Lincoln Educational Services Corp (LINC) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2011 Lincoln Educational Services Corporation earnings conference call. My name is Robin, and I will be your operator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions).

I would now like to turn the presentation over to your host for today, Mr. Shaun McAlmont. Please proceed.

Good morning and thank you, Robin. Good morning and welcome, everyone. Joining me today is Cesar Ribeiro, our Chief Financial Officer.

Let me begin this morning by reading the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements in this presentation concerning Lincoln Educational Services' future prospects are forward-looking statements that involve risks and uncertainties. There can be no assurance that future results will be achieved, and actual results may differ materially from forecasts and estimates contained in this presentation.

Important factors that could cause actual results to differ materially are included but not limited to those listed in Lincoln's Annual Report on Form 10-K for the year ended December 31, 2010, and other periodic reports filed with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement.

This morning, I'll provide an overview of our operations, and Cesar will review our third-quarter financial performance and provide our outlook for the year. We'll then take your questions.

Now, as an overview, Lincoln has been training many for the United States workforce since 1946. Since that time, we've taken steps to manage our company in a compliant, effective, and student-focused way. We take pride in our regulatory track record and currently maintain strong relationships with all accreditors, states, and the federal government.

We have low legal exposure, and we manage high student satisfaction levels. We err on the side of regulatory conservatism and feel that this is the prudent approach in a rapidly changing and tense educational environment. Furthermore, we made the decision in 2010 to focus on further bolstering our regulatory strength to better position ourselves for future growth in this new climate of regulatory, political, and media scrutiny.

The many changes we've made to our business model to meet existing and new regulations achieved the objectives we targeted early in the year, including addressing necessary 90/10, gainful employment, admissions, credit hour, and cohort default matters. We have implemented all admissions-related changes, increased cash contributions from our students. We've restructured programs and greatly decreased the number of at-risk or ATB students that we enroll.

Today, our admissions representatives are fully operating under new federal rules. We're disclosing all required performance data. Our 90/10 is expected to pass the 2011 threshold, actually relieving the previous pressure on eight campuses related to the loss of Title IV. And our ATB population has been reduced to 6% of our population, which has allowed us to improve processes for this group and determine the best ways to manage this demographic for the long term.

Additionally positive, all of these changes are now behind us, and we're focusing our efforts on ensuring that 2012 is a year where we return to growth. Over the last several quarters, we introduced programs focused on new student risk assessment, pre-orientation, and early student engagement mentoring for incoming students. Early indications are that these programs are proving very effective, and we're starting to see positive impacts on our student retention.

The lower number of at-risk students has specifically allowed us to pilot different educational approaches for this group. And as a result, we've identified methods to more effectively manage ATB students. As a result, we expect to relax our entrance requirements at select schools as we expand this program in January of 2012.

As we've stated in the past, while many of the changes we've made reduce our regulatory risk, they've also contributed to reduce new student enrollment at many of our campuses. In addition, the prolonged economic downturn continues to affect our students and their parents' decision to enroll and finance their education in this difficult environment.

This has also negatively impacted revenue and profitability for the first nine months of the year and will continue to impact our operations for the next several quarters, albeit on a smaller scale. Accordingly, we're actively managing our expenses to ensure that our staffing levels are commensurate with our student population.

As we look at the full year of 2011, we expect to start approximately 22,500 new students amidst a lot of change. With this as a baseline, and as we look toward the future, we're forecasting modest new student start growth in 2012 based on stabilizing many of the changes made in 2011, the contribution of new campuses and programs, and the easing of entrance requirements on ATB students.

As we stated on last quarter's call, the decline in current-year student starts will have a negative impact on our 2012 revenue and profitability. Accordingly, we continue to forecast future profitability on the assumption that our 2012 revenues will range between $450 million to $500 million. We feel this is an achievable range for the Company following the current year of retrenchment.

We ultimately expect to emerge from this period a stronger company and will remain a leading provider of vocational, career, and technical programs in this country. Moreover, we believe that demand will always exist for vocational and technical training in areas like nursing, medical office, automotive, and the skilled trades.

