UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





Form
10-Q





(Mark
One)





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





For
the quarterly period ended March 31, 2009





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 ofincorporation
      or organization)
              (IRS
      Employer Identification No.)





200
      Executive Drive, Suite 340
              07052West
      Orange, NJ
              (Zip
      Code)(Address
      of principal executive offices)





(973)
736-9340


(Registrant’s
telephone number, including area code)





No
change


(Former
name, former address and former fiscal year, if changed since last
report)





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 x  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 o  No £





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





Large
      accelerated filer £
              
              Accelerated
      filer TNon-accelerated
      filer £
              (Do
      not check if a smaller reporting company)
              Smaller
      reporting company £





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £  No
T





As of May
6, 2009, there were 26,757,964 shares of the registrant’s common stock
outstanding.













LINCOLN EDUCATIONAL SERVICES CORPORATION AND
SUBSIDIARIES





INDEX TO
FORM 10-Q





FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2009











PART I.
                                            FINANCIAL INFORMATIONItem 1.
                                            Financial
      Statements
                                            1Condensed Consolidated Balance
      Sheets at March 31, 2009 and December 31, 2008
      (unaudited)
                                            1Condensed Consolidated Statements of
      Income for the three months ended March 31, 2009 and 2008
      (unaudited)
                                            3Condensed Consolidated Statement of
      Changes in Stockholders’ Equity for the three months ended March 31, 2009
      (unaudited)
                                            4Condensed Consolidated Statements of
      Cash Flows for the three months ended March 31, 2009 and 2008
      (unaudited)
                                            5Notes to Unaudited Condensed
      Consolidated Financial Statements
                                            7Item 2.
                                            Management’s Discussion and Analysis
      of Financial Condition and Results of
Operations
                                            14Item 3.
                                            Quantitative and Qualitative
      Disclosures About Market Risk
                                            20Item 4.
                                            Controls and
      Procedures
                                            20PART II.
                                            OTHER INFORMATION
                                            20Item 1.
                                            Legal
      Proceedings
                                            20Item 2.
                                            Unregistered Sales of Equity
      Securities and Use of Proceeds
                                            20Item 6.
                                            Exhibits
                                            20





Index





PART
I – FINANCIAL INFORMATION





Item 1. Financial Statements





LINCOLN EDUCATIONAL SERVICES CORPORATION AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands, except share amounts)


(Unaudited)





March 31,
                  2009
                
                
                December 31,
                  2008ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                15,220
                
                
                $
                15,234Restricted
      cash
                
                
                389
                
                
                
                383Accounts
      receivable, less allowance of $16,524 and $13,914 at March 31, 2009 and
      December 31, 2008, respectively
                
                
                25,268
                
                
                
                22,857Inventories
                
                
                3,354
                
                
                
                3,374Deferred
      income taxes, net
                
                
                6,253
                
                
                
                5,627Due
      from federal programs
                
                
                -
                
                
                
                828Prepaid
      expenses and other current assets
                
                
                7,994
                
                
                
                2,958Total
      current assets
                
                
                58,478
                
                
                
                51,261PROPERTY,
      EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and
      amortization of $86,495 and $83,345 at March 31, 2009 and December 31,
      2008, respectively
                
                
                142,093
                
                
                
                108,567OTHER
      ASSETS:Noncurrent
      accounts receivable, less allowance of $844 and $824 at March 31, 2009 and
      December 31, 2008, respectively
                
                
                3,377
                
                
                
                3,326Deferred
      finance charges
                
                
                582
                
                
                
                632Deferred
      income taxes, net
                
                
                5,588
                
                
                
                7,080Goodwill
                
                
                113,089
                
                
                
                91,460Other
      assets, net
                
                
                9,411
                
                
                
                5,716Total
      other assets
                
                
                132,047
                
                
                
                108,214TOTAL
                
                $
                332,618
                
                
                $
                268,042





See notes
to unaudited condensed consolidated financial statements.





1
 Index





LINCOLN
EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
thousands, except share amounts)


(Unaudited)


(Continued)





March 31,
                  2009
                
                
                December 31,
                  2008LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Current
      portion of long-term debt and lease obligations
                
                $
                10,667
                
                
                $
                130Unearned
      tuition
                
                
                43,331
                
                
                
                38,806Accounts
      payable
                
                
                15,492
                
                
                
                12,349Accrued
      expenses
                
                
                14,950
                
                
                
                16,239Advanced
      payments from federal funds
                
                
                173
                
                
                
                -Income
      taxes payable
                
                
                1,558
                
                
                
                3,263Other
      short-term liabilities
                
                
                804
                
                
                
                314Total
      current liabilities
                
                
                86,975
                
                
                
                71,101NONCURRENT
      LIABILITIES:Long-term
      debt and lease obligations, net of current portion
                
                
                37,388
                
                
                
                10,044Pension
      plan liabilities, net
                
                
                3,951
                
                
                
                4,335Accrued
      rent
                
                
                6,068
                
                
                
                5,972Other
      long-term liabilities
                
                
                1,959
                
                
                
                1,641Total
      liabilities
                
                
                136,341
                
                
                
                93,093COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY:Preferred
      stock, no par value - 10,000,000 shares authorized, no shares issued and
      outstanding at March 31, 2009 and December 31, 2008
                
                
                -
                
                
                
                -Common
      stock, no par value - authorized 100,000,000 shares at March 31, 2009 and
      December 31, 2008, issued and outstanding 27,244,657 shares at March 31,
      2009 and26,088,261 shares at December 31, 2008
                
                
                135,580
                
                
                
                120,597Additional
      paid-in capital
                
                
                15,362
                
                
                
                15,119Deferred
      compensation
                
                
                (3,340
                )
                
                
                (3,619
                )Treasury
      stock at cost - 615,000 shares at March 31, 2009 and December 31,
      2008
                
                
                (6,584
                )
                
                
                (6,584
                )Retained
      earnings
                
                
                61,042
                
                
                
                55,219Accumulated
      other comprehensive loss
                
                
                (5,783
                )
                
                
                (5,783
                )Total
      stockholders' equity
                
                
                196,277
                
                
                
                174,949TOTAL
                
                $
                332,618
                
                
                $
                268,042





See notes
to unaudited condensed consolidated financial statements.





2
 Index





LINCOLN EDUCATIONALSERVICES CORPORATION AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(In
thousands, except per share amounts)


(Unaudited)





Three
      Months Ended March 31,2009
                
                
                2008REVENUES
                
                $
                118,599
                
                
                $
                84,047COSTS
      AND EXPENSES:Educational
      services and facilities
                
                
                48,299
                
                
                
                36,629Selling,
      general and administrative
                
                
                59,612
                
                
                
                46,132(Gain)
      loss on sale of assets
                
                
                (2
                )
                
                
                37Total
      costs & expenses
                
                
                107,909
                
                
                
                82,798OPERATING
      INCOME
                
                
                10,690
                
                
                
                1,249OTHER:Interest
      income
                
                
                2
                
                
                
                45Interest
      expense
                
                
                (1,006
                )
                
                
                (504
                )Other
      income
                
                
                8
                
                
                
                -INCOME
      BEFORE INCOME TAXES
                
                
                9,694
                
                
                
                790PROVISION
      FOR INCOME TAXES
                
                
                3,871
                
                
                
                306NET
      INCOME
                
                $
                5,823
                
                
                $
                484BasicNet
      income per share
                
                $
                0.23
                
                
                $
                0.02DilutedNet
      income per share
                
                $
                0.22
                
                
                $
                0.02Weighted
      average number of common shares outstanding:Basic
                
                
                25,704
                
                
                
                25,660Diluted
                
                
                26,452
                
                
                
                26,249





See notes
to unaudited condensed consolidated financial statements.





