved a plan to cease operations of the remaining school in this segment located in Hartford, Connecticut. The Hartford school is scheduled to close in the fourth quarter of 2016 and is included in the Transitional segment as of September 30, 2016.  In the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017.  As a result, operations related to these programs have been included in the Transitional segment as of September 30, 2016.  Divestiture of the Healthcare and Other Professions business segment marks a shift in the Company’s business strategy intended to enable the Company to focus its energy and resources predominantly on Transportation and Skilled Trades though some other programs will continue to be available at some campuses.  The results of operations of the 17 campuses included in the Healthcare and Other Professions segment that are being divested are reflected as discontinued operations in the condensed consolidated financial statements. 

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

In addition to the current sources of capital that will provide short term liquidity, the Company plans to sell approximately $32.3 million in assets net of liabilities, which are currently classified as held for sale and are expected to be sold within one year from the date of classification of which up to $10 million will be required to pay down debt.

Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements.  Certain information and footnote disclosures normally included in annual financial statements have been omitted or condensed pursuant to such regulations.  These statements, which should be read in conjunction with the December 31, 2015 consolidated financial statements and related disclosures of the Company included in the Annual Report on Form 10-K filed with the SEC on March 10, 2016, reflect all adjustments, consisting of normal recurring adjustments and impairments necessary to present fairly the consolidated financial position, results of operations and cash flows for such periods.  The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2016.
 
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.

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

New Accounting Pronouncements – In August 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is effective for the Company beginning after December 15, 2017, including interim periods within that fiscal year. Early application is permitted. The Company is currently evaluating the impact of ASU No. 2016-15, however it is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement. Further, tax benefits should be recognized regardless of whether the benefits reduce taxes payable in the current period.  Under the previous U.S. GAAP, excess tax benefits are recognized in additional paid-in capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement. Also, under the previous U.S. GAAP, excess tax benefits are not recognized until the deduction reduces taxes payable. The new guidance is effective for the Company on January 1, 2017, with earlier application permitted in any interim or annual period. ASU No. 2016-09 is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or financial statement disclosures.

In February 2016, the FASB issued ASU Topic 842, Leases requires a lessee to record a right-of-use asset and a lease liability for all leases with a lease term greater than 12 months. The main difference between previous U.S. GAAP and ASU Topic 842 is the recognition under ASU 842 of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The new guidance, effective for the Company on January 1, 2019, with earlier application permitted, is being evaluated to determine if it will have a material impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued guidance which simplifies the balance sheet classification of deferred taxes. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This guidance is effective for public business entities for annual periods, and for interim periods within those periods, beginning after December 15, 2016 with early adoption permitted. The Company early adopted this guidance as of December 31, 2015.  It did not have a material impact on the Company’s consolidated results of operations, financial condition or financial statement disclosures.

In April 2015, the FASB issued accounting guidance related to the presentation of debt issuance costs in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts, rather than as an asset.  Amortization of debt issuance costs will continue to be reported as interest expense.  Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an asset and amortized ratably over the term of the arrangement.  In August 2015, the FASB issued accounting guidance related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements which clarifies that companies may continue to present unamortized debt issuance costs associated with line of credit arrangements as an asset.  These pronouncements are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted.  The guidance became effective for the Company on January 1, 2016 and did not have a material impact on the Company’s consolidated financial statements.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items. ASU 2015-01 simplifies income statement classification by removing the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is of unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed. The existing requirement to separately present items that are of unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The new guidance also requires similar separate presentation of items that are both unusual and infrequent. The guidance, effective for the Company on January 1, 2016, with earlier application permitted as of the beginning of the fiscal year of adoption, did not have a material impact on the Company’s consolidated financial statements.
 
In August 2014, the FASB issued a new standard – ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern - that will explicitly require management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. According to the new standard, substantial doubt about an entity’s ability to continue as a going concern exists if it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the entity’s financial statements are issued. In order to determine the specific disclosures, if any, that would be required, management will need to assess if substantial doubt exists, and, if so, whether its plans will alleviate such substantial doubt. The new standard requires assessment each annual and interim period and will be effective for the Company on December 31, 2016 with earlier application permitted.  The Company does not believe this guidance will have any impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, a new standard related to revenue recognition, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will replace most of the existing revenue recognition standards in GAAP.  In July 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  In August 2015, the FASB issued ASU 2015-14 which defers the effective date of revenue standard ASU 2014-09 by one year for all entities and permits early adoptions on a limited basis.  The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. The Company is assessing the potential impact of the new standard on financial reporting and has not yet selected a transition method.

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

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

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

Income Taxes – The Company accounts for income taxes in accordance with FASB Accounting Standards Code (“ASC”) Topic 740, “Income Taxes” (“ASC 740”). This statement requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
In accordance with ASC 740, the Company assesses its deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable.  A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, the Company’s assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, the Company considered, among other things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company’s consolidated financial statements and/or tax returns.  Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on the Company’s consolidated financial position or results of operations.  Changes in, among other things, income tax legislation, statutory income tax rates, or future income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause the Company’s income tax provision to vary significantly among financial reporting periods.
 
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.  During the three and nine months ended September 30, 2016 and 2015, the Company did not have any interest and penalties expense associated with uncertain tax positions.
 
Reclassification – During the quarter ended September 30, 2016, the Board of Directors approved a plan for the Company to teach-out certain programs in the West Palm Beach, Florida campus which are included in the Transitional segment.  In 2016, the Company reclassified related amounts reflected in the 2015 Condensed Consolidated Balance Sheet.
XML 19 R9.htm IDEA: XBRL DOCUMENT v3.5.0.2
WEIGHTED AVERAGE COMMON SHARES
 9 Months Ended
Sep. 30, 2016
WEIGHTED AVERAGE COMMON SHARES [Abstract]  
WEIGHTED AVERAGE COMMON SHARES
2.
WEIGHTED AVERAGE COMMON SHARES

The weighted average number of common shares used to compute basic and diluted loss per share for the three and nine months ended September 30, 2016 and 2015 was as follows:

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  
2016
  
2015
  
2016
  
2015
 
Basic shares outstanding
  
23,498,904
   
23,230,438
   
23,433,015
   
23,140,006
 
Dilutive effect of stock options
  
1,181,073
   
39,197
   
-
   
-
 
Diluted shares outstanding
  
24,679,977
   
23,269,635
   
23,433,015
   
23,140,006
 

For the nine months ended September 30, 2016 and 2015, options to acquire 668,307 and 47,015 shares, respectively, were excluded from the above table because the Company recorded a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the three and nine months ended September 30, 2016, options to acquire 224,667 shares were excluded from the above table because they have an exercise price that is greater than the average market price of the Company’s common stock and, therefore, their impact on reported income (loss) per share would have been antidilutive. For the three and nine months ended September 30, 2015, options to acquire 540,567 shares were excluded from the above table because they have an exercise price that is greater than the average market price of the Company’s common stock and, therefore, their impact on reported income (loss) per share would have been antidilutive.

In 2013, and 2014, the Company issued performance shares that vest when certain performance conditions are satisfied.  As of September 30, 2016, these performance conditions were not met for most of these shares.  As a result, the Company has determined that most of these shares are contingently issuable.  Accordingly, 998,827 shares of outstanding performance shares have been excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2016, and 152,837 shares have been excluded for the three and nine months ended September 30, 2015.  Refer to Note 6 for more information on performance shares.
XML 20 R10.htm IDEA: XBRL DOCUMENT v3.5.0.2
DISCONTINUED OPERATIONS
 9 Months Ended
Sep. 30, 2016
DISCONTINUED OPERATIONS [Abstract]  
DISCONTINUED OPERATIONS
3.
DISCONTINUED OPERATIONS

On November 3, 2015, the Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in its Healthcare and Other Professions segment.  The planned divestiture of the Company’s Healthcare and Other Professions segment constitutes a strategic shift for the Company.  The results of operations of these campuses are reflected as discontinued operations in the condensed consolidated financial statements.  Implementation of the plan will result in the Company’s operations being focused solely on the Transportation and Skilled Trades segment.

The results of operations at these 17 campuses for the three and nine months ended September 30, 2016 and September 30, 2015 were as follows:

  
Three Months Ended September 30,
  
Nine Months Ended September 30,
 
  
2016
  
2015
  
2016
  
2015
 
Revenue
 
$
24,464
  
$
25,013
  
$
74,547
  
$
77,590
 
                 
Loss before income tax
  
(1,733
)
  
(1,374
)
  
(1,978
)
  
(4,271
)
Income tax benefit
  
-
   
-
   
-
   
-
 
Net loss from discontinued operations
 
$
(1,733
)
 
$
(1,374
)
 
$
(1,978
)
 
$
(4,271
)

On December 3, 2015, the Board of Directors approved a plan to cease operations at the Hartford, Connecticut school which is scheduled to close in the fourth quarter of 2016 and is included in the Transitional segment.

On July 1, 2016, New England Institute of Technology at Palm Beach, Inc. (“NEIT”), a wholly-owned subsidiary of the Company, entered into a purchase and sale agreement (the “WPB Sale Agreement”) with School Property Development Metrocentre, LLC (“SPD”), pursuant to which NEIT agreed to sell to SPD the real property owned by NEIT located at 2400 and 2410 Metrocentre Boulevard East, West Palm Beach, Florida, including the improvements and other personal property located thereon  (the “WPB Property”) for a cash purchase price of approximately $15.9 million.
 
In the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus, which is expected to be completed in the first quarter of 2017.  As a result, operations related to these programs have been included in the Transitional segment as of September 30, 2016. The remaining assets and liabilities at the West Palm Beach, Florida campus remain in classified as held for sale in the Condensed Consolidated Balance Sheet as of September 30, 2016.  The remaining operations at the West Palm Beach, Florida campus remain in classified as discontinued operations in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2016.
 
On September 1, 2016, the Company received notification of termination of the WPB Sale Agreement from SPD pursuant to the terms of the WPB Sale Agreement.
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GOODWILL AND LONG-LIVED ASSETS
 9 Months Ended
Sep. 30, 2016
GOODWILL AND LONG-LIVED ASSETS [Abstract]  
GOODWILL AND LONG-LIVED ASSETS
4.
GOODWILL AND LONG-LIVED ASSETS

The Company reviews long-lived assets for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

As of September 30, 2016 and 2015, long-lived assets were tested at certain campuses as a result of certain financial indicators such as the Company’s history of losses, current respective period losses, as well as future projected losses at these campuses.  The Company concluded that there was sufficient evidence to conclude that there was no impairment of long-lived assets as of September 30, 2016 and 2015.

