Lincoln Educational Services Corporation (LINC) Q3 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Third Quarter 2014 Lincoln Educational Services Earnings Conference Call. My name is Lisa, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Shaun McAlmont, Chief Executive Officer. Please proceed, sir.

Thank you, Lisa, and good morning, everyone. Joining me in the room today is Scott Shaw, our President and Chief Operating Officer; and also Brian Meyers, our Senior Vice President and Controller. Brian is acting as our Principal Accounting Officer today in the absence of our CFO, Cesar Ribeiro, who's on medical leave. Let me begin this morning by referring to our Safe Harbor statement under the Private Securities Litigation Reform Act of 1995, which specifies that statements in this presentation and earnings release concerning Lincoln Educational Services' future prospects include forward-looking statements that involve risks and uncertainties. There can be no assurance that future results will be achieved, and actual results may differ materially from forecasts, estimates and summary information contained in our earnings release and this presentation. Factors that could cause actual results to differ materially are included but not limited to those listed in our company's annual report on Form 10-K for the year ended December 31, 2013, and other periodic reports filed with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement. This morning, I'll provide some general opening remarks, and Scott will provide a more detailed overview of our company's operations. Brian will then provide a financial review for the quarter and provide a forecast for the year and then turn the time back to me. After a brief summary, we'll take your call to questions. As outlined in our press release, in the third quarter, we achieved some positive milestones for the company, which included positive cash flow from operations, significant annualized expense reductions, year-over-year improvement in our key student outcome metrics, and we also launched our third industry partnership, CNC Machining program, in Mahwah, New Jersey. Scott and Brian will go into more detail about some of these in their remarks. These accomplishments are somewhat overshadowed by the company's retrenchment efforts, which have been significant over the past 5 years. This said, our performance reflects a strengthening foundation from which we'll continue to operate our institutions. As we look forward from this quarter, we reaffirmed our guidance for the full year in terms of adjusted EPS, revenue and student starts. Our expectation is that student starts will be down approximately 3% for the full year, which assumes some weakness in the fourth quarter based on limited start dates and as we shift our sales and marketing expense later into the fourth quarter with an eye squarely on first quarter 2015 new student starts. In addition, with the posting of the final gainful employment rule, stability will return to the sector and the cloud of uncertainty also begins to clear from our company's operational outlook. We spent a number of years and significant resources preparing to operate under any version of the gainful employment rule and any other rule targeting our industry. We focused on the basic goal of continuing compliant operations amid rapidly changing rules, which we felt was the most prudent short-term approach to maintaining our value for employees, students and shareholders. We specifically prepared our company for either side of the proposed 2-part gainful employment rule, and although we disagree with the approach of the federal government, we're prepared to operate under the new version of the rule, with minor future adjustments to operations. In our estimation, the government's onerous process has peaked. And we now know what the playing field is, and we can plan and execute a longer-term strategy to drive shareholder value. This said, and to capitalize on a growing market opportunity, we recently completed an in-depth strategic planning process with our Board of Directors, which was intended to drive growth over the next 3-year period through a reintroduction of the Lincoln brand, improved company cost structure, steps to aid student affordability and improved educational delivery of our training products. The shift will ultimately allow us to address markets by aggressively promoting our training to consumers and also to employers while also adjusting our business model in ways which will focus on the needs of students and industry. We will describe the specifics of this strategy as a