Now in regards to our new student admissions, new student starts trended downward in the third quarter by 34.8%, which is within the range we anticipated. Our fourth-quarter starts will approximate the same range based on continued macroeconomic impact and reduced end-of-year spending in sales and marketing, which we expect to ramp back up early in quarter 1 of 2012 to achieve the subsequent-year enrollment goals. Affordability issues continue to plague the country and also affect personal educational spending, thereby affecting new student starts.

These issues are somewhat amplified as we continue to require more of a cash commitment from our students on a monthly basis to address the long-term 90/10 levels. Overall, we believe our year-over-year start decline could be attributed in large part to affordability. We estimate that the impact of actions we've taken has decreased new starts approximately 40%, while affordability remains the larger part of the decline at 60%.

Regarding our high school recruitment program, we saw declines similar to media starts this year for high school new students. This said, the Lincoln high school program continues to serve both local and regional demand for entry-level skilled workers. Moreover, outcomes for this demographic continue to positively influence overall company student outcomes. Specifically, in terms of graduation, loan repayment, and placement rates, recent high school graduates outperform their adult counterparts by a significant margin.

The high school teams around the country generated 173,000 inquiries in 2011, which is a 10% increase over 2010 volume. Representatives recruited and enrolled approximately 12,000 of these high school students versus 15,000 last year, or a 20% reduction in enrollment volume. And we started 4,400 new high school students this year versus 6,500 new students last year, or a 32% decline in high school starts.

We attribute the major part of this drop in number to affordability on the part of parents, who hesitated in taking on debt for their dependent children. Furthermore, high school students that do not complete capstone courses will sometimes fall into the ATB category. And this year we had a significantly fewer number of these students start school due to our ATB risk-mitigation efforts. Compounding these results was our conservatism underlying the federal admissions process rule changes, along with financing adjustments we implemented to manage our 90/10.

We feel that next year's campaign will again be successful in lead generation and that stability in process, administrative representative comfort, and eased entrance standards will allow enrollment and start conversions to return to more normalized levels.

In regards to market demand, we see continued market interest in our programs, as the volume of inquiries decreased only 10% year over year, primarily based on reduced ad spending and some economic impact. Interest and demand have decreased at a slower rate than the students' ability to actually start school.

Our cost per start for the third quarter increased by 36% against prior year, based on lower new-student start numbers. Our cost per inquiry actually decreased to $75 in this period versus $78 prior year, as we shifted between advertising channels.

Of our total inquiries for the quarter, 52% came from online aggregators, 14% from TV and other sources, and the remaining 34% came from search terms and organic Web sources toward our website. We focused on reducing the volume of inquiries from aggregators and have seen progress to date. Our efforts will become more aggressive in this area over coming quarters. However, we will do it in ways that maintain a certain volume of overall inquiry for our company.

In regards to student persistence, we've seen improvements in new student persistence within the first 90 days, especially in our schools where we've made the earliest changes to high-risk student admissions. We realized meaningful improvements in the interrupt rate for new students over a 90-day period. And our overall company third-quarter interrupt rate improved by 101 basis points, despite attrition caused by structural and program length changes related to 90/10 management.

Regarding job placement, we invested in our placement services last year, as we work against the headwind caused by a prolonged economic downturn. We work to assist all in-school students and graduates with job placement assistance, while also validating our placements to ensure accuracy in our reporting. Our final placement rate for 2010 is 71%, compared to last year's 75%.

Regarding cohort default and repayment rates, improving default and repayment rates is a key long-term company objective. Ultimately, improved graduation rates and strong financial responsibility training for students will be the long-term solution in this area. While we strive to improve the cohort default rate for each of our institutions, the current economic climate, combined with the demographics of the students that we traditionally serve, makes this objective even more challenging.