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

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

The carrying amount of goodwill at September 30, 2016 and 2015 is as follows:

  
Gross
Goodwill
Balance
  
Accumulated
Impairment
Losses
  
Net
Goodwill
Balance
 
Balance as of January 1, 2016
 
$
108,417
  
$
(93,881
)
 
$
14,536
 
Adjustments
  
-
   
-
   
-
 
Balance as of September 30, 2016
 
$
108,417
  
$
(93,881
)
 
$
14,536
 
 
  
Gross
Goodwill
Balance
  
Accumulated
Impairment
 Losses
  
Net
Goodwill
Balance
 
Balance as of January 1, 2015
 
$
115,872
  
$
(93,665
)
 
$
22,207
 
Adjustments
  
-
   
(216
)
  
(216
)
Balance as of September 30, 2015
 
$
115,872
  
$
(93,881
)
 
$
21,991
 
 
Intangible assets, which are included in other assets, net in the accompanying Condensed Consolidated Balance Sheets, consist of the following:

  
Trade Name
  
Curriculum
  
Total
 
Gross carrying amount at December 31, 2015
 
$
310
  
$
160
  
$
470
 
Adjustments
  
-
   
-
   
-
 
Gross carrying amount at September 30, 2016
  
310
   
160
   
470
 
             
Accumulated amortization at December 31, 2015
  
308
   
112
   
420
 
Amortization
  
2
   
11
   
13
 
Accumulated amortization at September 30, 2016
  
310
   
123
   
433
 
             
Net carrying amount at September 30, 2016
 
$
-
  
$
37
  
$
37
 
             
Weighted average amortization period (years)
  
7
   
10
     

Amortization of intangible assets was less than $0.1 million for each of the three and nine months ended September 30, 2016 and 2015.

The following table summarizes the estimated future amortization expense:

Year Ending December 31,
   
Remainder of 2016
 
$
4
 
2017
  
16
 
2018
  
17
 
  
$
37
 
XML 22 R12.htm IDEA: XBRL DOCUMENT v3.5.0.2
LONG-TERM DEBT AND LEASE OBLIGATIONS
 9 Months Ended
Sep. 30, 2016
LONG-TERM DEBT AND LEASE OBLIGATIONS [Abstract]  
LONG-TERM DEBT AND LEASE OBLIGATIONS
5.
LONG-TERM DEBT AND LEASE OBLIGATIONS

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

  
September 30,
2016
  
December 31,
2015
 
Term loan (a)
 
$
41,734
  
$
42,124
 
Finance obligation (b)
  
1,678
   
9,672
 
Capital lease-property (with a rate of 8.0%) (c)
  
-
   
3,899
 
   
43,412
   
55,695
 
Less current maturities
  
(11,678
)
  
(10,114
)
  
$
31,734
  
$
45,581
 
 
(a) On July 31, 2015, the Company entered into a credit agreement with three lenders, Alostar Bank of Commerce (“Alostar”), HPF Holdco, LLC and Rushing Creek 4, LLC, led by HPF Service, LLC, as administrative agent and collateral agent (the “Agent”), for an aggregate principal amount of $45 million (the “Term Loan”).  The July 31, 2015 credit agreement, along with subsequent amendments to the Credit Agreement dated December 31, 2015 and February 29, 2016, are collectively referred to as the “Credit Agreement.”  As of December 31, 2015 and prior to the effectiveness of a second amendment to the Credit Agreement on February 29, 2016 (the “Second Amendment”), the Term Loan consisted of a $30 million term loan (the “Term Loan A”) from HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC, secured by a first priority lien in favor of the Agent on substantially all of the real and personal property owned by the Company, and a $15 million term loan (the “Term Loan B”) from Alostar secured by a $15.3 million cash collateral account. Pursuant to the Second Amendment, the Company received an additional $5 million term loan from Alostar with which the Company repaid $5 million of the principal amount of the Term Loan A.  Accordingly, upon the effectiveness of the Second Amendment, the aggregate term loans outstanding under the Credit Agreement remained at approximately $45 million, consisting of an approximate $25 million Term Loan A and a $20 million Term Loan B.  In addition, pursuant to the Second Amendment, the amount of cash collateral securing the Term Loan B was increased to $20.3 million.  At the Company’s request, a percentage of the cash collateral may be released to the Company at the Agent’s sole discretion and with the consent of Alostar upon the satisfaction of certain criteria as outlined in the Credit Agreement.  The Term Loan, which matures on July 31, 2019, replaced a previously existing $20 million revolving credit facility with Bank of America, N.A. and other lenders, which was due to expire on April 5, 2016.  The previously existing revolving credit facility was terminated concurrently with the effective date of the Credit Agreement on July 31, 2015 (the “Closing Date”).

A portion of the proceeds of the Term Loan was used by the Company to (i) repay approximately $6.3 million in outstanding principal, accrued interest and fees due under the previously existing revolving credit facility, (ii) fund the $20.3 million cash collateral account securing the portion of the Term Loan provided by Alostar, (iii) fund approximately $7.4 million in a cash collateral account securing the letters of credit issued under the previously existing revolving credit facility that remain outstanding after the termination of that facility and (iv) pay transaction expenses in connection with the Term Loan and the termination of the previously existing revolving credit facility.  The remaining proceeds of the Term Loan of approximately $11 million may be used by the Company to finance capital expenditures and for general corporate purposes consistent with the terms of the Credit Agreement.

Interest will accrue on the Term Loan at a per annum rate equal to the greater of (i) 11% or (ii) 90-day LIBOR plus 9%  determined monthly by the Agent and will be payable monthly in arrears.  The principal balance of the Term Loan will be repaid in equal monthly installments, commencing on August 1, 2017, determined as the quotient of (i) 10% of the outstanding principal balance of the Term Loan as of July 2, 2017 divided by (ii) 12.  A final installment of principal and all accrued and unpaid interest will be due on the maturity date of the Term Loan.

The Term Loan may be prepaid, in whole or in part, at any time, subject to the payment of a prepayment premium equal to (i) 5% of the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date and (ii) 3% of the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date.  In the event of any sale or other disposition of a school or real property by the Company permitted under the Term Loan, the net proceeds of such sale or disposition must be used to prepay the Loan in an amount determined pursuant to the Credit Agreement, subject to the applicable prepayment premium; provided, however, that no prepayment premium will be due with respect to up to $15 million of aggregate repayments of the Term Loan made during the first year that the Term Loan is outstanding.  A portion of the net cash proceeds of any disposition of a school in an amount determined pursuant to the terms of the Term Loan, must be deposited and held as cash collateral in a deposit account controlled by the Agent until the conditions for release set forth in the Term Loan are satisfied.  In connection with the assets which are currently classified as held for sale and are expected to be sold within one year, the Company is required to classify $10 million as short term debt due to the Term Loan prepayment minimum required with respect to any such disposition.

The Term Loan contains customary representations, warranties and covenants such as minimum financial responsibility composite score, cohort default rate, and other financial covenants, including minimum liquidity, maximum capital expenditures, maximum 90/10 ratio and minimum EBITDA (as defined in the Term Loan), as well as affirmative and negative covenants and events of default customary for facilities of this type.  The Company was in compliance with all covenants as of September 30, 2016.  Subsequent to the 2015 fiscal year end, pursuant to the Second Amendment, the financial covenants were adjusted and, at the Company’s election, will be adjusted for fiscal year 2017 and for each subsequent fiscal year until the maturity of the Term Loan at either the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Credit Agreement as of the Closing Date or the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Second Amendment.  In the event that the Company elects to re-set the financial covenants at the 2016 covenant levels contained in the Second Amendment, the Company will be required to prepay on or before January 15, 2017, without prepayment penalty, amounts outstanding under the Term Loan up to $4 million.

The Credit Agreement contains events of default, the occurrence and continuation of which provide the Company’s lenders with the right to exercise remedies against the Company and the collateral securing the Term Loan, including the Company’s cash. These events of default include, among other things, the Company’s failure to pay any amounts due under the Term Loan, a breach of covenants under the Credit Agreement, the Company’s insolvency and the insolvency of its subsidiaries, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness, and a final judgment against the Company in an amount greater than $1 million.
 
Also, in connection with the Term Loan, the Company paid to the Agent a commitment fee of $1 million on the Closing Date and is required to pay to the Agent other customary fees for facilities of this type. Total fees for the Term Loan were $2.8 million during fiscal year 2015. During the first quarter of 2016, in connection with the effectiveness of the Second Amendment, the Company paid loan modification fees of $0.5 million.  These deferred finance fees are netted against the Term Loan on the Condensed Consolidated Balance Sheets and amortized to interest expense on the Condensed Consolidated Statement of Operations.

As of September 30, 2016 and December 31, 2015, the Company had $44.3 million and $44.7 million outstanding under the Term Loan; offset by $2.5 million and $2.5 million of deferred finance fees, respectively.

(b) The Company completed a sale and a leaseback of four facilities on December 28, 2001. The Company retained a continuing involvement in the lease and, as a result, the Company was prohibited from utilizing sale-leaseback accounting. Accordingly, the Company had treated this transaction as a finance lease. In January 2016, the lease was amended to cure certain provisions related to continuing involvement and, as a consequence, achieved sales treatment.  In the first quarter of 2016, the lease was converted to an operating lease and rent payments are included in educational, services and facilities expense in the Condensed Consolidated Statement of Operations.  In addition, the finance obligation, net of land and buildings, is being amortized straight-line through December 31, 2016.

(c) In 2009, the Company assumed a real estate capital lease for a property located in Fern Park, Florida having a term continuing through October 31, 2032.  On February 27, 2015, the Company’s Board of Directors approved a plan to cease operations of its school located at the Fern Park, Florida property, which school closed in the first quarter of 2016.  In connection with the closure of the Fern Park, Florida school, on February 12, 2016, the Company paid a $2.8 million lease termination fee to the landlord of the Fern Park, Florida property in connection with the amendment and early termination of the 2009 lease agreement.  The amended lease agreement subsequently expired on April 10, 2016.

(d)  On April 12, 2016, the Company entered into a credit agreement (the “L/C Agreement”) with Sterling National Bank (“Sterling” under which Sterling has agreed to issue letters of credit from time to time at 100% margin against available funds in a cash collateral account maintained by the Company at Sterling.  The maximum availability under the L/C Agreement is $9.5 million.  The Company will pay Sterling a letter of credit fee equal to 1.75% on the daily amount available to be drawn under each outstanding letter of credit, which fee is payable in quarterly installments in arrears.  The L/C Agreement matures on April 1, 2017 and replaces a letter of credit facility with a prior lender.  The L/C Agreement contains representations, warranties, affirmative and negative covenants and events of default customary for facilities of this type. As of September 30, 2016 the Company has $5.5 million of letters of credit outstanding under the L/C Agreement.

Scheduled maturities of long-term debt and lease obligations at September 30, 2016 are as follows:
 
Year ending December 31,
   
2016
 
$
10,000
 
2017
  
3,173
 
2018
  
3,462
 
2019
  
27,632
 
  
$
44,267
 

The finance obligation of $1.7 million is excluded from the scheduled maturities schedule as it is a non-cash liability.
XML 23 R13.htm IDEA: XBRL DOCUMENT v3.5.0.2
STOCKHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2016
STOCKHOLDERS' EQUITY [Abstract]  
STOCKHOLDERS' EQUITY
6.
STOCKHOLDERS’ EQUITY

Restricted Stock

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

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

On May 13, 2016, performance-based shares were granted which vest over two years on March 15, 2017 and March 15, 2018 based upon the attainment of a financial responsibility ratio during each fiscal year ending December 31, 2016 and 2017.  There is no vesting period on the right to vote or the right to receive dividends on any of the restricted shares.
 