part of future shareholder calls. As we look to 2015 and beyond, there are a couple of facts that support the long-term plan for Lincoln Educational Services. First, there is a skill gap in this country driven by the high demand for skilled workers. Secondly, there's a large addressable market of those who do not have and will not obtain traditional degrees. According to a recent Careerbuilder survey of employers, job seekers and educators, titled "The Shocking Truth about the Skills Gap," we can surmise that the skills gap is a collective dilemma of employers, unqualified job seekers and training opportunities. We will reposition Lincoln over the next 3 years in a number of ways as a training bridge between skilled employment and the job seeker. The statistics are clear. As many as 39% of people under the age of 25 are underemployed or unemployed. And according to BLS data, 8% of those under the age of 25 who have 4-year degree can't find a job at all. This reality is compounded for minority families as seen in recent Census Bureau statistics, which show these families significantly behind in median family income. And if you go further into these statistics by age, the data for those in the 15-to-25 age group with no college education are at the bottom of the country's earnings scale. It has been 5 years since the Great Depression, and while more jobs are added to the economy every day, employers continue to have a difficult time filling open jobs. Now going back to the notion that the skills gap dilemma is a collective issue for employers, for trainers and job seekers, let me share with you a trend we are seeing within our own program verticals, which illustrates a step toward a viable skills gap solution. Of our total third quarter student population, our enrollment for the top 3 verticals is as follows: automotive programs were 41.5% of the population; allied health was 30.5%; and skilled trades was 15.1%. The prior year comparisons show that skilled trades was 13.5% of the total last quarter 3. Moreover, the skilled trades program vertical grew in population every quarter against prior year this year and also shows the most significant year-to-date start growth. What's more, skilled trades shows the best student retention characteristics by far compared to the other program verticals. These trends line up with the introduction of our CNC Machining program as one of a few new programs we've added over the past few years. Despite the market and regulatory uncertainty, which limited program expansion, we felt this program met the cost and debt metrics for gainful employment. It expanded our demographic reach. It's a high-demand skills gap area of training and there was high employer partnering interest. Our industry partners, which include Hurco and the Haas corporations have been instrumental in bringing these programs to life. Now I share this example as one which will characterize Lincoln's skills gap market opportunity moving forward. To assist us in expanding the scope of this initiative, we will bring on a partnership or B2B executive to continue driving this direction for the company. The Careerbuilder report goes on to assert, and I quote, "Trade schools are an efficient path to gaining necessary skills for in-demand jobs. Unlike colleges, trade schools are required to maintain a minimum level of job placement, giving most students the opportunity to put those skills to work immediately." We see this is as a validation of the sector of education we serve and feel that our Lincoln Tech campuses have the unique opportunity to provide skill training to satisfy market demand in the United States for years to come, but we must do a better job of promoting our ability to serve this demand. This said, we've engaged a new ad agency, which will begin this effort with a shift of some of our Q4 marketing spending toward a 2015 launch of a new branding campaign aimed at differentiating us as the skills gap solution for the country. Our approach will address multiple channels to reach the consumer in order to inform them about our training and access the jobs and careers they might not otherwise find on their own. As I close this portion of my prepared remarks, I wanted to mention that as we move forward in executing our plans in terms of company leadership, Scott Shaw, our President and Chief Operating Officer, continues to take over more of the company's operations, as I will focus more on the longer-term strategic opportunities. So at this point in time, I'd like to turn over -- the time over to Scott for a more detailed review of our operations. Scott?