As a result, we've increased our default management personnel to help enhance the financial literacy of our students and graduates, with the goal of helping students stay current in their loan payments as well as engaging in new third-party consultant assistance to help those institutions that have historically had the highest cohort default rates within our company. We'll also implement data management software, which will help us prioritize our efforts in managing the highest risk within the repayment cohorts. We're currently tracking ahead of prior-year repayments at this point in the process as we manage the 2010 cohort.

In regards to growth-related actions, we will continue to manage our initiatives focused on new campus locations, expansions, online initiatives, and new programs and acquisitions. In 2012, we will see incremental contributions from our three new campuses in Columbus, Cleveland, and Hartford. In addition, we opened our new expanded Denver facility in July and expect its growth to continue into 2012.

We continue to proceed with our plans to develop regionally accredited online and degree programs predominantly in the health sciences. The approval timelines have lengthened significantly, and so in the interim we will focus our online attention to providing hybrid and blended learning opportunities to our ground students.

We also continue to seek out acquisition opportunities that will ultimately provide growth and diversification for the Company. And also, we're focused on new program launches that will expand our nursing programs geographically. And we're also entering into higher-level RN programs while adding dental assisting to certain schools, which ultimately will constitute the long-term goal of upgrading our offerings.

In summary, we're confident in what we do as a company, and the hundreds of thousands of Lincoln graduate success stories since 1946 strengthen that confidence. In 2011 and 2012, the size of our company may change. However, the pride and effort and focus of our students and employees will not. We feel that shareholder value is tied directly to student value. This critical relationship will be strengthened by the many efforts that we're taking.

As we manage the close of this year and look out over the next, we'll continue to manage our expenses -- however, not to the detriment of our long-term goals to improve student performance. In the short term, we will see margin contraction, as we've mentioned in previous calls.

In addition, we'll continue to build the foundation of this company by renovating and relocating facilities that we feel will benefit our long-term plans. We'll selectively add student services staffing in places with the greatest need to assist students inside and outside of the classroom. We'll evaluate our online opportunity based on the regulatory landscape and utilize our platform to build online hybrid delivery to support our vocational base. We'll also seek out startup locations and acquisition opportunities using a filter based on the quality metrics we're aspiring to.

And finally, we've made an incredible number of changes in a relatively short period of time, which we felt was the right thing to do for the long-term performance of the Company. And we feel that Lincoln can emerge from this period as the leader in vocational and technical training in this country.

Now I'll turn the call over to Cesar for a financial review, including our outlook for the third quarter and year. Cesar.

Thank you, Shaun. Good morning, everyone. As we disclosed in our press release earlier this morning, and as Shaun stated in his prepared remarks, during the third quarter we continued to be challenged with student starts. The changes that we made to our business model to comply with gainful employment regulations, 90/10 regulations, and cohort default regulations, coupled with prospective students' hesitation to take on debt in the current economic environment, have placed significant pressure on our revenue's margins. With that said, we still expect to enroll 22,500 students in 2011, and our continued expectations are for gradual improvement over the next several quarters.

We started the third quarter with approximately 7,700 fewer students than we had on July 1, 2010. This decrease in student population resulted in a decrease in our average population for the third quarter of 2011 of 28.9%, which led to revenue declining by 26.2% or approximately $43.7 million as compared to the third quarter of 2010.

The decrease in revenue for the quarter was somewhat offset by an increase in average revenue per student during the quarter of 3.9% to $5,437, from the prior-year quarter of $5,233. This increase is mainly from tuition increases, which averaged about 3% per year.

The decrease in student starts has also impacted our capacity utilization, which decreased on a same-school basis to 47%, from 70% in the third quarter of 2010. The decrease in capacity utilization produced approximately 1,500 basis points of negative leverage, as our operating margin, excluding a charge of $10.4 million related to impairment of goodwill and other long-lived assets, decreased to 4.3% for the third quarter of 2011, from 19.4% in the third quarter of 2010.

Other key highlights in the quarter include -- earnings per diluted share, excluding the impairment charge, decreased to $0.13, from $0.76 in the third quarter of 2010. We generated free cash flow of $1.5 million, down from free cash flow of $33.8 million in the third quarter of 2010.