On June 2, 2014 and December 18, 2014, performance-based shares were granted which vest over three years based upon the attainment of (i) a specified operating income margin during any one or more of the fiscal years in the period beginning January 1, 2015 and ending December 31, 2017 and (ii) the attainment of earnings before interest, taxes, depreciation and amortization targets during each of the fiscal years ended December 31, 2015 through 2017.  There is no vesting period on the right to vote or the right to receive dividends on any of the restricted shares.

On April 29, 2013, performance-based shares were granted which vest over four years based upon the attainment of (i) a specified operating income margin during any one or more of the fiscal years in the period beginning January 1, 2013 and ending December 31, 2016 and (ii) the attainment of earnings before interest, taxes, depreciation and amortization targets during each of the fiscal years ended December 31, 2013 through 2016.  There is no vesting period on the right to vote or the right to receive dividends on any of the restricted shares.

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

For the nine months ended September 30, 2016 and 2015, the Company completed a net share settlement for 38,389 and 49,075 restricted shares, respectively, on behalf of certain employees who participate in the LTIP upon the vesting of the restricted shares pursuant to the terms of the LTIP.  The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 2016 and/or 2015, creating taxable income for the employees.   At the employees’ request, the Company will pay these taxes on behalf of the employees in exchange for the employees returning an equivalent value of restricted shares to the Company.  These transactions resulted in a decrease of $0.1 million or less for each of the three and nine months ended September 30, 2016 and 2015, 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:

  
Shares
  
Weighted
Average Grant
Date Fair Value
Per Share
 
Nonvested restricted stock outstanding at December 31, 2015
  
450,494
  
$
3.69
 
Granted
  
1,105,487
   
1.67
 
Canceled
  
(26,200
)
  
5.63
 
Vested
  
(244,029
)
  
3.05
 
         
Nonvested restricted stock outstanding at September 30, 2016
  
1,285,752
   
2.03
 

The restricted stock expense for the three months ended September 30, 2016 and 2015 was $0.4 million and $0.1 million, respectively.  The restricted stock expense for the nine months ended September 30, 2016 and 2015 was $1.1 million and $0.9 million, respectively. The unrecognized restricted stock expense as of September 30, 2016 and December 31, 2015 was $1.9 million and $1.3 million, respectively.  As of September 30, 2016, outstanding restricted shares under the LTIP had aggregate intrinsic value of $2.8 million.
 
Stock Options

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

  
Shares
  
Weighted
Average
Exercise Price
Per Share
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic Value
(in thousands)
 
Outstanding at December 31, 2015
  
246,167
  
$
12.52
 
 3.98 years
 
$
-
 
Canceled
  
(21,500
)
  
15.63
    
-
 
              
Outstanding at September 30, 2016
  
224,667
   
12.23
 
 3.48 years
  
-
 
              
Vested or expected to vest
  
224,667
   
12.23
 
 3.48 years
  
-
 
              
Exercisable as of September 30, 2016
  
224,667
   
12.23
 
 3.48 years
  
-
 
 
As of September 30, 2016, there was no unrecognized pre-tax compensation expense.

The following table presents a summary of stock options outstanding:

   
At September 30, 2016
 
   
Stock Options Outstanding
  
Stock Options Exercisable
 
Range of Exercise Prices
  
Shares
  
Contractual
Weighted
Average Life
(years)
  
Weighted
Average Price
  
Shares
  
Weighted
 Average Exercise
Price
 
$
4.00-$13.99
   
165,167
   
3.60
  
$
9.46
   
165,167
  
$
9.46
 
$
14.00-$19.99
   
28,500
   
2.40
   
19.12
   
28,500
   
19.12
 
$
20.00-$25.00
   
31,000
   
3.85
   
20.62
   
31,000
   
20.62
 
                       
     
224,667
   
3.48
   
12.23
   
224,667
   
12.23
 
XML 24 R14.htm IDEA: XBRL DOCUMENT v3.5.0.2
INCOME TAXES
 9 Months Ended
Sep. 30, 2016
INCOME TAXES [Abstract]  
INCOME TAXES
7.
INCOME TAXES

The provision for income taxes for the three months ended September 30, 2016 and 2015 was $0.1 million, or 3.8% of pretax income, and $0.1 million, or 1.2% of pretax income, respectively.  The provision for income taxes for the nine months ended September 30, 2016 and 2015 was $0.2 million, or 2.0% of pretax loss, and $0.2 million, or 2.0% of pretax loss, respectively.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.  A significant piece of objective negative evidence was the cumulative losses incurred by the Company in recent years.  On the basis of this evaluation the realization of the Company’s deferred tax assets was not deemed to be more likely than not and thus the Company maintained a valuation allowance on its net deferred tax assets as of September 30, 2016.
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CONTINGENCIES
 9 Months Ended
Sep. 30, 2016
CONTINGENCIES [Abstract]  
CONTINGENCIES
8.
CONTINGENCIES

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

On December 15, 2015, the Company received an administrative subpoena from the Attorney General of the State of Maryland. Pursuant to the subpoena, Maryland’s Attorney General has requested from the Company documents and detailed information relating to its Columbia, Maryland campus.  The Company has responded to this request and intends to continue cooperating with the Maryland Attorney General’s Office.
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SEGMENTS
 9 Months Ended
Sep. 30, 2016
SEGMENTS [Abstract]  
SEGMENTS
9.
SEGMENTS

The for-profit education industry has been impacted by numerous regulatory changes, the changing economy and an onslaught of negative articles in the press. As a result of these actions, student populations have declined and operating costs have increased.  Over the past few years, the Company has closed over 10 locations and exited its online business.  The Company reviewed how it has been structured and in the first quarter of 2015 decided to change its organization to enable the Company to better allocate financial and human resources to respond to its markets and with the goal of improving its profitability and competitive advantage.  In the past, the Company offered any combination of programs at any campus.  The Company has changed its focus to program offerings that create greater differentiation and attain excellence to attract more students and gain market share.  Also strategically, the Company began offering continuing education training to employers who hire its students and this is best achieved at campuses focused on their professions.

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

The Company’s 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 the Company’s strategic plan.  Each of the Company’s schools is a reporting unit and an operating segment.  The Company’s operating segments have been aggregated into three reportable segments because, in the Company’s judgment, the reporting units have similar services, types of customers, regulatory environment and economic characteristics.

On November 3, 2015 the Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in the Healthcare and Other Professions business segment.  Then, in December 2015, the Board of Directors approved a plan to cease operations of the remaining school in this segment located in Hartford, Connecticut, which is scheduled to close in the fourth quarter of 2016.  The divestiture of the Company’s Healthcare and Other Professions business segment marks a strategic shift in business strategy.  The results of operations of these 17 campuses are reflected as discontinued operations in the consolidated financial statements.  The Hartford, Connecticut campus, which was previously included in the Healthcare and Other Professions segment is now included in the Transitional segment.  Implementation of the plan would result in the Company’s operations focused solely on the Transportation and Skilled Trades segment.  During the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017. The operations related to these programs have been included in the Transitional segment as of September 30, 2016.

The Company’s two continuing operations reporting segments are described below.

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

Transitional – Transitional refers to operations that were or are being taught out and consists of the Company’s Fern Park, Florida and Hartford, Connecticut campuses and certain programs at the West Palm Beach, Florida campus.  Each school employs a gradual teach-out process that enables the school to continue to operate while current students complete their course of study. The Fern Park, Florida and Hartford, Connecticut schools are no longer enrolling new students.  The West Palm Beach school is no longer enrolling new students for certain programs which was announced during the quarter ended September 30, 2016 and the teach-out of these programs is expected to be completed in the first quarter of 2017.  The Fern Park, Florida campus was taught out as of March 31, 2016.  On December 3, 2015, the Company announced it was teaching out the Hartford, Connecticut campus, where the teach-out is expected to be completed by December 2016.

The Company evaluates segment performance based on operating results.  Adjustments to reconcile segment results to consolidated results are included under the caption “Corporate,” which primarily includes unallocated corporate activity.
 
Summary financial information by reporting segment is as follows:

  
For the Three Months Ended September 30,
 
  
Revenue
  
Operating Income (Loss)
 
  
2016
  
% of
Total
  
2015
  
% of
Total
  
2016
  
2015
 
Transportation and Skilled Trades
 
$
47,939
   
96.3
%
 
$
49,697
   
92.0
%
 
$
6,122
  
$
10,588
 
Transitional
  
1,864
   
3.7
%
  
4,336
   
8.0
%
  
(1,359
)
  
(1,312
)
Corporate
  
-
   
0.0
%
  
-
   
0.0
%
  
(3,720
)
  
(3,404
)
Total
 
$
49,803
   
100.0
%
 
$
54,033
   
100.0
%
 
$
1,043
  
$
5,872
 
 
  
For the Nine Months Ended September 30,
 
  
Revenue
  
Operating (Loss) Income
 
  
2016
  
% of
Total
  
2015
  
% of
Total
  
2016
  
2015
 
Transportation and Skilled Trades
 
$
131,242
   
94.8
%
 
$
136,988
   
91.0
%
 
$
11,920
  
$
18,333
 
Transitional
  
7,202
   
5.2
%
  
13,581
   
9.0
%
  
(5,579
)
  
(4,916
)
Corporate
  
-
   
0.0
%
  
-
   
0.0
%
  
(14,568
)
  
(16,610
)
Total
 
$
138,444
   
100.0
%
 
$
150,569
   
100.0
%
 
$
(8,227
)
 
$
(3,193
)
 
  
Total Assets
 
  
September 30, 2016
  
December 31, 2015
 
Transportation and Skilled Trades
 
$
87,056
  
$
90,045
 
Transitional
  
1,298
   
2,448
 
Corporate
  
53,743
   
69,999
 
Discontinued Operations
  
48,297
   
45,258
 
Total
 
$
190,394
  
$
207,750
 
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FAIR VALUE
 9 Months Ended
Sep. 30, 2016
FAIR VALUE [Abstract]  
FAIR VALUE
10.
FAIR VALUE

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

  
At September 30, 2016
 
  
Carrying
Amount
  
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total
 
Financial Assets:
               
Cash and cash equivalents
 
$
19,240
  
$
19,240
  
$
-
  
$
-
  
$
19,240
 
Restricted cash
  
6,282
   
6,282
   
-
   
-
   
6,282
 
Prepaid expenses and other current assets
  
2,181
   
-
   
2,181
   
-
   
2,181
 
Noncurrent restricted cash
  
20,281
   
20,281
   
-
   
-
   
20,281
 
                     
Financial Liabilities:
                    
Accrued expenses
 
$
11,828
  
$
-
  
$
11,828
  
$
-
  
$
11,828
 
Other short term liabilities
  
157
   
-
   
157
   
-
   
157
 
Term loan
  
41,734
   
-
   
38,517
   
-
   
38,517
 

The fair value of the Term loan is estimated 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 Condensed Consolidated Balance Sheets for Cash and cash equivalents, Restricted cash and Noncurrent restricted cash approximate fair value because they are highly liquid.

