10-Q

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 June 30, 2017

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
(Address of principal executive offices)	(Zip Code)

(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, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth 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 ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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 August 8, 2017, there were 24,719,055 shares of the registrant’s common stock outstanding.

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at June 30, 2017 and December 31, 2016	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016	3
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2017 and 2016	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2017 and 2016	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 6.	Exhibits	36
	SIGNATURES	37

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	June 30, 2017		December 31, 2016
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7,210	$	21,064
Restricted cash		6,189		6,399
Accounts receivable, less allowance of $12,932 and $12,375 at June 30, 2017 and December 31, 2016, respectively		17,886		15,383
Inventories		1,884		1,687
Prepaid income taxes and income taxes receivable		252		262
Assets held for sale		16,820		16,847
Prepaid expenses and other current assets		2,586		2,894
Total current assets		52,827		64,536
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $160,375 and $157,152 at June 30, 2017 and December 31, 2016, respectively		55,132		55,445
OTHER ASSETS:
Noncurrent restricted cash		-		20,252
Noncurrent receivables, less allowance of $1,156 and $977 at June 30, 2017 and December 31, 2016, respectively		6,876		7,323
Goodwill		14,536		14,536
Other assets, net		860		1,115
Total other assets		22,272		43,226
TOTAL	$	130,231	$	163,207

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)

	June 30, 2017			December 31, 2016
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of credit agreement and term loan	$	8,000		$	11,713
Unearned tuition		20,528			24,778
Accounts payable		14,235			13,748
Accrued expenses		13,707			15,368
Other short-term liabilities		464			653
Total current liabilities		56,934			66,260
NONCURRENT LIABILITIES:
Long-term credit agreement and term loan		24,023			30,244
Pension plan liabilities		5,279			5,368
Accrued rent		5,278			5,666
Other long-term liabilities		825			743
Total liabilities		92,339			108,281
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2017 and December 31, 2016		-			-
Common stock, no par value - authorized: 100,000,000 shares at June 30, 2017 and December 31, 2016; issued and outstanding: 30,629,596 shares at June 30, 2017 and 30,685,017 shares at December 31, 2016		141,377			141,377
Additional paid-in capital		28,779			28,554
Treasury stock at cost - 5,910,541 shares at June 30, 2017 and December 31, 2016		(82,860	)		(82,860	)
Accumulated deficit		(43,744	)		(26,044	)
Accumulated other comprehensive loss		(5,660	)		(6,101	)
Total stockholders’ equity		37,892			54,926
TOTAL	$	130,231		$	163,207

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 June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
REVENUE	$	61,865		$	68,080		$	127,144		$	138,724
COSTS AND EXPENSES:
Educational services and facilities		32,405			35,569			65,113			72,691
Selling, general and administrative		35,554			35,750			73,879			75,905
Gain on sale of assets		(63	)		(6	)		(89	)		(395	)
Total costs & expenses		67,896			71,313			138,903			148,201
OPERATING LOSS		(6,031	)		(3,233	)		(11,759	)		(9,477	)
OTHER:
Interest income		9			8			40			72
Interest expense		(699	)		(1,541	)		(5,881	)		(3,132	)
Other income		-			1,678			-			3,431
LOSS BEFORE INCOME TAXES		(6,721	)		(3,088	)		(17,600	)		(9,106	)
PROVISION FOR INCOME TAXES		50			50			100			100
NET LOSS	$	(6,771	)	$	(3,138	)	$	(17,700	)	$	(9,206	)
Basic
Net loss per share	$	(0.28	)	$	(0.13	)	$	(0.74	)	$	(0.39	)
Diluted
Net loss per share	$	(0.28	)	$	(0.13	)	$	(0.74	)	$	(0.39	)
Weighted average number of common shares outstanding:
Basic		23,962			23,448			23,787			23,400
Diluted		23,962			23,448			23,787			23,400

See notes to unaudited condensed consolidated financial statements.

3

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Net loss	$	(6,771	)	$	(3,138	)	$	(17,700	)	$	(9,206	)
Other comprehensive income
Employee pension plan adjustments		220			222			441			444
Comprehensive loss	$	(6,551	)	$	(2,916	)	$	(17,259	)	$	(8,762	)

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)

	Common Stock					Additional Paid-in			Treasury			Retained Earnings (Accumulated			Accumulated Other Comprehensive
	Shares			Amount		Capital			Stock			Deficit)			Loss			Total
BALANCE - January 1, 2017		30,685,017		$	141,377	$	28,554		$	(82,860	)	$	(26,044	)	$	(6,101	)	$	54,926
Net loss		-			-		-			-			(17,700	)		-			(17,700	)
Employee pension plan adjustments		-			-		-			-			-			441			441
Stock-based compensation expense
Restricted stock		128,810			-		654			-			-			-			654
Net share settlement for equity-based compensation		(184,231	)		-		(429	)		-			-			-			(429	)
BALANCE - June 30, 2017		30,629,596		$	141,377	$	28,779		$	(82,860	)	$	(43,744	)	$	(5,660	)	$	37,892

	Common Stock						Additional Paid-in				Treasury				Retained Earnings (Accumulated				Accumulated Other 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		-				-			-				-				(9,206	)			-				(9,206	)
Employee pension plan adjustments		-				-			-				-				-				444				444
Stock-based compensation expense
Restricted stock		1,079,267				-			675				-				-				-				675
Net share settlement for equity-based compensation		(38,389	)			-			(107	)			-				-				-				(107	)
BALANCE - June 30, 2016		30,768,433			$	141,377		$	27,860			$	(82,860	)		$	(6,946	)		$	(6,628	)		$	72,803

See notes to unaudited condensed consolidated financial statements.

5

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(17,700	)	$	(9,206	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,275			6,094
Amortization of deferred finance charges		305			459
Write-off of deferred finance charges		2,161			-
Gain on disposition of assets		(89	)		(395	)
Gain on capital lease termination		-			(3,355	)
Fixed asset donation		(18	)		(58	)
Provision for doubtful accounts		7,220			6,587
Stock-based compensation expense		654			675
Deferred rent		(245	)		(271	)
(Increase) decrease in assets:
Accounts receivable		(9,276	)		(8,570	)
Inventories		(197	)		(128	)
Prepaid income taxes and income taxes receivable		10			35
Prepaid expenses and current assets		301			178
Other assets, net		(1,075	)		(1,044	)
Increase (decrease) in liabilities:
Accounts payable		(28	)		(1,097	)
Accrued expenses		(1,804	)		(88	)
Unearned tuition		(4,250	)		(7,908	)
Other liabilities		245			(46	)
Total adjustments		(1,811	)		(8,932	)
Net cash used in operating activities		(19,511	)		(18,138	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(2,098	)		(1,555	)
Restricted cash		210			816
Proceeds from sale of property and equipment		122			432
Net cash used in investing activities		(1,766	)		(307	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings		(49,266	)		(386	)
Proceeds from borrowings		38,000			-
Reclassifications of payments of borrowings from restricted cash		20,252			-
Proceeds of borrowings from restricted cash		(5,000	)		(5,023	)
Payments of borrowings from restricted cash		5,000			-
Payment of deferred finance fees		(1,134	)		(645	)
Net share settlement for equity-based compensation		(429	)		(107	)
Principal payments under capital lease obligations		-			(2,864	)
Net provided by (cash used) in financing activities		7,423			(9,025	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(13,854	)		(27,470	)
CASH AND CASH EQUIVALENTS—Beginning of period		21,064			38,420
CASH AND CASH EQUIVALENTS—End of period	$	7,210		$	10,950

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)

	Six Months Ended June 30,
	2017		2016
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	1,882	$	2,782
Income taxes	$	106	$	112
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Liabilities accrued for or noncash purchases of fixed assets	$	2,004	$	1,391

See notes to unaudited condensed consolidated financial statements.

7

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(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”, “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 28 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 Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences and associated brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The 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, we reorganized our operations into three reportable business segments:  (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions (“HOPS”), and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November 2015, the Board of Directors approved a plan for the Company to divest the schools included in the HOPS segment due to a strategic shift in the Company’s business strategy.  The Company underwent an exhaustive process to divest the HOPS schools which proved successful in attracting various purchasers but, ultimately, did not result in a transaction that our Board believed would enhance shareholder value. When the decision was first made by the Board of Directors to divest HOPS, 18 campuses were operating in this segment.  By the end of 2017, we will have strategically closed seven underperforming campuses leaving a total of eleven campuses remaining under HOPS.   The Company believes that the closures and planned closures of the aforementioned campuses has positioned this segment and the Company to be more profitable going forward as well as maximizing returns for the Company’s shareholders.

The combination of several factors, including the inability of the prospective buyer of the HOPS segment to close on the purchase, the improvements the Company has implemented in the HOPS operations, the closure of seven underperforming campuses and the change in federal government administration, resulted in the Board reevaluating its divestiture plan and the determination that shareholder value would more likely be enhanced by continuing to operate our HOPS segment as revitalized.  Consequently, in the first quarter of 2017, the Board of Directors abandoned the plan to divest the HOPS segment and the Company intends to retain the HOPS segment.  The results of operations of the campuses included in the HOPS business segment are reflected as continuing operations in the consolidated financial statements.

In the fourth quarter of 2016, the Company completed the teach-out of its Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.  Also in 2016, the Company announced the closing of its Northeast Philadelphia, Pennsylvania; Center City Philadelphia, Pennsylvania; and West Palm Beach, Florida facilities, each of which is expected to be fully taught out and closed during 2017.  In addition, in March 2017, the Board of Directors approved a plan to not renew the leases at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools, which are being taught out and expected to be closed in December 2017, are included in the Transitional segment as of June 30, 2017.

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 and thereafter for the foreseeable future.  At June 30, 2017, the Company’s sources of cash primarily included cash and cash equivalents of $13.4 million (of which $6.2 million is restricted). The Company is also continuing to take actions to improve cash flow by aligning its cost structure to its student population.

8

In addition to the current sources of capital discussed above that provide short term liquidity, the Company plans to sell three West Palm Beach, Florida properties and associated assets, which are currently classified as held for sale and are expected to be sold within one year from the date of classification.  On March 14, 2017, the Company entered into a purchase and sale agreement with Tambone Companies, LLC, pursuant to which the Company has agreed to sell two of the three properties (the “West Palm Beach Property”) for a cash purchase price of $15.7 million.  The purchase and sale agreement, as amended, is among other things, subject to customary closing conditions but the Company expects to close on the transaction in the third quarter of 2017.  On April 28, 2017, the Company obtained from its lender, Sterling National Bank, an $8 million bridge term loan secured by the West Palm Beach Property.  The bridge loan must be repaid upon the earlier of the sale of the West Palm Beach Property or October 1, 2017.

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, 2016 consolidated financial statements and related disclosures of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 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 six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2017.

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 – The Financial Accounting Standards Board (the “FASB”) has issued Accounting Standards Update (“ASU”) No. 2017-09,” “Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting.” ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award. The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment award require an entity to apply modification accounting under Topic 718. ASU 2017-09 is effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The Company does not expect the adoption of ASU 2017-09 will have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of comprehensive income separately from the service cost component and outside a subtotal of operating income. The ASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of this update on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.”  ASU 2017-04 provides amendments to Accounting Standards Code (“ASC”) No. 350, “Intangibles - Goodwill and Other,” which eliminate Step 2 from the goodwill impairment test. Entities should perform their goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2019, with early adoption permitted.  The Company early adopted the provisions of ASU 2017-04 as of April 1, 2017.  As fair values for our operating units exceed their carrying values, there has been no impact on our consolidated financial statements.

9

The FASB has recently issued several amendments to the new standard on revenue recognition, ASU No. 2014-09, “Revenue from Contracts with Customers.” The amendments include ASU  No. 2016-08, “Revenue from Contracts with Customers (Topic 606)—Principal versus Agent Considerations,” which was issued in March 2016, and clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09, and ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606)—Identifying Performance Obligations and Licensing,” which was issued in April 2016, and amends the guidance in ASU No. 2014-09 related to identifying performance obligations. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures.

The new standard is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016. We do not plan to early adopt and, accordingly, we will adopt the new standard effective January 1, 2018. The Company’s assessment of the potential impact is substantially complete based on our review of current enrollment agreements and other revenue generating contracts. We believe the timing of recognizing revenue for tuition and student fees will not significantly change. The Company is closely reviewing its book revenue stream to determine whether the performance obligation of the Company is satisfied over time and revenue is recognized over the length of the student contract, which is the Company’s current practice with respect to revenue recognition, or whether the performance obligation of the Company is satisfied at the point in time and revenue is recognized when students’ books are delivered.  Additionally, we are currently assessing the impacts related to the accounting for contract assets separate from accounts receivable and are evaluating the point at which a student’s contract asset becomes a receivable.

We are in the process of updating our revenue accounting policy and implementing changes to our business process and controls in response to the new standard, as necessary.  During the second half of 2017, we will finalize our revenue related documentation.  The Company currently expects to adopt the new standard on a modified retrospective basis with the cumulative effect of the change reflected in retained earnings as of January 1, 2018 and not restate prior periods.

In November 2016, the FASB issued ASU No. 2016-18: “Statement of Cash Flows (Topic 230): Restricted Cash.” This guidance was issued to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments will require that the statement of cash flows explain the change during the period in total cash, cash equivalents and restricted cash. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments will be applied using a retrospective transition method to each period presented. The Company anticipates that the adoption will not have a material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company anticipates that the adoption will not have a material impact on the Company’s consolidated financial statements.

The Company prospectively applied ASU 2016-09, “Improvements to Employee Share Based Payment Accounting,” to the condensed consolidated statement of operations for the recognition of tax benefits within the provision for taxes, which previously would have been recorded to additional paid-in capital. The impact for the six months ended June 30, 2017 was $0. In addition, the Company retrospectively recognized no tax benefits within operating activities within the condensed consolidated statements of cash flow for the six months ended June 30, 2017 and 2016. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in the condensed consolidated statements of cash flows, since such cash flows have historically been presented in financing activities. The treatment of forfeitures has not changed as the Company is electing to continue the current process of estimating the number of forfeitures. There was no cumulative-effect adjustment required to retained earnings under the prospective method as of the beginning of the year because all tax benefits had been previously recognized when the tax deductions related to stock compensation were utilized to reduce tax payable. The Company is not recording deferred tax assets or tax losses as the result of the adoption of ASU 2016-09.

In February 2016, the FASB issued guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statements of income. The guidance is effective for annual periods, including interim periods within those periods, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact that the update will have on our results of operations, financial condition and financial statement disclosures.

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.

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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 six months ended June 30, 2017 and 2016, the Company did not have any interest and penalties expense associated with uncertain tax positions.

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 six months ended June 30, 2017 and 2016 was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Basic shares outstanding		23,962,055		23,448,224		23,786,656		23,399,708
Dilutive effect of stock options		-		-		-		-
Diluted shares outstanding		23,962,055		23,448,224		23,786,656		23,399,708

For the three months ended June 30, 2017 and 2016, options to acquire 537,718 and 604,378 shares were excluded from the above table because the Company reported a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the six months ended June 30, 2017 and 2016, options to acquire 583,848 and 412,286 shares were excluded from the above table because the Company reported a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the three and six months ended June 30, 2017, options to acquire 170,667 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.

3. 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.  There were no long-lived asset impairments during the six months ended June 30, 2017 and 2016.

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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 June 30, 2017 and 2016, there was no indicator of potential impairment and, accordingly, the Company did not test goodwill for impairment.

The carrying amount of goodwill at June 30, 2017 and 2016 is as follows:

	Gross Goodwill Balance		Accumulated Impairment Losses			Net Goodwill Balance
Balance as of January 1, 2017	$	117,176	$	(102,640	)	$	14,536
Adjustments		-		-			-
Balance as of June 30, 2017	$	117,176	$	(102,640	)	$	14,536

	Gross Goodwill Balance		Accumulated Impairment Losses			Net Goodwill Balance
Balance as of January 1, 2016	$	117,176	$	(93,881	)	$	23,295
Adjustments		-		-			-
Balance as of June 30, 2016	$	117,176	$	(93,881	)	$	23,295

As of June 30, 2017, the goodwill balance is related to the Transportation and Skilled Trades segment.  As of June 30, 2016, the goodwill balance consists of $14.5 million related to the Transportation and Skilled Trades segment and $8.8 million related to the Healthcare and Other Professions segment.

Intangible assets, which are included in other assets in the accompanying condensed consolidated balance sheets, consist of the following:

	Curriculum
Gross carrying amount at December 31, 2016	$	160
Adjustments		-
Gross carrying amount at June 30, 2017		160
Accumulated amortization at December 31, 2016		128
Amortization		7
Accumulated amortization at June 30, 2017		135
Net carrying amount at June 30, 2017	$	25
Weighted average amortization period (years)		10

Amortization of intangible assets was less than $0.1 million for each of the three and six months ended June 30, 2017 and 2016.

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The following table summarizes the estimated future amortization expense:

Year Ending December 31,
Remainder of 2017	$	12
2018		13
	$	25

4. LONG-TERM DEBT AND LEASE OBLIGATIONS

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

	June 30, 2017			December 31, 2016
Credit agreement (a)	$	32,023		$	-
Term loan (a)		-			44,267
		32,023			44,267
Less current maturities		(8,000	)		(11,713	)
	$	24,023		$	32,554

(a)On March 31, 2017, the Company entered into a secured revolving credit agreement (the “Credit Agreement”) with Sterling National Bank (the “Bank”) pursuant to which the Company obtained a credit facility in the aggregate principal amount of up to $55 million (the “Credit Facility”).  The Credit Facility consists of (a) a $30 million loan facility (“Facility 1”), which is comprised of a $25 million revolving loan designated as “Tranche A” and a $5 million non-revolving loan designated as “Tranche B,” which Tranche B was repaid during the quarter ended June 30, 2017, and (b) a $25 million revolving loan facility (“Facility 2”), which includes a sublimit amount for letters of credit of $10 million.  The Credit Facility replaces a term loan facility (the “Prior Credit Facility”) from a lender group led by HPF Service, LLC, which was repaid and terminated concurrently with the effectiveness of the Credit Facility.  The term of the Credit Facility is 38 months, maturing on May 31, 2020.