3
 Index





LINCOLN EDUCATIONAL SERVICES CORPORATION AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY


(In
thousands, except share amounts)


(Unaudited)





Common
      Stock
                        
                        
                        Additional
                          Paid-in
                        
                        
                        Deferred
                        
                        
                        Treasury
                        
                        
                        Retained
                        
                        
                        Accumulated
      Other ComprehensiveShares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Compensation
                        
                        
                        Stock
                        
                        
                        Earnings
                        
                        
                        Loss
                        
                        
                        TotalBALANCE
      - January 1, 2009
                        
                        
                        26,088,261
                        
                        
                        $
                        120,597
                        
                        
                        $
                        15,119
                        
                        
                        $
                        (3,619
                        )
                        
                        $
                        (6,584
                        )
                        
                        $
                        55,219
                        
                        
                        $
                        (5,783
                        )
                        
                        $
                        174,949Net
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        5,823
                        
                        
                        
                        -
                        
                        
                        
                        5,823Stock-based
      compensation expenseRestricted
      stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        279
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        279Stock
      options
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        258
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        258Tax
      benefit of options exercised
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        40
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        40Sale
      of common stock,
                        
                        
                        1,150,000
                        
                        
                        
                        14,932
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        14,932net
      of expensesNet
      share settlement for equity-based compensation
                        
                        
                        (3,871
                        )
                        
                        
                        -
                        
                        
                        
                        (55
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (55
                        )Exercise
      of stock options
                        
                        
                        10,267
                        
                        
                        
                        51
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        51BALANCE
      - March 31, 2009
                        
                        
                        27,244,657
                        
                        
                        $
                        135,580
                        
                        
                        $
                        15,362
                        
                        
                        $
                        (3,340
                        )
                        
                        $
                        (6,584
                        )
                        
                        $
                        61,042
                        
                        
                        $
                        (5,783
                        )
                        
                        $
                        196,277





See notes
to unaudited condensed consolidated financial statements.





4
 Index





LINCOLNEDUCATIONAL SERVICES CORPORATION AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)





Three
      Months Ended March 31,2009
                
                
                2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                
                $
                5,823
                
                
                $
                484Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                5,249
                
                
                
                4,370Amortization
      of deferred finance charges
                
                
                50
                
                
                
                48Deferred
      income taxes
                
                
                (498
                )
                
                
                (493
                )(Gain)
      loss on disposition of assets
                
                
                (2
                )
                
                
                37Provision
      for doubtful accounts
                
                
                7,248
                
                
                
                4,030Stock-based
      compensation expense
                
                
                537
                
                
                
                558Tax
      benefit associated with exercise of stock options
                
                
                (40
                )
                
                
                (2
                )Deferred
      rent
                
                
                94
                
                
                
                110(Increase)
      decrease in assets, net of acquisitions:Accounts
      receivable
                
                
                (6,813
                )
                
                
                (1,219
                )Inventories
                
                
                155
                
                
                
                (42
                )Prepaid
      expenses and current assets
                
                
                (47
                )
                
                
                (400
                )Due
      from federal programs
                
                
                1,001
                
                
                
                6,192Other
      assets
                
                
                (449
                )
                
                
                247Increase
      (decrease) in liabilities, net of acquisitions:Accounts
      payable
                
                
                (2,287
                )
                
                
                1,723Other
      liabilities
                
                
                53
                
                
                
                (487
                )Income
      taxes payable/prepaid
                
                
                (1,665
                )
                
                
                (4,539
                )Accrued
      expenses
                
                
                (4,370
                )
                
                
                604Unearned
      tuition
                
                
                (1,746
                )
                
                
                (3,674
                )Total
      adjustments
                
                
                (3,530
                )
                
                
                7,063Net
      cash provided by operating activities
                
                
                2,293
                
                
                
                7,547CASH
      FLOWS FROM INVESTING ACTIVITIES:Restricted
      cash
                
                
                356
                
                
                
                -Capital
      expenditures
                
                
                (2,483
                )
                
                
                (7,440
                )Proceeds
      from sale of property and equipment
                
                
                19
                
                
                
                -Acquisitions,
      net of cash acquired
                
                
                (24,933
                )
                
                
                -Net
      cash used in investing activities
                
                
                (27,041
                )
                
                
                (7,440
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from borrowings
                
                
                40,000
                
                
                
                7,000Payments
      on borrowings
                
                
                (30,000
                )
                
                
                (5,000
                )Proceeds
      from exercise of stock options
                
                
                51
                
                
                
                62Tax
      benefit associated with exercise of stock options
                
                
                40
                
                
                
                2Net
      share settlement for equity-based compensation
                
                
                (55
                )
                
                
                -Principal
      payments under capital lease obligations
                
                
                (234
                )
                
                
                (53
                )Proceeds
      from issuance of common stock, net of issuance costs
                
                
                14,932
                
                
                
                -Net
      cash provided by financing activities
                
                
                24,734
                
                
                
                2,011NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                
                
                (14
                )
                
                
                2,118CASH
      AND CASH EQUIVALENTS—Beginning of year
                
                
                15,234
                
                
                
                3,502CASH
      AND CASH EQUIVALENTS—End of year
                
                $
                15,220
                
                
                $
                5,620





See notes
to unaudited condensed consolidated financial statements.





5
 Index





LINCOLN
EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
thousands)


(Unaudited)


(Continued)





Three
      Months Ended March 31,2009
                
                
                2008SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the year for:Interest
                
                $
                533
                
                
                $
                484Income
      taxes
                
                $
                6,617
                
                
                $
                5,641SUPPLEMENTAL
      SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:Cash
      paid during the period for:Fixed
      assets acquired in noncash transactions
                
                $
                302
                
                
                $
                1,969





See notes
to unaudited condensed consolidated financial statements.





6
 Index





LINCOLN EDUCATIONAL SERVICES CORPORATION AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS


THREE
MONTHS ENDED MARCH 31, 2009 AND 2008


(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 subsidiaries
(the "Company") is a diversified provider of career-oriented post-secondary
education. The Company offers recent high school graduates and working adults
degree and diploma programs in five principal areas of study: automotive
technology, health sciences, skilled trades, business and information technology
and hospitality services. The Company currently has 42 schools in 17 states
across the United States.





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 and in accordance with
accounting principles generally accepted in the United States of America
(“GAAP”).  Certain information and footnote disclosures normally
included in annual financial statements have been omitted or condensed pursuant
to such regulations.  These statements, should be read in conjunction
with the December 31, 2008 consolidated financial statements of the Company, and
reflect all adjustments, consisting solely of normal recurring adjustments,
necessary to present fairly the consolidated financial position, results of
operations, and cash flows for such periods.  The results of
operations for the three months ended March 31, 2009 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2009.





The
unaudited condensed consolidated financial statements include the accounts of
the Company and its subsidiaries.  All 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,
fixed assets, goodwill and other intangible assets, stock-based compensation,
income taxes, benefit plans and certain accruals.  Actual results
could differ from those estimates.





Stock Based
Compensation – The Company accounts for stock-based employee compensation
arrangements in accordance with the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 123R, “Share Based
Payment.” The accompanying condensed consolidated statements
of operations include compensation expense of approximately $0.5 million and
$0.6 million for the three months ended March 31, 2009 and 2008,
respectively.  The Company uses the Black-Scholes valuation model and
utilizes straight-line amortization of compensation expense over the requisite
service period of the grant.  The Company makes an estimate of
expected forfeitures at the time options are granted.





2.             RECENT
ACCOUNTING PRONOUNCEMENTS





In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles,” (“SFAS No. 162”).  SFAS No.
162 identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial
statements.  SFAS No. 162 was effective for the Company as of November
15, 2008.  The implementation of this standard had no effect on the
Company’s consolidated financial statements.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities,” (“SFAS No. 161”) –an amendment to FASB
Statement No. 133.   SFAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under SFAS No. 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance and cash flows. The
Statement is effective for the Company as of January 1, 2009. The adoption of
the provision of SFAS No. 161 had no effect on the Company’s consolidated
financial statements.