Good morning, and thank you, Shaun. I'll spend my time sharing with you the progress that we have made in the third quarter as well as highlight challenges and opportunities that we see as we approach the end of the year. In short, we have continued to achieve improvements in all of our outcomes, namely graduation rates and placement rates, while we continue to face an environment in which some parents and students are questioning whether or not they should take on debt to fund their education. Moreover, the recovering economy provides more opportunities for some individuals to find immediate employment, which further delays their returning to school to obtain the skills necessary for a long-term career. However, as Shaun pointed out in his review of the skills gap, the message from the employers remains strong and clear. They need more skilled employees today, and they see their need growing as their workforce retires in greater numbers over the coming years. We also have more employers asking us to create specialized training that enables our graduates to more seamlessly integrate into their companies. The challenge is enhancing our programs without increasing the cost to the students. We view these requests by industry as a further validation of what we do and the need for what we do. By partnering with employers and creating programs that better meet their needs, we will enable our students to differentiate themselves, which will lead to greater success for them and for Lincoln. As I mentioned during our last call, we will continue to grow our business by strengthening and expanding our relationships with employers and industry. As Shaun also mentioned, we opened our third CNC Machining program, which is our second school affiliated with Haas Automation, which is the nation's largest CNC machining manufacturer. Haas has helped us create a curriculum to train entry-level CNC machinists, which are in great demand. By partnering with the local Haas distributor in northern New Jersey, we have established a school that will provide CNC machinists for the growing northern New Jersey and Lower Hudson Valley markets. The employers in this region have told us that their biggest obstacle for growth has been finding well-trained employees. Our program will eliminate this obstacle and thus greatly benefit the numerous small manufacturers serving the medical and aerospace industry in this region. Haas has also helped us identify our next school in Connecticut, that will open in the next 12 months. Starts in the third quarter were down year-over-year by 5.9%, which is better than we had forecasted. Our third quarter is always our largest quarter for starts and is also the quarter in which we had the largest number of traditional students, those who have recently graduated from high school and our [ph] schools. While the cost to recruit a high school student is greater than the cost to recruit an adult student, we see added value in serving this demographic. First, it represents a different channel of students that we would not always reach with our traditional marketing approach. Second, high school students on average graduate at higher rates and also have more family support both financially and emotionally. The greatest challenge of high school recruiting is keeping students engaged with Lincoln throughout their senior year. The high school recruiting process begins in September and ends when a student starts. Consequently, it's incumbent on us to constantly gauge an enrolled student's interest in Lincoln, since we are often not the only school to which they have applied. During this past high school recruiting season, we piloted a new approach for processing financial aid, which resulted in a higher percent of enrolled high school students starting with us, as compared to last year. One of our differentiators is the level of service that we provide all students. We want the process of learning about Lincoln and enrolling as informative and as stress free as possible. One major rate of area of stress for all students is the financial aid process. Filling out all of the forms and finding all the required documentation is no easy task. However, we learned that by using technology and having a centralized financial aid team that we train and manage in our corporate office, we have been able to speed up the financial aid process and provide better customer service for a high school student enrolled in one of our 5 destination campuses. The results were clear. The start rate at each of our destination campuses improved year-over-year. As a result of this pilot, we've begun rolling out the same process to all of our campuses. We expect that this centralized approach to financial aid administration will improve the experience across all of our schools with a goal of higher start rates for 2015. By answering the question "How will I pay for my education as quickly and as easily as possible?" we eliminate or at least lessen the anxiety around this very critical question for most students and their families. Another benefit of this centralized process is that we are better equipped to reallocate resources to those campuses that need it most. By having more flexible resources, we are becoming more efficient and able to offer more for less, which has been a major focus for us over the past 3 years. Let me now speak a little about our marketing efforts. We continually evaluate the various media markets in order to optimize our marketing dollars. We've eliminated many of our third-party inquiry-generating affiliates for the adult market, which had for the most part produced low-interest inquires with very low conversion rates. As a result, we are seeing more interested, qualified, serious inquiries, which lead to higher conversions into enrollments and ultimately into starts. While our conversion rate from inquiry to enrollment was down in the third quarter as compared to last year, our conversion rate year-to-date is still running ahead of last year. This year-to-date trend gives us confidence that this is the right strategy for generating inquiries, and we will continue to refine this strategy in order to be as responsive as possible to the constantly changing Internet marketing environment. Another trend that we are seeing is lead costs escalating at rates greater than the overall inflation rate. Since we don't expect this trend to change anytime soon, we continue to seek new lower-cost sources of inquiries, such as local events hosted by our campuses. We continue to add to our expertise in understanding the evolving consumer buying behavior patterns within our targeted audiences, using data to identify where inquiries are in the decision-making funnel by specifics such as the keyword searches which bring them to our site. We've been able to use this information as another tool to help our admissions teams have more effective communications with interested prospective students. And we're responding to our future students' preferences for using multidevice communication