The Credit Facility is secured by a first priority lien in favor of the Bank on substantially all of the personal property owned by the Company as well as mortgages on four parcels of real property owned by the Company in Connecticut, Colorado, Tennessee and Texas at which four of the Company’s schools are located.

At the closing, the Company drew $25 million under Tranche A of Facility 1, which, pursuant to the terms of the Credit Agreement, was used to repay the Prior Credit Facility and to pay transaction costs associated with closing the Credit Facility.  After the disbursements of such amounts, the Company retained approximately $1.8 million of the borrowed amount for working capital purposes.

Also, at closing, $5 million was drawn under Tranche B and, pursuant to the terms of the Credit Agreement, was deposited into an interest-bearing pledged account (the “Pledged Account”) in the name of the Company maintained at the Bank in order to secure payment obligations of the Company with respect to the costs of remediation of any environmental contamination discovered at certain of the mortgaged properties upon completion of environmental studies undertaken at such properties.  Pursuant to the terms of the Credit Agreement, funds will be released from the Pledged Account upon request by the Company to reimburse the Company for costs incurred for environmental remediation, if required.  Upon the completion of any such environmental remediation or upon determination that no environmental remediation is necessary, funds remaining in the Pledged Account will be released from the Pledged Account and applied to the outstanding principal balance of Tranche B and availability under Tranche B will be permanently reduced to zero and, accordingly, the maximum principal amount of Facility 1 will be permanently reduced to $25 million.  During the quarter ended June 30, 2017 the environmental studies were completed and revealed no environmental issues existing at the properties.  Accordingly, pursuant to the terms of the Credit Agreement, the $5 million on deposit in the Pledged Account was released and used to repay the non-revolving loan outstanding under Tranche B.  Upon the repayment of Tranche B, the maximum principal amount of Facility 1 was permanently reduced to $25 million.

Pursuant to the terms of the Credit Agreement, all draws under Facility 2 for letters of credit or revolving loans must be secured by cash collateral in an amount equal to 100% of the aggregate stated amount of the letters of credit issued and revolving loans outstanding through draws from Facility 1 or other available cash of the Company.

Accrued interest on each revolving loan will be payable monthly in arrears.  Revolving loans under Tranche A of Facility 1 will bear interest at a rate per annum equal to the greater of (x) the Bank’s prime rate plus 2.50% and (y) 6.00%.  The amount borrowed under Tranche B of Facility 1 and revolving loans under Facility 2 will bear interest at a rate per annum equal to the greater of (x) the Bank’s prime rate and (y) 3.50%.

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Each issuance of a letter of credit under Facility 2 will require the payment of a letter of credit fee to the Bank equal to a rate per annum of 1.75% on the daily amount available to be drawn under the letter of credit, which fee shall be payable in quarterly installments in arrears.  Letters of credit totaling $6.2 million that were outstanding under a $9.5 million letter of credit facility previously provided to the Company by the Bank, which letter of credit facility was set to mature on April 1, 2017, are treated as letters of credit under Facility 2.

Under the terms of the Credit Agreement, the Bank receives an unused facility fee on the average daily unused balance of Facility 1 at a rate per annum equal to 0.50%, which fee is payable quarterly in arrears.  In addition, the Company is required to maintain, on deposit with the Bank in one or more non-interest bearing accounts, a minimum of $5 million in quarterly average aggregate balances.  If in any quarter the required average aggregate account balance is not maintained, the Company is required to pay the Bank a fee of $12,500 for that quarter.  Under the terms of the Credit Agreement, in the event that the Company terminates the Credit Facility or refinances with another lender within 18 months of closing, the Company shall be required to pay the Bank a breakage fee of $500,000.

In addition to the foregoing, the Credit Agreement contains customary representations, warranties and affirmative and negative covenants, including financial covenants that restrict capital expenditures, prohibit the incurrence of a net loss commencing on December 31, 2018 and require a minimum adjusted EBITDA and a minimum tangible net worth which is an annual covenant, as well as events of default customary for facilities of this type.  As of June 30, 2017, the Company is in compliance with all covenants.

In connection with the Credit Agreement, the Company paid the Bank an origination fee in the amount of $250,000 and other fees and reimbursements that are customary for facilities of this type.

The Company incurred an early termination premium of approximately $1.8 million in connection with the termination of the Prior Credit Facility.

On April 28, 2017, the Company entered into an additional secured credit agreement with the Bank, pursuant to which the Company has obtained a short term loan in the principal amount of $8 million, the proceeds of which are to be used for working capital and general corporate purposes.  The loan bears interest at a rate per annum equal to the greater of the Bank’s prime rate plus 2.50% or 6.00%.

The loan is secured by real property assets located in West Palm Beach, Florida at which schools operated by the Company are currently located.  The loan is payable interest only until its maturity, which will occur upon the earlier of October 1, 2017 and the date of the sale of the West Palm Beach, Florida property.  Pursuant to a purchase and sale agreement, as amended, the Company has agreed to sell two of three properties located in West Palm Beach, Florida to Tambone Companies, LLC for a cash purchase price of $15.7 million.  The Company expects this sale to be completed in the third quarter of 2017.

As of June 30, 2017, the Company had $33 million outstanding under the Credit Facility (which includes the short term loan of $8 million); offset by $1.0 million of deferred finance fees.  As of December 31, 2016, the Company had $44.3 million outstanding under the Prior Credit Facility; offset by $2.3 million of deferred finance fees, which were written-off.As of June 30, 2017 and December 31, 2016, there were letters of credit in the aggregate principal amount of $6.2 million outstanding, respectively.  As of June 30, 2017, there are no revolving loans outstanding under Facility 2.

Scheduled maturities of long-term debt and lease obligations at June 30, 2017 are as follows:

Year ending December 31,
2017	$	8,000
2018		-
2019		-
2020		25,000
	$	33,000

5. 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.

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On May 13, 2016 and January 16, 2017, performance-based restricted shares were granted to certain employees of the Company, which vest 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 restriction on the right to vote or the right to receive dividends with respect to any of these restricted shares.

On June 2, 2014 and December 18, 2014, performance-based restricted shares were granted to certain employees of the Company, 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 restriction on the right to vote or the right to receive dividends with respect to any of these 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.  There is no vesting period on the right to vote or the right to receive dividends with respect to these restricted shares.

For the six months ended June 30, 2017 and 2016, the Company completed a net share settlement for 184,231 and 38,389 restricted shares, respectively, on behalf of certain employees that participate in the LTIP upon the vesting of the restricted shares pursuant to the terms of the LTIP.  The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 2017 and/or 2016, 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 $0.4 million and $0.1 million for each of the six months ended June 30, 2017 and 2016, 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, 2016		1,143,599		$	1.89
Granted		181,208			2.58
Canceled		(52,398	)		5.63
Vested		(650,130	)		1.74
Nonvested restricted stock outstanding at June 30, 2017		622,279			1.92

The restricted stock expense for the three months ended June 30, 2017 and 2016 was $0.3 million and $0.3 million, respectively.  The restricted stock expense for the six months ended June 30, 2017 and 2016 was $0.7 million and $0.7 million, respectively.  The unrecognized restricted stock expense as of June 30, 2017 and December 31, 2016 was $0.9 million and $1.5 million, respectively.  As of June 30, 2017, outstanding restricted shares under the LTIP had aggregate intrinsic value of $1.9 million.

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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, 2016		218,167		$	12.11	3.33 years	$	-
Canceled		(47,500	)		12.37			-
Outstanding at June 30, 2017		170,667			12.04	3.49 years		-
Vested or expected to vest		170,667			12.04	3.49 years		-
Exercisable as of June 30, 2017		170,667			12.04	3.49 years		-

As of June 30, 2017, there was no unrecognized pre-tax compensation expense.

The following table presents a summary of stock options outstanding:

		At June 30, 2017
		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		122,667		3.75	$	8.77		122,667	$	8.77
$	14.00-$19.99		17,000		2.34		19.98		17,000		19.98
$	20.00-$25.00		31,000		3.10		20.62		31,000		20.62
			170,667		3.49		12.04		170,667		12.04

6. INCOME TAXES

The provision for income taxes for the three months ended June 30, 2017 and 2016 was less than $0.1 million, or 0.7% of pretax loss, and less than $0.1 million, or 1.6% of pretax loss, respectively.  The provision for income taxes for the six months ended June 30, 2017 and 2016 was $0.1 million, or 0.6% of pretax loss, and $0.1 million, or 1.1% of pretax loss, respectively.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to recover 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 full valuation allowance on its net deferred tax assets as of June 30, 2017.

7. CONTINGENCIES

In the ordinary conduct of its business, the Company is subject to certain other 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.

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On July 13, 2015, the Commonwealth of Massachusetts filed a complaint against the Company in the Suffolk County Superior Court alleging certain violations of the Massachusetts Consumer Protection Act since at least 2010 and continuing through 2013. At the same time, the Company agreed to the entry of a Final Judgment by Consent in order to avoid the time, burden, and expense of contesting such liability. As part of the Final Judgment by Consent, the Company denied all allegations of wrongdoing and any liability for the claims asserted in the complaint. The Company, however, paid the sum of $850,000 to the Massachusetts Attorney General and has agreed to forgive $165,000 of debt consisting of unpaid balances owed to the Company by certain graduates in the sole discretion of the Massachusetts Attorney General. The Final Judgment by Consent also provided certain requirements for calculation of job placement rates in Massachusetts and imposed certain disclosure obligations that are consistent with regulations that have been enacted by the Commonwealth of Massachusetts.

8. SEGMENTS

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.  In 2016, the Company ceased operations in Hartford, Connecticut; Fern Park, Florida; and Henderson (Green Valley), Nevada. In the fourth quarter of 2016, the Board of Directors approved plans to cease operations at our schools in Center City Philadelphia, Pennsylvania; Northeast Philadelphia, Pennsylvania; and West Palm Beach, Florida.  Each of these schools is expected to close in 2017.  In addition, in March 2017, the Board of Directors approved plans to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts which are expected to close in the fourth quarter of 2017.  These schools, which were previously included in the Healthcare and Other Professions segment, are now included in the Transitional segment.

In the past, we offered any combination of programs at any campus.  We have shifted our focus to program offerings that create greater differentiation among campuses and attain excellence to attract more students and gain market share.  Also, strategically, we began offering continuing education training to select employers who hire our students and this is best achieved at campuses focused on their profession.

We currently operate in three reportable segments: a) Transportation and Skilled Trades b) Healthcare and Other Professions and c) Transitional.  Our reportable segments represent 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 which have been determined based on a method by which we evaluate performance and allocate resources.  Our operating segments have been aggregated into three reportable segments because, in our judgment, the operating segments have similar services, types of customers, regulatory environment and economic characteristics.  Our reportable 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).

Healthcare and Other Professions – Healthcare and Other Professions offers academic programs in the career-oriented disciplines of health sciences, hospitality and business and information technology (e.g. dental assistant, medical assistant, practical nursing, culinary arts and cosmetology).

Transitional – Transitional refers to operations that are being phased out or closed and 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.  During the year ended December 31, 2016, the Company announced the closings of our Northeast Philadelphia, Pennsylvania; Center City Philadelphia, Pennsylvania; and West Palm Beach, Florida facilities.  These schools are expected to be fully taught out on August 31, 2017, August 31, 2017 and September 30, 2017, respectively.  In the first quarter of 2016 we completed the teach-out of our Fern Park, Florida campus.  Also, in the fourth quarter of 2016, we completed the teach-out of our Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.  In addition, in March 2017, the Board of Directors approved a plan to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools are being taught out and expected to be closed in December 2017.

The Company continually evaluates all campuses for profitability, earning potential, and customer satisfaction.  This evaluation takes several factors into consideration, including the campus’s geographic location, the programs offered at the campus, as well as skillsets required of our students by their potential employers.  The purpose of this evaluation is to ensure that our programs provide our students with the best possible opportunity to succeed in the marketplace with the goals of attracting more students to our programs and, ultimately, to provide the shareholders with the maximum return on their investment.  Campuses in the Transitional segment have been subject to this process and have been strategically identified for closure.

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.

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Summary financial information by reporting segment is as follows:

	For the Three Months Ended June 30,
	Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016
Transportation and Skilled Trades	$	41,310		66.8	%	$	41,032		60.3	%	$	850		$	2,430
Healthcare and Other Professions		17,932		29.0	%		18,661		27.4	%		(634	)		918
Transitional		2,623		4.2	%		8,387		12.3	%		(833	)		(1,458	)
Corporate		-		0.0	%		-		0.0	%		(5,414	)		(5,123	)
Total	$	61,865		100.0	%	$	68,080		100.0	%	$	(6,031	)	$	(3,233	)

	For the Six Months Ended June 30,
	Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016
Transportation and Skilled Trades	$	83,477		65.7	%	$	83,304		60.1	%	$	2,898		$	5,796
Healthcare and Other Professions		36,769		28.9	%		38,470		27.7	%		(474	)		2,673
Transitional		6,898		5.4	%		16,950		12.2	%		(1,401	)		(5,101	)
Corporate		-		0.0	%		-		0.0	%		(12,782	)		(12,845	)
Total	$	127,144		100.0	%	$	138,724		100.0	%	$	(11,759	)	$	(9,477	)

	Total Assets
	June 30, 2017		December 31, 2016
Transportation and Skilled Trades	$	84,578	$	83,320
Healthcare and Other Professions		7,622		7,506
Transitional		18,377		18,874
Corporate		19,654		53,507
Total	$	130,231	$	163,207

9. FAIR VALUE

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

	At June 30, 2017
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)		Total
Financial Assets:
Cash and cash equivalents	$	7,210	$	7,210	$	-	$	-	$	7,210
Restricted cash		6,189		6,189		-		-		6,189
Prepaid expenses and other current assets		2,586		-		2,586		-		2,586
Financial Liabilities:
Accrued expenses	$	13,707	$	-	$	13,707	$	-	$	13,707
Other short term liabilities		464		-		464		-		464
Credit facility		32,023		-		32,023		-		32,023

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The fair value of the credit facility approximates the carrying amount at June 30, 2017 as it relates to current market rates for similar types of instruments.

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

The carrying amounts reported on the 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.

10. 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 chief executive officer 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 June 30, 2017 and 2016. 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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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, 2016, 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, 2016, as filed with the SEC, which includes audited consolidated financial statements for our three fiscal years ended December 31, 2016.

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 28 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 Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences and associated brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The 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, we reorganized our operations into three reportable business segments:  (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions (“HOPS”), and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November 2015, the Board of Directors approved a plan for the Company to divest the schools included in the HOPS segment due to a strategic shift in the Company’s business strategy.  The Company underwent an exhaustive process to divest the HOPS schools which proved successful in attracting various purchasers but, ultimately, did not result in a transaction that our Board believed would enhance shareholder value. When the decision was first made by the Board of Directors to divest HOPS, 18 campuses were operating in this segment.  By the end of 2017, we will have strategically closed seven underperforming campuses leaving a total of 11 campuses remaining under HOPS.   The Company believes that the closures and planned closures of the aforementioned campuses has positioned this segment and the Company to be more profitable going forward as well as maximizing returns for the Company’s shareholders.

The combination of several factors, including the inability of the prospective buyer of the HOPS segment to close on the purchase, the improvements the Company has implemented in the HOPS operations, the closure of seven underperforming campuses and the change in Federal government administration, resulted in the Board reevaluating its divestiture plan and the determination that shareholder value would more likely be enhanced by continuing to operate our HOPS segment as revitalized.  Consequently, the Board of Directors has abandoned the plan to divest the HOPS segment and the Company now intends to retain the HOPS segment.  The results of operations of the campuses included in the HOPS business segment are reflected as continuing operations in the condensed consolidated financial statements.

In the fourth quarter of 2016, the Company completed the teach-out of its Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.  Also in 2016, the Company announced the closing of its Northeast Philadelphia, Pennsylvania, Center City Philadelphia Pennsylvania and West Palm Beach, Florida facilities, each of which is expected to be fully taught out and closed during 2017.  In addition, in March 2017, the Board of Directors approved a plan to not renew the leases at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools, which are being taught out and expected to be closed in December 2017, are included in the Transitional segment as of June 30, 2017.

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On March 14, 2017, the Company entered into a purchase and sale agreement with Tambone Companies, LLC, pursuant to which the Company has agreed to sell to Tambone Companies, LLC two of the three facilities it owns in West Palm Beach, Florida, including the improvements and other personal property located thereon (the “West Palm Beach Property”) for a cash purchase price of $15.7 million. The purchase and sale agreement, as amended, is among other things, subject to customary closing conditions.  The Company expects to close on the transaction in the third quarter of 2017. On April 28, 2017, the Company obtained from its lender, Sterling National Bank, an $8 million bridge term loan secured by the West Palm Beach Property.  The bridge loan must be repaid upon the earlier of the sale of the West Palm Beach Property or October 1, 2017.

On March 31, 2017, the Company entered into a new revolving credit facility with Sterling National Bank in the aggregate principal amount of up to $55 million, which consists of up to $50 million of revolving loans, including a $10 million sublimit for letters of credit, and an additional $5 million non-revolving loan.  The new credit facility requires that revolving loans in excess of $25 million and all letters of credit issued thereunder be cash collateralized dollar for dollar.  The proceeds of the $5 million non-revolving loan were held in a pledged account at Sterling National Bank as required by the terms of the new credit facility pending the completion of environmental studies undertaken at certain properties owned by the Company and mortgaged to Sterling National Bank.  Upon the completion of environmental studies that revealed that no environmental issues existed at the properties, during the quarter ended June 30, 2017, the $5 million held in the pledged account at Sterling National Bank was released and used to repay the $5 million non-revolving loan.  The new revolving credit facility replaces a term loan facility from a lender group led by HPF Service, LLC, which was repaid and terminated concurrently with the effectiveness of the new revolving credit facility.  The term of the new revolving credit facility is 38 months, maturing on May 31, 2020.  The new revolving credit facility is discussed in further detail under the heading “Liquidity and Capital Resources” below and in Note 4 to the condensed consolidated financial statements included in this report. 

As of June 30, 2017, we had 10,400 students enrolled at 28 campuses in our programs.

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 condensed consolidated financial statements.

Revenue Recognition.  Revenues are derived primarily from programs taught at our 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 we complete the performance of teaching the student which entitles us 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.