In
December 2007, the FASB issued SFAS No. 141R, "Business Combinations"
(“SFAS No. 141R”). SFAS No. 141R establishes revised principles and requirements
for how the Company will recognize and measure assets and liabilities acquired
in a business combination. SFAS 141R requires, among other things, transaction
costs incurred in a business combination to be expensed, establishes a new
measurement date for valuing acquirer shares issued in consideration for a
business combination, and requires the recognition of contingent consideration
and pre-acquisition gain and loss contingencies.  SFAS No. 141R was
effective for business combinations completed on or after January 1,
2009.  For the three months ended March 31, 2009, the Company expensed
$0.7 million of costs incurred related to an acquisition.





7
 Index





In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research Bulletin
(“ARB”) No. 51" (“SFAS No. 160”). SFAS No. 160 establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for the Company as of
January 1, 2009.  The adoption of the provision of SFAS No. 160R had
no effect on the Company’s consolidated financial statements.





3.             WEIGHTED
AVERAGE COMMON SHARES





The
weighted average number of common shares used to compute basic and diluted
income per share for the three months ended March 31, 2009 and 2008,
respectively, was as follows:





Three
      Months Ended March 31,2009
                  
                  
                  2008Basic
      shares outstanding
                  
                  
                  25,704,345
                  
                  
                  
                  25,659,964Dilutive
      effect of stock options
                  
                  
                  747,775
                  
                  
                  
                  589,315Diluted
      shares outstanding
                  
                  
                  26,452,120
                  
                  
                  
                  26,249,279





For the
three months ended March 31, 2009 and 2008, options to acquire 280,000 and
581,708 shares, respectively, were excluded from the above table as the effect
of their inclusion on reported earnings per share would have been
antidilutive.





4.             BUSINESS
ACQUISITIONS





On
January 20, 2009, the Company completed the acquisition of six of the seven
schools comprising Baran Institute of Technology, Inc. (“BAR”), for
approximately $24.9 million in cash, net of cash acquired, subject to further
customary post closing adjustments.  BAR consists of seven schools
serving approximately 1,800 students as of March 31, 2009 and offers associate
and diploma programs in the fields of automotive, skilled trades, health
sciences and culinary arts.  The six schools the Company acquired on
January 20, 2009 are Baran Institute of Technology in East Windsor, Connecticut
(“BIT”), Connecticut Culinary Institute in Hartford, Connecticut (“CCIH”),
Connecticut Culinary Institute in Suffield, Connecticut (“CCIS”), Americare
School of Nursing in Fern Park, Florida (“ASNF”), Americare School of Nursing in
St. Petersburg, Florida (“ASNS”), and Engine City Technical Institute in South
Plainfield, New Jersey (“ECTI”), see Note 13.  The Company also
acquired the membership interests of Hartford Urban Ventures, LLC and certain
assets and assumed certain liabilities of Educational Properties, LLC, which
provide support services to BAR.  In connection with these
acquisitions, the Company recorded a charge of approximately $0.7 million for
the three months ended March 31, 2009 to reflect the expenses related to the
acquisitions.





On
December 1, 2008, the Company acquired all of the rights, title and interest in
the assets of Briarwood College (“BRI”) for approximately $10.6 million, net of
cash acquired.  Briarwood is regionally accredited by the New England
Association of Schools and Colleges, and currently offers two bachelor’s degree
programs to approximately 600 students as of March 31, 2009 from Connecticut and
surrounding states.





The
consolidated financial statements include the results of operations from the
respective acquisition dates. The purchase price has been preliminarily
allocated to identifiable net assets with the excess of the purchase price over
the estimated fair value of the net assets acquired recorded as
goodwill.  The allocation may be revised when the Company receives
final information including appraisals, valuations and other analyses related to
certain intangible assets.





8
 Index





The
following table summarizes the estimated fair value of assets acquired and
liabilities related to acquisitions:





BAR January 20, 2009
                                            
                                            
                                            BRI December 1, 2008Restricted
      cash
                                            
                                            $
                                            362
                                            
                                            
                                            $
                                            -Current
      assets, excluding cash acquired (1)
                                            
                                            
                                            7,734
                                            
                                            
                                            
                                            195Property,
      equipment and facilities
                                            
                                            
                                            36,307
                                            
                                            
                                            
                                            1,265Goodwill
                                            
                                            
                                            21,581
                                            
                                            
                                            
                                            8,794Identified
      intangibles:Student
      contracts
                                            
                                            
                                            800
                                            
                                            
                                            
                                            348Trade
      name
                                            
                                            
                                            715
                                            
                                            
                                            
                                            -Accreditation
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,000Curriculum
                                            
                                            
                                            700
                                            
                                            
                                            
                                            1,300Non-compete
                                            
                                            
                                            1,500
                                            
                                            
                                            
                                            -Other
      long-term assets
                                            
                                            
                                            844
                                            
                                            
                                            
                                            21Current
      liabilities assumed
                                            
                                            
                                            (18,160
                                            )
                                            
                                            
                                            (1,539
                                            )Long-term
      liabilities assumed
                                            
                                            
                                            (27,450
                                            )
                                            
                                            
                                            (816
                                            )Cost
      of acquisition, net of cash acquired
                                            
                                            $
                                            24,933
                                            
                                            
                                            $
                                            10,568





(1)
Current assets, excluding cash acquired for BAR includes estimated amounts due
from the seller in accordance with the stock purchase agreement.





5.             GOODWILL
AND OTHER INTANGIBLE ASSETS





The
Company accounts for its goodwill and intangible assets in accordance with SFAS
No. 141R and SFAS No. 142,“Goodwill and Other Intangible Assets.”  The Company reviews
intangible assets for impairment when indicators of impairment
exist.  Annually, or more frequently, if necessary, the Company
evaluates goodwill for impairment, with any resulting impairment reflected as an
operating expense.





Changes
in the carrying amount of goodwill from December 31, 2008 through March 31, 2009
are as follows (in thousands):





Goodwill
      balance as of December 31, 2008
                  
                  $
                  91,460Goodwill
      adjustments (1)
                  
                  
                  48Goodwill
      acquired pursuant to business acquisition-BAR
                  
                  
                  21,581Goodwill
      balance as of March 31, 2009
                  
                  $
                  113,089





(1)
Goodwill adjustments relate to the settlement of the final purchase price of
BRI.





9
 Index





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





At March 31, 2009
                            
                            
                            At December 31, 2008Weighted Average Amortization Period
      (years)
                            
                            
                            Gross Carrying Amount
                            
                            
                            Accumulated Amortization
                            
                            
                            Net Carrying Amount
                            
                            
                            Gross Carrying Amount
                            
                            
                            Accumulated Amortization
                            
                            
                            Net Carrying AmountStudent
      contracts
                            
                            
                            2
                            
                            
                            $
                            3,363
                            
                            
                            $
                            2,384
                            
                            
                            $
                            979
                            
                            
                            $
                            2,563
                            
                            
                            $
                            2,230
                            
                            
                            $
                            333Trade
      name
                            
                            Indefinite
                            
                            
                            
                            1,688
                            
                            
                            
                            -
                            
                            
                            
                            1,688
                            
                            
                            
                            1,270
                            
                            
                            
                            -
                            
                            
                            
                            1,270Trade
      name
                            
                            
                            6
                            
                            
                            
                            297
                            
                            
                            
                            10
                            
                            
                            
                            287
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Accreditation
                            
                            Indefinite
                            
                            
                            
                            1,307
                            
                            
                            
                            -
                            
                            
                            
                            1,307
                            
                            
                            
                            1,307
                            
                            
                            
                            -
                            
                            
                            
                            1,307Curriculum
                            
                            
                            10
                            
                            
                            
                            2,700
                            
                            
                            
                            363
                            
                            
                            
                            2,337
                            
                            
                            
                            2,000
                            
                            
                            
                            289
                            
                            
                            
                            1,711Non-compete
                            
                            
                            3
                            
                            
                            
                            1,701
                            
                            
                            
                            220
                            
                            
                            
                            1,481
                            
                            
                            
                            201
                            
                            
                            
                            105
                            
                            
                            
                            96Total
                            
                            
                            
                            
                            
                            $
                            11,056
                            
                            
                            $
                            2,977
                            
                            
                            $
                            8,079
                            
                            
                            $
                            7,341
                            
                            
                            $
                            2,624
                            
                            
                            $
                            4,717





The
increase in student contracts, trade name, curriculum and non-compete assets was
due to the acquisition of BAR on January 20, 2009.





