Good day, ladies and gentlemen, and welcome to the Lincoln Educational Services Fourth Quarter and Full-Year 2016 Earning Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce our host for today's conference, Mr. Doug Sherk, The EVC Group. Sir, you may begin.

Thank you, Cailey, and good morning, everyone. Before the opening of the market today, Lincoln Educational Services issued its fourth quarter and full-year 2016 financial results. The release is available on the Investor Relations portion of the Company's corporate website at www.lincolnedu.com. Today's call is being broadcast live on the Company's website and a replay of this call will also be archived on the Company's website. Statements made during today's call made by management of Lincoln Educational Services Corporation regarding Lincoln's business that are not historical facts may be forward-looking statements as that term is defined in the federal securities law. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, and continue, and their opposites and similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. The Company cautions you that these statements concern current expectations about the Company's future performance or events and are subject to a number of uncertainties, risks and other influences many of which are beyond the Company’s control, that may influence the accuracy of the statements and the projects upon which the statements are based. Factors which may affect the Company’s results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange commission. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events. All forward-looking statements are qualified in their entirety by this cautionary statement and Lincoln undertakes no obligation to publicly advise or update any forward-looking statements whether it’s a result of new information, future events or otherwise after the date here off. Now, I'd like to turn the call over to Scott Shaw, President and Chief Executive Officer of Lincoln Educational Services.

Thank you, Doug, and good morning, everyone. Thank you for joining our call this morning to discuss our fourth quarter and full-year 2016 financial results as well as our outlook for 2017. With me today is Brian Meyers, Lincoln’s Chief Financial Officer. I'll begin the call by reviewing our recent operational highlights and progress in achieving our corporate objectives. Brian will provide further details on the quarter's financials as well as our outlook for the current year. Then we'll take your questions. For the past several years, our organization has faced many challenges and headwinds as we strive to achieve consistent profitability while continuing to enhance the student educational experience. Our team has been extremely focused on executing our strategy that enables Lincoln to capitalize on Transportation and Skilled Trades education routes. Builds partnerships with corporations actively seeking trained employees with specific specialized skill sets, generates maximum efficiencies from our operations, meets or exceeds the evolving regulatory requirements and finally maximizes the asset value of our non-core operations for the benefit of our shareholders. It's been a long road for both our organizations and our shareholders, but I believe the fact that we met all the guidance metrics we provided at the beginning of 2016 a test to our increasing consistency and position us for further improvement in 2017. A key factor behind returning Lincoln to consistent profitability is to grow student starts. Our relatively full employment economy has made that task especially difficult despite the continued skills gap between the skills needed by employers who are searching for candidates and the skills of the unemployed or underemployed. During the fourth quarter, our Transportation and Skilled Trades operations increased starts by 2.3% and finish the year with approximately 100 more students than on January 1, 2016 which is a very…

Thanks Scott and thank you all for joining us this morning. I'll begin my comments with the highlights of our continuing operation and financial performance. Continuing operations are comprised of our Transportation and Skilled Trades segment, our Transitional segment and our Corporate and other segment. The Transitional segment refers to operations that are closed or are currently being toed out. For the fourth quarter the segment consists of our campuses Fern Park, Northeast Philadelphia, Center City Philadelphia and our West Palm Beach, Florida campuses. It is important to note that we closed two campuses there in the quarter, Hartford and Henderson, which for the quarter was included in discontinued operations. The remainder of the schools in the Transitional segment are expected to be closed during 2017. Revenue from continuing operations for the quarter was $50.3 million versus $52.6 million in the prior year comparable period. The decrease in revenue of $2.3 million was mainly due to our Transitional segment, which accounted for approximately 91.2% of the revenue decline. Further as Scott mentioned, lower carry-in population has been a contributing factor to the revenue decline over the past few years and excluding our Transitional segment of continuing operations started 2017 was slightly more students than we had on January 1, 2016. We believe this positive momentum will help us achieve the 2017 guidance that I’ll review in a few moments. During the quarter students are remained essentially flat with a modest decline of 0.8% versus prior year period. Excluding the Transitional segment our students thought were up 2.3% for the quarter. Turning to operating expenses, we continue our efforts to implement efficiencies and cost reductions across the entire organization. Education services and facility expenses from continuing operation decreased by 800,000 to $22.5 million for the quarter from $23.3 million in the…

Thank you. [Operator Instructions] Our first question comes from the line of Alex Paris with Barrington Research. Your line is open.

Good morning, guys.

Good morning, Alex.

Good morning, Alex.

Congratulations on a strong finish to the year and now your guidance metrics.

Thank you.