We evaluate whether collectability of revenue is reasonably assured prior to the student attending class and reassess collectability of tuition and fees when a student withdraws from a course.  We calculate the amount to be returned under Title IV and its stated refund policy to determine eligible charges and, if there is a balance due from the student after this calculation, we expect payment from the student and we have 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 reasonable.  We continuously monitor our 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 we generally do not recognize tuition revenue in our consolidated statements of income (loss) until the related refund provisions have lapsed. Based on the application of our refund policies, we may be entitled to incremental revenue on the day the student withdraws from one of our schools. We record revenue for students who withdraw from one of our schools when payment is received because collectability on an individual student basis is not reasonably assured.

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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 June 30, 2017 and 2016 was 6.6% and 4.8%, respectively.  Our bad debt expense as a percentage of revenue for the six months ended June 30, 2017 and 2016 was 5.7% and 4.7%, respectively.  Our exposure to changes in our bad debt expense could impact our operations.  A 1% increase in our bad debt expense as a percentage of revenues for each of the three months ended June 30, 2017 and 2016 would have resulted in an increase in bad debt expense of $0.6 million and $0.7 million, respectively.  A 1% increase in our bad debt expense as a percentage of revenues for each of the six months ended June 30, 2017 and 2016 would have resulted in an increase in bad debt expense of $1.3 million and $1.4 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, student loans and parental loans that each student receives and the availability of family contributions.  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 and six months ended June 30, 2017 and 2016.

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.

There was no long-lived asset impairment during the three and six months ended June 30 2017 and 2016.

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.

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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 six months ended June 30, 2017 and 2016, 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.

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 June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue		100.0	%		100.0	%		100.0	%		100.0	%
Costs and expenses:
Educational services and facilities		52.4	%		52.2	%		51.2	%		52.4	%
Selling, general and administrative		57.5	%		52.5	%		58.1	%		54.7	%
Gain on sale of assets		-0.1	%		0.0	%		-0.1	%		-0.3	%
Total costs and expenses		109.8	%		104.7	%		109.2	%		106.8	%
Operating loss		-9.8	%		-4.7	%		-9.2	%		-6.8	%
Interest expense, net		-1.0	%		-2.3	%		-4.6	%		-2.2	%
Other income		0.0	%		2.5	%		0.0	%		2.5	%
Loss from operations before income taxes		-10.8	%		-4.5	%		-13.8	%		-6.5	%
Provision for income taxes		0.1	%		0.1	%		0.1	%		0.1	%
Net Loss		-10.9	%		-4.6	%		-13.9	%		-6.6	%

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Consolidated Results of Operations

Revenue.   Revenue decreased by $6.2 million, or 9.1%, to $61.9 million for the three months ended June 30, 2017 from $68.1 million for the prior year comparable period.  The decrease in revenue is mainly attributable to the suspension of new student starts at campuses in our Transitional segment, which accounted for approximately 93% of the total revenue decline; and a 3.4% decline in average revenue per student in the Healthcare and Other Professions segment due to shifts in program mix combined with tuition rate decreases in various programs.

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Total student starts decreased by 16.1% to approximately 2,600 from 3,100 for the three months ended June 30, 2017 as compared to the prior year comparable period.  The decrease was largely due to the suspension of new student starts for the Transitional segment which is down 100% as compared to the prior year comparable quarter.   The Transportation and Skilled Trades segment starts were down 9.0% and the Healthcare and Other Professions segment starts were up 2.7% for the three months ended June 30, 2017 as compared to the prior year comparable period.

Starts in the Transportation and Skilled Trades segment were down for the three months ended June 30, 2017 as a result of lower than expected high school start rates.  The shortfall occurred primarily at three campuses and was directly attributable to affordability and sustainability of student engagement between enrollment and start date.  Sustaining student engagement following enrollment, especially when the enrollment occurs months in advance, requires constant contact.  In addition, in striving to find the optimum affordability balance, the Company experienced a start decline in markets where scholarships were scaled back.  Certain external factors that are also driving the softer than expected start rate include low unemployment rates and increased wages for both skilled and unskilled labor.  The Company believes such external factors have caused many potential students to postpone training and enter the workforce directly upon graduation from high school.  Further, contributing to the decline in high school student starts is the lead time between the initial recruitment efforts and the actual start date, which could be up to one year.  High school students comprise approximately 30% of the segment’s population.  In an effort to increase high school enrollments, the Company has made various changes to processes and organizational structure.  As a result, enrollments for the quarter remained essentially flat; however, as noted above starts declined.

For a general discussion of trends in our student enrollment, see “Seasonality and Outlook” below.

Educational services and facilities expense.   Our educational services and facilities expense decreased by $3.2 million, or 8.9%, to $32.4 million for the three months ended June 30, 2017 from $35.6 million in the prior year comparable quarter.  This decrease is mainly attributable to the Transitional segment which accounted for $3.1 million in cost reductions as campuses in the segment prepare to close during this fiscal year.

Educational services and facilities expenses, as a percentage of revenue remained essentially flat at 52.4% for the three months ended June 30, 2017 from 52.2% in the prior year comparable period.

Selling, general and administrative expense.    Our selling, general and administrative expense decreased by $0.2 million, or 0.6%, to $35.6 million for the three months ended June 30, 2017 from $35.8 million in the comparable quarter of 2016.  The decrease was primarily due to the Transitional segment, which accounted for approximately $3.2 million in cost reductions as campuses in the segment prepare to close during this fiscal year.  Partially offsetting the cost reductions are $2.0 million in increased administrative costs and $1.3 million in additional sales and marketing expense.

Administrative expense increased primarily due to a $0.9 million increase in bad debt expense as a result of higher student accounts receivable, higher account write-offs, and timing of Title IV funds receipts; and a $1.0 million increase in medical costs as compared to the prior year.  In 2016, the Company had historically low medical claims as compared to medical claims in the current year, resulting in the significant increase quarter over quarter.

Sales and marketing expense increased by $1.3 million, or 10.8%, from strategic marketing initiatives intended to reach more students. These initiatives resulted in a slight improvement in starts in the adult demographic quarter over quarter.

As a percentage of revenues, selling, general and administrative expense increased to 57.5% for the three months ended June 30, 2017 from 52.5% in the comparable prior year period.

Net interest expense. For the three months ended June 30, 2017 net interest expense decreased by $0.8 million, or 55% to $0.7 million from $1.5 million in the prior year comparable period.  The cost reductions resulted from favorable terms under our new Credit Facility with Sterling National Bank effective on March 31, 2017.

Other Income.  For the three months ended June 30, 2017 other income decreased by $1.7 million from the prior year comparable period.  The $1.7 million of other income in 2016 reflected the amortization of a one-time gain from the modification of a lease at three of the Company’s campuses which were previously accounted for as finance obligations in the prior year.

Income taxes.    Our provision for income taxes was $0.1 million, or 0.7% of pretax loss, for the three months ended June 30, 2017, compared to $0.1 million, or 1.6% of pretax loss, in the prior year comparable 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.

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Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Consolidated Results of Operations

Revenue.   Revenue decreased by $11.6 million, or 8.3%, to $127.1 million for the six months ended June 30, 2017 from $138.7 million for the prior year comparable period.  The decrease in revenue is mainly attributable to the suspension of new student enrollments at campuses in our Transitional segment, which accounted for approximately 87% of the total revenue decline; and a 2.7% decline in average revenue per student in the Healthcare and Other Professions segment due to shifts in program mix combined with tuition rate decreases in various programs.

Total student starts decreased by 13.8% to approximately 5,500 from 6,300 for the six months ended June 30, 2017 as compared to the prior year comparable period.  The decrease was largely due to the suspension of new student starts for the Transitional segment which had 132 students for the six months ended June 30, 2017 as compared to 806 students in the prior year comparable period.   The Transportation and Skilled Trades segment starts were down 3.1% and the Healthcare and Other Professions segment starts were down 4.7% for the six months ended June 30, 2017 as compared to the prior year comparable period.

Starts in the Transportation and Skilled Trades segment were down for the six months ended June 30, 2017 as a result of lower than expected high school start rates.  The shortfall occurred mainly at three campuses and was directly attributable to affordability and sustainability of student engagement between enrollment and start date.  Sustaining student engagement following enrollment, especially when enrollment occurs months in advance, requires constant contact.  In addition, in striving to find the optimum affordability balance the Company experienced a start decline in markets where scholarships were scaled back.  Certain external factors that are also driving the softer than expected start rate include low unemployment rates and increased wages for both skilled and unskilled labor.  The Company believes such external factors have caused many potential students to postpone training and enter the workforce directly upon graduation from high school.  Further, contributing to the decline in high school student starts is the lead time between the initial recruitment efforts and the actual start date, which could be up to one year.  High school students comprise approximately 30% of the segment’s population.  In an effort to increase high school enrollments, the Company has made various changes to processes and organizational structure.  As a result, enrollments for the quarter remained essentially flat; however, as noted above, starts declined.

For a general discussion of trends in our student enrollment, see “Seasonality and Outlook” below.

Educational services and facilities expense.   Our educational services and facilities expense decreased by $7.6 million, or 10.4%, to $65.1 million for the six months ended June 30, 2017 from $72.7 million in the prior year comparable period.  This decrease is mainly attributable to the Transitional segment which accounted for $7.1 million in cost reductions as campuses in the segment prepare to close during this fiscal year.

Educational services and facilities expenses, as a percentage of revenue decreased to 51.2% for the six months ended June 30, 2017 from 52.4% in the prior year comparable period.

Selling, general and administrative expense.    Our selling, general and administrative expense decreased by $2.0 million, or 2.7%, to $73.9 million for the six months ended June 30, 2017 from $75.9 million in the comparable period of 2016.  The decrease was primarily due to the Transitional segment, which accounted for approximately $6.6 million in cost reductions as campuses in the segment prepare to close during this fiscal year.  Partially offsetting these costs reductions are $2.3 million in increased administrative expense; and $2.6 million in additional sales and marketing expense.

Administrative expense increased primarily due to a $1.5 million increase in bad debt expense as a result of higher student accounts receivable, higher account write-offs, and timing of Title IV funds receipts; and a $1.0 million increase in medical costs as compared to the prior year.  In 2016, the Company had historically low medical claims as compared to this year resulting in the significant increase for the six months ended June 30, 2017 as compared to the prior comparable period.

Sales and marketing expense increased by $2.6 million, or 10.4%, primarily as a result of $2.0 million in increased marketing expense, in combination with an increase in sales spending of $0.6 million.  Increased marketing spend was part of a strategic marketing initiatives intended to reach more students. These initiatives resulted in a slight improvement in starts in the adult demographic for the six months ended June 30, 2017 as compared to the prior comparable period.

As a percentage of revenues, selling, general and administrative expense increased to 58.1% for the six months ended June 30, 2017 from 54.7% in the comparable prior year period.

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As of June 30, 2017, we had total outstanding loan commitments to our students of $42.2 million, as compared to $40.0 million at December 31, 2016.  Loan commitments, net of interest that would be due on the loans through maturity, were $31.4 million at June 30, 2017, as compared to $30.0 million at December 31, 2016.  The increase in loan commitments was due in part to the seasonality of the Company’s operations.  Students that miss the fall enrollments in the third and fourth quarter typically start in the first and second quarter of the new year.  Students requiring additional subsidy for tuition increased 6.1% to approximately 6,200 for the six months ended June 30, 2017 as compared to approximately 5,900 for the year ended December 31, 2016.

Gain on sale of assets.  Gain on sale of fixed assets decreased by $0.3 million for the six months ended June 30, 2017 primarily as a result of the sale of certain of the Company’s assets during the six months ended June 30, 2016.

Net interest expense. For the six months ended June 30, 2017 net interest expense increased by 2.8 million, or 91% to $5.8 million from $3.1 million in the prior year comparable period.  The increase was mainly attributable to a $2.2 million non-cash write-off of previously capitalized deferred financing fees; and $1.7 million of additional costs relating to the early retirement of our previous term loan.  These costs were incurred at March 31, 2017 when the Company entered into a new revolving credit facility with Sterling National Bank.

Other Income.  For the six months ended June 30, 2017 other income decreased by $3.4 million from the prior year comparable period.  The $3.4 million in 2016 reflected the amortization of a one-time gain from the modification of a lease at three of the Company’s campuses which were previously accounted for as finance obligations in the prior year.

Income taxes.    Our provision for income taxes was $0.1 million, or 0.6% of pretax loss, for the three months ended June 30, 2017, compared to $0.1 million, or 1.1% of pretax loss, in the prior year comparable 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.  In 2016, the Company ceased operations in Hartford, Connecticut; Fern Park, Florida; and Henderson (Green Valley), Nevada. In the fourth quarter of 2016, the Board of Directors approved plans to cease operations at our schools in Center City Philadelphia, Pennsylvania; Northeast Philadelphia, Pennsylvania; and West Palm Beach, Florida.  Each of these schools is expected to close in 2017.  In addition, in March 2017, the Board of Directors approved plans to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts, which are expected to close in the fourth quarter of 2017.  These schools, which were previously included in the Healthcare and Other Professions segment, are now included in the Transitional segment.

In the past, we offered any combination of programs at any campus.  We have shifted our focus to program offerings that create greater differentiation among campuses and attain excellence to attract more students and gain market share.  Also, strategically, we began offering continuing education training to select employers who hire our students and this is best achieved at campuses focused on their profession.

As a result of the regulatory environment, market forces and strategic decisions, we now operate our business in three reportable segments: a) Transportation and Skilled Trades; b) Healthcare and Other Professions; and c) 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 the three reportable segments 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).

Healthcare and Other Professions – Healthcare and Other Professions offers academic programs in the career-oriented disciplines of health sciences, hospitality and business and information technology (e.g. dental assistant, medical assistant, practical nursing, culinary arts and cosmetology).

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Transitional – Transitional refers to operations that are being phased out or closed 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 addition, in March 2017, the Board of Directors of the Company approved a plan to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools are being taught out and expected to be closed in December 2017.  During the year ended December 31, 2016, the Company announced the closing of our Northeast Philadelphia, Pennsylvania, Center City Philadelphia, Pennsylvania and West Palm Beach, Florida facilities.  These schools are expected to be fully taught out on August 31, 2017, August 31, 2017, and September 30, 2017, respectively.  In the first quarter of 2016, we completed the teach-out of our Fern Park, Florida campus.   In addition, in the fourth quarter of 2016, we completed the teach-out of our Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.

The Company continually evaluates each campus for profitability, earning potential, and customer satisfaction.  This evaluation takes several factors into consideration, including the campus’s geographic location and program offerings, as well as skillsets required of our students by their potential employers.  The purpose of this evaluation is to ensure that our programs provide our students with the best possible opportunity to succeed in the marketplace with the goals of attracting more students to our programs and, ultimately, to provide the shareholders with the maximum return on their investment.  Campuses in the Transitional segment have been subject to this process and have been strategically identified for closure.

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.

The following table present results for our three reportable segments for the three months ended June 30, 2017 and 2016:

	Three Months Months Ended June 30, 2017
	2017			2016			% Change
Revenue:
Transportation and Skilled Trades	$	41,310		$	41,032			0.7	%
Healthcare and Other Professions		17,932			18,661			-3.9	%
Transitional		2,623			8,387			-68.7	%
Total	$	61,865		$	68,080			-9.1	%
Operating Income (Loss):
Transportation and Skilled Trades	$	850		$	2,430			-65.0	%
Healthcare and Other Professions		(634	)		918			-169.1	%
Transitional		(833	)		(1,458	)		42.9	%
Corporate		(5,414	)		(5,123	)		-5.7	%
Total	$	(6,031	)	$	(3,233	)		-86.5	%
Starts:
Transportation and Skilled Trades		1,762			1,936			-9.0	%
Healthcare and Other Professions		842			820			2.7	%
Transitional		-			348			-100.0	%
Total		2,604			3,104			-16.1	%
Average Population:
Transportation and Skilled Trades		6,532			6,490			0.6	%
Healthcare and Other Professions		3,471			3,492			-0.6	%
Transitional		579			1,535			-62.3	%
Total		10,582			11,517			-8.1	%

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Transportation and Skilled Trades

Student start results decreased by 9.0% to 1,762 from 1,936 for the three months ended June 30, 2017 as compared to the prior year comparable period.    This decrease was a result of lower than expected start rates for high school students.  The majority of the decline occurred at three campuses and was directly attributable to affordability and sustainability of student engagement between enrollment and start date.  In addition, in striving to find the optimum affordability balance the Company experienced a start decline in markets where scholarships were scaled back.  External factors including low unemployment rates and increased wages for both skilled and unskilled labor also contributed to the decline in student starts.

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Operating income decreased by $1.6 million, or 65.0%, to $0.9 million from $2.4 million in the prior year comparable period mainly driven by the following factors:

· Revenue increased by $0.3 million, or 0.7% to $41.3 million for the three months ended June 30, 2017 from $41.0 million in the prior year comparable period.  The increase in revenue was primarily driven by higher carry in population compared to the prior year comparable period.

· Educational services and facilities expense remained essentially flat only increasing by $0.1 million quarter over quarter.  This increase is primarily attributable to increased costs associated with materials used for instructional purposes.

· Selling, general and administrative expenses increased by $1.8 million due to $0.9 million of additional bad debt expense primarily the result of higher student accounts receivable, higher account write-offs, and timing of Title IV fund receipts.    In addition, sales and marketing expense increased by $0.7 million resulting from strategic marketing initiatives intended to reach more students.  These initiatives resulted in a slight improvement in starts in the adult demographic quarter over quarter.

Healthcare and Other Professions

Student start results increased by 2.7% to 842 from 820 for the three months ended June 30, 2017 as compared to the prior year comparable period.

Operating loss for the three months ended June 30, 2017 was $0.6 million compared to operating income of $0.9 million in the prior year comparable period.  The $1.6 million change was mainly driven by the following factors:

· Revenue decreased to $17.9 million for the three months ended June 30, 2017, as compared to $18.7 million in the prior year comparable quarter.  The decrease in revenue is mainly attributable to a 3.4% decline in average revenue per student due to shifts in our program mix combined with tuition rate decreases in various programs.  Slightly offsetting the decline in revenue was a 2.7% increase in student starts for the quarter compared to the prior year comparable period.