Amortization
of intangible assets was approximately $353 thousand and $30 thousand for the
three months ended March 31, 2009 and 2008, respectively.





The
following table summarizes the estimated future amortization
expense:





Year Ending December 31,2009
                    
                    $
                    1,1762010
                    
                    
                    1,3092011
                    
                    
                    8362012
                    
                    
                    3412013
                    
                    
                    303Thereafter
                    
                    
                    1,119$
                    5,084





6.             LONG-TERM
DEBT AND LEASE OBLIGATIONS





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





March 31,
                    2009
                  
                  
                  December 31,
                    2008Credit
      agreement (a)
                  
                  $
                  10,000
                  
                  
                  $
                  -Finance
      obligation (b)
                  
                  
                  9,672
                  
                  
                  
                  9,672Notes
      payable (with rates ranging from 7.8% to 10.2%)
                  
                  
                  554
                  
                  
                  
                  -Capital
      lease - property (c)
                  
                  
                  27,353
                  
                  
                  
                  -Capital
      leases-equipment (with rates ranging from 8.4% to 8.7%)
                  
                  
                  476
                  
                  
                  
                  50248,055
                  
                  
                  
                  10,174Less
      current maturities
                  
                  
                  (10,667
                  )
                  
                  
                  (130
                  )$
                  37,388
                  
                  
                  $
                  10,044





(a) The
Company has a credit agreement with a syndicate of banks which expires on
February 15, 2010.  Under the terms of the credit agreement, the
syndicate provided the Company with a $100 million credit
facility.  The credit agreement permits the issuance of up to $20
million in letters of credit, the amount of which reduces the availability of
permitted borrowings under the agreement.  At the time of entering
into the credit agreement, the Company incurred approximately $0.8 million of
deferred finance charges.  At March 31, 2009, the Company had
outstanding letters of credit aggregating $5.6 million which were primarily
comprised of letters of credit for the Department of Education and real estate
leases.





10
 Index





The
obligations of the Company under the credit agreement are secured by a lien on
substantially all of the assets of the Company and its subsidiaries and any
assets that it or its subsidiaries may acquire in the future, including a pledge
of substantially all of the subsidiaries’ common stock.  Outstanding
borrowings bear interest at the rate of adjusted LIBOR plus 1.0% to 1.75%, as
defined, or a base rate (as defined in the credit agreement).  In
addition to paying interest on outstanding principal under the credit agreement,
the Company and its subsidiaries are required to pay a commitment fee to the
lender with respect to the unused amounts available under the credit agreement
at a rate equal to 0.25% to 0.40% per year, as defined.





As of
December 31, 2008, the Company had no amounts outstanding under its credit
agreement.  During the three months ended March 31, 2009, the Company
borrowed a total of $40.0 million and repaid $30.0 million under its credit
agreement.  As of March 31, 2009, the Company had $10.0 million
outstanding borrowings under its credit agreement.  Interest rates on
the loans during the first quarter of 2009 ranged from 1.52% to
3.25%.





The
credit agreement contains various covenants, including a number of financial
covenants.  Furthermore, the credit agreement contains customary
events of default as well as an event of default in the event of the suspension
or termination of Title IV Program funding for the Company’s and its
subsidiaries' schools aggregating 10% or more of the Company’s EBITDA (as
defined) or its consolidated total assets and such suspension or termination is
not cured within a specified period.  As of March 31, 2009, the
Company was in compliance with the financial covenants contained in the credit
agreement.





(b) The
Company completed a sale and a leaseback of several facilities on December 28,
2001. The Company retained a continuing involvement in the lease and as a result
it is prohibited from utilizing sale-leaseback accounting. Accordingly, the
Company has treated this transaction as a finance lease. The lease expiration
date is December 31, 2016.





(c) As
part of the acquisition of BAR the Company assumed real estate capital leases
related to ASNF and CCIH.  These leases bear interest at 8% and expire
in 2032 and 2031, respectively.





7.             EQUITY





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 an award of restricted shares of common stock
totaling 200,000 shares, valued at $2.9 million, on October 30, 2007; 80,000
shares, valued at $1.0 million, on February 29, 2008; 8,000 shares, valued at
$0.1 million, on May 2, 2008; and 8,000 shares, valued at $0.1 million, on May
5, 2008.  As of March 31, 2009, there were a total of 296,000
restricted shares awarded and 56,000 shares vested under the
LTIP.  The restricted shares vest ratably on the first through fifth
anniversary of the grant date; however, there is no vesting period on the right
to vote or the right to receive dividends on these restricted
shares.  The recognized restricted stock expense for the three months
ended March 31, 2009 and 2008 was $0.2 million and $0.2 million, respectively.
The deferred compensation or unrecognized restricted stock expense under the
LTIP as of March 31, 2009 and December 31 2008 was $3.0 million and $3.2
million, respectively.





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
ratably on the first through third anniversary of the grant date; however, there
is no vesting period on the right to vote or the right to receive dividends on
these restricted shares. As of March 31, 2009, there were a total of 84,954
shares awarded and 40,138 shares vested under the Non-Employee Directors Plan.
The recognized restricted stock expense for the three months ended March 31,
2009 and 2008 was $0.1 million and $0.1 million, respectively. The deferred
compensation or unrecognized restricted stock expense under the Non-Employee
Directors Plan as of March 31, 2009 and December 31, 2008 was $0.3 million and
$0.4 million, respectively.





On April
1, 2008, the Company’s Board of Directors approved the repurchase of up to
1,000,000 shares of its common stock over the period of one year.  The
purchases may be made in the open market or in privately negotiated transactions
from time to time as permitted by securities laws and other legal
requirements.  The timing, manner, price and amount of any repurchases
will be determined by the Company in its discretion and will be subject to
economic and market conditions, stock price, applicable legal requirements and
other factors.  The program may be suspended or discontinued at any
time.  The Company did not repurchase any shares of its common stock
during the three months ended March 31, 2009.





In 2008
and 2009, the Company completed a net share settlement for 13,512 and 3,871
restricted shares, respectively, on behalf of some 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 to taxes incurred on
restricted shares that vested and were transferred to the employee during 2008
and/or 2009, creating taxable income for the employee.   The
Company has agreed to pay these taxes on behalf of the employees in return for
the employee returning an equivalent value of restricted shares to the
Company.  This transaction resulted in a decrease of approximately
$0.2 million and $0.1 million in 2008 and 2009, respectively, to equity on the
consolidated balance sheets as the cash payment of the taxes effectively was a
repurchase of the restricted shares granted in previous years.





11
 Index





On
February 18, 2009, the Company issued 1.15 million shares of common stock in a
public offering and received net proceeds of approximately $14.9 million, after
deducting underwriting commissions and offering expenses of approximately $1.2
million.




Fair
Value of 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 weighted average fair values of options granted
during 2009 were $7.34 using the following weighted average assumptions for
grants:





March 31, 2009Expected
      volatility
                  
                  
                  51.95
                  %Expected
      dividend yield
                  
                  
                  0
                  %Expected
      life (term)
                  
                  6
      YearsRisk-free
      interest rate
                  
                  
                  2.29
                  %Weighted-average
      exercise price during the year
                  
                  $
                  14.36








The
following is a summary of transactions pertaining to the stock
options:





Shares
                      
                      
                      Weighted Average Exercise Price Per
      Share
                      
                      Weighted Average Remaining Contractual
      Term
                      
                      Aggregate intrinsic Value (in
      thousands)Outstanding
      December 31, 2008
                      
                      
                      1,474,215
                      
                      
                      $
                      9.98
                      
                      5.25
      years
                      
                      
                      6,808Granted
                      
                      
                      27,000
                      
                      
                      
                      14.36Canceled
                      
                      
                      (13,000
                      )
                      
                      
                      13.10Exercised
                      
                      
                      (10,267
                      )
                      
                      
                      4.98
                      
                      
                      
                      
                      48Outstanding
      March 31, 2009
                      
                      
                      1,477,948
                      
                      
                      
                      10.07
                      
                      5.08
      years
                      
                      
                      12,727Exercisable
      as of March 31, 2009
                      
                      
                      1,227,237
                      
                      
                      
                      9.21
                      
                      4.44
      years
                      
                      
                      11,627





As of
March 31, 2009, the pre-tax compensation expense for all unvested stock option
awards was $1.0 million.  This amount will be expensed over the
weighted-average period of approximately 2.1 years.