The carrying amounts reported on the Condensed Consolidated Balance Sheets for Prepaid expenses and other current assets, Accrued expenses and Other short term liabilities approximate fair value due to the short-term nature of these items.
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RELATED PARTY
 9 Months Ended
Sep. 30, 2016
RELATED PARTY [Abstract]  
RELATED PARTY
11.
RELATED PARTY

The Company has an agreement with MATCO Tools, whereby MATCO will provide the Company, on an advance commission basis, credits in MATCO-branded tools, tool storage, equipment, and diagnostics products. The CEO of the parent company of MATCO is considered an immediate family member of one of the Company’s board members.  The Company’s payable balances from this third party was immaterial at September 30, 2016 and 2015. Management believes that such transactions are at arm’s length and on similar terms as would have been obtained from unaffiliated third parties.
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SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2016
SUBSEQUENT EVENTS [Abstract]  
SUBSEQUENT EVENTS
12.
SUBSEQUENT EVENTS

On November 1, 2016, the Board of Directors approved a plan for the Company to teach-out the Green Valley, Nevada and Center City, Philadelphia campuses.  The teach-out of the Green Valley, Nevada campus is expected to be completed in the fourth quarter of 2016.  The teach-out of the Center City, Philadelphia campus is expected to be completed by the second quarter of 2017.  As of September 30, 2016, both the Green Valley, Nevada and the Center City, Philadelphia campuses financial results were included in discontinued operations on the statement of operations and held for sale on the statement of financial position.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 9 Months Ended
Sep. 30, 2016
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Business Activities
Business Activities – Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”) provide diversified career-oriented post-secondary education to recent high school graduates and working adults. The Company currently operates 30 schools in 15 states and  offers programs in automotive technology, skilled trades (which include HVAC, welding and computerized numerical control and electronic systems technology, among other programs), healthcare services (which include nursing, dental assistant, medical administrative assistant and pharmacy technician, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and business and information technology (which includes information technology and criminal justice programs).  The schools operate under the Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company’s other campuses primarily attract students from their local communities and surrounding areas.  All of the campuses are nationally or regionally accredited and are eligible to participate in federal financial aid programs by the U.S. Department of Education (the “DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal student loans as well as other forms of financial aid.

In the first quarter of 2015, the Company reorganized its operations into three reportable business segments: (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions, and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November, 2015, the Company’s Board of Directors approved a plan for the Company to divest 17 of the 18 schools included in its Healthcare and Other Professions business segment and, then, in December, 2015, the Board of Directors approved a plan to cease operations of the remaining school in this segment located in Hartford, Connecticut. The Hartford school is scheduled to close in the fourth quarter of 2016 and is included in the Transitional segment as of September 30, 2016.  In the third quarter of 2016, the Board of Directors approved a plan to teach-out certain programs at the West Palm Beach, Florida campus which is expected to be completed in the first quarter of 2017.  As a result, operations related to these programs have been included in the Transitional segment as of September 30, 2016.  Divestiture of the Healthcare and Other Professions business segment marks a shift in the Company’s business strategy intended to enable the Company to focus its energy and resources predominantly on Transportation and Skilled Trades though some other programs will continue to be available at some campuses.  The results of operations of the 17 campuses included in the Healthcare and Other Professions segment that are being divested are reflected as discontinued operations in the condensed consolidated financial statements.
Liquidity
Liquidity—For the last several years, the Company and the proprietary school sector have faced deteriorating earnings. Government regulations have negatively impacted earnings by making it more difficult for potential students to obtain loans, which, when coupled with the overall economic environment, have discouraged potential students from enrolling in post-secondary schools. In light of these factors, the Company has incurred significant operating losses as a result of lower student population.  Despite these events, the Company believes that its likely sources of cash should be sufficient to fund operations for the next twelve months.  At September 30, 2016, the Company’s sources of cash primarily included cash and cash equivalents of $45.8 million (of which $26.6 million is restricted). The Company is also continuing to take actions to improve cash flow by aligning its cost structure to its student population.

In addition to the current sources of capital that will provide short term liquidity, the Company plans to sell approximately $32.3 million in assets net of liabilities, which are currently classified as held for sale and are expected to be sold within one year from the date of classification of which up to $10 million will be required to pay down debt.
Basis of Presentation
Basis of Presentation – The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements.  Certain information and footnote disclosures normally included in annual financial statements have been omitted or condensed pursuant to such regulations.  These statements, which should be read in conjunction with the December 31, 2015 consolidated financial statements and related disclosures of the Company included in the Annual Report on Form 10-K filed with the SEC on March 10, 2016, reflect all adjustments, consisting of normal recurring adjustments and impairments necessary to present fairly the consolidated financial position, results of operations and cash flows for such periods.  The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2016.
 
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.  All significant intercompany accounts and transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
Use of Estimates in the Preparation of Financial Statements – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period.  On an ongoing basis, the Company evaluates the estimates and assumptions including those related to revenue recognition, bad debts, impairments, fixed assets, income taxes, benefit plans and certain accruals.  Actual results could materially differ from those estimates.
New Accounting Pronouncements
New Accounting Pronouncements – In August 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is effective for the Company beginning after December 15, 2017, including interim periods within that fiscal year. Early application is permitted. The Company is currently evaluating the impact of ASU No. 2016-15, however it is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. ASU No. 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement. Further, tax benefits should be recognized regardless of whether the benefits reduce taxes payable in the current period.  Under the previous U.S. GAAP, excess tax benefits are recognized in additional paid-in capital; tax deficiencies are recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement. Also, under the previous U.S. GAAP, excess tax benefits are not recognized until the deduction reduces taxes payable. The new guidance is effective for the Company on January 1, 2017, with earlier application permitted in any interim or annual period. ASU No. 2016-09 is not expected to have a material impact on the Company’s consolidated results of operations, financial condition or financial statement disclosures.

In February 2016, the FASB issued ASU Topic 842, Leases requires a lessee to record a right-of-use asset and a lease liability for all leases with a lease term greater than 12 months. The main difference between previous U.S. GAAP and ASU Topic 842 is the recognition under ASU 842 of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The new guidance, effective for the Company on January 1, 2019, with earlier application permitted, is being evaluated to determine if it will have a material impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued guidance which simplifies the balance sheet classification of deferred taxes. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This guidance is effective for public business entities for annual periods, and for interim periods within those periods, beginning after December 15, 2016 with early adoption permitted. The Company early adopted this guidance as of December 31, 2015.  It did not have a material impact on the Company’s consolidated results of operations, financial condition or financial statement disclosures.

In April 2015, the FASB issued accounting guidance related to the presentation of debt issuance costs in the balance sheet as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts, rather than as an asset.  Amortization of debt issuance costs will continue to be reported as interest expense.  Debt issuance costs related to revolving credit arrangements, however, will continue to be presented as an asset and amortized ratably over the term of the arrangement.  In August 2015, the FASB issued accounting guidance related to the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements which clarifies that companies may continue to present unamortized debt issuance costs associated with line of credit arrangements as an asset.  These pronouncements are effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted.  The guidance became effective for the Company on January 1, 2016 and did not have a material impact on the Company’s consolidated financial statements.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items. ASU 2015-01 simplifies income statement classification by removing the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is of unusual nature and occurs infrequently. This separate, net-of-tax presentation (and corresponding earnings per share impact) will no longer be allowed. The existing requirement to separately present items that are of unusual nature or occur infrequently on a pre-tax basis within income from continuing operations has been retained. The new guidance also requires similar separate presentation of items that are both unusual and infrequent. The guidance, effective for the Company on January 1, 2016, with earlier application permitted as of the beginning of the fiscal year of adoption, did not have a material impact on the Company’s consolidated financial statements.
 
In August 2014, the FASB issued a new standard – ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern - that will explicitly require management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. According to the new standard, substantial doubt about an entity’s ability to continue as a going concern exists if it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the entity’s financial statements are issued. In order to determine the specific disclosures, if any, that would be required, management will need to assess if substantial doubt exists, and, if so, whether its plans will alleviate such substantial doubt. The new standard requires assessment each annual and interim period and will be effective for the Company on December 31, 2016 with earlier application permitted.  The Company does not believe this guidance will have any impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, a new standard related to revenue recognition, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard will replace most of the existing revenue recognition standards in GAAP.  In July 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  In August 2015, the FASB issued ASU 2015-14 which defers the effective date of revenue standard ASU 2014-09 by one year for all entities and permits early adoptions on a limited basis.  The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. The Company is assessing the potential impact of the new standard on financial reporting and has not yet selected a transition method.
Stock-Based Compensation
Stock-Based Compensation – The Company measures the value of stock options on the grant date at fair value, using the Black-Scholes option valuation model.  The Company amortizes the fair value of stock options, net of estimated forfeitures, utilizing straight-line amortization of compensation expense over the requisite service period of the grant.

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

The Company amortizes the fair value of the performance-based restricted stock based on the determination of the probable outcome of the performance condition.  If the performance condition is expected to be met, then the Company amortizes the fair value of the number of shares expected to vest utilizing straight-line basis over the requisite performance period of the grant.  However, if the associated performance condition is not expected to be met, then the Company does not recognize the stock-based compensation expense.
Income Taxes
Income Taxes – The Company accounts for income taxes in accordance with FASB Accounting Standards Code (“ASC”) Topic 740, “Income Taxes” (“ASC 740”). This statement requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered.
In accordance with ASC 740, the Company assesses its deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable.  A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, the Company’s assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, the Company considered, among other things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in the Company’s consolidated financial statements and/or tax returns.  Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on the Company’s consolidated financial position or results of operations.  Changes in, among other things, income tax legislation, statutory income tax rates, or future income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause the Company’s income tax provision to vary significantly among financial reporting periods.
 
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.  During the three and nine months ended September 30, 2016 and 2015, the Company did not have any interest and penalties expense associated with uncertain tax positions.
Reclassification
Reclassification – During the quarter ended September 30, 2016, the Board of Directors approved a plan for the Company to teach-out certain programs in the West Palm Beach, Florida campus which are included in the Transitional segment.  In 2016, the Company reclassified related amounts reflected in the 2015 Condensed Consolidated Balance Sheet.
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
WEIGHTED AVERAGE COMMON SHARES (Tables)
 9 Months Ended
Sep. 30, 2016
WEIGHTED AVERAGE COMMON SHARES [Abstract]  
Weighted average numbers of common shares used to compute basic and diluted loss per share
The weighted average number of common shares used to compute basic and diluted loss per share for the three and nine months ended September 30, 2016 and 2015 was as follows:

  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  
2016
  
2015
  
2016
  
2015
 
Basic shares outstanding
  
23,498,904
   
23,230,438
   
23,433,015
   
23,140,006
 
Dilutive effect of stock options
  
1,181,073
   
39,197
   
-
   
-
 
Diluted shares outstanding
  
24,679,977
   
23,269,635
   
23,433,015
   
23,140,006
 
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
DISCONTINUED OPERATIONS (Tables)
 9 Months Ended
Sep. 30, 2016
DISCONTINUED OPERATIONS [Abstract]  
Results of operations at campuses
The results of operations at these 17 campuses for the three and nine months ended September 30, 2016 and September 30, 2015 were as follows:

  
Three Months Ended September 30,
  
Nine Months Ended September 30,
 
  
2016
  
2015
  
2016
  
2015
 
Revenue
 
$
24,464
  
$
25,013
  
$
74,547
  
$
77,590
 
                 
Loss before income tax
  
(1,733
)
  
(1,374
)
  
(1,978
)
  