· Educational services and facilities expense remained essentially flat for the three months ended June 30, 2017 as compared to the prior year comparable period.

· Selling general and administrative expenses increased by $1.0 million primarily resulting from a $0.6 million increase in sales and marketing expense, which has driven student starts up 2.7% quarter over quarter and a $0.3 million increase in administrative expenses mainly the result of increased bad debt primarily due to higher student accounts receivable, higher account write-offs, and timing of Title IV fund receipts.

Transitional

The following table lists the schools that are categorized in the Transitional segment and their status as of June 30, 2017:

Campus	Date Closed	Date Scheduled to Close
Northeast Philadelphia, Pennsylvania	N/A	August 31, 2017
Center City Philadelphia, Pennsylvania	N/A	August 31, 2017
West Palm Beach, Florida	N/A	September 30, 2017
Brockton, Massachusetts	N/A	December 31, 2017
Lowell, Massachusetts	N/A	December 31, 2017
Fern Park, Florida	March 31, 2016	N/A
Hartford, Connecticut	December 31, 2016	N/A
Henderson (Green Valley), Nevada	December 31, 2016	N/A

**Revenue for the campuses in the above table have been classified in the Transitional segment for comparability for the three months ended June 30, 2017 and 2016.

Revenue was $2.6 million for the three months ended June 30, 2017 as compared to $8.4 million in the prior year comparable period mainly attributable to the closing of campuses within this segment.

Operating loss decreased by $0.6 million to $0.8 million for the three months ended June 30, 2017 from $1.5 million in the prior year comparable period.  The decrease is primarily attributable to a decrease in salaries and benefits as a result of the suspension of new student enrollments and a declining student population.

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Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company.  Corporate and Other costs increased by $0.3 million, or 5.7%, to $5.4 million from $5.1 million, for the prior year comparable period.

The increase in Corporate expenses was driven in part by a $1.0 million increase in medical expenses resulting from historically low claims in 2016 as compared to the three months ended June 30, 2017.  Partially offsetting this expense is a reduction in salaries and benefits of $0.7 million.

Included in Corporate and Other costs for the three months ended June 30, 2017 are approximately $0.3 million of additional dormitory costs directly relating to the closure of the Hartford, Connecticut campus on December 31, 2016.  

The following table present results for our three reportable segments for the six months ended June 30, 2017 and 2016:

	Six Months Ended June 30, 2017
	2017			2016			% Change
Revenue:
Transportation and Skilled Trades	$	83,477		$	83,304			0.2	%
Healthcare and Other Professions		36,769			38,470			-4.4	%
Transitional		6,898			16,950			-59.3	%
Total	$	127,144		$	138,724			-8.3	%
Operating Income (Loss):
Transportation and Skilled Trades	$	2,898		$	5,796			-50.0	%
Healthcare and Other Professions		(474	)		2,673			-117.7	%
Transitional		(1,401	)		(5,101	)		72.5	%
Corporate		(12,782	)		(12,845	)		0.5	%
Total	$	(11,759	)	$	(9,477	)		-24.1	%
Starts:
Transportation and Skilled Trades		3,486			3,596			-3.1	%
Healthcare and Other Professions		1,843			1,933			-4.7	%
Transitional		132			806			-83.6	%
Total		5,461			6,335			-13.8	%
Average Population:
Transportation and Skilled Trades		6,553			6,521			0.5	%
Healthcare and Other Professions		3,552			3,618			-1.8	%
Transitional		731			1,564			-53.3	%
Total		10,836			11,703			-7.4	%
End of Period Population:
Transportation and Skilled Trades		6,809			6,950			-2.0	%
Healthcare and Other Professions		3,219			3,160			1.9	%
Transitional		372			1,398			-73.4	%
Total		10,400			11,508			-9.6	%

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Transportation and Skilled Trades

Student start results decreased by 3.1% to 3,486 from 3,596 for the six months ended June 30, 2017 as compared to the prior year comparable period.  This decrease was a result of lower than expected start rates for high school students.  The decline occurred primarily at three campuses and was directly attributable to affordability and sustainability of student engagement between enrollment and start date.  In addition, in striving to find the optimum affordability balance the Company experienced a start decline in markets where scholarships were scaled back.  External factors including low unemployment rates and increased wages for both skilled and unskilled labor also contributed to the decline in student starts.

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Operating income decreased by $2.9 million, or 50.0%, to $2.9 million for the six months ended June 30, 2017 from $5.8 million in the prior year comparable period mainly driven by the following factors:

· Revenue increased by $0.2 million, or 0.2% to $83.5 million for the six months ended June 30, 2017 from $83.3 million in the prior year comparable period.  The increase in revenue was primarily driven by higher carry in population compared to the prior year comparable period.

· Educational services and facilities expense remained essentially flat only decreasing by $0.2 million.   The decrease was mainly due to decreased depreciation expense partially offset by an increase in instructional expense and an increase in books and tools expense.

· Selling, general and administrative expense increased by $3.3 million due to $1.1 million of additional bad debt expense resulting from higher accounts receivable balances, higher account write-offs, and timing of Title IV fund receipts , as well as a $1.6 million increase in spending for sales and marketing.  The increased spending in sales and marketing was part of a strategic effort to attract student enrollments and increase brand awareness.  This initiative has yielded positive results in our adult demographic which was up slightly for the for the six months ended June 30, 2017 over the prior year comparable period; however, the high school demographic produced lower than expected starts in the current period.  Partially offsetting these expenses is a $0.4 million decrease in student services which can be attributed to reduced salaries and benefits.

Healthcare and Other Professions

Student start results decreased by 4.7% to 1,843 from 1,933 for the six months ended June 30, 2017 as compared to the prior year comparable period.

Operating loss for the six months ended June 30, 2017 was $0.5 million compared to operating income of $2.7 million in the prior year comparable period.  The $3.1 million change was mainly driven by the following factors:

· Revenue decreased to $36.8 million for the six months ended June 30, 2017, as compared to $38.5 million in the prior year comparable quarter.  The decrease in revenue is mainly attributable to a 2.7% decline in average revenue per student due to shifts in our program mix combined with tuition rate decreases in various programs

· Educational services and facilities expense decreased by $0.3 million, or 1.3% to $19.7 million for the six months ended June 30, 2017, from $19.9 million in the prior year comparable period.  The decrease was primarily the result of $0.4 million of costs reductions in facilities expense as a result of reduced rent expense and real estate taxes resulting from the relocation of one of our campuses in the second quarter of 2016.  Partially offsetting the costs reduction is an increase of $0.2 million in books and tools expense as a result of increased purchasing of new laptops for students attending certain programs in combination with increases in salaries and benefits.

· Selling general and administrative expenses increased by $1.7 million primarily resulting from a $1.0 million increase in sales and marketing expense; and a $0.6 million increase in administrative expenses mainly the result of bad debt expense which increased due to higher student accounts receivable, higher account write-offs, and timing of Title IV fund receipts.

Transitional

Revenue was $6.9 million for the six months ended June 30, 2017 as compared to $17.0 million in the prior year comparable period mainly attributable to the closing of campuses within this segment.

Operating loss decreased by $3.7 million to $1.4 million for the six months ended June 30, 2017 from $5.1 million in the prior year comparable period.  The decrease is primarily attributable to a decrease in salaries and benefits as a result of the suspension of new student enrollments and a declining student population.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company.  Corporate and Other costs remained essentially flat for the six months ended June 30, 2017 when compared to the prior year comparable period.  Included in the expenses for the six months ended June 30, 2017 are approximately $1.0 million in increased medical expenses resulting from historically low medical claims in 2016 as compared to the six months ended June 30, 2017, partially offset by a reduction in salaries and benefits of $0.5 million in the current period.

Included in Corporate and Other costs for the six months ended June 30, 2017 are approximately $0.6 million of additional dormitory costs directly relating to the closure of the Hartford, Connecticut campus on December 31, 2016. 

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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 provided by borrowings under our credit facilities.  The following chart summarizes the principal elements of our cash flow:

	Six Months Ended June 30,
	2017			2016
Net cash used in operating activities	$	(19,511	)	$	(18,138	)
Net cash used in investing activities		(1,766	)		(307	)
Net cash provided by (used in) financing activities		7,423			(9,025	)

At June 30, 2017, the Company had $13.4 million of cash, cash equivalents and restricted cash (which includes $6.2 million of restricted cash) as compared to $47.7 million of cash, cash equivalents and restricted cash (which includes $26.7 million of restricted cash) as of December 31, 2016.  This decrease is primarily the result of a net loss during the six months ended June 30, 2017; repayment of $44.3 million under our previous term loan facility; and seasonality of the business.

For the last several years, the Company and the proprietary school sector generally have faced deteriorating earnings growth. Government regulations have negatively impacted earnings by making it more difficult for prospective students to obtain loans, which when coupled with the overall economic environment have hindered prospective 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 and thereafter for the foreseeable future.

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. 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 79% of our cash receipts relating to revenues in 2016. 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 31-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 restriction on our eligibility to receive Title IV funds would have a significant impact on our operations and our financial condition.  See “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.

Operating Activities

Net cash used in operating activities was $19.5 million for the six months ended June 30, 2017 compared to $18.1 million for the comparable period of 2016.  For the six months ended June 30, 2017, changes in our operating assets and liabilities resulted in cash outflows of $15.3 million primarily attributable to decreases in deferred revenue, accounts receivable, accounts payable and accrued expenses.  The decrease in deferred revenue resulted in a cash outflow of $4.3 million 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 June 30, 2017 when compared to June 30, 2016.  The decrease in accounts receivable resulted in a cash outflow of $9.3 million primarily due to the timing of Title IV disbursements and other cash receipts on behalf of our students.  The net decrease in accounts payable and accrued expenses resulted in a cash outflow of $1.8 million and was attributable to the timing of invoices received during the quarter.

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Investing Activities

Net cash used in investing activities was $1.8 million for the six months ended June 30, 2017 compared to $0.3 million for the prior year comparable period.   Our primary use of cash in investing activities was capital expenditures associated with investments in training technology, classroom furniture, and new program buildouts.

We currently lease a majority of our campuses. We own our campuses in Grand Prairie, Texas; Nashville, Tennessee; West Palm Beach, Florida, Suffield, Connecticut; and Denver, Colorado.  The sale of two of our three properties in West Palm Beach, Florida, is pending for a cash purchase price of $15.7 million.  We expect to close on the sale of the West Palm Beach, Florida property in the third quarter of 2017.

Capital expenditures are expected to approximate 2% of revenues in 2017.  We expect to fund future capital expenditures with cash generated from operating activities, borrowings under our revolving credit facility, and cash from our real estate monetization, including the pending sale of the Company’s West Palm Beach, Florida property.  On April 28, 2017, the Company obtained from its lender, Sterling National Bank, an $8 million short-term loan secured by the West Palm Beach, Florida property.  This loan must be repaid upon the earlier of the sale of the West Palm Beach, Florida property or October 1, 2017.

Financing Activities

Net cash provided by financing activities was $7.4 million as compared to net cash used of $9.0 million for the six months ended June 30, 2017 and 2016, respectively. The increase of $16.4 million was primarily due to three main factors: (a) net borrowing of $9.0 million; (b) $2.9 million in lease termination fees paid in the prior year; and (c) the reclassification of $5 million in restricted cash in the prior year.

Net borrowings consisted of: (a) total borrowing to date under our new secured revolving credit facility of $38.0 million; (b) reclassification of payments of borrowing from restricted cash of $20.3 million; and (c) $49.3 million in total repayments made by the Company.

Credit Agreement

On March 31, 2017, the Company entered into a secured revolving credit agreement (the “Credit Agreement”) with Sterling National Bank (the “Bank”) pursuant to which the Company obtained a credit facility in the aggregate principal amount of up to $55 million (the “Credit Facility”).  The Credit Facility consists of (a) a $30 million loan facility (“Facility 1”), which is comprised of a $25 million revolving loan designated as “Tranche A” and a $5 million non-revolving loan designated as “Tranche B,” which Tranche B was repaid during the quarter ended June 30, 2017 and (b) a $25 million revolving loan facility (“Facility 2”), which includes a sublimit amount for letters of credit of $10 million.  The Credit Facility replaces a term loan facility (the “Prior Credit Facility”) from a lender group led by HPF Service, LLC, which was repaid and terminated concurrently with the effectiveness of the Credit Facility.  The term of the Credit Facility is 38 months, maturing on May 31, 2020.

The Credit Facility is secured by a first priority lien in favor of the Bank on substantially all of the personal property owned by the Company as well as mortgages on four parcels of real property owned by the Company in Connecticut, Colorado, Tennessee and Texas at which four of the Company’s schools are located.

At the closing, the Company drew $25 million under Tranche A of Facility 1, which, pursuant to the terms of the Credit Agreement, was used to repay the Prior Credit Facility and to pay transaction costs associated with closing the Credit Facility.  After the disbursements of such amounts, the Company retained approximately $1.8 million of the borrowed amount for working capital purposes.

Also, at closing, $5 million was drawn under Tranche B and, pursuant to the terms of the Credit Agreement, was deposited into an interest-bearing pledged account (the “Pledged Account”) in the name of the Company maintained at the Bank in order to secure payment obligations of the Company with respect to the costs of remediation of any environmental contamination discovered at certain of the mortgaged properties upon completion of environmental studies undertaken at such properties.  Pursuant to the terms of the Credit Agreement, funds will be released from the Pledged Account upon request by the Company to reimburse the Company for costs incurred for environmental remediation, if required.  Upon the completion of any such environmental remediation or upon determination that no environmental remediation is necessary, funds remaining in the Pledged Account will be released from the Pledged Account and applied to the outstanding principal balance of Tranche B and availability under Tranche B will be permanently reduced to zero and, accordingly, the maximum principal amount of Facility 1 will be permanently reduced to $25 million.  During the quarter ended June 30, 2017 the environmental studies were completed and revealed no environmental issues existing at the properties.  Accordingly, pursuant to the terms of the Credit Agreement, the $5 million on deposit in the Pledged Account was released and used to repay the non-revolving loan outstanding under Tranche B.  Upon the repayment of Tranche B, the maximum principal amount of Facility 1 was permanently reduced to $25 million.

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Pursuant to the terms of the Credit Agreement, all draws under Facility 2 for letters of credit or revolving loans must be secured by cash collateral in an amount equal to 100% of the aggregate stated amount of the letters of credit issued and revolving loans outstanding through draws from Facility 1 or other available cash of the Company.

Accrued interest on each revolving loan will be payable monthly in arrears.  Revolving loans under Tranche A of Facility 1 will bear interest at a rate per annum equal to the greater of (x) the Bank’s prime rate plus 2.50% and (y) 6.00%.  The amount borrowed under Tranche B of Facility 1 and revolving loans under Facility 2 will bear interest at a rate per annum equal to the greater of (x) the Bank’s prime rate and (y) 3.50%.

Each issuance of a letter of credit under Facility 2 will require the payment of a letter of credit fee to the Bank equal to a rate per annum of 1.75% on the daily amount available to be drawn under the letter of credit, which fee shall be payable in quarterly installments in arrears.  Letters of credit totaling $6.2 million that were outstanding under a $9.5 million letter of credit facility previously provided to the Company by the Bank, which letter of credit facility was set to mature on April 1, 2017, are treated as letters of credit under Facility 2.

Under the terms of the Credit Agreement, the Bank receives an unused facility fee on the average daily unused balance of Facility 1 at a rate per annum equal to 0.50%, which fee is payable quarterly in arrears.  In addition, the Company is required to maintain, on deposit with the Bank in one or more non-interest bearing accounts, a minimum of $5 million in quarterly average aggregate balances.  If in any quarter the required average aggregate account balance is not maintained, the Company is required to pay the Bank a fee of $12,500 for that quarter.  Under the terms of the Credit Agreement, in the event that the Company terminates the Credit Facility or refinances with another lender within 18 months of closing, the Company shall be required to pay the Bank a breakage fee of $500,000.

In addition to the foregoing, the Credit Agreement contains customary representations, warranties and affirmative and negative covenants, including financial covenants that restrict capital expenditures, prohibit the incurrence of a net loss commencing on December 31, 2018 and require a minimum adjusted EBITDA and a minimum tangible net worth, which is an annual covenant, as well as events of default customary for facilities of this type.  As of June 30, 2017, the Company is in compliance with all covenants.

In connection with the Credit Agreement, the Company paid the Bank an origination fee in the amount of $250,000 and other fees and reimbursements that are customary for facilities of this type.

The Company incurred an early termination premium of approximately $1.8 million in connection with the termination of the Prior Credit Facility.

On April 28, 2017, the Company entered into an additional secured credit agreement with its existing lender, Sterling National Bank, pursuant to which the Company has obtained a short term loan in the principal amount of $8 million, the proceeds of which are to be used for working capital and general corporate purposes.  The loan bears interest at a rate per annum equal to the greater of the Bank’s prime rate plus 2.50% or 6.00%.

The loan is secured by property located in West Palm Beach, Florida at which schools operated by the Company are currently located.  The loan is payable interest only until its maturity, which will occur upon the earlier of October 1, 2017 and the date of the sale of the West Palm Beach, Florida property.  The Company has entered into a contract to sell two of three properties located in West Palm Beach, Florida to Tambone Companies, LLC for a cash purchase price of $15.7 million.  The Company expects this sale to be completed in the third quarter of 2017.

As of June 30, 2017, the Company had $33 million outstanding under the Credit Facility (which includes the short term loan of $8 million); offset by $1.0 million of deferred finance fees.  As of December 31, 2016, the Company had $44.3 million outstanding under the Prior Credit Facility; offset by $2.3 million of deferred finance fees which were written-off.As of June 30, 2017 and December 31, 2016 there were letters of credit in the aggregate principal amount of $6.2 million outstanding, respectively.  As of June 30, 2017, there are no revolving loans outstanding under Facility 2.

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The following table sets forth our long-term debt (in thousands):

	June 30, 2017			December 31, 2016
Credit agreement	$	32,023		$	-
Term loan		-			44,267
		32,023			44,267
Less current maturities		(8,000	)		(11,713	)
	$	24,023		$	32,554

As of June 30, 2017, we had outstanding loan commitments to our students of $42.2 million, as compared to $40.0 million at December 31, 2016.  Loan commitments, net of interest that would be due on the loans through maturity, were $31.4 million at June 30, 2017, as compared to $30.0 million at December 31, 2016.