channels by ensuring that our websites are optimized to be viewed on a laptop, a tablet or a cell phone. Currently, 50% of our inquiries first engage with us either by a mobile device or a tablet. We are committed to finding new ways to reach and engage prospective students. We continue to be encouraged by the positive response that we receive whenever third parties come and visit our campuses. At our most recent ribbon-cutting ceremony for the CNC Machining program in New Jersey, we had over 250 people from industry, politics and high schools tour our campus. While all were impressed by what they saw, many did not know that CNC Machining -- many did not know what CNC Machining was, that New Jersey and the Hudson Valley have thousands of manufacturing jobs and that the manufacturing process of today is far cleaner, safer and high-tech than ever before. Consequently, not only do we need to market our schools, we also need to market some of the careers that we offer. This second form of marketing is best done in partnership with industry, which is why we are dedicating more resources into this area. Finally, with regards to marketing, in order to get our message out to the general public, we have made over 140 videos accessible from our website. These videos include student testimonials, employee testimonials and instructional content. In total, they've been viewed more than 1 million times. One of my favorite employee testimonials is from our Northeast largest -- is from the Northeast's largest Mercedes-Benz service shop, which has hired 30% of their technicians from Lincoln Tech over the years. As the employee goes on to say, "Lincoln Tech has provided the foundation of the technician base at Prestige Mercedes." The numbers speak for themselves. Now I will share with you some of our insights in our results. First, while we primarily focus on offering 1-year certificate programs, we do also offer select associate and bachelor's degrees. At the end of the third quarter, the percent of students enrolled in degree programs increased from 15.1% last year to 18.8% this year. This increase in degrees helps with increasing average population, which also improves profitability since these students remain in school for a longer period of time. Next, since affordability remains a very key element in the buying process, we continue to test various levels of scholarship and pricing adjustment. What we have found is that each market reacts differently, and thus our approach has become much more targeted and will remain targeted as we go into 2015. As we have shared on other calls, we remain focused on balancing our cost structure with our revenues. We have rationalized our organization to ensure that we are still able to deliver the highest level of education and service as possible while reducing our expenses. We have achieved this by reducing our headcount, renegotiating leases, improving processes, merging or closing campuses and through overall better fiscal management. And despite our losses, Lincoln continues to remain cash-flow positive. Our goal is to reach a cost structure that will make us profitable while operating with lower student populations. With this in mind during the third quarter, we took steps to eliminate $11 million of expenses on an annualized basis. The benefit of these reductions will occur in 2015. From a qualitative standpoint, Lincoln continues to improve on every measure. Our retention rate remains strong. Throughout the third quarter, our placement rates showed ongoing strength, growing 2.5% over prior year. Our programs continue to produce quality graduates with the skills that are in demand among employers and the industries we support. We enjoy mutually productive partnerships with leading employers across industries. And this month, more than 100 employers attended a career day held at our national campus. Many of these same employers were also present at our recent 95th anniversary celebration for our national campus. We are seeing an increase in large corporations seeking placement partnerships with Lincoln, demonstrating the value of our training outcomes for both graduates and employers. For example, besides working with numerous local Audi dealerships, we are also now working with Audi's corporate office to help them find the best technicians possible through specialized career fairs held at our campuses. By adding this extra level of service to our larger employers, we are better able to leverage our national presence and differentiate ourselves in the marketplace. This strong demand from industry reassures us that Lincoln has a golden opportunity to grow and become an even more important industry partner for many large regional and national companies. Finally, I want to focus on an important initiative for Lincoln going forward, which is part of our strategy and which involves strengthening our value proposition. These actions are taking -- are taking address -- these actions we are taking address affordability, increase engagement in the classroom and lower our costs. In total, we call these actions Lincoln 2.0. To address affordability, we are evaluating a number of alternatives from shortening programs and having students come to school fewer days in a week so that they can work longer. This latter solution overlaps with the need to make our programs more convenient for students by lessening the time commitment of being on campus. We overwhelmingly serve a working adult population that has family and work obligations in addition to going to school. By reducing the amount of time that a student is required to be away from home or work, we will make it easier for students to seek an education with Lincoln and thus will increase our potential market. Our blended learning pilots are clearly demonstrating that students like the additional flexibility afforded by attending school only 3 days a week, rather than 4 or 5 days. Additionally, since our students seek constant support and motivation and since our programs are geared around providing a robust hands-on experience, we still see value in face-to-face learning. By working remotely for a portion of one's program -- working remotely for a portion of one's program has not diminished our students' learning or satisfaction, and in fact has increased the perceived value of our program over others. To date, we have piloted a few courses and 1 full program. And over the next 12 months, we expect to have more full programs up and running in this new blended model. In summary, we continue to position Lincoln for long-term health and success. We are confident on the path we are taking to meet employer demand while creating programs that are affordable and appeal to students. The overall market seems to be stabilizing, which provides us with the opportunity to grow our population. By staying focused on quality outcomes and industry demand, we should be able to achieve Lincoln's vision to be America's technical school. And I would now like to turn the call over to Brian Meyers.