(4,271
)
Income tax benefit
  
-
   
-
   
-
   
-
 
Net loss from discontinued operations
 
$
(1,733
)
 
$
(1,374
)
 
$
(1,978
)
 
$
(4,271
)
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
GOODWILL AND LONG-LIVED ASSETS (Tables)
 9 Months Ended
Sep. 30, 2016
GOODWILL AND LONG-LIVED ASSETS [Abstract]  
Changes in carrying amount of goodwill
The carrying amount of goodwill at September 30, 2016 and 2015 is as follows:

  
Gross
Goodwill
Balance
  
Accumulated
Impairment
Losses
  
Net
Goodwill
Balance
 
Balance as of January 1, 2016
 
$
108,417
  
$
(93,881
)
 
$
14,536
 
Adjustments
  
-
   
-
   
-
 
Balance as of September 30, 2016
 
$
108,417
  
$
(93,881
)
 
$
14,536
 
 
  
Gross
Goodwill
Balance
  
Accumulated
Impairment
 Losses
  
Net
Goodwill
Balance
 
Balance as of January 1, 2015
 
$
115,872
  
$
(93,665
)
 
$
22,207
 
Adjustments
  
-
   
(216
)
  
(216
)
Balance as of September 30, 2015
 
$
115,872
  
$
(93,881
)
 
$
21,991
 
Summary of finite-lived intangible assets
Intangible assets, which are included in other assets, net in the accompanying Condensed Consolidated Balance Sheets, consist of the following:

  
Trade Name
  
Curriculum
  
Total
 
Gross carrying amount at December 31, 2015
 
$
310
  
$
160
  
$
470
 
Adjustments
  
-
   
-
   
-
 
Gross carrying amount at September 30, 2016
  
310
   
160
   
470
 
             
Accumulated amortization at December 31, 2015
  
308
   
112
   
420
 
Amortization
  
2
   
11
   
13
 
Accumulated amortization at September 30, 2016
  
310
   
123
   
433
 
             
Net carrying amount at September 30, 2016
 
$
-
  
$
37
  
$
37
 
             
Weighted average amortization period (years)
  
7
   
10
     
Summary of estimated future amortization expense
The following table summarizes the estimated future amortization expense:

Year Ending December 31,
   
Remainder of 2016
 
$
4
 
2017
  
16
 
2018
  
17
 
  
$
37
 
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
LONG-TERM DEBT AND LEASE OBLIGATIONS (Tables)
 9 Months Ended
Sep. 30, 2016
LONG-TERM DEBT AND LEASE OBLIGATIONS [Abstract]  
Long-term debt and lease obligations
Long-term debt and lease obligations consist of the following:

  
September 30,
2016
  
December 31,
2015
 
Term loan (a)
 
$
41,734
  
$
42,124
 
Finance obligation (b)
  
1,678
   
9,672
 
Capital lease-property (with a rate of 8.0%) (c)
  
-
   
3,899
 
   
43,412
   
55,695
 
Less current maturities
  
(11,678
)
  
(10,114
)
  
$
31,734
  
$
45,581
 
 
(a) On July 31, 2015, the Company entered into a credit agreement with three lenders, Alostar Bank of Commerce (“Alostar”), HPF Holdco, LLC and Rushing Creek 4, LLC, led by HPF Service, LLC, as administrative agent and collateral agent (the “Agent”), for an aggregate principal amount of $45 million (the “Term Loan”).  The July 31, 2015 credit agreement, along with subsequent amendments to the Credit Agreement dated December 31, 2015 and February 29, 2016, are collectively referred to as the “Credit Agreement.”  As of December 31, 2015 and prior to the effectiveness of a second amendment to the Credit Agreement on February 29, 2016 (the “Second Amendment”), the Term Loan consisted of a $30 million term loan (the “Term Loan A”) from HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC, secured by a first priority lien in favor of the Agent on substantially all of the real and personal property owned by the Company, and a $15 million term loan (the “Term Loan B”) from Alostar secured by a $15.3 million cash collateral account. Pursuant to the Second Amendment, the Company received an additional $5 million term loan from Alostar with which the Company repaid $5 million of the principal amount of the Term Loan A.  Accordingly, upon the effectiveness of the Second Amendment, the aggregate term loans outstanding under the Credit Agreement remained at approximately $45 million, consisting of an approximate $25 million Term Loan A and a $20 million Term Loan B.  In addition, pursuant to the Second Amendment, the amount of cash collateral securing the Term Loan B was increased to $20.3 million.  At the Company’s request, a percentage of the cash collateral may be released to the Company at the Agent’s sole discretion and with the consent of Alostar upon the satisfaction of certain criteria as outlined in the Credit Agreement.  The Term Loan, which matures on July 31, 2019, replaced a previously existing $20 million revolving credit facility with Bank of America, N.A. and other lenders, which was due to expire on April 5, 2016.  The previously existing revolving credit facility was terminated concurrently with the effective date of the Credit Agreement on July 31, 2015 (the “Closing Date”).

A portion of the proceeds of the Term Loan was used by the Company to (i) repay approximately $6.3 million in outstanding principal, accrued interest and fees due under the previously existing revolving credit facility, (ii) fund the $20.3 million cash collateral account securing the portion of the Term Loan provided by Alostar, (iii) fund approximately $7.4 million in a cash collateral account securing the letters of credit issued under the previously existing revolving credit facility that remain outstanding after the termination of that facility and (iv) pay transaction expenses in connection with the Term Loan and the termination of the previously existing revolving credit facility.  The remaining proceeds of the Term Loan of approximately $11 million may be used by the Company to finance capital expenditures and for general corporate purposes consistent with the terms of the Credit Agreement.

Interest will accrue on the Term Loan at a per annum rate equal to the greater of (i) 11% or (ii) 90-day LIBOR plus 9%  determined monthly by the Agent and will be payable monthly in arrears.  The principal balance of the Term Loan will be repaid in equal monthly installments, commencing on August 1, 2017, determined as the quotient of (i) 10% of the outstanding principal balance of the Term Loan as of July 2, 2017 divided by (ii) 12.  A final installment of principal and all accrued and unpaid interest will be due on the maturity date of the Term Loan.

The Term Loan may be prepaid, in whole or in part, at any time, subject to the payment of a prepayment premium equal to (i) 5% of the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date and (ii) 3% of the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date.  In the event of any sale or other disposition of a school or real property by the Company permitted under the Term Loan, the net proceeds of such sale or disposition must be used to prepay the Loan in an amount determined pursuant to the Credit Agreement, subject to the applicable prepayment premium; provided, however, that no prepayment premium will be due with respect to up to $15 million of aggregate repayments of the Term Loan made during the first year that the Term Loan is outstanding.  A portion of the net cash proceeds of any disposition of a school in an amount determined pursuant to the terms of the Term Loan, must be deposited and held as cash collateral in a deposit account controlled by the Agent until the conditions for release set forth in the Term Loan are satisfied.  In connection with the assets which are currently classified as held for sale and are expected to be sold within one year, the Company is required to classify $10 million as short term debt due to the Term Loan prepayment minimum required with respect to any such disposition.

The Term Loan contains customary representations, warranties and covenants such as minimum financial responsibility composite score, cohort default rate, and other financial covenants, including minimum liquidity, maximum capital expenditures, maximum 90/10 ratio and minimum EBITDA (as defined in the Term Loan), as well as affirmative and negative covenants and events of default customary for facilities of this type.  The Company was in compliance with all covenants as of September 30, 2016.  Subsequent to the 2015 fiscal year end, pursuant to the Second Amendment, the financial covenants were adjusted and, at the Company’s election, will be adjusted for fiscal year 2017 and for each subsequent fiscal year until the maturity of the Term Loan at either the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Credit Agreement as of the Closing Date or the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Second Amendment.  In the event that the Company elects to re-set the financial covenants at the 2016 covenant levels contained in the Second Amendment, the Company will be required to prepay on or before January 15, 2017, without prepayment penalty, amounts outstanding under the Term Loan up to $4 million.

The Credit Agreement contains events of default, the occurrence and continuation of which provide the Company’s lenders with the right to exercise remedies against the Company and the collateral securing the Term Loan, including the Company’s cash. These events of default include, among other things, the Company’s failure to pay any amounts due under the Term Loan, a breach of covenants under the Credit Agreement, the Company’s insolvency and the insolvency of its subsidiaries, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness, and a final judgment against the Company in an amount greater than $1 million.
 
Also, in connection with the Term Loan, the Company paid to the Agent a commitment fee of $1 million on the Closing Date and is required to pay to the Agent other customary fees for facilities of this type. Total fees for the Term Loan were $2.8 million during fiscal year 2015. During the first quarter of 2016, in connection with the effectiveness of the Second Amendment, the Company paid loan modification fees of $0.5 million.  These deferred finance fees are netted against the Term Loan on the Condensed Consolidated Balance Sheets and amortized to interest expense on the Condensed Consolidated Statement of Operations.

As of September 30, 2016 and December 31, 2015, the Company had $44.3 million and $44.7 million outstanding under the Term Loan; offset by $2.5 million and $2.5 million of deferred finance fees, respectively.

(b) The Company completed a sale and a leaseback of four facilities on December 28, 2001. The Company retained a continuing involvement in the lease and, as a result, the Company was prohibited from utilizing sale-leaseback accounting. Accordingly, the Company had treated this transaction as a finance lease. In January 2016, the lease was amended to cure certain provisions related to continuing involvement and, as a consequence, achieved sales treatment.  In the first quarter of 2016, the lease was converted to an operating lease and rent payments are included in educational, services and facilities expense in the Condensed Consolidated Statement of Operations.  In addition, the finance obligation, net of land and buildings, is being amortized straight-line through December 31, 2016.

(c) In 2009, the Company assumed a real estate capital lease for a property located in Fern Park, Florida having a term continuing through October 31, 2032.  On February 27, 2015, the Company’s Board of Directors approved a plan to cease operations of its school located at the Fern Park, Florida property, which school closed in the first quarter of 2016.  In connection with the closure of the Fern Park, Florida school, on February 12, 2016, the Company paid a $2.8 million lease termination fee to the landlord of the Fern Park, Florida property in connection with the amendment and early termination of the 2009 lease agreement.  The amended lease agreement subsequently expired on April 10, 2016.