Contractual Obligations

Long-term Debt.  As of June 30, 2017, our current portion of long-term debt and our long-term debt consisted of borrowings under our Credit Facility.

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 June 30, 2017 (in thousands):

	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Credit facility	$	33,000	$	8,000	$	-	$	25,000	$	-
Operating leases		90,930		20,446		34,008		18,268		18,208
Total contractual cash obligations	$	123,930	$	28,446	$	34,008	$	43,268	$	18,208

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of June 30, 2017, except for surety bonds.  As of June 30, 2017, we posted surety bonds in the total amount of approximately $14.3 million.  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.

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.

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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 “ability-to-benefit,” 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.

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 new credit facilities as 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.

Regulatory Update

On July 6, 2017, the DOE notified our Indianapolis, Indiana campus that an on-site Program Review is scheduled to begin on August 14, 2017. The Program Review will assess the institution’s administration of Title IV Programs in which the campus participated for the 2015-2016 and 2016-2017 award years.

On August 2, 2017, the DOE issued its Final Program Review Determination (“FPRD”) letter to the Columbia, MD, school that included the DOE’s review of our initial response and corrective actions for the five findings originally noted in the June 29, 2015, program review report.  The DOE concluded in its FPRD letter that the school had taken the corrective actions necessary to resolve and close the first four findings.  The DOE concluded in the fifth finding that there were violations of the Clery Act, but accepted the school’s response and stated that it now considers the finding closed for program review purposes.  However, the DOE reserved the right to impose an administrative action and/or require additional corrective actions by the school in connection with the Clery Act finding in the report.  The DOE did not impose any financial liabilities in any of the five findings in the FPRD letter. 

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 March 31, 2017, the Company repaid in full and terminated a previously existing term loan with the proceeds of a new revolving credit facility provided by Sterling National Bank in an aggregate principal amount of up to $50 million, which revolving credit facility is referred to in this report as the “Credit Facility.”  Our obligations under the Credit Facility are secured by a lien on substantially all of our assets and any assets that we or our subsidiaries may acquire in the future. Outstanding borrowings under the Credit Facility bear interest at the rate of 6.75% as of June 30, 2017.  As of June 30, 2017, we had $33 million outstanding under the Credit Facility (which includes the short term loan of $8 million).

Based on our outstanding debt balance as of June 30, 2017, a change of one percent in the interest rate would have caused a change in our interest expense of approximately $0.3 million, or $0.01 per basic share, on an annual basis.  Changes in interest rates could have an impact on our operations, which are greatly dependent on our 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.

35

(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

Information regarding certain specific legal proceedings in which the Company is involved is contained in Part I, Item 3 and in Note 14 to the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.  Unless otherwise indicated in this report, all proceedings discussed in the earlier report which are not indicated therein as having been concluded, remain outstanding as of June 30, 2017.

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.

Item 6. EXHIBITS

Exhibit Number	Description
10.1(1)	Credit Agreement dated as of April 28, 2017 among Lincoln Educational Services Corporation, its subsidiaries, and Sterling National Bank
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 June 30, 2017, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) 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 Form 8-K filed with the Securities and Exchange Commission on May 4, 2017.

* 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.

36

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: August 10, 2017	By:	/s/ Brian Meyers
		Brian Meyers
		Executive Vice President, Chief Financial Officer and Treasurer

37

Exhibit Index

10.1(1)	Credit Agreement dated as of April 28, 2017 among Lincoln Educational Services Corporation, its subsidiaries, and Sterling National Bank
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 June 30, 2017, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) 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 Form 8-K filed with the Securities and Exchange Commission on May 4, 2017.

* 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.

38

EX-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: August 10, 2017

/s/ Scott Shaw

Scott Shaw

Chief Executive Officer

EX-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: August 10, 2017

/s/ Brian Meyers

Brian Meyers

Chief Financial Officer

EX-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 June 30, 2017 (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:    August 10, 2017

/s/ Scott Shaw

Scott Shaw

Chief Executive Officer

/s/ Brian Meyers

Brian Meyers

Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 08, 2017
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		24,719,055
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
CURRENT ASSETS:
Cash and cash equivalents	$ 7,210	$ 21,064
Restricted cash	6,189	6,399
Accounts receivable, less allowance of $12,932 and $12,375 at June 30, 2017 and December 31, 2016, respectively	17,886	15,383
Inventories	1,884	1,687
Prepaid income taxes and income taxes receivable	252	262
Assets held for sale	16,820	16,847
Prepaid expenses and other current assets	2,586	2,894
Total current assets	52,827	64,536
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $160,375 and $157,152 at June 30, 2017 and December 31, 2016, respectively	55,132	55,445
OTHER ASSETS:
Noncurrent restricted cash	0	20,252
Noncurrent receivables, less allowance of $1,156 and $977 at June 30, 2017 and December 31, 2016, respectively	6,876	7,323
Goodwill	14,536	14,536
Other assets, net	860	1,115
Total other assets	22,272	43,226
TOTAL	130,231	163,207
CURRENT LIABILITIES:
Current portion of credit agreement and term loan	8,000	11,713
Unearned tuition	20,528	24,778
Accounts payable	14,235	13,748
Accrued expenses	13,707	15,368
Other short-term liabilities	464	653
Total current liabilities	56,934	66,260
NONCURRENT LIABILITIES:
Long-term credit agreement and term loan	24,023	30,244
Pension plan liabilities	5,279	5,368
Accrued rent	5,278	5,666
Other long-term liabilities	825	743
Total liabilities	92,339	108,281
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, no par value - 10,000,000 shares authorized, no shares issued and outstanding at June 30, 2017 and December 31, 2016	0	0
Common stock, no par value - authorized: 100,000,000 shares at June 30, 2017 and December 31, 2016; issued and outstanding: 30,629,596 shares at June 30, 2017 and 30,685,017 shares at December 31, 2016	141,377	141,377
Additional paid-in capital	28,779	28,554
Treasury stock at cost - 5,910,541 shares at June 30, 2017 and December 31, 2016	(82,860)	(82,860)
Accumulated deficit	(43,744)	(26,044)
Accumulated other comprehensive loss	(5,660)	(6,101)
Total stockholders' equity	37,892	54,926
TOTAL	$ 130,231	$ 163,207

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
CURRENT ASSETS:
Accounts receivable, allowance	$ 12,932	$ 12,375
PROPERTY, EQUIPMENT AND FACILITIES - accumulated depreciation and amortization	160,375	157,152
OTHER ASSETS:
Noncurrent receivables, allowance	$ 1,156	$ 977
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)	30,629,596	30,685,017
Common stock, shares outstanding (in shares)	30,629,596	30,685,017
Treasury stock, shares (in shares)	5,910,541	5,910,541

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Abstract]
REVENUE	$ 61,865	$ 68,080	$ 127,144	$ 138,724
COSTS AND EXPENSES:
Educational services and facilities	32,405	35,569	65,113	72,691
Selling, general and administrative	35,554	35,750	73,879	75,905
Gain on sale of assets	(63)	(6)	(89)	(395)
Total costs & expenses	67,896	71,313	138,903	148,201
OPERATING LOSS	(6,031)	(3,233)	(11,759)	(9,477)
OTHER:
Interest income	9	8	40	72
Interest expense	(699)	(1,541)	(5,881)	(3,132)
Other income	0	1,678	0	3,431
LOSS BEFORE INCOME TAXES	(6,721)	(3,088)	(17,600)	(9,106)
PROVISION FOR INCOME TAXES	50	50	100	100
NET LOSS	$ (6,771)	$ (3,138)	$ (17,700)	$ (9,206)
Basic
Net loss per share (in dollars per share)	$ (0.28)	$ (0.13)	$ (0.74)	$ (0.39)
Diluted
Net loss per share (in dollars per share)	$ (0.28)	$ (0.13)	$ (0.74)	$ (0.39)
Weighted average number of common shares outstanding:
Basic (in shares)	23,962,055	23,448,224	23,786,656	23,399,708
Diluted (in shares)	23,962,055	23,448,224	23,786,656	23,399,708

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME [Abstract]
Net loss	$ (6,771)	$ (3,138)	$ (17,700)	$ (9,206)
Other comprehensive income
Employee pension plan adjustments	220	222	441	444
Comprehensive loss	$ (6,551)	$ (2,916)	$ (17,259)	$ (8,762)

XML

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, 2015	$ 141,377	$ 27,292	$ (82,860)	$ 2,260	$ (7,072)	$ 80,997
BALANCE (in shares) at Dec. 31, 2015	29,727,555
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	$ 0	0	0	(9,206)	0	(9,206)
Employee pension plan adjustments	0	0	0	0	444	444
Stock-based compensation expense
Restricted stock	$ 0	675	0	0	0	675
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 Jun. 30, 2016	$ 141,377	27,860	(82,860)	(6,946)	(6,628)	72,803
BALANCE (in shares) at Jun. 30, 2016	30,768,433
BALANCE at Dec. 31, 2016	$ 141,377	28,554	(82,860)	(26,044)	(6,101)	$ 54,926
BALANCE (in shares) at Dec. 31, 2016	30,685,017					30,685,017
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	$ 0	0	0	(17,700)	0	$ (17,700)
Employee pension plan adjustments	0	0	0	0	441	441
Stock-based compensation expense
Restricted stock	$ 0	654	0	0	0	654
Restricted stock (in shares)	128,810
Net share settlement for equity-based compensation	$ 0	(429)	0	0	0	(429)
Net share settlement for equity-based compensation (in shares)	(184,231)
BALANCE at Jun. 30, 2017	$ 141,377	$ 28,779	$ (82,860)	$ (43,744)	$ (5,660)	$ 37,892
BALANCE (in shares) at Jun. 30, 2017	30,629,596					30,629,596

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (17,700)	$ (9,206)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,275	6,094
Amortization of deferred finance charges	305	459
Write-off of deferred finance charges	2,161	0
Gain on disposition of assets	(89)	(395)
Gain on capital lease termination	0	(3,355)
Fixed asset donation	(18)	(58)
Provision for doubtful accounts	7,220	6,587
Stock-based compensation expense	654	675
Deferred rent	(245)	(271)
(Increase) decrease in assets:
Accounts receivable	(9,276)	(8,570)
Inventories	(197)	(128)
Prepaid income taxes and income taxes receivable	10	35
Prepaid expenses and current assets	301	178
Other assets, net	(1,075)	(1,044)
Increase (decrease) in liabilities:
Accounts payable	(28)	(1,097)
Accrued expenses	(1,804)	(88)
Unearned tuition	(4,250)	(7,908)
Other liabilities	245	(46)
Total adjustments	(1,811)	(8,932)
Net cash used in operating activities	(19,511)	(18,138)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(2,098)	(1,555)
Restricted cash	210	816
Proceeds from sale of property and equipment	122	432
Net cash used in investing activities	(1,766)	(307)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings	(49,266)	(386)
Proceeds from borrowings	38,000	0
Reclassifications of payments of borrowings from restricted cash	20,252	0
Proceeds of borrowings from restricted cash	(5,000)	(5,023)
Payments of borrowings from restricted cash	5,000	0
Payment of deferred finance fees	(1,134)	(645)
Net share settlement for equity-based compensation	(429)	(107)
Principal payments under capital lease obligations	0	(2,864)
Net provided by (cash used) in financing activities	7,423	(9,025)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(13,854)	(27,470)
CASH AND CASH EQUIVALENTS-Beginning of period	21,064	38,420
CASH AND CASH EQUIVALENTS-End of period	7,210	10,950
Cash paid for:
Interest	1,882	2,782
Income taxes	106	112
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Liabilities accrued for or noncash purchases of fixed assets	$ 2,004	$ 1,391

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2017

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”, “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 28 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 Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences and associated brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The 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, we reorganized our operations into three reportable business segments:  (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions (“HOPS”), and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November 2015, the Board of Directors approved a plan for the Company to divest the schools included in the HOPS segment due to a strategic shift in the Company’s business strategy.  The Company underwent an exhaustive process to divest the HOPS schools which proved successful in attracting various purchasers but, ultimately, did not result in a transaction that our Board believed would enhance shareholder value. When the decision was first made by the Board of Directors to divest HOPS, 18 campuses were operating in this segment.  By the end of 2017, we will have strategically closed seven underperforming campuses leaving a total of eleven campuses remaining under HOPS.   The Company believes that the closures and planned closures of the aforementioned campuses has positioned this segment and the Company to be more profitable going forward as well as maximizing returns for the Company’s shareholders.

The combination of several factors, including the inability of the prospective buyer of the HOPS segment to close on the purchase, the improvements the Company has implemented in the HOPS operations, the closure of seven underperforming campuses and the change in federal government administration, resulted in the Board reevaluating its divestiture plan and the determination that shareholder value would more likely be enhanced by continuing to operate our HOPS segment as revitalized.  Consequently, in the first quarter of 2017, the Board of Directors abandoned the plan to divest the HOPS segment and the Company intends to retain the HOPS segment.  The results of operations of the campuses included in the HOPS business segment are reflected as continuing operations in the consolidated financial statements.

In the fourth quarter of 2016, the Company completed the teach-out of its Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.  Also in 2016, the Company announced the closing of its Northeast Philadelphia, Pennsylvania; Center City Philadelphia, Pennsylvania; and West Palm Beach, Florida facilities, each of which is expected to be fully taught out and closed during 2017.  In addition, in March 2017, the Board of Directors approved a plan to not renew the leases at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools, which are being taught out and expected to be closed in December 2017, are included in the Transitional segment as of June 30, 2017.

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 and thereafter for the foreseeable future.  At June 30, 2017, the Company’s sources of cash primarily included cash and cash equivalents of $13.4 million (of which $6.2 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 discussed above that provide short term liquidity, the Company plans to sell three West Palm Beach, Florida properties and associated assets, which are currently classified as held for sale and are expected to be sold within one year from the date of classification.  On March 14, 2017, the Company entered into a purchase and sale agreement with Tambone Companies, LLC, pursuant to which the Company has agreed to sell two of the three properties (the “West Palm Beach Property”) for a cash purchase price of $15.7 million.  The purchase and sale agreement, as amended, is among other things, subject to customary closing conditions but the Company expects to close on the transaction in the third quarter of 2017.  On April 28, 2017, the Company obtained from its lender, Sterling National Bank, an $8 million bridge term loan secured by the West Palm Beach Property.  The bridge loan must be repaid upon the earlier of the sale of the West Palm Beach Property or October 1, 2017.

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, 2016 consolidated financial statements and related disclosures of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 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 six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2017.

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 – The Financial Accounting Standards Board (the “FASB”) has issued Accounting Standards Update (“ASU”) No. 2017-09,” “Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting.” ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award. The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment award require an entity to apply modification accounting under Topic 718. ASU 2017-09 is effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The Company does not expect the adoption of ASU 2017-09 will have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of comprehensive income separately from the service cost component and outside a subtotal of operating income. The ASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of this update on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.”  ASU 2017-04 provides amendments to Accounting Standards Code (“ASC”) No. 350, “Intangibles - Goodwill and Other,” which eliminate Step 2 from the goodwill impairment test. Entities should perform their goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2019, with early adoption permitted.  The Company early adopted the provisions of ASU 2017-04 as of April 1, 2017.  As fair values for our operating units exceed their carrying values, there has been no impact on our consolidated financial statements.

The FASB has recently issued several amendments to the new standard on revenue recognition, ASU No. 2014-09, “Revenue from Contracts with Customers.” The amendments include ASU  No. 2016-08, “Revenue from Contracts with Customers (Topic 606)—Principal versus Agent Considerations,” which was issued in March 2016, and clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09, and ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606)—Identifying Performance Obligations and Licensing,” which was issued in April 2016, and amends the guidance in ASU No. 2014-09 related to identifying performance obligations. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures.

The new standard is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016. We do not plan to early adopt and, accordingly, we will adopt the new standard effective January 1, 2018. The Company’s assessment of the potential impact is substantially complete based on our review of current enrollment agreements and other revenue generating contracts. We believe the timing of recognizing revenue for tuition and student fees will not significantly change. The Company is closely reviewing its book revenue stream to determine whether the performance obligation of the Company is satisfied over time and revenue is recognized over the length of the student contract, which is the Company’s current practice with respect to revenue recognition, or whether the performance obligation of the Company is satisfied at the point in time and revenue is recognized when students’ books are delivered.  Additionally, we are currently assessing the impacts related to the accounting for contract assets separate from accounts receivable and are evaluating the point at which a student’s contract asset becomes a receivable.

We are in the process of updating our revenue accounting policy and implementing changes to our business process and controls in response to the new standard, as necessary.  During the second half of 2017, we will finalize our revenue related documentation.  The Company currently expects to adopt the new standard on a modified retrospective basis with the cumulative effect of the change reflected in retained earnings as of January 1, 2018 and not restate prior periods.

In November 2016, the FASB issued ASU No. 2016-18: “Statement of Cash Flows (Topic 230): Restricted Cash.” This guidance was issued to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments will require that the statement of cash flows explain the change during the period in total cash, cash equivalents and restricted cash. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments will be applied using a retrospective transition method to each period presented. The Company anticipates that the adoption will not have a material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company anticipates that the adoption will not have a material impact on the Company’s consolidated financial statements.

The Company prospectively applied ASU 2016-09, “Improvements to Employee Share Based Payment Accounting,” to the condensed consolidated statement of operations for the recognition of tax benefits within the provision for taxes, which previously would have been recorded to additional paid-in capital. The impact for the six months ended June 30, 2017 was $0. In addition, the Company retrospectively recognized no tax benefits within operating activities within the condensed consolidated statements of cash flow for the six months ended June 30, 2017 and 2016. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in the condensed consolidated statements of cash flows, since such cash flows have historically been presented in financing activities. The treatment of forfeitures has not changed as the Company is electing to continue the current process of estimating the number of forfeitures. There was no cumulative-effect adjustment required to retained earnings under the prospective method as of the beginning of the year because all tax benefits had been previously recognized when the tax deductions related to stock compensation were utilized to reduce tax payable. The Company is not recording deferred tax assets or tax losses as the result of the adoption of ASU 2016-09.