Thank you, Scott. Good morning. I'll begin by reviewing our financial results included in our press release this morning as well as provide more financial insights on the quarter and for the remainder of 2014. Student starts declined 5.9% from continuing operations for the third quarter of 2014 as compared to the third quarter of 2013. However, these results were better than our previously issued guidance. We began the first quarter of 2014 with approximately 1,800 less students than we had on January 1, 2013. This led to our average population declining 4% for the third quarter of 2014. As a result, revenue declined by 4.4% or $3.9 million as compared to the third quarter of 2013. Average revenue per student for the third quarter of 2014 was $5,895, essentially flat compared to the third quarter of 2013. The decrease in student population during 2014 also impacted our capacity utilization, which decreased to 36% for the third quarter of 2014 from 37.1% in the third quarter of 2013. Other key highlights of the quarter included loss per share from continuing operation was $1.67 for the third quarter of 2014 as compared to breakeven for the same period in 2013. Excluding the impairment, we had a loss per share of $0.12, which met our third quarter guidance. Free cash flow for the third quarter of 2014 was $14 million as compared to $3.3 million in 2013. We finished the quarter with $12.7 million in cash and cash equivalents and $7.5 million of borrowings outstanding under our credit agreement. Subsequently, we repaid the $7.5 million and have no debt outstanding as of today. We paid a $0.02 quarterly dividend on September 30, 2014. Total dividends paid year-to-date were $3.8 million. Bad debt for the quarter was 5.1% of revenue as compared to 4.7% for the third quarter of 2013. Bad debt was negatively impacted during the quarter by a slight deterioration in our collections history coupled with a realignment of efforts to accelerate the packaging of third quarter starts. Cost per start increased 1.4% for the quarter to $2,394 from $2,362 in 2013 mainly due to higher costs to acquire leads. During the third quarter, we tested our goodwill and long-lived assets for impairment and determined that a noncash charge of $41.4 million existed. Goodwill as of September 30, 2014, was $23.5 million. We do not anticipate an impairment charge in the fourth quarter. Our benefit for income tax was $5.7 million for the third quarter of 2014 as compared to a provision of $0.1 million for the third quarter of 2013. Total [ph] impairment this quarter the deferred tax liability related to the indefinite life intangible reverse resulting in a decrease in the valuation allowance needed. This release of the valuation allowance resulted in an income tax benefit. Capital expenditures for the 9 months ended September 30, 2014, were $4.8 million and are expected to be between 2% and 3% of revenue for 2014. In regard to our loan program. As of September 30, 2014, loan commitments to our students, net of interest that would be due on these loans to maturity, were $24.6 million as compared to loan commitments of $26.5 million at December 31, 2013. Now to our current outlook for the full year. Our guidance is based on our current expectation. We are reaffirming previously issued 2014 guidance in terms of revenue, net loss per share and starts. In addition, we continue to expect to be cash flow from operations and free cash flow positive. The Board of Directors has set the record and payment date for the dividend for the fourth quarter of 2014. The cash dividend of $0.02 per share will be payable on December 31, 2014, to shareholders of record as of December 15, 2014. With regard to our balance sheet. As we mentioned during our last call, we have begun the process of unlocking value in our own real estate. We have a potential buyer for a vacant 56-acre campus in Connecticut, and we are in the process of either mortgaging -- mortgages or sale leasebacks depending on the facility for 4 of our own schools. In total, we expect to receive approximately $50 million in cash from these various transactions. This cash will either replace or supplement whatever new credit facility we enter into with our lenders. As most of you are aware, given the current state of the proprietary school industry, lenders have pulled back in this sector. By monetizing our real estate, we will be well positioned to execute on our strategy with or without the banks. In conclusion, we continue to manage our operation expenses based upon expected student population while focusing our student services and outcomes. We also continue to anticipate achieving profitability for the fourth quarter of 2014. I will now turn the call back over to Shaun.