The
following table presents a summary of stock options outstanding:





At March 31, 2009Stock Options Outstanding
                            
                            
                            Stock Options ExercisableRange of Exercise Prices
                            
                            
                            Shares
                            
                            
                            Contractual Weighted Average life
      (years)
                            
                            
                            Weighted Average
                              Price
                            
                            
                            Shares
                            
                            
                            Weighted Exercise
                              Price$
                            3.10
                            
                            
                            
                            620,407
                            
                            
                            
                            2.78
                            
                            
                            $
                            3.10
                            
                            
                            
                            620,407
                            
                            
                            $
                            3.10$
                            4.00-$13.99
                            
                            
                            
                            290,333
                            
                            
                            
                            8.23
                            
                            
                            
                            11.81
                            
                            
                            
                            143,182
                            
                            
                            
                            11.66$
                            14.00-$19.99
                            
                            
                            
                            449,708
                            
                            
                            
                            6.13
                            
                            
                            
                            15.22
                            
                            
                            
                            368,548
                            
                            
                            
                            14.98$
                            20.00-$25.00
                            
                            
                            
                            117,500
                            
                            
                            
                            5.36
                            
                            
                            
                            22.88
                            
                            
                            
                            95,100
                            
                            
                            
                            23.081,477,948
                            
                            
                            
                            5.08
                            
                            
                            
                            10.07
                            
                            
                            
                            1,227,237
                            
                            
                            
                            9.21








12
 Index





8.          INCOME
TAXES





The
effective tax rate for the three months ended March 31, 2009 and 2008 was 39.9%
and 38.7%, respectively.





9.          CONTINGENCIES





Litigation and
Regulatory Matters– In the ordinary conduct of its business, the Company
is subject to periodic 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 proceeding to which it
is a party will have a material adverse effect on the Company’s business,
financial condition, results of operations or cash flows.





10.          PENSION
PLAN





The
Company sponsors a noncontributory defined benefit pension plan covering
substantially all of the Company’s union employees.  Benefits are
provided based on employees’ years of service and earnings.  This plan
was frozen on December 31, 1994 for non-union employees.  The total
amount of the Company’s contributions paid under its pension plan was $0.6
million and $0 for the three months ended March 31, 2009 and 2008,
respectively.  The net periodic benefit cost was $245 thousand for the
three months ended March 31, 2009.  The net periodic benefit income
was $17 thousand for the three months ended March 31, 2008.





11.          RELATED
PARTY





As part
of the acquisition of BAR, the Company entered into an operating lease with
Educational Properties, LLC, for the BIT facility located at 1760 Mapleton
Avenue, Suffield, Connecticut.  Bradley Baran is a member of
Educational Properties, LLC and is currently an employee of the
Company.





12.          OTHER
ASSETS





The
Company acquired 100% of the membership units of Hartford Urban Ventures, LLC,
which has a 5% ownership interest in CCI/85 Sigourney, LLC.  The
Company leases from CCI/85 Sigourney, LLC, under a capital lease, the CCI
facility located at 85 Sigourney Street, Hartford, Connecticut.  The
investment of $0.3 million is included in other assets in the condensed
consolidated balance sheet at March 31, 2009.





13.          SUBSEQUENT
EVENT





On April
20, 2009, the Company acquired the seventh Baran school, Clemens College, for
$2.8 million.  The purchase price may be subject to revisions when the
Company receives final information including appraisals, valuations and other
analyses.





13
 Index





Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





The
following discussion may contain forward-looking statements regarding us, 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, 2008, as filed with the Securities and Exchange Commission (“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 filed on 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,
2008, as filed with the SEC, which includes audited consolidated financial
statements for our three fiscal years ended December 31, 2008.





General





We are a
leading and diversified provider of career-oriented post-secondary education. We
offer recent high school graduates and working adults degree and diploma
programs in five areas principal of study: automotive technology, health
sciences, skilled trades, business and information technology and hospitality
services. Each area of study is specifically designed to appeal to and meet the
educational objectives of our student population, while also satisfying the
criteria established by industry and employers and state and federal accrediting
bodies. We believe that diversification limits our dependence on any one
industry for enrollment growth or placement opportunities and broadens our
opportunity to introduce new programs. As of March 31, 2009, 25,588 students
were enrolled at our 42 campuses across 17 states. Our campuses primarily
attract students from their local communities and surrounding areas, although
our destination schools attract students from across the United States, and in
some cases, from abroad.





Critical
Accounting Policies and Estimates





Our
discussions of our financial condition and results of operations are based upon
our 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 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, fixed assets, goodwill and other
intangible assets, income taxes 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. There are
also areas in which management's judgment in selecting any available alternative
would not produce a materially different result from the result derived from the
application of our critical accounting policies. We believe that the following
accounting policies are most critical to us in that they represent the primary
areas where financial information is subject to the application of management’s
estimates, assumptions and judgment in the preparation of our consolidated
financial statements.





Revenue
recognition.  Revenues are derived primarily from programs
taught at 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,
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.  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.  Other revenues, such as tool sales and contract training
revenues are recognized as goods are delivered or services are
performed.  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.





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, a student’s status (in-school or out-of-school),
whether or not additional financial aid funding will be collected from Title IV
Programs or other sources, 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.





14
 Index





Our bad
debt expense as a percentage of revenues for the three months ended March 31,
2009 and 2008 was 6.1% and 4.8%, 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 the three months ended March 31, 2009
and 2008 would have resulted in an increase in bad debt expense of $1.2 million
and $0.8 million, respectively.





Because a
substantial portion of our revenues 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 our ability to
realize our receivables.





Goodwill.
We test our goodwill for impairment annually, or whenever events or changes in
circumstances indicate 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.





Goodwill
represents a significant portion of our total assets. As of March 31, 2009,
goodwill represented approximately $113.1 million, or 34.0%, of our total
assets. At December 31, 2008, we tested our goodwill for impairment utilizing a
market capitalization approach and determined that there was no impairment of
our goodwill.  No events have occurred subsequently that would have
required retesting.





Stock-based
compensation.  We currently account for stock-based employee
compensation arrangements in accordance with the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 123R, “Share Based
Payment.”  We use a fair value-based method of accounting for
options as prescribed by SFAS No. 123 “Accounting for Stock-Based
Compensation.”





Bonus
costs.  We accrue the estimated cost of our bonus programs
using current financial and statistical information as compared to targeted
financial achievements and key performance objectives.  Although we
believe our estimated liability recorded for bonuses is reasonable, actual
results could differ and require adjustment of the recorded
balance.





Effect
of Inflation





Inflation
has not had a material effect on our operations.





Recent
Accounting Pronouncements





In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles,” (“SFAS No. 162”).  SFAS No.
162 identifies the sources of accounting principles and the framework for
selecting the principles used in the preparation of financial
statements.  SFAS No. 162 was effective for us as of November 15,
2008.  The implementation of this standard had no effect on our
consolidated financial statements.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities,” (“SFAS No. 161”) –an amendment to FASB
Statement No. 133.   SFAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under SFAS No. 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows.
The Statement is effective for us as of January 1, 2009. The adoption of the
provision of SFAS No. 161 had no effect on our consolidated financial
statements.




In
December 2007, the FASB issued SFAS No. 141R, "Business Combinations"(“SFAS No. 141R”). SFAS No. 141R establishes revised principles and
requirements for how we will recognize and measure assets and liabilities
acquired in a business combination. SFAS No. 141R requires, among other things,
transaction costs incurred in a business combination to be expensed, establishes
a new measurement date for valuing acquirer shares issued in consideration for a
business combination, and requires the recognition of contingent consideration
and pre-acquisition gain and loss contingencies.  SFAS No. 141R was
effective for our business combinations completed on or after January 1,
2009.  For the three months ended March 31, 2009, we expensed $0.7
million of costs incurred related to an acquisition.