We paid a $0.25 quarterly dividend on September 30, 2011. We finished the quarter with $26.1 million in cash and cash equivalents and no borrowings outstanding under our credit agreement.

Bad debt for the quarter was 7.8% of revenue, as compared to 7.7% for the third quarter of 2010. Cost per start, as Shaun mentioned, increased 36% for the third quarter of 2011 to $2,769, from $2,035 in the third quarter of 2011. Cost per start has been negatively impacted by our decision to limit the number of ATB students we will enroll in our schools and the other changes we made to our business model to ensure compliance with 90/10 and cohort default rules.

Net accounts receivable at September 30, 2011, were $26.1 million, as compared to $40.5 million at December 31, 2010. The decrease in net accounts receivable is primarily due to improved cash collections and lower average student populations throughout the year as compared to prior year.

Net property and equipment grew to $180.4 million at September 30, 2011, as compared to $172.4 million at December 31, 2010. Capital expenditures for 2011 include certain expenditures that were being carried forward from 2010 and are expected to range between 8% and 9% of revenue.

Now, turning to our loan program -- loan commitments to our students, net of interest that would be due on the loans to maturity as of September 30, 2011, were $20.9 million, as compared to loan commitments of $15.4 million at December 31, 2010. For 2011, we expect that loan commitments will increase from the December 31, 2010, period by $5 million to $10 million, as we have created financing gaps for many of our programs to ensure our continued compliance with the 90/10 ratios.

Shareholders' equity at September 30, 2011, was $236.4 million, up from $222.5 million at December 31, 2010.

I'll finish my prepared remarks by providing our current outlook for the year 2011. Our guidance is based on our current expectation and reflects the $10.4 million impairment of goodwill and other long-lived assets charge we incurred in the third quarter.

We expect revenue to range between $510 million to $520 million, representing a decrease of approximately 19% to 20% over 2010; full-year diluted EPS guidance range of $0.70 to $0.76, representing a decrease of approximately 73% to 75% from 2010; and we expect a decrease in expected student starts of 36% to 39% over 2010.

And finally, due to lower revenue and profitability in 2011, the Board of Directors has decided to reduce our quarterly dividend and has declared a cash dividend of $0.07 per share for the fourth quarter of 2011. The dividend is payable on December 30, 2011, to shareholders of record on December 15, 2011.

In conclusion, while we continue to operate in a challenging and difficult environment, we are actively managing our expense structure while at the same time making strategic investments in our business to ensure that we are poised for a return to growth in 2011. Accordingly, we will continue to balance our growth objectives with our responsibility to deliver quality education and to enhance student outcomes.

Now we'll open the call to your questions. With that said, I'd like to turn the call back over to the operator. Robin?

Yes, sir. (Operator Instructions). Our first question comes from the line of Gary Bisbee from Barclays Capital. Please proceed.

Hey, guys, good morning.

Good morning.

Hi, Gary.

I guess the first question is, how -- you've made a lot of changes, and it feels like you sort of put them in, and now you're executing them. At some point next year we anniversary a lot of this negative impact that that's caused. But how confident are you that the majority of the changes have been made and that these will ensure regulatory compliance as we look to 2012 and not just hitting the year-end metrics for this year?

That's a good question, Gary. We are extremely confident. We made changes in almost every area of the business, really according to the new rules that were in place by the Department of Ed, in addition to changes made to manage our cohort default rate for the long term and our 90/10 for the long term.

And as you can recall, one of the reasons we had to make some significant adjustments, which affected our starts a little more than we expected earlier in the year, really related to 90/10 management. We feel that we've successfully adjusted the way we look at new student admissions. And we found ways to manage the higher-risk students in our incoming student population, as well as managing more of a gap in student financing and the way that they can finance it as they go through school. So not only have we made changes based on what was necessary to do in 2010-2011, but we feel that we've made those changes in a way that will position us for success in 2012 and beyond.