Thanks, Brian. So let me quickly summarize what you heard from us on the call today before we get to your questions. There's stability returning to our industry, and opportunity exists for Lincoln to be a more significant skills gap solution from an addressable market and employment demand perspective. Industry partnerships will play a more prominent role in our operations. Our business fundamentals are getting stronger after our retrenchment efforts. Although onerous and detrimental, we feel that the federal rule-making process is at least complete, which provides a more clear regulatory runway for us to operate. Our balance sheet is strengthening and will get incrementally stronger as we finalize our real estate monetization processes. We will aggressively launch our brand in the new year to better identify Lincoln's role in the skills gap. And finally, we'll adjust our business model to benefit students in a variety of ways to achieve necessary employment-related training. At this point, I'll turn it back over to Lisa, and we'll now take your questions.

[Operator Instructions] And your first question comes from the line of Jeff Silber with BMO Capital Markets.

In looking at your guidance for the year and reaffirming that, it implies a pretty sizable increase in revenues in the fourth quarter and some operating income leverage. Let me focus on the revenues first. I think you mentioned that you expect starts to be down about 3%. Are you expecting the remainder of the benefit either in retention and/or revenues per student increasing?

Well, let me just take a shot at that. I mean, I don't necessarily see the acceleration that you do. I mean, essentially, we feel that retention remains strong for the company. We expect that to follow through. We feel that we'll be at the 3% for the year in terms of start decline. And with that said, I mean, we end up the year where we end up. I can't really respond exactly to what you're saying, because I don't necessarily see what you see. I don't know, Brian, if you want to jump in.

We are expecting the fourth quarter starts to be slightly down, so it's not too aggressive, our fourth quarter revenue, to make the guidance.

All right. How about on the operating income line then? Where are you expecting the leverage relative to the current quarter if we're not going to see the benefits from all the cost cutting you had mentioned until next year?

Well, for the fourth quarter, we did do many of the cuts in August. So it will be in the fourth quarter. You will be able to see a lot of the benefit in the fourth quarter.

So yes, I said that we'll get the full impact, Jeff, next year, but starting in the fourth quarter, we do start receiving some of the benefits from the cost reductions that took place, as Brian said, at the end of summer.

Okay. My bad, I misunderstood you. And specifically, which line item? Is it on the educational services line item or the SG&A line item?

It will be on actually all the line items. So, I mean, there are people out of administration, there are people out of the -- fewer faculty members. Just because if their populations are down, we constantly readjust. So you'll see it in -- also, you'll see it in the sales side. So you'll see it in SG&A and in the education side.