(d)  On April 12, 2016, the Company entered into a credit agreement (the “L/C Agreement”) with Sterling National Bank (“Sterling” under which Sterling has agreed to issue letters of credit from time to time at 100% margin against available funds in a cash collateral account maintained by the Company at Sterling.  The maximum availability under the L/C Agreement is $9.5 million.  The Company will pay Sterling a letter of credit fee equal to 1.75% on the daily amount available to be drawn under each outstanding letter of credit, which fee is payable in quarterly installments in arrears.  The L/C Agreement matures on April 1, 2017 and replaces a letter of credit facility with a prior lender.  The L/C Agreement contains representations, warranties, affirmative and negative covenants and events of default customary for facilities of this type. As of September 30, 2016 the Company has $5.5 million of letters of credit outstanding under the L/C Agreement.
Scheduled maturities of long-term debt and lease obligations
Scheduled maturities of long-term debt and lease obligations at September 30, 2016 are as follows:
 
Year ending December 31,
   
2016
 
$
10,000
 
2017
  
3,173
 
2018
  
3,462
 
2019
  
27,632
 
  
$
44,267
 
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
STOCKHOLDERS' EQUITY (Tables)
 9 Months Ended
Sep. 30, 2016
STOCKHOLDERS' EQUITY [Abstract]  
Summary of transactions pertaining to restricted stock
The following is a summary of transactions pertaining to restricted stock:

  
Shares
  
Weighted
Average Grant
Date Fair Value
Per Share
 
Nonvested restricted stock outstanding at December 31, 2015
  
450,494
  
$
3.69
 
Granted
  
1,105,487
   
1.67
 
Canceled
  
(26,200
)
  
5.63
 
Vested
  
(244,029
)
  
3.05
 
         
Nonvested restricted stock outstanding at September 30, 2016
  
1,285,752
   
2.03
 
Summary of transactions pertaining to option plans
The following is a summary of transactions pertaining to stock options:

  
Shares
  
Weighted
Average
Exercise Price
Per Share
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic Value
(in thousands)
 
Outstanding at December 31, 2015
  
246,167
  
$
12.52
 
 3.98 years
 
$
-
 
Canceled
  
(21,500
)
  
15.63
    
-
 
              
Outstanding at September 30, 2016
  
224,667
   
12.23
 
 3.48 years
  
-
 
              
Vested or expected to vest
  
224,667
   
12.23
 
 3.48 years
  
-
 
              
Exercisable as of September 30, 2016
  
224,667
   
12.23
 
 3.48 years
  
-
 
Summary of options outstanding
The following table presents a summary of stock options outstanding:

   
At September 30, 2016
 
   
Stock Options Outstanding
  
Stock Options Exercisable
 
Range of Exercise Prices
  
Shares
  
Contractual
Weighted
Average Life
(years)
  
Weighted
Average Price
  
Shares
  
Weighted
 Average Exercise
Price
 
$
4.00-$13.99
   
165,167
   
3.60
  
$
9.46
   
165,167
  
$
9.46
 
$
14.00-$19.99
   
28,500
   
2.40
   
19.12
   
28,500
   
19.12
 
$
20.00-$25.00
   
31,000
   
3.85
   
20.62
   
31,000
   
20.62
 
                       
     
224,667
   
3.48
   
12.23
   
224,667
   
12.23
 
XML 36 R26.htm IDEA: XBRL DOCUMENT v3.5.0.2
SEGMENTS (Tables)
 9 Months Ended
Sep. 30, 2016
SEGMENTS [Abstract]  
Summary financial information by reporting segment
Summary financial information by reporting segment is as follows:

  
For the Three Months Ended September 30,
 
  
Revenue
  
Operating Income (Loss)
 
  
2016
  
% of
Total
  
2015
  
% of
Total
  
2016
  
2015
 
Transportation and Skilled Trades
 
$
47,939
   
96.3
%
 
$
49,697
   
92.0
%
 
$
6,122
  
$
10,588
 
Transitional
  
1,864
   
3.7
%
  
4,336
   
8.0
%
  
(1,359
)
  
(1,312
)
Corporate
  
-
   
0.0
%
  
-
   
0.0
%
  
(3,720
)
  
(3,404
)
Total
 
$
49,803
   
100.0
%
 
$
54,033
   
100.0
%
 
$
1,043
  
$
5,872
 
 
  
For the Nine Months Ended September 30,
 
  
Revenue
  
Operating (Loss) Income
 
  
2016
  
% of
Total
  
2015
  
% of
Total
  
2016
  
2015
 
Transportation and Skilled Trades
 
$
131,242
   
94.8
%
 
$
136,988
   
91.0
%
 
$
11,920
  
$
18,333
 
Transitional
  
7,202
   
5.2
%
  
13,581
   
9.0
%
  
(5,579
)
  
(4,916
)
Corporate
  
-
   
0.0
%
  
-
   
0.0
%
  
(14,568
)
  
(16,610
)
Total
 
$
138,444
   
100.0
%
 
$
150,569
   
100.0
%
 
$
(8,227
)
 
$
(3,193
)
 
  
Total Assets
 
  
September 30, 2016
  
December 31, 2015
 
Transportation and Skilled Trades
 
$
87,056
  
$
90,045
 
Transitional
  
1,298
   
2,448
 
Corporate
  
53,743
   
69,999
 
Discontinued Operations
  
48,297
   
45,258
 
Total
 
$
190,394
  
$
207,750
 
XML 37 R27.htm IDEA: XBRL DOCUMENT v3.5.0.2
FAIR VALUE (Tables)
 9 Months Ended
Sep. 30, 2016
FAIR VALUE [Abstract]  
Fair value, by balance sheet grouping
The carrying amount and estimated fair value of the Company’s financial instruments, assets and liabilities, which are not measured at fair value on the Condensed Consolidated Balance Sheets, are listed in the table below:

  
At September 30, 2016
 
  
Carrying
Amount
  
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total
 
Financial Assets:
               
Cash and cash equivalents
 
$
19,240
  
$
19,240
  
$
-
  
$
-
  
$
19,240
 
Restricted cash
  
6,282
   
6,282
   
-
   
-
   
6,282
 
Prepaid expenses and other current assets
  
2,181
   
-
   
2,181
   
-
   
2,181
 
Noncurrent restricted cash
  
20,281
   
20,281
   
-
   
-
   
20,281
 
                     
Financial Liabilities:
                    