In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of Accounting Research Bulletin
(“ARB”) No. 51"(“SFAS No. 160”). SFAS No. 160 establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS No. 160 is effective for us as of January
1, 2009. The adoption of the provision of SFAS No. 160 had no effect on our
consolidated financial statements.





15
 Index





Results
of Operations





Certain
reported amounts in our analysis have been rounded for presentation
purposes.





The
following table sets forth selected consolidated statements of operations data
as a percentage of revenues for each of the periods indicated:





Three Months Ended
      March 31,2009
                  
                  
                  2008Revenues
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Costs
      and expenses:Educational
      services and facilities
                  
                  
                  40.7
                  %
                  
                  
                  43.6
                  %Selling,
      general and administrative
                  
                  
                  50.3
                  %
                  
                  
                  54.9
                  %Total
      costs and expenses
                  
                  
                  91.0
                  %
                  
                  
                  98.5
                  %Operating
      income
                  
                  
                  9.0
                  %
                  
                  
                  1.5
                  %Interest
      expense, net
                  
                  
                  -0.8
                  %
                  
                  
                  -0.5
                  %Income
      from continuing operations before income taxes
                  
                  
                  8.2
                  %
                  
                  
                  1.0
                  %Provision
      for income taxes
                  
                  
                  3.3
                  %
                  
                  
                  0.4
                  %Income
      from continuing operations
                  
                  
                  4.9
                  %
                  
                  
                  0.6
                  %





Three
Months Ended March 31, 2009 Compared to Three Months Ended March 31,
2008





Revenues.    Revenues
increased by $34.6 million, or 41.1%, to $118.6 million for the quarter ended
March 31, 2009 from $84.0 million for the quarter ended March 31, 2008.
Approximately $11.6 million of this increase was a result of our acquisitions of
Briarwood College on December 1, 2008 and Baran Institute of Technology, Inc. on
January 20, 2009 (the “Acquisitions”).  Excluding the Acquisitions,
the increase in revenues was primarily attributable to a 22.4% increase in
average student population, which increased to 22,597 for the quarter ended
March 31, 2009 from 18,459 for the quarter ended March 31, 2008.  The
remainder of this increase was due to tuition increases.  For a
general discussion of trends in our student enrollment, see “Seasonality and
Trends” below.





Educational
services and facilities expenses.   Our educational
services and facilities expenses increased by $11.7 million, or 31.9%, to $48.3
million for the quarter ended March 31, 2009 from $36.6 million for the quarter
ended March 31, 2008. The Acquisitions accounted for $6.4 million, or 54.7%, of
this increase. Excluding the Acquisitions, the increase in educational services
and facilities expenses was primarily due to instructional expenses which
increased by $2.7 million, or 14.0%, and books and tools expenses, which
increased by $1.9 million, or 43.5%, respectively, over the same quarter in
2008. This increase was attributable to a 35.1% increase in student starts for
the first quarter of 2009 as compared to the first quarter in 2008 and the
overall increase in student population and higher tool sales during the first
quarter of 2009 compared to the first quarter of 2008.  On a same
school basis, we began 2009 with approximately 3,000 more students than we had
on January 1, 2008, and as of March 31, 2009, our population on a same school
basis was approximately 4,500 higher than as of March 31,
2008.  Educational services and facilities expenses as a percentage of
revenues decreased to 40.7% for the first quarter of 2009 from 43.6% for the
first quarter of 2008.





Selling, general
and administrative expenses.    Our selling, general
and administrative expenses for the quarter ended March 31, 2009 were $59.6
million, an increase of $13.5 million, or 29.2%, from $46.1 million for the
quarter ended March 31, 2008. Approximately $6.4 million, or 47.4%, of this
increase was attributable to the Acquisitions. Excluding the Acquisitions, the
increase in our selling, general and administrative expenses for the quarter
ended March 31, 2009 was primarily due to: (a) a $0.6 million, or 16.1%,
increase in student services; (b) a $1.4 million, or 8.1%, increase in sales and
marketing; and (c) a $5.0 million, or 20.3%, increase in administrative expenses
as compared to the quarter ended March 31, 2008.





16
 Index





The
increase in student services was primarily due to increases in compensation and
benefit expenses attributable to increased financial aid and career services
personnel as a result of the larger student population during the first quarter
of 2009 as compared to the first quarter of 2008.   The increase
in administrative expenses during the first quarter of 2009 as compared to the
first quarter of 2008 was primarily due to: (a) a $2.3 million increase in
personnel costs, relating to annual compensation increases, increased incentive
compensation and increased cost of benefits provided to employees;
(b)  a $1.9 million increase in bad debt expense; and (c) $0.7 million
of  acquisition costs incurred in the first quarter of 2009 related to
our acquisition of Baran Institute of Technology, Inc. (“BAR”) in accordance
with SFAS No. 141R. As a percentage of revenues, selling, general and
administrative expenses for the first quarter of 2009 decreased to 50.3% from
54.9% for the first quarter of 2008.





For the
quarter ended March 31, 2009, including the Acquisitions, our bad debt expense
as a percentage of revenue was 6.1% as compared to 4.8% for the same quarter in
2008.  This increase was primarily attributable to higher accounts
receivable due to an increase of 33.7% in average student population for the
first quarter of 2009 as compared to the first quarter of 2008.  The
number of days sales outstanding at March 31, 2009 decreased to 21.7 days,
compared to 23.9 days at March 31, 2008. This decrease is primarily attributable
to our program to centralize the back office administration of our financial aid
department in an effort to improve the effectiveness and timeliness of our
financial aid processing. As of March 31, 2009, we had outstanding loan
commitments to our students of $23.6 million as compared to $24.8 million at
December 31, 2008.  Loan commitments, net of interest that would be
due on the loans through maturity, were $16.2 million at March 31, 2009 as
compared to $17.0 million at December 31, 2008.





Net interest
expense.    Our net interest expense for the quarter
ended March 31, 2009 was $1.0 million, an increase of $0.5 million, from $0.5
million for the quarter ended March 31, 2008.  This increase of $0.5
million is attributable to real estate capital leases assumed in connection with
the Acquisitions. Excluding the Acquisitions our net interest expense for the
quarter ended March 31, 2009 was essentially flat as compared to the quarter
ended March 31, 2008.





Income
taxes.    Our provision for income taxes for the
quarter ended March 31, 2009 was $3.9 million, or 39.9% of pretax income,
compared to $0.3 million, or 38.7% of pretax income for the quarter ended March
31, 2008. The increase in our effective tax rate for the quarter ended March 31,
2009 was primarily attributable to a state tax adjustment made during the first
quarter of 2008.





Liquidity
and Capital Resources





Our
primary capital requirements are for facility expansion and maintenance,
acquisitions and the development of new programs.  Our principal
sources of liquidity have been cash provided by operating activities and
borrowings under our credit agreement.