All right. And then one more quick numbers question. What kind of tax rate are you expecting in the fourth quarter?

The tax rate will be similar to what we show for the 9 months, which is 7.3%. So it'll be -- it'll be based on our income. It will be 7.3% of our income, will be a tax provision.

Your next question comes from the line of Trace Urdan with Wells Fargo.

For what it's worth, I have the same issue that Jeff has. It's very hard to get even to the bottom end of your revenue guidance range on a full year basis without a pretty significant increase in either revenue per student or persistence or both based on the numbers that we've got so far. So I don't expect you to say anything else, but I'm just throwing that out there, because he's not crazy. So what I did want to ask, Shaun, was that last quarter when we spoke, you were a bit apprehensive about what was happening at Corinthian Colleges and Everest. And the potential, I think you had more of a cautious view on what kind of impact that might have in the market. It doesn't seem as though it's impacted your starts at all, but I just wondered if you could address that, the impact of that event in the market either positively or negatively on your campuses.

Yes. I'll say that early on, we felt the instability come from a lot of the bad news, and that was right at the time that our last call was happening. Since then, I feel that -- essentially, the industry stabilized. And with the new rule being finalized, a lot of the noise around some of the industry challenges being settled, we feel that we're looking at a smoother path forward. So that's externally. And then, internally, we just feel that we know what the playing field is at this point in time. Based on the regulatory rules, we feel that we've made the right amounts of moves to stabilize our company. And moving forward, we essentially know what we need to do to foster long-term growth. So I just think that the industry stabilized. Our company has stabilized, and it's just a much smoother path forward, Trace.

Yes. I'm just more interested in what the impression is in the market among students. I mean, are you picking up any of the Everest students in any of your markets? Are you hearing them talk about that or mention that at the admissions point of contact?

I'll just say this. Everest continues to advertise at a pretty heavy rate. And so, yes, our admissions people hear things. We've had some students come through our schools, but students continue to make the same on-the-ground decisions that they've made over the years. And we have not seen a significant number of those students come our way. I think not -- unless a school actually goes out of operation and a teach-out is complete, I think that's the time that the market will shift and we'll start seeing our market dynamics change. To this point, they're still operating and still marketing so.

And your next question comes from the line of Alex Paris of Barrington Research.

So a couple of follow-up questions. What was the tax accrual in the third quarter, excluding the intangible goodwill write-off? In Q1 and Q2, you had a dollar amount of $431,000 exactly in Q1 and Q2. And then in Q3, you had a tax credit of $5,666. So excluding it, was the tax in dollars a similar amount as it was in Q1 and Q2?

It was. It was for $430,000.

Okay. And then, second, with regard to monetizing some of those assets. When can we expect some movement on that? You talked about it last quarter. I think you said by year end, you maybe even said by Thanksgiving. Are we still on track for an announcement in that regard?

Yes. I mean, those processes continue. I think in Brian's prepared remarks, he talked about the fact that we're looking at a combination of mortgages and sale leaseback and also the sale of a unused facility up in Connecticut, and they're all in process. So we've -- we're going back and forth pretty aggressively on one of those, which is a sale leaseback that has a longer runway. But we expect that all of those could be completed by year end.

Okay. And then, the -- back to the guidance again. We're all a little troubled with that, I think. What I'm trying to do is do the math, on Q -- on full year guidance minus 9-month results. Can you help us out and give us guidance on Q4? It's just the basis of which is 9 months. I know what the 9-month revenue was. But are you excluding any items from that full year loss per share like the intangible write-off, things like that?

We are excluding the intangibles for the EPS line item, yes.

And is there anything else excluded from the first 6 months in that full year target?

No. Just, really, we're just excluding the impairment write-off.

Okay. The...

I mean, Alex, we'll probably have to sort of work on this offline. We can go over the detail later on.