I have a few questions. First of all just kind of a strategy question. November 2015, if you're going to sell healthcare and other professions, you've been working at it for 14 months or so and things have changed dramatically in for-profit post-secondary education. I got to imagine whatever price talk that was going on until the last 14 months, multiples are higher today. Is that part of what's been holding it up? And secondly, I would think if you're still going to sell these things and I think you should consider keeping up in a place that you seem to have them turn. If you're still considering selling them, I would think that you'd want to start the process all over again, what’s your big picture thoughts with regard to that segment?

Sure. Good question. Certainly a lot has changed and also to say with the election things have changed, and as Brian highlighted, we continue to invest in those schools for their long-term health. We are focused on what we can do to maximize shareholder value, so we will continue to be focused on that. And as far as the negotiations they have been challenging, there's lots of different pieces have been moving around both positively and negatively, I mean the change with ACICS is somewhat a complicating factor, but we're in the process there of switching over accreditation. But it's a jump ball to live ball, we're trying to figure out what the best way is to maximize shareholder value and we would just keep you all posted, but that is what we're focused on. And so to your point maybe it might be best to hold on to it, but again we'll update people who don't have more definitive answers.

Okay. Any thought as to timetable, do you think we'll know one way or another by mid-year, by the end of the year or?

Well definitely know by mid-year because I think all parties involved to our best interest to make a decision.

With regard to the ACICS switch, have you said who you are switching over to ACCST and where do we stand in that process?

Sure. We haven’t said, but we are switching over to ACCST and we’ve been in that process and everything is on track to have those schools switched over to them by year end.

Okay. And then while staying on the big picture; it was nice to see Starts growth in both transportation and in the discontinued operations. What's been the big and I think you touched on little bit in your prepared comments, what's been the biggest challenge, I think you said job market in that aversion, but what are you doing to overcome that or are things just starting to improve because the year ago number is so low.

Well, your latter point could be part of it, but I think I hope that the efforts that our teams are making are actually leading to our growth. I mean we're just focused on making sure that that message is communicated properly both at the high school level and the adult level of what the job opportunities are. I think there is more general conversation about the value of what we do and still we have a long ways to go, but I think that more people do question, do they really need to spend a lot of money in four years of their lives to go get a degree when they see their friends not being employed and so there are a lot of small things I can say that there's a tidal wave change yet Alex. But I think that we will continue to drive home that message that we offer great opportunities, our graduates have great career potential and we link and provide people in opportunity to advance themselves. So we'll just continue sharing all those marks and I am confident that given the demand out there and what we offer, things will turn.

All right on the regulatory front, you mentioned your 90:10 ratio 79%, composite ratio projected, your CDR. I forget but where do you stand on gainful employment both within the Transportation segment as well as with the discontinued operation?

Sure, I think that in the last call we mentioned that again fewer than like 1.5% of our students being negatively impacted and a lot of those – some of those were in, some of the discontinued operations as far as on the auto side, we really have no challenges as of right now with any of our programs. We had an issue maybe with our collision program that we've addressed that through offering a new program. That said, it's a shorter program at a lower wage and actually we've seen some nice growth in that segment. So it's probably been a really positive change. But all-in-all gainful employment at this stage is not an issue for us. And the challenges that we did have been the discontinued operations were in the schools that were closed or in the process of closing?

Gotcha. All right, and then one last question and it leads to a related question and then the transition conditional segment is that whatever is in there now will be out of there this year. Am I remembering right?

Correct.

To be done with a lot of the left of them by midyear is that right or is that they go beyond that is…?

I think it goes into the third quarter.

Okay, yes. And then any other – is there the real potential of any other schools going into that that line item.

I’d say think anything possible, not planned it.

So by the fourth quarter, we're going to have a pretty clean quarter. It's going to be transportation still trades to be nothing really coming in – on the transitional line and then you have a discontinued operation if you still have the discontinued operation. That's correct our accounting people will know what to do with all this free time I was going to have a simplified?

Me neither.

So then that brings me to the last question about guidance. He said that you expect to achieve low single-digit revenue growth in Transportation and Skilled Trades. What revenue would you expect from transitional in 2017 between now and the time that they’re all complete?

Under $4 billion between $3.5 million to $4 million.

Okay. And then you expect to achieve operating income, a Companywide including this year operation that means including transition also right? You said Company wide?

Yes, but I backed out closed schools in transitional be closed. So it includes transportation and are on continuing hot schools ACICS, healthcare school that's going to continued off just backing up the losses from the schools that are closed before schools.

Gotcha. Okay, well that helps. Thank you very much and good luck in 2017.

Thanks Alex.

Thank you. And our next question of the line Douglas Ruth with Lenox Financial Services?

Good morning. Congratulations to the progress in that you did achieve the goals that you did stated, how about the line of credit the revolver or any opportunity here to refinance that. What we're always looking the see how we can optimize and reduce – right now the term loan we have as you know and facility up for sales and there is current interest in that that could in 2017. So we all working towards that as the results improve it makes that much easier to do.

