Lincoln Educational Services (LINC) Q4 2005 earnings summary

Executive summary

• FY05 revenue rose 14.5% to $299.2M; net income reached $18.7M and diluted EPS was $0.76, up 44.2% and 35.7%, respectively.

• Average enrollment increased 9.9% to 17,869; excluding NETI, enrollment growth was 3.0%.

• Q4 revenue was $81.8M, operating income $21.3M and net income $12.4M, versus $73.3M, $11.1M and $6.1M in Q4 2004.

Financial highlights

• FY05 operating income increased to $32.5M from $25.1M; net income rose to $18.7M from $13.0M.

• Operating cash flow increased to $39.0M from $26.7M, while investing cash outflow was $50.4M, including acquisitions and capital expenditures.

• Reported costs included a $0.5M write-off for a discontinued Philadelphia site, $0.4M of deferred financing cost write-off and $0.2M catch-up depreciation.

• FY05 tax expense included a $0.8M benefit from favorable resolution of a tax contingency.

Outlook and guidance

• FY06 capital expenditures were expected at 10%–15% of revenue, funded with operating cash and, if needed, credit-facility borrowings.

• Queens was scheduled to open in March 2006; the expanded Grand Prairie campus was expected to be operational by Q3 2006 and serve ~2,400 students.

• 100% online offerings were planned for June 2006; Health Information Technology and Criminal Justice programs were also planned for launch in 2006.

• Management expected growth from new campuses, facility expansion, acquisitions, online programs and degree offerings, while anticipating revenue growth to moderate as the business matured.