In February 2016, the FASB issued guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statements of income. The guidance is effective for annual periods, including interim periods within those periods, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact that the update will have on our results of operations, financial condition and financial statement disclosures.

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 six months ended June 30, 2017 and 2016, the Company did not have any interest and penalties expense associated with uncertain tax positions.

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WEIGHTED AVERAGE COMMON SHARES

6 Months Ended

Jun. 30, 2017

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 six months ended June 30, 2017 and 2016 was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Basic shares outstanding		23,962,055		23,448,224		23,786,656		23,399,708
Dilutive effect of stock options		-		-		-		-
Diluted shares outstanding		23,962,055		23,448,224		23,786,656		23,399,708

For the three months ended June 30, 2017 and 2016, options to acquire 537,718 and 604,378 shares were excluded from the above table because the Company reported a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the six months ended June 30, 2017 and 2016, options to acquire 583,848 and 412,286 shares were excluded from the above table because the Company reported a net loss for each quarter and, therefore, their impact on reported loss per share would have been antidilutive.  For the three and six months ended June 30, 2017, options to acquire 170,667 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.

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GOODWILL AND LONG-LIVED ASSETS

6 Months Ended

Jun. 30, 2017

GOODWILL AND LONG-LIVED ASSETS [Abstract]

GOODWILL AND LONG-LIVED ASSETS

3. 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.  There were no long-lived asset impairments during the six months ended June 30, 2017 and 2016.

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 June 30, 2017 and 2016, there was no indicator of potential impairment and, accordingly, the Company did not test goodwill for impairment.

The carrying amount of goodwill at June 30, 2017 and 2016 is as follows:

	Gross Goodwill Balance		Accumulated Impairment Losses			Net Goodwill Balance
Balance as of January 1, 2017	$	117,176	$	(102,640	)	$	14,536
Adjustments		-		-			-
Balance as of June 30, 2017	$	117,176	$	(102,640	)	$	14,536

	Gross Goodwill Balance		Accumulated Impairment Losses			Net Goodwill Balance
Balance as of January 1, 2016	$	117,176	$	(93,881	)	$	23,295
Adjustments		-		-			-
Balance as of June 30, 2016	$	117,176	$	(93,881	)	$	23,295

As of June 30, 2017, the goodwill balance is related to the Transportation and Skilled Trades segment.  As of June 30, 2016, the goodwill balance consists of $14.5 million related to the Transportation and Skilled Trades segment and $8.8 million related to the Healthcare and Other Professions segment.

Intangible assets, which are included in other assets in the accompanying condensed consolidated balance sheets, consist of the following:

	Curriculum
Gross carrying amount at December 31, 2016	$	160
Adjustments		-
Gross carrying amount at June 30, 2017		160
Accumulated amortization at December 31, 2016		128
Amortization		7
Accumulated amortization at June 30, 2017		135
Net carrying amount at June 30, 2017	$	25
Weighted average amortization period (years)		10

Amortization of intangible assets was less than $0.1 million for each of the three and six months ended June 30, 2017 and 2016.

The following table summarizes the estimated future amortization expense:

Year Ending December 31,
Remainder of 2017	$	12
2018		13
	$	25

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LONG-TERM DEBT AND LEASE OBLIGATIONS

6 Months Ended

Jun. 30, 2017

LONG-TERM DEBT AND LEASE OBLIGATIONS [Abstract]

LONG-TERM DEBT AND LEASE OBLIGATIONS

4. LONG-TERM DEBT AND LEASE OBLIGATIONS

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

	June 30, 2017			December 31, 2016
Credit agreement (a)	$	32,023		$	-
Term loan (a)		-			44,267
		32,023			44,267
Less current maturities		(8,000	)		(11,713	)
	$	24,023		$	32,554

(a)On March 31, 2017, the Company entered into a secured revolving credit agreement (the “Credit Agreement”) with Sterling National Bank (the “Bank”) pursuant to which the Company obtained a credit facility in the aggregate principal amount of up to $55 million (the “Credit Facility”).  The Credit Facility consists of (a) a $30 million loan facility (“Facility 1”), which is comprised of a $25 million revolving loan designated as “Tranche A” and a $5 million non-revolving loan designated as “Tranche B,” which Tranche B was repaid during the quarter ended June 30, 2017, and (b) a $25 million revolving loan facility (“Facility 2”), which includes a sublimit amount for letters of credit of $10 million.  The Credit Facility replaces a term loan facility (the “Prior Credit Facility”) from a lender group led by HPF Service, LLC, which was repaid and terminated concurrently with the effectiveness of the Credit Facility.  The term of the Credit Facility is 38 months, maturing on May 31, 2020.

The Credit Facility is secured by a first priority lien in favor of the Bank on substantially all of the personal property owned by the Company as well as mortgages on four parcels of real property owned by the Company in Connecticut, Colorado, Tennessee and Texas at which four of the Company’s schools are located.

At the closing, the Company drew $25 million under Tranche A of Facility 1, which, pursuant to the terms of the Credit Agreement, was used to repay the Prior Credit Facility and to pay transaction costs associated with closing the Credit Facility.  After the disbursements of such amounts, the Company retained approximately $1.8 million of the borrowed amount for working capital purposes.

Also, at closing, $5 million was drawn under Tranche B and, pursuant to the terms of the Credit Agreement, was deposited into an interest-bearing pledged account (the “Pledged Account”) in the name of the Company maintained at the Bank in order to secure payment obligations of the Company with respect to the costs of remediation of any environmental contamination discovered at certain of the mortgaged properties upon completion of environmental studies undertaken at such properties.  Pursuant to the terms of the Credit Agreement, funds will be released from the Pledged Account upon request by the Company to reimburse the Company for costs incurred for environmental remediation, if required.  Upon the completion of any such environmental remediation or upon determination that no environmental remediation is necessary, funds remaining in the Pledged Account will be released from the Pledged Account and applied to the outstanding principal balance of Tranche B and availability under Tranche B will be permanently reduced to zero and, accordingly, the maximum principal amount of Facility 1 will be permanently reduced to $25 million.  During the quarter ended June 30, 2017 the environmental studies were completed and revealed no environmental issues existing at the properties.  Accordingly, pursuant to the terms of the Credit Agreement, the $5 million on deposit in the Pledged Account was released and used to repay the non-revolving loan outstanding under Tranche B.  Upon the repayment of Tranche B, the maximum principal amount of Facility 1 was permanently reduced to $25 million.

Pursuant to the terms of the Credit Agreement, all draws under Facility 2 for letters of credit or revolving loans must be secured by cash collateral in an amount equal to 100% of the aggregate stated amount of the letters of credit issued and revolving loans outstanding through draws from Facility 1 or other available cash of the Company.

Accrued interest on each revolving loan will be payable monthly in arrears.  Revolving loans under Tranche A of Facility 1 will bear interest at a rate per annum equal to the greater of (x) the Bank’s prime rate plus 2.50% and (y) 6.00%.  The amount borrowed under Tranche B of Facility 1 and revolving loans under Facility 2 will bear interest at a rate per annum equal to the greater of (x) the Bank’s prime rate and (y) 3.50%.

Each issuance of a letter of credit under Facility 2 will require the payment of a letter of credit fee to the Bank equal to a rate per annum of 1.75% on the daily amount available to be drawn under the letter of credit, which fee shall be payable in quarterly installments in arrears.  Letters of credit totaling $6.2 million that were outstanding under a $9.5 million letter of credit facility previously provided to the Company by the Bank, which letter of credit facility was set to mature on April 1, 2017, are treated as letters of credit under Facility 2.

Under the terms of the Credit Agreement, the Bank receives an unused facility fee on the average daily unused balance of Facility 1 at a rate per annum equal to 0.50%, which fee is payable quarterly in arrears.  In addition, the Company is required to maintain, on deposit with the Bank in one or more non-interest bearing accounts, a minimum of $5 million in quarterly average aggregate balances.  If in any quarter the required average aggregate account balance is not maintained, the Company is required to pay the Bank a fee of $12,500 for that quarter.  Under the terms of the Credit Agreement, in the event that the Company terminates the Credit Facility or refinances with another lender within 18 months of closing, the Company shall be required to pay the Bank a breakage fee of $500,000.

In addition to the foregoing, the Credit Agreement contains customary representations, warranties and affirmative and negative covenants, including financial covenants that restrict capital expenditures, prohibit the incurrence of a net loss commencing on December 31, 2018 and require a minimum adjusted EBITDA and a minimum tangible net worth which is an annual covenant, as well as events of default customary for facilities of this type.  As of June 30, 2017, the Company is in compliance with all covenants.

In connection with the Credit Agreement, the Company paid the Bank an origination fee in the amount of $250,000 and other fees and reimbursements that are customary for facilities of this type.

The Company incurred an early termination premium of approximately $1.8 million in connection with the termination of the Prior Credit Facility.

On April 28, 2017, the Company entered into an additional secured credit agreement with the Bank, pursuant to which the Company has obtained a short term loan in the principal amount of $8 million, the proceeds of which are to be used for working capital and general corporate purposes.  The loan bears interest at a rate per annum equal to the greater of the Bank’s prime rate plus 2.50% or 6.00%.

The loan is secured by real property assets located in West Palm Beach, Florida at which schools operated by the Company are currently located.  The loan is payable interest only until its maturity, which will occur upon the earlier of October 1, 2017 and the date of the sale of the West Palm Beach, Florida property.  Pursuant to a purchase and sale agreement, as amended, the Company has agreed to sell two of three properties located in West Palm Beach, Florida to Tambone Companies, LLC for a cash purchase price of $15.7 million.  The Company expects this sale to be completed in the third quarter of 2017.

As of June 30, 2017, the Company had $33 million outstanding under the Credit Facility (which includes the short term loan of $8 million); offset by $1.0 million of deferred finance fees.  As of December 31, 2016, the Company had $44.3 million outstanding under the Prior Credit Facility; offset by $2.3 million of deferred finance fees, which were written-off.As of June 30, 2017 and December 31, 2016, there were letters of credit in the aggregate principal amount of $6.2 million outstanding, respectively.  As of June 30, 2017, there are no revolving loans outstanding under Facility 2.

Scheduled maturities of long-term debt and lease obligations at June 30, 2017 are as follows:

Year ending December 31,
2017	$	8,000
2018		-
2019		-
2020		25,000
	$	33,000

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STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2017

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

5. 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 and January 16, 2017, performance-based restricted shares were granted to certain employees of the Company, which vest 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 restriction on the right to vote or the right to receive dividends with respect to any of these restricted shares.

On June 2, 2014 and December 18, 2014, performance-based restricted shares were granted to certain employees of the Company, 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 restriction on the right to vote or the right to receive dividends with respect to any of these 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.  There is no vesting period on the right to vote or the right to receive dividends with respect to these restricted shares.

For the six months ended June 30, 2017 and 2016, the Company completed a net share settlement for 184,231 and 38,389 restricted shares, respectively, on behalf of certain employees that participate in the LTIP upon the vesting of the restricted shares pursuant to the terms of the LTIP.  The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 2017 and/or 2016, 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 $0.4 million and $0.1 million for each of the six months ended June 30, 2017 and 2016, 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, 2016		1,143,599		$	1.89
Granted		181,208			2.58
Canceled		(52,398	)		5.63
Vested		(650,130	)		1.74
Nonvested restricted stock outstanding at June 30, 2017		622,279			1.92

The restricted stock expense for the three months ended June 30, 2017 and 2016 was $0.3 million and $0.3 million, respectively.  The restricted stock expense for the six months ended June 30, 2017 and 2016 was $0.7 million and $0.7 million, respectively.  The unrecognized restricted stock expense as of June 30, 2017 and December 31, 2016 was $0.9 million and $1.5 million, respectively.  As of June 30, 2017, outstanding restricted shares under the LTIP had aggregate intrinsic value of $1.9 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, 2016		218,167		$	12.11	3.33 years	$	-
Canceled		(47,500	)		12.37			-
Outstanding at June 30, 2017		170,667			12.04	3.49 years		-
Vested or expected to vest		170,667			12.04	3.49 years		-
Exercisable as of June 30, 2017		170,667			12.04	3.49 years		-

As of June 30, 2017, there was no unrecognized pre-tax compensation expense.

The following table presents a summary of stock options outstanding:

		At June 30, 2017
		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		122,667		3.75	$	8.77		122,667	$	8.77
$	14.00-$19.99		17,000		2.34		19.98		17,000		19.98
$	20.00-$25.00		31,000		3.10		20.62		31,000		20.62
			170,667		3.49		12.04		170,667		12.04

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INCOME TAXES

6 Months Ended

Jun. 30, 2017

INCOME TAXES [Abstract]

INCOME TAXES

6. INCOME TAXES

The provision for income taxes for the three months ended June 30, 2017 and 2016 was less than $0.1 million, or 0.7% of pretax loss, and less than $0.1 million, or 1.6% of pretax loss, respectively.  The provision for income taxes for the six months ended June 30, 2017 and 2016 was $0.1 million, or 0.6% of pretax loss, and $0.1 million, or 1.1% of pretax loss, respectively.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to recover 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 full valuation allowance on its net deferred tax assets as of June 30, 2017.

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CONTINGENCIES

6 Months Ended

Jun. 30, 2017

CONTINGENCIES [Abstract]

CONTINGENCIES

7. CONTINGENCIES

In the ordinary conduct of its business, the Company is subject to certain other 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 July 13, 2015, the Commonwealth of Massachusetts filed a complaint against the Company in the Suffolk County Superior Court alleging certain violations of the Massachusetts Consumer Protection Act since at least 2010 and continuing through 2013. At the same time, the Company agreed to the entry of a Final Judgment by Consent in order to avoid the time, burden, and expense of contesting such liability. As part of the Final Judgment by Consent, the Company denied all allegations of wrongdoing and any liability for the claims asserted in the complaint. The Company, however, paid the sum of $850,000 to the Massachusetts Attorney General and has agreed to forgive $165,000 of debt consisting of unpaid balances owed to the Company by certain graduates in the sole discretion of the Massachusetts Attorney General. The Final Judgment by Consent also provided certain requirements for calculation of job placement rates in Massachusetts and imposed certain disclosure obligations that are consistent with regulations that have been enacted by the Commonwealth of Massachusetts.

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SEGMENTS

6 Months Ended

Jun. 30, 2017

SEGMENTS [Abstract]

SEGMENTS

8. SEGMENTS

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.  In 2016, the Company ceased operations in Hartford, Connecticut; Fern Park, Florida; and Henderson (Green Valley), Nevada. In the fourth quarter of 2016, the Board of Directors approved plans to cease operations at our schools in Center City Philadelphia, Pennsylvania; Northeast Philadelphia, Pennsylvania; and West Palm Beach, Florida.  Each of these schools is expected to close in 2017.  In addition, in March 2017, the Board of Directors approved plans to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts which are expected to close in the fourth quarter of 2017.  These schools, which were previously included in the Healthcare and Other Professions segment, are now included in the Transitional segment.

In the past, we offered any combination of programs at any campus.  We have shifted our focus to program offerings that create greater differentiation among campuses and attain excellence to attract more students and gain market share.  Also, strategically, we began offering continuing education training to select employers who hire our students and this is best achieved at campuses focused on their profession.

We currently operate in three reportable segments: a) Transportation and Skilled Trades b) Healthcare and Other Professions and c) Transitional.  Our reportable segments represent 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 which have been determined based on a method by which we evaluate performance and allocate resources.  Our operating segments have been aggregated into three reportable segments because, in our judgment, the operating segments have similar services, types of customers, regulatory environment and economic characteristics.  Our reportable 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).

Healthcare and Other Professions – Healthcare and Other Professions offers academic programs in the career-oriented disciplines of health sciences, hospitality and business and information technology (e.g. dental assistant, medical assistant, practical nursing, culinary arts and cosmetology).

Transitional – Transitional refers to operations that are being phased out or closed and 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.  During the year ended December 31, 2016, the Company announced the closings of our Northeast Philadelphia, Pennsylvania; Center City Philadelphia, Pennsylvania; and West Palm Beach, Florida facilities.  These schools are expected to be fully taught out on August 31, 2017, August 31, 2017 and September 30, 2017, respectively.  In the first quarter of 2016 we completed the teach-out of our Fern Park, Florida campus.  Also, in the fourth quarter of 2016, we completed the teach-out of our Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.  In addition, in March 2017, the Board of Directors approved a plan to cease operations at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools are being taught out and expected to be closed in December 2017.

The Company continually evaluates all campuses for profitability, earning potential, and customer satisfaction.  This evaluation takes several factors into consideration, including the campus’s geographic location, the programs offered at the campus, as well as skillsets required of our students by their potential employers.  The purpose of this evaluation is to ensure that our programs provide our students with the best possible opportunity to succeed in the marketplace with the goals of attracting more students to our programs and, ultimately, to provide the shareholders with the maximum return on their investment.  Campuses in the Transitional segment have been subject to this process and have been strategically identified for closure.

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.

Summary financial information by reporting segment is as follows:

	For the Three Months Ended June 30,
	Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016
Transportation and Skilled Trades	$	41,310		66.8	%	$	41,032		60.3	%	$	850		$	2,430
Healthcare and Other Professions		17,932		29.0	%		18,661		27.4	%		(634	)		918
Transitional		2,623		4.2	%		8,387		12.3	%		(833	)		(1,458	)
Corporate		-		0.0	%		-		0.0	%		(5,414	)		(5,123	)
Total	$	61,865		100.0	%	$	68,080		100.0	%	$	(6,031	)	$	(3,233	)

	For the Six Months Ended June 30,
	Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016
Transportation and Skilled Trades	$	83,477		65.7	%	$	83,304		60.1	%	$	2,898		$	5,796
Healthcare and Other Professions		36,769		28.9	%		38,470		27.7	%		(474	)		2,673
Transitional		6,898		5.4	%		16,950		12.2	%		(1,401	)		(5,101	)
Corporate		-		0.0	%		-		0.0	%		(12,782	)		(12,845	)
Total	$	127,144		100.0	%	$	138,724		100.0	%	$	(11,759	)	$	(9,477	)

	Total Assets
	June 30, 2017		December 31, 2016
Transportation and Skilled Trades	$	84,578	$	83,320
Healthcare and Other Professions		7,622		7,506
Transitional		18,377		18,874
Corporate		19,654		53,507
Total	$	130,231	$	163,207

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FAIR VALUE

6 Months Ended

Jun. 30, 2017

FAIR VALUE [Abstract]

FAIR VALUE

9. FAIR VALUE

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

	At June 30, 2017
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)		Total
Financial Assets:
Cash and cash equivalents	$	7,210	$	7,210	$	-	$	-	$	7,210
Restricted cash		6,189		6,189		-		-		6,189
Prepaid expenses and other current assets		2,586		-		2,586		-		2,586
Financial Liabilities:
Accrued expenses	$	13,707	$	-	$	13,707	$	-	$	13,707
Other short term liabilities		464		-		464		-		464
Credit facility		32,023		-		32,023		-		32,023

The fair value of the credit facility approximates the carrying amount at June 30, 2017 as it relates to current market rates for similar types of instruments.