The
following chart summarizes the principal elements of our cash
flows:





Three
      Months Ended March 31,2009
                        
                        
                        2008(In
      thousands)Net
      cash provided by operating activities
                        
                        $
                        2,293
                        
                        
                        $
                        7,547Net
      cash used in investing activities
                        
                        $
                        (27,041
                        )
                        
                        $
                        (7,440
                        )Net
      cash provided by financing activities
                        
                        $
                        24,734
                        
                        
                        $
                        2,011





At March
31, 2009, we had $15.2 million in cash and cash equivalents, essentially flat
with cash and cash equivalents at December 31, 2008.  Historically, we
have financed our operating activities and organic growth primarily through cash
generated from operations.  We have financed acquisitions primarily
through borrowings under our credit facility and cash generated from
operations.  During the first quarter of 2009, we borrowed $40.0
million and subsequently repaid $30.0 million to finance our acquisition of BAR
and to finance our working capital needs.  We currently anticipate
that we will be able to meet both our short-term cash needs, as well as our need
to fund operations and meet our obligations beyond the next twelve months with
cash generated by operations, existing cash balances and, if necessary,
borrowings under our credit facility. In February 2009, we sold common stock in
a public offering and received net proceeds of approximately $14.9
million.  The proceeds of this offering were used to repay borrowings
under our credit facility.  In addition, we may also consider
accessing the financial markets in the future as a source of liquidity for
capital requirements, acquisitions and general corporate purposes to the extent
such requirements are not satisfied by cash on hand, borrowings under our credit
facility or operating cash flows.  However, we cannot assure
you that we will be able to raise additional capital on favorable terms, if
at all.  At March 31, 2009, we had net borrowings available under our
$100 million credit agreement of approximately $84.4 million, including a $14.4
million sub-limit on letters of credit.  The line of credit matures on
February 15, 2010.





Our
primary source of cash is tuition collected from the 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 2008. Students must apply for a new loan for
each academic period. Federal regulations dictate the timing of disbursements of
funds under Title IV Programs and loan funds are generally provided by lenders
in two disbursements for each academic year. The first disbursement is usually
received approximately 31 days after the start of a student's academic year and
the second disbursement is typically received at the beginning of the sixteenth
week from the start of the student's academic year. Certain types of grants and
other funding are not subject to a 30-day delay. Our programs range from 14 to
102 weeks. 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 state and federal regulations.





17
 Index





As
a result of the significance of the Title IV funds received by our students, we
are highly dependent on these funds to operate our business. Any reduction in
the level of Title IV funds that our students are eligible to receive or any
impact on our ability to be able to receive Title IV funds would have a
significant impact on our operations and our financial condition.  See
“Risk Factors” in Item 1A, included in our Annual Report on Form 10-K for the
year ended December 31, 2008.





Cash
Flow Operating Activities





Net cash
provided by operating activities was $2.3 million for the quarter ended March
31, 2009 compared to $7.5 million for the quarter ended March 31,
2008.  The $5.2 million decrease was primarily due to a decrease in
timing of cash received from federal fund programs of $5.2 million coupled with
higher tax payments of $1.0 million and offset by other working capital items
during the quarter ended March 31, 2009 as compared to the quarter ended March
31, 2008.





Cash
Flow Investing Activities





Net cash
used in investing activities increased by $19.6 million to $27.0 million for the
quarter ended March 31, 2009 from $7.4 million for the quarter ended March 31,
2008. This increase was primarily attributable to a $24.9 million increase in
cash used towards the BAR acquisition offset by a $5.0 million decrease in
capital expenditures for the quarter ended March 31, 2009 as compared to the
same quarter in 2008.  Our capital expenditures mainly resulted from
facility expansion, leasehold improvements, and investments in classroom and
shop technology.





Capital
expenditures are expected to continue to increase in the remainder of 2009 as we
upgrade and expand current equipment and facilities or open new facilities to
meet increased student enrollments. We anticipate capital expenditures to range
between 5% and 6% of revenues in 2009 and expect to fund these capital
expenditures with cash generated from operating activities and, if necessary,
with borrowings under our credit agreement.





Cash
Flow Financing Activities





Net cash
provided by financing activities was $24.7 million for the quarter ended March
31, 2009, as compared to $2.0 million for the quarter ended March 31,
2008.  This increase was primarily due to $14.9 million received from
the Company’s sale of common stock in a public offering and the remainder of
this increase was attributable to an increase in net borrowings of $10.0 million
to fund our BAR acquisition.





Under the
terms of our credit agreement, the lending syndicate provided us with a $100
million credit facility for a term of five years which expires in February
2010.  The credit agreement permits the issuance of letters of credit
of up to $20 million, the amount of which reduces the availability of permitted
borrowings under the agreement.





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





March 31,
                    2009
                  
                  
                  December 31,
                    2008Credit
      agreement
                  
                  $
                  10,000
                  
                  
                  $
                  -Finance
      obligation
                  
                  
                  9,672
                  
                  
                  
                  9,672Notes
      payable (with rates ranging from 7.8% to 10.2%)
                  
                  
                  554
                  
                  
                  
                  -Capital
      lease - property
                  
                  
                  27,353
                  
                  
                  
                  -Capital
      leases-equipment (with rates ranging from 8.4% to 8.7%)
                  
                  
                  476
                  
                  
                  
                  502Subtotal
                  
                  
                  48,055
                  
                  
                  
                  10,174Less
      current maturities
                  
                  
                  (10,667
                  )
                  
                  
                  (130
                  )Total
      long-term debt
                  
                  $
                  37,388
                  
                  
                  $
                  10,044





18
 Index





Contractual
Obligations





Long-term
Debt.  As of March 31, 2009, our long term debt consisted of
amounts borrowed under our credit agreement, the finance obligation in
connection with our sale-leaseback transaction in 2001, notes payable, and
amounts due under capital lease obligations.





Lease
Commitments.  We lease offices, educational facilities and
equipment for varying periods through the year 2023 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 March 31, 2009, measured from the end of our
fiscal year, December 31, 2008 (in thousands):





Payments Due by PeriodTotal
                  
                  
                  Less than 1 year
                  
                  
                  2-3 years
                  
                  
                  4-5 years
                  
                  
                  After 5 yearsCredit
      agreement
                  
                  $
                  10,000
                  
                  
                  $
                  10,000
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Capital
      leases (including interest)
                  
                  
                  62,170
                  
                  
                  
                  2,554
                  
                  
                  
                  5,143
                  
                  
                  
                  5,059
                  
                  
                  
                  49,414Notes
      payable (including interest)
                  
                  
                  602
                  
                  
                  
                  358
                  
                  
                  
                  231
                  
                  
                  
                  13
                  
                  
                  
                  -Operating
      leases
                  
                  
                  144,893
                  
                  
                  
                  17,917
                  
                  
                  
                  32,344
                  
                  
                  
                  29,210
                  
                  
                  
                  65,422Rent
      on finance obligation
                  
                  
                  11,169
                  
                  
                  
                  1,426
                  
                  
                  
                  2,852
                  
                  
                  
                  2,852
                  
                  
                  
                  4,039Total
      contractual cash obligations
                  
                  $
                  228,834
                  
                  
                  $
                  32,255
                  
                  
                  $
                  40,570
                  
                  
                  $
                  37,134
                  
                  
                  $
                  118,875





Off-Balance
Sheet Arrangements





We had no
off-balance sheet arrangements as of March 31, 2009, except for our letters of
credit of $5.6 million which 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 Trends





Our net
revenues 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
large class starts in the third and fourth quarters and 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, do not
vary significantly over the course of the year with changes in our student
population and net revenues. During the first half of the year, we make
significant investments in marketing, staff, programs and facilities to ensure
that we 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 revenues, in the second half of the year fall short of
our estimates, our operating results could suffer. 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.





Similar
to many other for-profit post secondary education companies, the increase in our
average undergraduate enrollments in 2007 and 2006 did not meet our anticipated
growth rates. As a result of the slowdown in 2005, we entered 2006 with fewer
students enrolled than we had in January of 2005. This trend continued
throughout 2006 and resulted in a shortfall in the enrollments we were expecting
in the second half of 2006 and especially in the third quarter which has
accounted for a majority of our yearly starts. As a result we also entered 2007
with fewer students enrolled than we had in January 2006.   This
trend continued during the first half of 2007 and reversed itself in the latter
half of the year as we benefited from the 2007 high school recruiting
season.





As a
result of soft organic enrollment trends that we had experienced, we instituted
numerous initiatives and took steps to address and optimize our internal
operations.  These initiatives, coupled with the counter cyclicality
of our programs which thrive during a weak economy, have now produced ten
consecutive quarters of positive student start growth and seven consecutive
quarters of enrollment growth, culminating in a 35.1% student start growth in
the first quarter of 2009.  This has resulted in us entering 2009 with
approximately 3,100 more students on a same school basis than we had on January
1, 2008.  Because our revenue stream is closely related to our
enrollments, we believe that this will result in meaningful revenue and net
income growth in 2009.