Okay. And then in the past you talked a little bit about the specific schools and some of the struggles with the marketing, is there any update as far as how these schools – you had talked about some personnel changes. Could you give us – is there anything to updated as far as what's been happening since you made the changes?

Sure. I mean I'll just say that we constantly valuing each of the campuses and their teams and we'll make changes as necessary. As of right now I can't say that the changes have materially changed their financials, but I can tell you that changes that they made and from all of us looking at our different departments feel very good that they're moving in the right direction just sometimes it takes a while to start seeing the impact at the bottom line, but as far as where we've made the changes we are definitely seeing progress as we would like.

Okay. What about the marketing initiatives, is there any plan or anything that you're doing different or planning to do different for 2017?

Well, we're always looking to change things up which you don't want to keep doing the same thing, so we're definitely focused a lot more on social media and expanding our opportunities there that's both a financial commitment as well as just getting more people engaged at the campuses whether it's employees or students or alone. We have a unique opportunity that we have with Schmidt Peterson racing that we're doing this year whereby not only [reporting] a lot of marketing efforts with them, but we have a unique mentorship program set up, so that a student and a faculty member from six of our campuses will get to go and work in the pit with them and we're hoping that's going to drive a lot of excitement both at the campuses, but also in the high school market and frankly should also lead to some interesting social media as well. So it's got to be a continued focus of ours and we'll continue to look at ways to enhance what we're doing, but it's really a long litany of changes without any major global changes that I can share with you Doug.

Okay. All right. Well thanks for answering the question. We're looking forward to the clean accounting quarter.

Yes, we all are.

Yes, thank you for doing what you're doing.

Thanks, Doug. Appreciated.

Thank you. [Operator Instructions] Our next question comes from the line of [indiscernible] with BMO Capital. Your line is open.

Good morning.

Good morning, Eric.

Good morning.

So there is two buildings for sale in West Palm and I think if I remember correctly you owned three, is that correct?

Correct.

All three are for sale.

Okay. That’s the change from last quarter correct?

That's correct.

All right. The two that fell through in September, do you often know the book value and recurring value of those buildings?

Yes. The book value of those buildings are approximately $90 million including the improvement and the appraisal value is slightly higher.

Okay. You said $19 million?

Correct, for the three building.

All right. Are those in yes, Scott for the back in transitional level?

It’s included in held for sale the assets and the buildings are included in the held for sale and school themselves are included in transitional which is continuing operations.

Okay. So do I have this correct that the book value of those two buildings is higher than the book value of the entire held for sale assets?

No, because the held for sale – I think that is…

$13.2 million now right after the impairment?

Yes, held for sale is $24.7 million. You're looking at the assets held for sales are $24.8 million and if you looking at net of our liabilities.

I got it. Okay, so in overwhelming majority of those two buildings?

Three buildings, correct.

For the carrying value that three buildings is 19 or the…?

Yes, the three buildings are 19, the three buildings.

Okay, all right. But the two buildings are almost 100,000 square feet, correct. And then last one small?

The last one smaller, I'm not sure...

Okay, all right. Do you have the depreciation for the [disk ops] segment for the year end quarter?

Right, for the disk ops segment, because we classified in this held for sale. There is no depreciation for the disk ops segment.

Okay. And there hasn't been for the entirety of its being in that…

That is correct. The only time that we have depreciation if we decide to close them and move them in transitional and then we do that catch up depreciation.

I gotcha, okay. And do you know what percent of the disk ops is in the hospitality field, culinary and what have you?

Majority of it all is medical though.

Medical yes, oh.

That I would say maybe we’ve been shutting down a lot of that, I’d say maybe 20%.

And then the other 80% nursing stuff?

Correct, medical. Yes.

Gotcha. And if I’m – that’s more desirable two or three was type [indiscernible] am I correct in that assumption?

Duty is in the height of the holder, but I would say yes in general, certainly nursing is a very strong program.

But also our culinary school in that segment is performing very well.

All right.

But I think a number of – at least one of your competitors has their culinary store and either run off what for sale, so.

Correct. Yes, in general they wrote challenge with the employment.

Right, gotcha, okay. Now the $6.7 million gain in other income, is that done now that we're in 2017…

That was from changing, we had lease back that we convert basically over to an operating at lease. So it does not go into 2017.

Gotcha. And the $9.4 million in Transportation and Skilled Trades very income that are there any one time gains in that.

No.

Okay. That’s it, thank you.

Great.

Thank you. End of Q&A

Thank you. And I'm showing no further question at this time. I would now like to turn the call back Mr. Shaw for closing remarks.

Thank you, operator, and thanks to everyone for participating in our call this morning. We continue to channel our efforts towards establishing sustained profitability while offering the high quality educational experience to our students that results in our graduates mastering marketable skills across a range of in demand industries. We are continuing to advance in a direction that supports these objectives and we look forward to updating you on our progress as developments occur. And talking with you again in May. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a wonderful day.