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

The carrying amounts reported on the 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

6 Months Ended

Jun. 30, 2017

RELATED PARTY [Abstract]

RELATED PARTY

10. 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 chief executive officer 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 June 30, 2017 and 2016. 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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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Business Activities

Business Activities— Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”, “we”, “our” and “us”, as applicable) provide diversified career-oriented post-secondary education to recent high school graduates and working adults.  The Company, which currently operates 28 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 Lincoln Technical Institute, Lincoln College of Technology, Lincoln College of New England, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences and associated brand names.  Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study.  Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The 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, we reorganized our operations into three reportable business segments:  (a) Transportation and Skilled Trades, (b) Healthcare and Other Professions (“HOPS”), and (c) Transitional which refers to businesses that have been or are currently being taught out.  In November 2015, the Board of Directors approved a plan for the Company to divest the schools included in the HOPS segment due to a strategic shift in the Company’s business strategy.  The Company underwent an exhaustive process to divest the HOPS schools which proved successful in attracting various purchasers but, ultimately, did not result in a transaction that our Board believed would enhance shareholder value. When the decision was first made by the Board of Directors to divest HOPS, 18 campuses were operating in this segment.  By the end of 2017, we will have strategically closed seven underperforming campuses leaving a total of eleven campuses remaining under HOPS.   The Company believes that the closures and planned closures of the aforementioned campuses has positioned this segment and the Company to be more profitable going forward as well as maximizing returns for the Company’s shareholders.

The combination of several factors, including the inability of the prospective buyer of the HOPS segment to close on the purchase, the improvements the Company has implemented in the HOPS operations, the closure of seven underperforming campuses and the change in federal government administration, resulted in the Board reevaluating its divestiture plan and the determination that shareholder value would more likely be enhanced by continuing to operate our HOPS segment as revitalized.  Consequently, in the first quarter of 2017, the Board of Directors abandoned the plan to divest the HOPS segment and the Company intends to retain the HOPS segment.  The results of operations of the campuses included in the HOPS business segment are reflected as continuing operations in the consolidated financial statements.

In the fourth quarter of 2016, the Company completed the teach-out of its Hartford, Connecticut and Henderson (Green Valley), Nevada campuses.  Also in 2016, the Company announced the closing of its Northeast Philadelphia, Pennsylvania; Center City Philadelphia, Pennsylvania; and West Palm Beach, Florida facilities, each of which is expected to be fully taught out and closed during 2017.  In addition, in March 2017, the Board of Directors approved a plan to not renew the leases at our schools in Brockton, Massachusetts and Lowell, Massachusetts.  These schools, which are being taught out and expected to be closed in December 2017, are included in the Transitional segment as of June 30, 2017.

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 and thereafter for the foreseeable future.  At June 30, 2017, the Company’s sources of cash primarily included cash and cash equivalents of $13.4 million (of which $6.2 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 discussed above that provide short term liquidity, the Company plans to sell three West Palm Beach, Florida properties and associated assets, which are currently classified as held for sale and are expected to be sold within one year from the date of classification.  On March 14, 2017, the Company entered into a purchase and sale agreement with Tambone Companies, LLC, pursuant to which the Company has agreed to sell two of the three properties (the “West Palm Beach Property”) for a cash purchase price of $15.7 million.  The purchase and sale agreement, as amended, is among other things, subject to customary closing conditions but the Company expects to close on the transaction in the third quarter of 2017.  On April 28, 2017, the Company obtained from its lender, Sterling National Bank, an $8 million bridge term loan secured by the West Palm Beach Property.  The bridge loan must be repaid upon the earlier of the sale of the West Palm Beach Property or October 1, 2017.

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, 2016 consolidated financial statements and related disclosures of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 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 six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2017.

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 – The Financial Accounting Standards Board (the “FASB”) has issued Accounting Standards Update (“ASU”) No. 2017-09,” “Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting.” ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award. The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment award require an entity to apply modification accounting under Topic 718. ASU 2017-09 is effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The Company does not expect the adoption of ASU 2017-09 will have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of comprehensive income separately from the service cost component and outside a subtotal of operating income. The ASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of this update on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Simplifying the Test for Goodwill Impairment.”  ASU 2017-04 provides amendments to Accounting Standards Code (“ASC”) No. 350, “Intangibles - Goodwill and Other,” which eliminate Step 2 from the goodwill impairment test. Entities should perform their goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments in this update are effective prospectively during interim and annual periods beginning after December 15, 2019, with early adoption permitted.  The Company early adopted the provisions of ASU 2017-04 as of April 1, 2017.  As fair values for our operating units exceed their carrying values, there has been no impact on our consolidated financial statements.

The FASB has recently issued several amendments to the new standard on revenue recognition, ASU No. 2014-09, “Revenue from Contracts with Customers.” The amendments include ASU  No. 2016-08, “Revenue from Contracts with Customers (Topic 606)—Principal versus Agent Considerations,” which was issued in March 2016, and clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09, and ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606)—Identifying Performance Obligations and Licensing,” which was issued in April 2016, and amends the guidance in ASU No. 2014-09 related to identifying performance obligations. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures.

The new standard is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted for annual reporting periods beginning after December 15, 2016. We do not plan to early adopt and, accordingly, we will adopt the new standard effective January 1, 2018. The Company’s assessment of the potential impact is substantially complete based on our review of current enrollment agreements and other revenue generating contracts. We believe the timing of recognizing revenue for tuition and student fees will not significantly change. The Company is closely reviewing its book revenue stream to determine whether the performance obligation of the Company is satisfied over time and revenue is recognized over the length of the student contract, which is the Company’s current practice with respect to revenue recognition, or whether the performance obligation of the Company is satisfied at the point in time and revenue is recognized when students’ books are delivered.  Additionally, we are currently assessing the impacts related to the accounting for contract assets separate from accounts receivable and are evaluating the point at which a student’s contract asset becomes a receivable.

We are in the process of updating our revenue accounting policy and implementing changes to our business process and controls in response to the new standard, as necessary.  During the second half of 2017, we will finalize our revenue related documentation.  The Company currently expects to adopt the new standard on a modified retrospective basis with the cumulative effect of the change reflected in retained earnings as of January 1, 2018 and not restate prior periods.

In November 2016, the FASB issued ASU No. 2016-18: “Statement of Cash Flows (Topic 230): Restricted Cash.” This guidance was issued to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments will require that the statement of cash flows explain the change during the period in total cash, cash equivalents and restricted cash. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments will be applied using a retrospective transition method to each period presented. The Company anticipates that the adoption will not have a material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company anticipates that the adoption will not have a material impact on the Company’s consolidated financial statements.

The Company prospectively applied ASU 2016-09, “Improvements to Employee Share Based Payment Accounting,” to the condensed consolidated statement of operations for the recognition of tax benefits within the provision for taxes, which previously would have been recorded to additional paid-in capital. The impact for the six months ended June 30, 2017 was $0. In addition, the Company retrospectively recognized no tax benefits within operating activities within the condensed consolidated statements of cash flow for the six months ended June 30, 2017 and 2016. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in the condensed consolidated statements of cash flows, since such cash flows have historically been presented in financing activities. The treatment of forfeitures has not changed as the Company is electing to continue the current process of estimating the number of forfeitures. There was no cumulative-effect adjustment required to retained earnings under the prospective method as of the beginning of the year because all tax benefits had been previously recognized when the tax deductions related to stock compensation were utilized to reduce tax payable. The Company is not recording deferred tax assets or tax losses as the result of the adoption of ASU 2016-09.

In February 2016, the FASB issued guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statements of income. The guidance is effective for annual periods, including interim periods within those periods, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact that the update will have on our results of operations, financial condition and financial statement disclosures.

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 six months ended June 30, 2017 and 2016, the Company did not have any interest and penalties expense associated with uncertain tax positions.

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WEIGHTED AVERAGE COMMON SHARES (Tables)

6 Months Ended

Jun. 30, 2017

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 six months ended June 30, 2017 and 2016 was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Basic shares outstanding		23,962,055		23,448,224		23,786,656		23,399,708
Dilutive effect of stock options		-		-		-		-
Diluted shares outstanding		23,962,055		23,448,224		23,786,656		23,399,708

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GOODWILL AND LONG-LIVED ASSETS (Tables)

6 Months Ended

Jun. 30, 2017

GOODWILL AND LONG-LIVED ASSETS [Abstract]

Changes in carrying amount of goodwill

The carrying amount of goodwill at June 30, 2017 and 2016 is as follows:

	Gross Goodwill Balance		Accumulated Impairment Losses			Net Goodwill Balance
Balance as of January 1, 2017	$	117,176	$	(102,640	)	$	14,536
Adjustments		-		-			-
Balance as of June 30, 2017	$	117,176	$	(102,640	)	$	14,536

	Gross Goodwill Balance		Accumulated Impairment Losses			Net Goodwill Balance
Balance as of January 1, 2016	$	117,176	$	(93,881	)	$	23,295
Adjustments		-		-			-
Balance as of June 30, 2016	$	117,176	$	(93,881	)	$	23,295

Summary of finite-lived intangible assets

Intangible assets, which are included in other assets in the accompanying condensed consolidated balance sheets, consist of the following:

	Curriculum
Gross carrying amount at December 31, 2016	$	160
Adjustments		-
Gross carrying amount at June 30, 2017		160
Accumulated amortization at December 31, 2016		128
Amortization		7
Accumulated amortization at June 30, 2017		135
Net carrying amount at June 30, 2017	$	25
Weighted average amortization period (years)		10

Summary of estimated future amortization expense

The following table summarizes the estimated future amortization expense:

Year Ending December 31,
Remainder of 2017	$	12
2018		13
	$	25

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LONG-TERM DEBT AND LEASE OBLIGATIONS (Tables)

6 Months Ended

Jun. 30, 2017

LONG-TERM DEBT AND LEASE OBLIGATIONS [Abstract]

Long-term debt and lease obligations

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

	June 30, 2017			December 31, 2016
Credit agreement (a)	$	32,023		$	-
Term loan (a)		-			44,267
		32,023			44,267
Less current maturities		(8,000	)		(11,713	)
	$	24,023		$	32,554

(a)On March 31, 2017, the Company entered into a secured revolving credit agreement (the “Credit Agreement”) with Sterling National Bank (the “Bank”) pursuant to which the Company obtained a credit facility in the aggregate principal amount of up to $55 million (the “Credit Facility”).  The Credit Facility consists of (a) a $30 million loan facility (“Facility 1”), which is comprised of a $25 million revolving loan designated as “Tranche A” and a $5 million non-revolving loan designated as “Tranche B,” which Tranche B was repaid during the quarter ended June 30, 2017, and (b) a $25 million revolving loan facility (“Facility 2”), which includes a sublimit amount for letters of credit of $10 million.  The Credit Facility replaces a term loan facility (the “Prior Credit Facility”) from a lender group led by HPF Service, LLC, which was repaid and terminated concurrently with the effectiveness of the Credit Facility.  The term of the Credit Facility is 38 months, maturing on May 31, 2020.

Scheduled maturities of long-term debt and lease obligations

Scheduled maturities of long-term debt and lease obligations at June 30, 2017 are as follows:

Year ending December 31,
2017	$	8,000
2018		-
2019		-
2020		25,000
	$	33,000

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STOCKHOLDERS' EQUITY (Tables)

6 Months Ended

Jun. 30, 2017

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, 2016		1,143,599		$	1.89
Granted		181,208			2.58
Canceled		(52,398	)		5.63
Vested		(650,130	)		1.74
Nonvested restricted stock outstanding at June 30, 2017		622,279			1.92

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, 2016		218,167		$	12.11	3.33 years	$	-
Canceled		(47,500	)		12.37			-
Outstanding at June 30, 2017		170,667			12.04	3.49 years		-
Vested or expected to vest		170,667			12.04	3.49 years		-
Exercisable as of June 30, 2017		170,667			12.04	3.49 years		-

Summary of options outstanding

The following table presents a summary of stock options outstanding:

		At June 30, 2017
		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		122,667		3.75	$	8.77		122,667	$	8.77
$	14.00-$19.99		17,000		2.34		19.98		17,000		19.98
$	20.00-$25.00		31,000		3.10		20.62		31,000		20.62
			170,667		3.49		12.04		170,667		12.04

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SEGMENTS (Tables)

6 Months Ended

Jun. 30, 2017

SEGMENTS [Abstract]

Summary financial information by reporting segment

Summary financial information by reporting segment is as follows:

	For the Three Months Ended June 30,
	Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016
Transportation and Skilled Trades	$	41,310		66.8	%	$	41,032		60.3	%	$	850		$	2,430
Healthcare and Other Professions		17,932		29.0	%		18,661		27.4	%		(634	)		918
Transitional		2,623		4.2	%		8,387		12.3	%		(833	)		(1,458	)
Corporate		-		0.0	%		-		0.0	%		(5,414	)		(5,123	)
Total	$	61,865		100.0	%	$	68,080		100.0	%	$	(6,031	)	$	(3,233	)

	For the Six Months Ended June 30,
	Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016
Transportation and Skilled Trades	$	83,477		65.7	%	$	83,304		60.1	%	$	2,898		$	5,796
Healthcare and Other Professions		36,769		28.9	%		38,470		27.7	%		(474	)		2,673
Transitional		6,898		5.4	%		16,950		12.2	%		(1,401	)		(5,101	)
Corporate		-		0.0	%		-		0.0	%		(12,782	)		(12,845	)
Total	$	127,144		100.0	%	$	138,724		100.0	%	$	(11,759	)	$	(9,477	)

	Total Assets
	June 30, 2017		December 31, 2016
Transportation and Skilled Trades	$	84,578	$	83,320
Healthcare and Other Professions		7,622		7,506
Transitional		18,377		18,874
Corporate		19,654		53,507
Total	$	130,231	$	163,207

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FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2017

FAIR VALUE [Abstract]

Fair value, by balance sheet grouping

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

	At June 30, 2017
	Carrying		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)		Total
Financial Assets:
Cash and cash equivalents	$	7,210	$	7,210	$	-	$	-	$	7,210
Restricted cash		6,189		6,189		-		-		6,189
Prepaid expenses and other current assets		2,586		-		2,586		-		2,586
Financial Liabilities:
Accrued expenses	$	13,707	$	-	$	13,707	$	-	$	13,707
Other short term liabilities		464		-		464		-		464
Credit facility		32,023		-		32,023		-		32,023

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands		3 Months Ended			6 Months Ended
	Mar. 14, 2017 USD ($) Property	Jun. 30, 2017 USD ($) State	Jun. 30, 2016 USD ($)	Mar. 31, 2015 Campus Segment	Jun. 30, 2017 USD ($) School State Campus Segment	Jun. 30, 2016 USD ($)	Apr. 28, 2017 USD ($)
Business Activities [Abstract]
Number of schools | School					28
Number of states in which schools operate across the United States | State		15			15
Number of campuses treated as destination schools | Campus					5
Number of reportable segments | Segment				3	3
Number of campuses operating under HOPS | Campus				18
Number of campuses closed under HOPS | Campus					7
Number of campuses remaining under HOPS | Campus					11
Liquidity [Abstract]
Cash and cash equivalents		$ 13,400			$ 13,400
Restricted cash		6,200			6,200
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Income tax benefit		50	$ 50		100	$ 100
Income Taxes [Abstract]
Interest and penalties expense		$ 0	$ 0		0	0
West Palm Beach Property [Member]
Liquidity [Abstract]
Number of properties | Property	3
Number of properties agreed to be sold | Property	2
Cash purchase price	$ 15,700
Bridge term loan							$ 8,000
Tambone Companies, LLC [Member]
Liquidity [Abstract]
Number of properties agreed to be sold | Property	2
ASU 2016-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Income tax benefit					$ 0	$ 0

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WEIGHTED AVERAGE COMMON SHARES (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Shares used to compute basic and diluted loss income per share [Abstract]
Basic shares outstanding (in shares)	23,962,055	23,448,224	23,786,656	23,399,708
Dilutive effect of stock options (in shares)	0	0	0	0
Diluted shares outstanding (in shares)	23,962,055	23,448,224	23,786,656	23,399,708
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)	537,718	604,378	583,848	412,286
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)	170,667		170,667

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GOODWILL AND LONG-LIVED ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
GOODWILL AND LONG-LIVED ASSETS [Abstract]
Impairment of long-lived assets			$ 0	$ 0
Changes in carrying amount of goodwill [Abstract]
Gross Goodwill Balance		$ 117,176		117,176	$ 117,176	$ 117,176	$ 117,176
Accumulated Impairment Losses		(93,881)		(93,881)	(102,640)	(102,640)	(93,881)
Adjustments			0	0
Net Goodwill Balance		23,295		23,295	14,536	$ 14,536	$ 23,295
Finite-Lived Intangible Assets [Line Items]
Net carrying amount	$ 25		25
Estimated future amortization expense [Abstract]
Remainder of 2017					12
2018					13
Total	25		25		25
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization	100	100	100	100
Transportation and Skilled Trades [Member]
Changes in carrying amount of goodwill [Abstract]
Net Goodwill Balance		14,500		14,500
Healthcare and Other Professions [Member]
Changes in carrying amount of goodwill [Abstract]
Net Goodwill Balance		$ 8,800		$ 8,800
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			128
Amortization			7
Accumulated amortization, ending balance	135		135
Net carrying amount	25		$ 25
Weighted average amortization period			10 years
Estimated future amortization expense [Abstract]
Total	$ 25		$ 25		$ 25