19
 Index





Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK





We are
exposed to certain market risks as part of our on-going business
operations.  We have a credit agreement with a syndicate of
banks.  Our obligations under the credit agreement are secured by a
lien on substantially all of our assets and our subsidiaries and any assets that
we or our subsidiaries may acquire in the future, including a pledge of
substantially all of our subsidiaries’ common stock. Outstanding borrowings bear
interest at the rate of adjusted LIBOR plus 1.0% to 1.75%, as defined, or a base
rate (as defined in the credit agreement).  As of March 31, 2009, we
had $10.0 million outstanding borrowings under our credit
agreement.  The interest rate under this borrowing was 1.52% at March
31, 2009.





Based on
our outstanding borrowings, a change of one percent in the interest rate would
cause a change in our interest expense of approximately $0.1 million, or less
than $.01 per basic share, on an annual basis.  Changes in interest
rates could have an impact on our operations, which are greatly dependent on
students’ ability to obtain financing.  Increases 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 and notes payable, which are 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 Securities and Exchange
Commissions’ Rules and Forms and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.





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




PART
II. OTHER INFORMATION




Item1.  LEGALPROCEEDINGS





In the
ordinary conduct of our business, we are periodically subject to 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 or financial condition, results of operations or
cash flows.





Item2.  UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





We did
not repurchase any shares of our common stock during the three months ended
March 31, 2009.





Item6.EXHIBITS





EXHIBIT
INDEX





The
following exhibits are filed with or incorporated by reference into this Form
10-Q.





Exhibit
                    Number
                  
                  Description3.1
                  
                  Amended
      and Restated Certificate of Incorporation of the Company
    (1).3.2
                  
                  Amended
      and Restated By-laws of the Company (2).4.1
                  
                  Stockholders’
      Agreement, dated as of September 15, 1999, among Lincoln Technical
      Institute, Inc., Back to School Acquisition, L.L.C. and Five Mile River
      Capital Partners LLC
(1).





20
 Index




4.2
                
                Letter
      agreement, dated August 9, 2000, by Back to School Acquisition, L.L.C.,
      amending the Stockholders’ Agreement (1).4.3
                
                Letter
      agreement, dated August 9, 2000, by Lincoln Technical Institute, Inc.,
      amending the Stockholders’ Agreement (1).4.4
                
                Management
      Stockholders Agreement, dated as of January 1, 2002, by and among Lincoln
      Technical Institute, Inc., Back to School Acquisition, L.L.C. and the
      Stockholders and other holders of options under the Management Stock
      Option Plan listed therein (1).4.5
                
                Assumption
      Agreement and First Amendment to Management Stockholders Agreement, dated
      as of December 20, 2007, by and among Lincoln Educational Services
      Corporation, Lincoln Technical Institute, Inc., Back to School
      Acquisition, L.L.C. and the Management Investors parties therein
      (6).4.6
                
                Registration
      Rights Agreement between the Company and Back to School Acquisition,
      L.L.C. (2).4.7
                
                Specimen
      Stock Certificate evidencing shares of common stock
(1).10.1
                
                Credit
      Agreement, dated as of February 15, 2005, among the Company, the
      Guarantors from time to time parties thereto, the Lenders from time to
      time parties thereto and Harris Trust and Savings Bank, as Administrative
      Agent (1).10.2
                
                Amended
      and Restated Employment Agreement, dated as of February 1, 2007, between
      the Company and David F. Carney (3).10.3
                
                Amendment
      to Amended and Restated Employment Agreement, dated as of January 14,
      2009, between the Company and David F. Carney (8).10.4
                
                Separation
      and Release Agreement, dated as of October 15, 2007, between the Company
      and Lawrence E. Brown (4).10.5
                
                Amended
      and Restated Employment Agreement, dated as of February 1, 2007, between
      the Company and Scott M. Shaw (3).10.6
                
                Amendment
      to Amended and Restated Employment Agreement, dated as of January 14,
      2009, between the company and Scott M. Shaw (8).10.7
                
                Amended
      and Restated Employment Agreement, dated as of February 1, 2007, between
      the Company and Cesar Ribeiro (3).10.8
                
                Amendment
      to Amended and Restated Employment Agreement, dated as of January 14,
      2009, between the company and Cesar Ribeiro (8).10.9
                
                Amended
      and Restated Employment Agreement, dated as of February 1, 2007, between
      the Company and Shaun E. McAlmont (3).10.10
                
                Amendment
      to Amended and Restated Employment Agreement, dated as of January 14,
      2009, between the company and Shaun E. McAlmont (8).10.11
                
                Lincoln
      Educational Services Corporation 2005 Long Term Incentive Plan
      (1).10.12
                
                Lincoln
      Educational Services Corporation 2005 Non Employee Directors Restricted
      Stock Plan (1).10.13
                
                Lincoln
      Educational Services Corporation 2005 Deferred Compensation Plan
      (1).10.14
                
                Lincoln
      Technical Institute Management Stock Option Plan, effective January 1,
      2002 (1).10.15
                
                Form
      of Stock Option Agreement, dated January 1, 2002, between Lincoln
      Technical Institute, Inc. and certain participants
  (1).





21
 Index




10.16
                
                Form
      of Stock Option Agreement under our 2005 Long Term Incentive Plan
      (7).10.17
                
                Form
      of Restricted Stock Agreement under our 2005 Long Term Incentive Plan
      (7).10.18
                
                Management
      Stock Subscription Agreement, dated January 1, 2002, among Lincoln
      Technical Institute, Inc. and certain management investors
      (1).10.19
                
                Stockholder’s
      Agreement among Lincoln Educational Services Corporation, Back to School
      Acquisition L.L.C., Steven W. Hart and Steven W. Hart 2003 Grantor
      Retained Annuity Trust (2).10.20
                
                Stock
      Purchase Agreement, dated as of March 30, 2006, among Lincoln Technical
      Institute, Inc., and Richard I. Gouse, Andrew T. Gouse, individually and
      as Trustee of the Carolyn Beth Gouse Irrevocable Trust, Seth A. Kurn and
      Steven L. Meltzer (5).10.21
                
                Stock
      Purchase Agreement, dated as of January 20, 2009, among Lincoln Technical
      Institute, Inc., NN Acquisition, LLC, Brad Baran, Barbara Baran, UGP
      Education Partners, LLC, UGPE Partners Inc. and Merion Investment
      Partners, L.P (8).10.22
                
                Stock
      Purchase Agreement, dated as of January 20, 2009, among Lincoln Technical
      Institute, Inc., NN Acquisition, LLC, Brad Baran, Barbara Baran, UGP
      Education Partners, LLC, Merion Investment Partners, L.P. and, for certain
      limited purposes only, UGPE Partners Inc (8).31.1 *
                
                Certification
      of President & 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 President & 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.


________________________________________________





(1)
            Incorporated
      by reference to the Company’s Registration Statement on Form S-1
      (Registration No. 333-123664).





(2)
            Incorporated
      by reference to the Company’s Form 8-K dated June 28,
  2005.





(3)
            Incorporated
      by reference to the Company’s Form 10-K for the year ended December 31,
      2006.





(4)
            Incorporated
      by reference to the Company’s Form 8-K dated October 15,
    2007.





(5)
            Incorporated
      by reference to the Company’s Form 10-Q for the quarterly period ended
      March 31, 2006.





(6)
            Incorporated
      by reference to the Company’s Registration Statement on Form S-3
      (Registration No. 333-148406).





(7)
            Incorporated
      by reference to the Company’s Form 10-K for the year ended December 31,
      2007.





(8)
            Incorporated
      by reference to the Company’s Form 10-K for the year ended December 31,
      2008.





*
            Filed
      herewith.





22
 Index





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 CORPORATIONDate:
      May 8, 2009
                      By:
                      /s/ Cesar RibeiroCesar
      RibeiroChief
      Financial Officer(Duly
      Authorized Officer, Principal Accounting and Financial
      Officer)






23