Accrued expenses
 
$
11,828
  
$
-
  
$
11,828
  
$
-
  
$
11,828
 
Other short term liabilities
  
157
   
-
   
157
   
-
   
157
 
Term loan
  
41,734
   
-
   
38,517
   
-
   
38,517
 
XML 38 R28.htm IDEA: XBRL DOCUMENT v3.5.0.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
$ in Millions
 9 Months Ended
Nov. 30, 2015
School
Nov. 03, 2015
School
Sep. 30, 2016
USD ($)
School
Segment
Business Activities [Abstract]      
Number of schools     30
Number of states in which schools operate across the United States     15
Number of campuses treated as destination schools     5
Number of reportable segments | Segment     3
Liquidity [Abstract]      
Cash and cash equivalents | $     $ 45.8
Restricted cash | $     26.6
Net, assets held for sale | $     32.0
Amount required to pay down debt | $     $ 10.0
Healthcare and Other Professions Business Segment [Member]      
Business Activities [Abstract]      
Number of schools 18 18  
Number of schools approved to divest 17 17  
XML 39 R29.htm IDEA: XBRL DOCUMENT v3.5.0.2
WEIGHTED AVERAGE COMMON SHARES (Details) - shares
 3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
Shares used to compute basic and diluted loss income per share [Abstract]        
Basic shares outstanding (in shares) 23,498,904 23,230,438 23,433,015 23,140,006
Dilutive effect of stock options (in shares) 1,181,073 39,197 0 0
Diluted shares outstanding (in shares) 24,679,977 23,269,635 23,433,015 23,140,006
Stock Option 2 [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive shares excluded from computation of income (loss) per share (in shares)     668,307 47,015
Stock Option 1 [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive shares excluded from computation of income (loss) per share (in shares) 224,667 540,567 224,667 540,567
Performance Shares [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Antidilutive shares excluded from computation of income (loss) per share (in shares) 998,827 152,837 998,827 152,837
XML 40 R30.htm IDEA: XBRL DOCUMENT v3.5.0.2
DISCONTINUED OPERATIONS (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Jul. 01, 2016
USD ($)
Nov. 30, 2015
School
Nov. 03, 2015
School
Sep. 30, 2016
USD ($)
Sep. 30, 2015
USD ($)
Sep. 30, 2016
USD ($)
School
Sep. 30, 2015
USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]              
Number of schools | School           30  
Result of discontinued operations [Abstract]              
Revenue       $ 24,464 $ 25,013 $ 74,547 $ 77,590
Loss before income tax       (1,733) (1,374) (1,978) (4,271)
Income tax benefit       0 0 0 0
Net loss from discontinued operations       $ (1,733) $ (1,374) $ (1,978) $ (4,271)
West Palm Beach Property [Member]              
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]              
Cash purchase price $ 15,900            
Healthcare and Other Professions Business Segment [Member]              
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]              
Number of schools approved to divest | School   17 17        
Number of schools | School   18 18        
XML 41 R31.htm IDEA: XBRL DOCUMENT v3.5.0.2
GOODWILL AND LONG-LIVED ASSETS (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2016
USD ($)
Sep. 30, 2015
USD ($)
Sep. 30, 2016
USD ($)
Sep. 30, 2015
USD ($)
Unit
Sep. 30, 2016
USD ($)
Dec. 31, 2015
USD ($)
Dec. 31, 2014
USD ($)
GOODWILL AND LONG-LIVED ASSETS [Abstract]              
Number of reporting units impaired | Unit       1      
Impairment of long-lived assets $ 0 $ 0 $ 0 $ 0      
Changes in carrying amount of goodwill [Abstract]              
Gross Goodwill Balance   115,872   115,872 $ 108,417 $ 108,417 $ 115,872
Accumulated Impairment Losses   (93,881)   (93,881) (93,881) (93,881) (93,665)
Adjustments     0 (216)      
Net Goodwill Balance   21,991   21,991 14,536 $ 14,536 $ 22,207
Finite-Lived Intangible Assets [Line Items]              
Gross carrying amount, beginning balance     470        
Adjustments     0        
Gross carrying amount, ending balance 470   470        
Accumulated amortization, beginning balance     420        
Amortization     13        
Accumulated amortization, ending balance 433   433        
Net carrying amount 37   37        
Amortization of intangible assets     13        
Estimated future amortization expense [Abstract]              
Remainder of 2016         4    
2017         16    
2018         17    
Total 37   37   37    
Maximum [Member]              
Finite-Lived Intangible Assets [Line Items]              
Amortization 100 100 100 100      
Amortization of intangible assets 100 $ 100 100 $ 100      
Trade Name [Member]              
Finite-Lived Intangible Assets [Line Items]              
Gross carrying amount, beginning balance     310        
Adjustments     0        
Gross carrying amount, ending balance 310   310        
Accumulated amortization, beginning balance     308        
Amortization     2        
Accumulated amortization, ending balance 310   310        
Net carrying amount 0   $ 0        
Weighted average amortization period     7 years        
Amortization of intangible assets     $ 2        
Estimated future amortization expense [Abstract]              
Total 0   0   0    
Curriculum [Member]              
Finite-Lived Intangible Assets [Line Items]              
Gross carrying amount, beginning balance     160        
Adjustments     0        
Gross carrying amount, ending balance 160   160        
Accumulated amortization, beginning balance     112        
Amortization     11        
Accumulated amortization, ending balance 123   123        
Net carrying amount 37   $ 37        
Weighted average amortization period     10 years        
Amortization of intangible assets     $ 11        
Estimated future amortization expense [Abstract]              
Total $ 37   $ 37   $ 37    
XML 42 R32.htm IDEA: XBRL DOCUMENT v3.5.0.2
LONG-TERM DEBT AND LEASE OBLIGATIONS (Details)
 9 Months Ended
Apr. 12, 2016
USD ($)
Feb. 29, 2016
USD ($)
Feb. 12, 2016
USD ($)
Jul. 31, 2015
USD ($)
Sep. 30, 2016
USD ($)
Lender
Dec. 31, 2015
USD ($)
Long-term debt and lease obligations [Abstract]            
Long-term line of credit         $ 44,300,000 $ 44,700,000
Long term debt and capital lease obligations         43,412,000 55,695,000
Less current maturities         (11,678,000) (10,114,000)
Long-term debt and lease obligations         $ 31,734,000 45,581,000
Interest rate of debt instrument         11.00%  
Percentage of outstanding principal balance of loan         10.00%  
Percentage of principal amount prepaid but not including in the second anniversary         5.00%  
Percentage of principal amount prepaid but not including in the third anniversary         3.00%  
Deferred finance fee, offset         $ 2,500,000 2,500,000
Sale and a leaseback of several facilities, Date         December 28, 2001  
Scheduled maturities of long-term debt and lease obligations [Abstract]            
2016         $ 10,000,000  
2017         3,173,000  
2018         3,462,000  
2019         27,632,000  
Long term debt and capital lease obligations         $ 44,267,000  
Fern Park [Member]            
Long-term debt and lease obligations [Abstract]            
Lease termination fee     $ 2,800,000      
90-day LIBOR [Member]            
Long-term debt and lease obligations [Abstract]            
Debt instrument, basis spread on variable rate         9.00%  
Credit Agreement [Member]            
Long-term debt and lease obligations [Abstract]            
Number of lenders | Lender         3  
Revolving Credit Facility [Member]            
Long-term debt and lease obligations [Abstract]            
Expiration date of credit facility         Apr. 05, 2016  
Repayment of outstanding principal, accrued interest and fees       $ 6,300,000    
Proceeds for remaining loan amount       11,000,000    
Revolving Credit Facility [Member] | Bank of America and Other Lenders [Member]            
Long-term debt and lease obligations [Abstract]            
Long-term line of credit       20,000,000    
Letter of Credit [Member]            
Long-term debt and lease obligations [Abstract]            
Cash collateral amount       7,400,000    
Expiration date of credit facility Apr. 01, 2017          
Percentage of margin against available funds in cash collateral account 100.00%          
Maximum availability under the facility $ 9,500,000          
Letter of credit fee percentage 1.75%          
Letters of credit outstanding         $ 5.5  
Term Loan Agreement [Member]            
Long-term debt and lease obligations [Abstract]            
Long-term line of credit [1]         $ 41,734,000 42,124,000
Outstanding term loan   $ 45,000,000   45,000,000    
Expiration date of credit facility         Jul. 31, 2019  
Short-term debt         $ 10,000,000  
Term loan maximum amount required for repayment   4,000,000        
Judgment amount to cause breach of covenant         1,000,000  
Commitment fee         1,000,000  
Amount of fees for term loan         500,000 2,800,000
Term Loan A [Member]            
Long-term debt and lease obligations [Abstract]            
Outstanding term loan   25,000,000        
Term Loan A [Member] | HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC [Member]            
Long-term debt and lease obligations [Abstract]            
Outstanding term loan       30,000,000    
Term Loan A [Member] | Alostar Bank of Commerce [Member]            
Long-term debt and lease obligations [Abstract]            
Term loan principal repayment       5,000,000    
Term Loan B [Member]            
Long-term debt and lease obligations [Abstract]            
Outstanding term loan   20,000,000        
Cash collateral amount   $ 20,300,000        
Term Loan B [Member] | Alostar Bank of Commerce [Member]            
Long-term debt and lease obligations [Abstract]            
Outstanding term loan       15,000,000    
Cash collateral amount       15,300,000    
Outstanding term loan additional amount       $ 5,000,000    
Maximum [Member] | Term Loan Agreement [Member]            
Long-term debt and lease obligations [Abstract]            
Aggregate repayments of the Loan         15,000,000  
Finance Obligation [Member]            
Long-term debt and lease obligations [Abstract]            
Finance obligation [2]         1,678,000 9,672,000
Capital Lease-Property (rate of 8.0%) [Member]            
Long-term debt and lease obligations [Abstract]            
Finance obligation [3]         $ 0 $ 3,899,000
Interest rate of debt instrument         8.00%  
[1] On July 31, 2015, the Company entered into a credit agreement with three lenders, Alostar Bank of Commerce ("Alostar"), HPF Holdco, LLC and Rushing Creek 4, LLC, led by HPF Service, LLC, as administrative agent and collateral agent (the "Agent"), for an aggregate principal amount of $45 million (the "Term Loan"). The July 31, 2015 credit agreement, along with subsequent amendments to the Credit Agreement dated December 31, 2015 and February 29, 2016, are collectively referred to as the "Credit Agreement." As of December 31, 2015 and prior to the effectiveness of a second amendment to the Credit Agreement on February 29, 2016 (the "Second Amendment"), the Term Loan consisted of a $30 million term loan (the "Term Loan A") from HPF Holdco, LLC, Rushing Creek 4, LLC and Tiger Capital Group, LLC, secured by a first priority lien in favor of the Agent on substantially all of the real and personal property owned by the Company, and a $15 million term loan (the "Term Loan B") from Alostar secured by a $15.3 million cash collateral account. Pursuant to the Second Amendment, the Company received an additional $5 million term loan from Alostar with which the Company repaid $5 million of the principal amount of the Term Loan A. Accordingly, upon the effectiveness of the Second Amendment, the aggregate term loans outstanding under the Credit Agreement remained at approximately $45 million, consisting of an approximate $25 million Term Loan A and a $20 million Term Loan B. In addition, pursuant to the Second Amendment, the amount of cash collateral securing the Term Loan B was increased to $20.3 million. At the Company's request, a percentage of the cash collateral may be released to the Company at the Agent's sole discretion and with the consent of Alostar upon the satisfaction of certain criteria as outlined in the Credit Agreement. The Term Loan, which matures on July 31, 2019, replaced a previously existing $20 million revolving credit facility with Bank of America, N.A. and other lenders, which was due to expire on April 5, 2016. The previously existing revolving credit facility was terminated concurrently with the effective date of the Credit Agreement on July 31, 2015 (the "Closing Date"). A portion of the proceeds of the Term Loan was used by the Company to (i) repay approximately $6.3 million in outstanding principal, accrued interest and fees due under the previously existing revolving credit facility, (ii) fund the $20.3 million cash collateral account securing the portion of the Term Loan provided by Alostar, (iii) fund approximately $7.4 million in a cash collateral account securing the letters of credit issued under the previously existing revolving credit facility that remain outstanding after the termination of that facility and (iv) pay transaction expenses in connection with the Term Loan and the termination of the previously existing revolving credit facility. The remaining proceeds of the Term Loan of approximately $11 million may be used by the Company to finance capital expenditures and for general corporate purposes consistent with the terms of the Credit Agreement. Interest will accrue on the Term Loan at a per annum rate equal to the greater of (i) 11% or (ii) 90-day LIBOR plus 9% determined monthly by the Agent and will be payable monthly in arrears. The principal balance of the Term Loan will be repaid in equal monthly installments, commencing on August 1, 2017, determined as the quotient of (i) 10% of the outstanding principal balance of the Term Loan as of July 2, 2017 divided by (ii) 12. A final installment of principal and all accrued and unpaid interest will be due on the maturity date of the Term Loan. The Term Loan may be prepaid, in whole or in part, at any time, subject to the payment of a prepayment premium equal to (i) 5% of the principal amount prepaid at any time up to but not including the second anniversary of the Closing Date and (ii) 3% of the principal amount prepaid at any time commencing on the second anniversary of the Closing Date up to but not including the third anniversary of the Closing Date. In the event of any sale or other disposition of a school or real property by the Company permitted under the Term Loan, the net proceeds of such sale or disposition must be used to prepay the Loan in an amount determined pursuant to the Credit Agreement, subject to the applicable prepayment premium; provided, however, that no prepayment premium will be due with respect to up to $15 million of aggregate repayments of the Term Loan made during the first year that the Term Loan is outstanding. A portion of the net cash proceeds of any disposition of a school in an amount determined pursuant to the