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LONG-TERM DEBT AND LEASE OBLIGATIONS (Details)			3 Months Ended		6 Months Ended
		Mar. 14, 2017 USD ($) Property	Jun. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Jun. 30, 2017 USD ($) Property	Apr. 28, 2017 USD ($)	Dec. 31, 2016 USD ($)
Long-term debt and lease obligations [Abstract]
Long term debt and capital lease obligations			$ 32,023,000		$ 32,023,000		$ 44,267,000
Less current maturities			(8,000,000)		(8,000,000)		(11,713,000)
Long-term debt and lease obligations			24,023,000		24,023,000		32,554,000
Scheduled maturities of long-term debt and lease obligations [Abstract]
2017			8,000,000		8,000,000
2018			0		0
2019			0		0
2020			25,000,000		25,000,000
Long term debt and capital lease obligations			33,000,000		33,000,000
West Palm Beach Property [Member]
Long-term debt and lease obligations [Abstract]
Number of properties owned | Property		3
Short term loan						$ 8,000,000
Number of properties agreed to be sold | Property		2
Cash purchase price		$ 15,700,000
Credit Agreement [Member]
Long-term debt and lease obligations [Abstract]
Long-term line of credit	[1]		32,023,000		$ 32,023,000		0
Term of credit facility				38 months
Expiration date of credit facility				May 31, 2020
Number of properties owned | Property					4
Percentage of letters of credit margin against available funds in cash collateral					100.00%
Percentage of unused facility fee payable quarterly					0.50%
Minimum quarterly average aggregate balances to be maintained			5,000,000
Bank fees if minimum quarterly average aggregate balances is not maintained					$ 12,500
Closing term to terminate the credit facility					18 months
Breakage fee					$ 500,000
Bank origination fee			250,000		250,000
Deferred finance fee, offset			1,000,000		$ 1,000,000
Letter of Credit [Member]
Long-term debt and lease obligations [Abstract]
Line of credit facility, maximum borrowing capacity				$ 10,000,000
Expiration date of credit facility					Apr. 01, 2017
Percentage of letter of credit fee, quarterly installment					1.75%
Letters of credit outstanding			6,200,000		$ 6,200,000		6,200,000
Maximum availability under the facility previously provided			9,500,000		9,500,000
Term Loan [Member]
Long-term debt and lease obligations [Abstract]
Long-term line of credit	[1]		0		0		44,267,000
Revolving Credit Facility 2 [Member]
Long-term debt and lease obligations [Abstract]
Line of credit facility, maximum borrowing capacity				25,000,000
Line of credit facility, amount outstanding			0		0
Prior Credit Agreement [Member]
Long-term debt and lease obligations [Abstract]
Long-term line of credit							44,300,000
Termination premium incurred					1,800,000
Deferred finance fee, offset							$ 2,300,000
Credit Facility 1 [Member]
Long-term debt and lease obligations [Abstract]
Line of credit facility, maximum borrowing capacity				30,000,000
Outstanding principal balance after released from the pledged account			25,000,000		25,000,000
Line of credit facility, amount outstanding			33,000,000		$ 33,000,000
Minimum [Member] | Prime Rate [Member]
Long-term debt and lease obligations [Abstract]
Interest rate on credit facility					2.50%
Maximum [Member] | Prime Rate [Member]
Long-term debt and lease obligations [Abstract]
Interest rate on credit facility					6.00%
Maximum [Member] | Credit Agreement [Member]
Long-term debt and lease obligations [Abstract]
Line of credit facility, maximum borrowing capacity				55,000,000
Tranche A [Member] | Credit Agreement [Member]
Long-term debt and lease obligations [Abstract]
Long-term line of credit			25,000,000		$ 25,000,000
Tranche A [Member] | Revolving Credit Facility 1 [Member]
Long-term debt and lease obligations [Abstract]
Line of credit facility, maximum borrowing capacity				25,000,000
Amount borrowed for working capital			1,800,000		$ 1,800,000
Interest rate on credit facility					6.00%
Tranche A [Member] | Revolving Credit Facility 1 [Member] | Prime Rate [Member]
Long-term debt and lease obligations [Abstract]
Interest rate on credit facility					2.50%
Tranche B [Member] | Credit Agreement [Member]
Long-term debt and lease obligations [Abstract]
Long-term line of credit			5,000,000		$ 5,000,000
Tranche B [Member] | Non-Revolving Credit Facility [Member]
Long-term debt and lease obligations [Abstract]
Line of credit facility, maximum borrowing capacity				$ 5,000,000
Outstanding principal balance after released from the pledged account			$ 0		$ 0
Tranche B [Member] | Non-Revolving Credit Facility [Member] | Prime Rate [Member]
Long-term debt and lease obligations [Abstract]
Interest rate on credit facility					3.50%
Tranche B [Member] | Revolving Credit Facility 2 [Member] | Prime Rate [Member]
Long-term debt and lease obligations [Abstract]
Interest rate on credit facility					3.50%

[1] On March 31, 2017, the Company entered into a secured revolving credit agreement (the "Credit Agreement") with Sterling National Bank (the "Bank") pursuant to which the Company obtained a credit facility in the aggregate principal amount of up to $55 million (the "Credit Facility"). The Credit Facility consists of (a) a $30 million loan facility ("Facility 1"), which is comprised of a $25 million revolving loan designated as "Tranche A" and a $5 million non-revolving loan designated as "Tranche B" and (b) a $25 million revolving loan facility ("Facility 2"), which includes a sublimit amount for letters of credit of $10 million. The Credit Facility replaces a term loan facility (the "Prior Credit Facility") from a lender group led by HPF Service, LLC, which was repaid and terminated concurrently with the effectiveness of the Credit Facility. The term of the Credit Facility is 38 months, maturing on May 31, 2020. The Credit Facility is secured by a first priority lien in favor of the Bank on substantially all of the personal property owned by the Company as well as mortgages on four parcels of real property owned by the Company in Connecticut, Colorado, Tennessee and Texas at which four of the Company's schools are located. At the closing, the Company drew $25 million under Tranche A of Facility 1, which, pursuant to the terms of the Credit Agreement, was used to repay the Prior Credit Facility and to pay transaction costs associated with closing the Credit Facility. After the disbursements of such amounts, the Company retained approximately $1.8 million of the borrowed amount for working capital purposes. Also, at closing, $5 million was drawn under Tranche B and, pursuant to the terms of the Credit Agreement, was deposited into an interest-bearing pledged account (the "Pledged Account") in the name of the Company maintained at the Bank in order to secure payment obligations of the Company with respect to the costs of remediation of any environmental contamination discovered at certain of the mortgaged properties upon completion of environmental studies undertaken at such properties. Pursuant to the terms of the Credit Agreement, funds will be released from the Pledged Account upon request by the Company to reimburse the Company for costs incurred for environmental remediation, if required. Upon the completion of any such environmental remediation or upon determination that no environmental remediation is necessary, funds remaining in the Pledged Account will be released from the Pledged Account and applied to the outstanding principal balance of Tranche B and availability under Tranche B will be permanently reduced to zero and, accordingly, the maximum principal amount of Facility 1 will be permanently reduced to $25 million. During the quarter ended June 30, 2017 the environmental studies were completed and revealed no environmental issues existing at the properties. Accordingly, pursuant to the terms of the Credit Agreement, the $5 million on deposit in the Pledged Account was released and used to repay the non-revolving loan outstanding under Tranche B. Upon the repayment of Tranche B, the maximum principal amount of Facility 1 was permanently reduced to $25 million. Pursuant to the terms of the Credit Agreement, all draws under Facility 2 for letters of credit or revolving loans must be secured by cash collateral in an amount equal to 100% of the aggregate stated amount of the letters of credit issued and revolving loans outstanding through draws from Facility 1 or other available cash of the Company. Accrued interest on each revolving loan will be payable monthly in arrears. Revolving loans under Tranche A of Facility 1 will bear interest at a rate per annum equal to the greater of (x) the Bank's prime rate plus 2.50% and (y) 6.00%. The amount borrowed under Tranche B of Facility 1 and revolving loans under Facility 2 will bear interest at a rate per annum equal to the greater of (x) the Bank's prime rate and (y) 3.50%. Each issuance of a letter of credit under Facility 2 will require the payment of a letter of credit fee to the Bank equal to a rate per annum of 1.75% on the daily amount available to be drawn under the letter of credit, which fee shall be payable in quarterly installments in arrears. Letters of credit totaling $6.2 million that were outstanding under a $9.5 million letter of credit facility previously provided to the Company by the Bank, which letter of credit facility was set to mature on April 1, 2017, are treated as letters of credit under Facility 2. Under the terms of the Credit Agreement, the Bank receives an unused facility fee on the average daily unused balance of Facility 1 at a rate per annum equal to 0.50%, which fee is payable quarterly in arrears. In addition, the Company is required to maintain, on deposit with the Bank in one or more non-interest bearing accounts, a minimum of $5 million in quarterly average aggregate balances. If in any quarter the required average aggregate account balance is not maintained, the Company is required to pay the Bank a fee of $12,500 for that quarter. Under the terms of the Credit Agreement, in the event that the Company terminates the Credit Facility or refinances with another lender within 18 months of closing, the Company shall be required to pay the Bank a breakage fee of $500,000. In addition to the foregoing, the Credit Agreement contains customary representations, warranties and affirmative and negative covenants, including financial covenants that restrict capital expenditures, prohibit the incurrence of a net loss commencing on December 31, 2018 and require a minimum adjusted EBITDA and a minimum tangible net worth which is an annual covenant, as well as events of default customary for facilities of this type. As of June 30, 2017, the Company is in compliance with all covenants. In connection with the Credit Agreement, the Company paid the Bank an origination fee in the amount of $250,000 and other fees and reimbursements that are customary for facilities of this type. The Company incurred an early termination premium of approximately $1.8 million in connection with the termination of the Prior Credit Facility. On April 28, 2017, the Company entered into a secured credit agreement with the Bank, pursuant to which the Company has obtained a short term loan in the principal amount of $8 million, the proceeds of which are to be used for working capital and general corporate purposes. The loan bears interest at a rate per annum equal to the greater of the Bank's prime rate plus 2.50% or 6.00%. The loan is secured by real property assets located in West Palm Beach, Florida at which schools operated by the Company are currently located. The loan is payable interest only until its maturity, which will occur upon the earlier of October 1, 2017 and the date of the sale of the West Palm Beach, Florida property. The Company has entered into a contract to sell the West Palm Beach, Florida property to Tambone Companies, LLC for a cash purchase price of $16.3 million. The Company expects this sale to be completed in the third quarter of 2017. As of June 30, 2017, the Company had $33 million outstanding under the Credit Facility; offset by $1.0 million of deferred finance fees. As of December 31, 2016, the Company had $44.3 million outstanding under the Prior Credit Facility; offset by $2.3 million of deferred finance fees, which were written-off. As of June 30, 2017 and December 31, 2016, there were letters of credit in the aggregate principal amount of $6.2 million outstanding, respectively.

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STOCKHOLDERS' EQUITY (Details) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017 USD ($) $ / shares shares	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) Plan $ / shares shares	Jun. 30, 2016 USD ($) shares	Dec. 31, 2016 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock incentive plans | Plan			2
Shares [Abstract]
Outstanding, beginning balance (in shares) | shares			218,167
Canceled (in shares) | shares			(47,500)
Outstanding, ending balance (in shares) | shares	170,667		170,667		218,167
Vested or expected to vest (in shares) | shares	170,667		170,667
Exercisable, ending balance (in shares) | shares	170,667		170,667
Weighted Average Exercise Price Per Share [Abstract]
Outstanding, beginning balance (in dollars per share)			$ 12.11
Cancelled (in dollars per share)			12.37
Outstanding, ending balance (in dollars per share)	$ 12.04		12.04		$ 12.11
Vested or expected to vest (in dollars per share)	12.04		12.04
Exercisable, ending balance (in dollars per share)	$ 12.04		$ 12.04
Weighted Average Remaining Contractual Term [Abstract]
Outstanding			3 years 5 months 26 days		3 years 3 months 29 days
Vested or expected to vest			3 years 5 months 26 days
Exercisable			3 years 5 months 26 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	170,667		170,667
Contractual Weighted Average Life			3 years 5 months 26 days
Weighted Average Price (in dollars per share)	$ 12.04		$ 12.04
Stock Options Exercisable [Abstract]
Shares (in shares) | shares	170,667		170,667
Weighted Exercise Price (in dollars per share)	$ 12.04		$ 12.04
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			1,143,599
Granted (in shares) | shares			181,208
Canceled (in shares) | shares			(52,398)
Vested (in shares) | shares			(650,130)
Nonvested restricted stock outstanding, ending balance (in shares) | shares	622,279		622,279		1,143,599
Weighted Average Grant Date Fair Value [Abstract]
Nonvested restricted stock outstanding, beginning balance (in dollars per share)			$ 1.89
Granted (in dollars per share)			2.58
Canceled (in dollars per share)			5.63
Vested (in dollars per share)			1.74
Nonvested restricted stock outstanding, ending balance (in dollars per share)	$ 1.92		$ 1.92		$ 1.89
Recognized restricted stock expense | $	$ 300	$ 300	$ 700	$ 700
Unrecognized restricted stock expense | $	900		$ 900		$ 1,500
LTIP [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Net share settlement for restricted stock (in shares) | shares			184,231	38,389
Decrease in equity due to payment of tax for employee | $			$ 400	$ 100
LTIP [Member] | June 2, 2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period of performance-based shares			3 years
Specified operating income margin period			1 year
LTIP [Member] | December 18, 2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period of performance-based shares			3 years
Specified operating income margin period			1 year
LTIP [Member] | Restricted Stock [Member]
Weighted Average Grant Date Fair Value [Abstract]
Outstanding restricted shares, intrinsic value | $	$ 1,900		$ 1,900
$ 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	122,667		122,667
Contractual Weighted Average Life			3 years 9 months
Weighted Average Price (in dollars per share)	$ 8.77		$ 8.77
Stock Options Exercisable [Abstract]
Shares (in shares) | shares	122,667		122,667
Weighted Exercise Price (in dollars per share)	$ 8.77		$ 8.77
$ 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	17,000		17,000
Contractual Weighted Average Life			2 years 4 months 2 days
Weighted Average Price (in dollars per share)	$ 19.98		$ 19.98
Stock Options Exercisable [Abstract]
Shares (in shares) | shares	17,000		17,000
Weighted Exercise Price (in dollars per share)	$ 19.98		$ 19.98
$ 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 1 month 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

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
INCOME TAXES [Abstract]
Provision for income taxes	$ 50	$ 50	$ 100	$ 100
Effective income tax rate	0.70%	1.60%	0.60%	1.10%

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CONTINGENCIES (Details) $ in Thousands	Jul. 13, 2015 USD ($)
CONTINGENCIES [Abstract]
Settlement amount	$ 850,000
Debt forgiveness	$ 165,000

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SEGMENTS (Details) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Mar. 31, 2015 Segment	Jun. 30, 2017 USD ($) Segment Location	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
SEGMENTS [Abstract]
Number of locations closed | Location				10
Number of reportable segments | Segment			3	3
Summary financial information by reporting segment [Abstract]
Revenues	$ 61,865	$ 68,080		$ 127,144	$ 138,724
Percentage of Total Revenue	100.00%	100.00%		100.00%	100.00%
Operating Income (Loss)	$ (6,031)	$ (3,233)		$ (11,759)	$ (9,477)
Assets	130,231			130,231		$ 163,207
Reportable Segments [Member] | Transportation and Skilled Trades [Member]
Summary financial information by reporting segment [Abstract]
Revenues	$ 41,310	$ 41,032		$ 83,477	$ 83,304
Percentage of Total Revenue	66.80%	60.30%		65.70%	60.10%
Operating Income (Loss)	$ 850	$ 2,430		$ 2,898	$ 5,796
Assets	84,578			84,578		83,320
Reportable Segments [Member] | Healthcare and Other Professions [Member]
Summary financial information by reporting segment [Abstract]
Revenues	$ 17,932	$ 18,661		$ 36,769	$ 38,470
Percentage of Total Revenue	29.00%	27.40%		28.90%	27.70%
Operating Income (Loss)	$ (634)	$ 918		$ (474)	$ 2,673
Assets	7,622			7,622		7,506
Reportable Segments [Member] | Transitional [Member]
Summary financial information by reporting segment [Abstract]
Revenues	$ 2,623	$ 8,387		$ 6,898	$ 16,950
Percentage of Total Revenue	4.20%	12.30%		5.40%	12.20%
Operating Income (Loss)	$ (833)	$ (1,458)		$ (1,401)	$ (5,101)
Assets	18,377			18,377		18,874
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 Income (Loss)	$ (5,414)	$ (5,123)		$ (12,782)	$ (12,845)
Assets	$ 19,654			$ 19,654		$ 53,507

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FAIR VALUE (Details) $ in Thousands	Jun. 30, 2017 USD ($)
Carrying Amount [Member]
Financial Assets [Abstract]
Cash and cash equivalents	$ 7,210
Restricted cash	6,189
Prepaid expenses and other current assets	2,586
Financial Liabilities [Abstract]
Accrued expenses	13,707
Other short-term liabilities	464
Credit facility	32,023
Fair Value [Member]
Financial Assets [Abstract]
Cash and cash equivalents	7,210
Restricted cash	6,189
Prepaid expenses and other current assets	2,586
Financial Liabilities [Abstract]
Accrued expenses	13,707
Other short-term liabilities	464
Credit facility	32,023
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value [Member]
Financial Assets [Abstract]
Cash and cash equivalents	7,210
Restricted cash	6,189
Prepaid expenses and other current assets	0
Financial Liabilities [Abstract]
Accrued expenses	0
Other short-term liabilities	0
Credit facility	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	2,586
Financial Liabilities [Abstract]
Accrued expenses	13,707
Other short-term liabilities	464
Credit facility	32,023
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
Financial Liabilities [Abstract]
Accrued expenses	0
Other short-term liabilities	0
Credit facility	$ 0