Okay. That's fine. And then just I guess a bigger-picture question. Recently there's been some movement on the part of the Department of Education with regard to PLUS loans. I recall a couple of years ago when the Department of Education increased the credit underwriting standards. It had a negative impact on Lincoln. Lincoln was one of the companies that singled that out as a negative impact on enrollment. Now according to the Department of Education, the credit standards being eased are going to result in 370,000 more applications approved each year. Do you anticipate a benefit from that? And when might we see that in enrollments? Is that really a high school-related thing?

Yes, it's a high school-related thing only because the PLUS loans relate to dependent students primarily. But we expect to see a big benefit from that. I don't know, Scott, if you want to jump in.

Yes. Whatever benefit from that when that gets rolled out, I think you'll see it much more towards next summer, when we have more of the high school students with the PLUS loans.

[Operator Instructions] Your next question comes from the line of Bill Nasgovitz with Heartland Funds.

So just, you said your placement rates were up 2.5%.

Correct.

What is that rate?

We're now around 77.5%.

Is what we're projecting for 2014.

That's your projection?

Yes. Year-to-date, it's up on a year-to-date basis, and that forecast looks forward at a placement rate of about 77% versus 74% to 75% prior year.

Okay. What was the all-time high for Lincoln in terms of placement?

I would say that it's -- on a blended basis, it's probably in the high 70s all time.

Okay, so we're close.

Yes, we're close. The auto and skilled trades are always a little higher. The allied health has been probably lower 70s. And so we're tracking close to all time.

Those partnerships with the Hurcos and Haases and so forth seem to be pretty unique. Do you anticipate that to be a major driver going forward?

I would say so. I'll start on this, and I'll have Scott jump in. But I believe that when we have an employer who has a significant demand in terms of their employment force come to us and ask us to provide a program that helps them meet that demand, I think it's a huge positive. In addition to that, they're willing to do whatever they can to help us on the front end in terms of promoting the program. And so it ends up being a win-win. And all they ask for is first shot at the best grads that come out of those programs. And so this Hurco-Haas partnership has really taught something about the role of an employment partner. And we're seeing just great results from the students as well. Scott?

Yes, so I think that the concept of the partnerships is definitely where we'll be going more and more. The absolute numbers of the Machining program, though aren't as, let's say, big as automotive per se, but we'll certainly add about 100 students per campus, where we roll it out. But the benefit is -- of the partnership is, as Shaun was saying, they're really bringing in the employers to help us educate people about the need for these programs. And so that helps on the marketing front, especially in areas whereby people just really aren't quite sure what a particular career opportunity is. So by partnering with these industry people, we really get the best of both world, someone will help and hire our graduates, but also someone who's helping us on the front end drive demand.

Okay. That's sounds great. And just for me, to be clear, I guess, what is your top line guidance for all of 2014, top line sales?

Revenue range is between $330 million and $340 million.

Okay. All right. Terrific. Well, that does imply a pretty good quarter. So keep it going. You mentioned remaining goodwill of $23.5 million. How many locations are we operating today?

We have 31 operating...

31. And how many of those are profitable?

When we look at the 4-wall level, at EBITDA, about 21 of those.

And you maintain that you're not going to have any additional impairment charges in the year ahead?

At least for the fourth quarter, we're not anticipating any.

When do you expect starts to turn positive?

Well, I mean, Bill, that's a tough question. It really also relates to how we budget our year and how we look at our branding campaign, marketing sales force, et cetera. We're in the middle of doing that for 2015. And so I won't jump out right now and give you a date. We've done that before, but we'd rather talk about it at the appropriate time, when we've got the details under our belt.

And when might that be?

We'll do that specifically on our next call when we look at what we forecast 2015.

I would now like to turn the presentation back over to Mr. Shaun McAlmont for closing remarks.

All right, thank you, everyone. I think you get a sense for how the company's positioned and where we're going in the future. And I appreciate your time today. We look forward to updating you on the year, early in the new year. Thanks very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.