terms of the Term Loan, must be deposited and held as cash collateral in a deposit account controlled by the Agent until the conditions for release set forth in the Term Loan are satisfied. In connection with the assets which are currently classified as held for sale and are expected to be sold within one year, the Company is required to classify $10 million as short term debt due to the Term Loan prepayment minimum required with respect to any such disposition. The Term Loan contains customary representations, warranties and covenants such as minimum financial responsibility composite score, cohort default rate, and other financial covenants, including minimum liquidity, maximum capital expenditures, maximum 90/10 ratio and minimum EBITDA (as defined in the Term Loan), as well as affirmative and negative covenants and events of default customary for facilities of this type. The Company was in compliance with all covenants as of September 30, 2016. Subsequent to the 2015 fiscal year end, pursuant to the Second Amendment, the financial covenants were adjusted and, at the Company's election, will be adjusted for fiscal year 2017 and for each subsequent fiscal year until the maturity of the Term Loan at either the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Credit Agreement as of the Closing Date or the levels applicable to fiscal year 2016 (and each fiscal quarter thereof) contained in the Second Amendment. In the event that the Company elects to re-set the financial covenants at the 2016 covenant levels contained in the Second Amendment, the Company will be required to prepay on or before January 15, 2017, without prepayment penalty, amounts outstanding under the Term Loan up to $4 million. The Credit Agreement contains events of default, the occurrence and continuation of which provide the Company's lenders with the right to exercise remedies against the Company and the collateral securing the Term Loan, including the Company's cash. These events of default include, among other things, the Company's failure to pay any amounts due under the Term Loan, a breach of covenants under the Credit Agreement, the Company's insolvency and the insolvency of its subsidiaries, the occurrence of a material adverse event, the occurrence of any default under certain other indebtedness, and a final judgment against the Company in an amount greater than $1 million. Also, in connection with the Term Loan, the Company paid to the Agent a commitment fee of $1 million on the Closing Date and is required to pay to the Agent other customary fees for facilities of this type. Total fees for the Term Loan were $2.8 million during fiscal year 2015. During the first quarter of 2016, in connection with the effectiveness of the Second Amendment, the Company paid loan modification fees of $0.5 million. These deferred finance fees are netted against the Term Loan on the Condensed Consolidated Balance Sheet and amortized to interest expense on the Condensed Consolidated Statement of Operations. As of September 30, 2016 and December 31, 2015, the Company had $44.3 million and $44.7 million outstanding under the Term Loan; offset by $2.5 million and $2.5 million of deferred finance fees, respectively.
[2] The Company completed a sale and a leaseback of several facilities on December 28, 2001. The Company retained a continuing involvement in the lease and, as a result, it is prohibited from utilizing sale-leaseback accounting. Accordingly, the Company had treated this transaction as a finance lease. In January 2016, the lease was amended to cure certain provisions related to continuing involvement and, as a consequence, achieved sales treatment. In the first quarter of 2016, the lease was converted to an operating lease and rent payments are included in educational, services and facilities expense in the Condensed Consolidated Statement of Operations. In addition, the finance obligation, net of land and buildings, is being amortized straight-line through December 31, 2016.
[3] In 2009, the Company assumed a real estate capital lease for a property located in Fern Park, Florida having a term continuing through October 31, 2032. On February 27, 2015, the Company's Board of Directors approved a plan to cease operations of its school located at the Fern Park, Florida property, which school closed in the first quarter of 2016. In connection with the closure of the Fern Park, Florida school, on February 12, 2016, the Company paid a $2.8 million lease termination fee to the landlord of the Fern Park, Florida property in connection with the amendment and early termination of the 2009 lease agreement. The amended lease agreement subsequently expired on April 10, 2016.
XML 43 R33.htm IDEA: XBRL DOCUMENT v3.5.0.2
STOCKHOLDERS' EQUITY (Details)
$ / shares in Units, $ in Thousands
 3 Months Ended 9 Months Ended 12 Months Ended
May 13, 2016
Sep. 30, 2016
USD ($)
$ / shares
shares
Sep. 30, 2015
USD ($)
Sep. 30, 2016
USD ($)
Plan
$ / shares
shares
Sep. 30, 2015
USD ($)
shares
Dec. 31, 2015
USD ($)
$ / shares
shares
Dec. 31, 2014
Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Number of stock incentive plans | Plan       2        
Vesting period of performance-based shares 2 years           3 years 4 years
Specified operating income margin period             1 year 1 year
Shares [Abstract]                
Outstanding, beginning balance (in shares) | shares       246,167        
Canceled (in shares) | shares       (21,500)        
Outstanding, ending balance (in shares) | shares   224,667   224,667   246,167    
Vested or expected to vest (in shares) | shares   224,667   224,667        
Exercisable, ending balance (in shares) | shares   224,667   224,667        
Weighted Average Exercise Price Per Share [Abstract]                
Outstanding, beginning balance (in dollars per share)       $ 12.52        
Cancelled (in dollars per share)       15.63        
Outstanding, ending balance (in dollars per share)   $ 12.23   12.23   $ 12.52    
Vested or expected to vest (in dollars per share)   12.23   12.23        
Exercisable, ending balance (in dollars per share)   $ 12.23   $ 12.23        
Weighted Average Remaining Contractual Term [Abstract]                
Outstanding       3 years 5 months 23 days   3 years 11 months 23 days    
Vested or expected to vest       3 years 5 months 23 days        
Exercisable       3 years 5 months 23 days        
Aggregate Intrinsic Value [Abstract]                
Outstanding, beginning balance | $       $ 0        
Canceled | $       0        
Outstanding, ending balance | $   $ 0   0   $ 0    
Vested or expected to vest | $   0   0        
Exercisable, ending balance | $   $ 0   $ 0        
Stock Options Outstanding [Abstract]                
Shares (in shares) | shares   224,667   224,667        
Contractual Weighted Average Life       3 years 5 months 23 days        
Weighted Average Price (in dollars per share)   $ 12.23   $ 12.23        
Stock Options Exercisable [Abstract]                
Shares (in shares) | shares   224,667   224,667        
Weighted Exercise Price (in dollars per share)   $ 12.23   $ 12.23        
Stock Options [Member]                
Aggregate Intrinsic Value [Abstract]                
Unrecognized pre-tax compensation expense | $   $ 0   $ 0        
Restricted Stock [Member]                
Shares [Abstract]                
Nonvested restricted stock outstanding, beginning balance (in shares) | shares       450,494        
Granted (in shares) | shares       1,105,487        
Canceled (in shares) | shares       (26,200)        
Vested (in shares) | shares       (244,029)        
Nonvested restricted stock outstanding, ending balance (in shares) | shares   1,285,752   1,285,752   450,494    
Weighted Average Grant Date Fair Value [Abstract]                
Nonvested restricted stock outstanding, beginning balance (in dollars per share)       $ 3.69        
Granted (in dollars per share)       1.67        
Canceled (in dollars per share)       5.63        
Vested (in dollars per share)       3.05        
Nonvested restricted stock outstanding, ending balance (in dollars per share)   $ 2.03   $ 2.03   $ 3.69    
Recognized restricted stock expense | $   $ 400 $ 100 $ 1,100 $ 900      
Unrecognized restricted stock expense | $   1,900   $ 1,900   $ 1,300    
LTIP [Member]                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                
Net share settlement for restricted stock (in shares) | shares       38,389 49,075      
Decrease in equity due to payment of tax for employee | $   100 $ 100 $ 100 $ 100      
LTIP [Member] | Restricted Stock [Member]                
Weighted Average Grant Date Fair Value [Abstract]                
Outstanding restricted shares, intrinsic value | $   $ 2,800   $ 2,800        
$ 4.00-$13.99 [Member]                
Range of Exercise Prices [Abstract]                
Range of Exercise Prices, Minimum (in dollars per share)       $ 4.00        
Range of Exercise Prices, Maximum (in dollars per share)       $ 13.99        
Stock Options Outstanding [Abstract]                
Shares (in shares) | shares   165,167   165,167        
Contractual Weighted Average Life       3 years 7 months 6 days        
Weighted Average Price (in dollars per share)   $ 9.46   $ 9.46        
Stock Options Exercisable [Abstract]                
Shares (in shares) | shares   165,167   165,167        
Weighted Exercise Price (in dollars per share)   $ 9.46   $ 9.46        
$ 14.00-$19.99 [Member]                
Range of Exercise Prices [Abstract]                
Range of Exercise Prices, Minimum (in dollars per share)       14.00        
Range of Exercise Prices, Maximum (in dollars per share)       $ 19.99        
Stock Options Outstanding [Abstract]                
Shares (in shares) | shares   28,500   28,500        
Contractual Weighted Average Life       2 years 4 months 24 days        
Weighted Average Price (in dollars per share)   $ 19.12   $ 19.12        
Stock Options Exercisable [Abstract]                
Shares (in shares) | shares   28,500   28,500        
Weighted Exercise Price (in dollars per share)   $ 19.12   $ 19.12        
$ 20.00-$25.00 [Member]                
Range of Exercise Prices [Abstract]                
Range of Exercise Prices, Minimum (in dollars per share)       20.00        
Range of Exercise Prices, Maximum (in dollars per share)       $ 25.00        
Stock Options Outstanding [Abstract]                
Shares (in shares) | shares   31,000   31,000        
Contractual Weighted Average Life       3 years 10 months 6 days        
Weighted Average Price (in dollars per share)   $ 20.62   $ 20.62        
Stock Options Exercisable [Abstract]                
Shares (in shares) | shares   31,000   31,000        
Weighted Exercise Price (in dollars per share)   $ 20.62   $ 20.62        
XML 44 R34.htm IDEA: XBRL DOCUMENT v3.5.0.2
INCOME TAXES (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2016
Sep. 30, 2015
Sep. 30, 2016
Sep. 30, 2015
INCOME TAXES [Abstract]        
Provision for income taxes $ 50 $ 50 $ 150 $ 150
Effective income tax rate 3.80% 1.20% 2.00% 2.00%
XML 45 R35.htm IDEA: XBRL DOCUMENT v3.5.0.2
SEGMENTS (Details)
$ in Thousands
 3 Months Ended 9 Months Ended
Nov. 30, 2015
School
Nov. 03, 2015
School
Sep. 30, 2016
USD ($)
Sep. 30, 2015
USD ($)
Sep. 30, 2016
USD ($)
School
Segment
Location
Sep. 30, 2015
USD ($)
Dec. 31, 2015
USD ($)
SEGMENTS [Abstract]              
Number of locations closed | Location         10    
Number of remaining reportable segments | Segment         2    
Number of reportable segments | Segment         3    
Segment Reporting Information [Line Items]              
Number of schools | School         30    
Summary financial information by reporting segment [Abstract]              
Revenues     $ 49,803 $ 54,033 $ 138,444 $ 150,569  
Percentage of Total Revenue     100.00% 100.00% 100.00% 100.00%  
Operating (Loss) Income     $ 1,043 $ 5,872 $ (8,227) $ (3,193)  
Assets     190,394   190,394   $ 207,750
Healthcare and Other Professions Business Segment [Member]              
Segment Reporting Information [Line Items]              
Number of schools approved to divest | School 17 17          
Number of schools | School 18 18          
Discontinued Operations [Member]              
Summary financial information by reporting segment [Abstract]              
Assets     48,297   48,297   45,258
Reportable Segments [Member] | Transportation and Skilled Trades [Member]              
Summary financial information by reporting segment [Abstract]              
Revenues     $ 47,939 $ 49,697 $ 131,242 $ 136,988  
Percentage of Total Revenue     96.30% 92.00% 94.80% 91.00%  
Operating (Loss) Income     $ 6,122 $ 10,588 $ 11,920 $ 18,333  
Assets     87,056   87,056   90,045
Reportable Segments [Member] | Transitional [Member]              
Summary financial information by reporting segment [Abstract]              
Revenues     $ 1,864 $ 4,336 $ 7,202 $ 13,581  
Percentage of Total Revenue     3.70% 8.00% 5.20% 9.00%  
Operating (Loss) Income     $ (1,359) $ (1,312) $ (5,579) $ (4,916)  
Assets     1,298   1,298   2,448
Corporate [Member]              
Summary financial information by reporting segment [Abstract]              
Revenues     $ 0 $ 0 $ 0 $ 0  
Percentage of Total Revenue     0.00% 0.00% 0.00% 0.00%  
Operating (Loss) Income     $ (3,720) $ (3,404) $ (14,568) $ (16,610)  
Assets     $ 53,743   $ 53,743   $ 69,999
XML 46 R36.htm IDEA: XBRL DOCUMENT v3.5.0.2
FAIR VALUE (Details)
$ in Thousands
Sep. 30, 2016
USD ($)
Carrying Amount [Member]  
Financial Assets [Abstract]  
Cash and cash equivalents $ 19,240
Restricted cash 6,282
Prepaid expenses and other current assets 2,181
Noncurrent restricted cash 20,281
Financial Liabilities [Abstract]  
Accrued expenses 11,828
Other short-term liabilities 157
Term loan 41,734
Fair Value [Member]  
Financial Assets [Abstract]  
Cash and cash equivalents 19,240
Restricted cash 6,282
Prepaid expenses and other current assets 2,181
Noncurrent restricted cash 20,281
Financial Liabilities [Abstract]  
Accrued expenses 11,828
Other short-term liabilities 157
Term loan 38,517
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value [Member]  
Financial Assets [Abstract]  
Cash and cash equivalents 19,240
Restricted cash 6,282
Prepaid expenses and other current assets 0
Noncurrent restricted cash 20,281
Financial Liabilities [Abstract]  
Accrued expenses 0
Other short-term liabilities 0
Term loan 0
Significant Other Observable Inputs (Level 2) [Member] | Fair Value [Member]  
Financial Assets [Abstract]  
Cash and cash equivalents 0
Restricted cash 0
Prepaid expenses and other current assets 2,181
Noncurrent restricted cash 0
Financial Liabilities [Abstract]  
Accrued expenses 11,828
Other short-term liabilities 157
Term loan 38,517
Significant Unobservable Inputs (Level 3) [Member] | Fair Value [Member]  
Financial Assets [Abstract]  
Cash and cash equivalents 0
Restricted cash 0
Prepaid expenses and other current assets 0
Noncurrent restricted cash 0
Financial Liabilities [Abstract]  
Accrued expenses 0
Other short-term liabilities 0
Term loan $ 0
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