And let me also say that one of the reasons that we have confidence moving into 2012 goes beyond just the regulatory measures. I mean, as I mentioned in my opening remarks, we're extremely proud of our regulatory track record. And I think as you know, and most know, we've managed it extremely well over the long term, over 65 years, not just recently.

As we look forward to 2012, many of the changes that we've made really become stabilized. And you can see comfort coming back into the way all of our employees are managing according to these new rules.

In addition to that, we have a number of new programs coming on board. We continue to seek acquisitions. We have the contribution of three new campuses, our Denver expansion. And we've managed our high-risk population in a way that will allow us to relax some of our entrance requirements. We mentioned that ATB is at 6% of our population today. Our original goal was to be below 10%. But we've also found ways to manage those students successfully in their early-term education.

So we're feeling very good about the changes that we've made, how we've executed them, and the long-term view of our company, beginning as early as 2012.

Great, and then just one follow-up -- as we look at the cost structure, I think you gave us an early read on revenue continuing to notch lower in '12. Are there more costs that can be taken out of the business from a fixed-cost nature? And I guess any sense on how we should think about profitability next year? I would think margins continue to contract, but any level we should think about? Thank you.

Well, Gary, I think what we said is we're expecting that we will bottom out somewhere around $450 million to $500 million. And our goal is to make sure that we continue to have a profitable business in 2012 and beyond.

As far as what the actual amounts are going to be, I think you're going to need to stay tuned for our year-end call. But we continue to right-size our business to our student population. We've always done that. It's nothing new for Lincoln. I think you saw it in this quarter. I think you'll see it next quarter. And so, again, we align the services that we need to provide to students to make sure we deliver quality education with the students that we have, and we act accordingly. And we will continue to do that as our population goes up or down.

So just looking at 2011, it looks like you, based on your guidance, took out $40 million, $45 million of cost year over year. Is that magnitude possible again, or assuming --

No --

-- assuming there's a revenue decline?

No, obviously it's not. When you first start cutting, there are variable costs you can take out of a business. When you get to a certain level, it becomes all break-even. If 2012 we were to have another year we were down 30%, obviously we would not be able to take those costs out of the business. Our expectations is that the worst is behind us and that we will return to growth. And so we don't expect to have those issues going forward.

Thanks for the color.

And our next question comes from the line of Amy Junker from Robert Baird.

Can you perhaps just -- given the issues that one of your competitor is facing with placement rates, can you maybe just address how you calculate and monitor accurate placement rate statistics at your campuses?

I'll just say that we've been monitoring placement the same way for years. We take a very close look at how we place students, how we verify the placement, and how we report it. I'll say that we also have a very strict regulatory compliance review and internal audit function. And if we ever find any kind of impropriety through all of those checks, we take care of it immediately. We send a message to the organization, and we also will retrain if we have to. But we're confident in how we look at job placement, and we always have been. Our placements are pretty straightforward with the types of programs that we offer.

Great, Shaun, thanks for the color. And Cesar, if I can just go back to you, you just sounded like we're kind of reiterating that you think $450 million to $500 million is a bottom in terms of what you would expect in terms of revenue. Do you think that given current trends you're seeing, that you could get back to revenue growth at some point in 2012, or does that seem unlikely given the start declines that we've seen the last couple of quarters?

No. I mean, I think we made the comments before. Obviously, we expect the starts declines that we've experienced over the last three and that we continue to expect in the fourth quarter are going to put pressure on the first half of 2012. But as we go into the second half of 2012, we do expect to start to see growth.

Great, thank you.

And our next question comes from the line of David Chu from Bank of America-Merrill Lynch. Please proceed.

Thank you. Good morning, guys.

Good morning, David.

Good morning, David.

So when you guys talk about -- or I guess can you highlight your start expectations for 2012? Is there anything you can share with us about that?

Well, yes. As Cesar mentioned earlier, David, we'll talk about 2012 specifically on our year-end call. And I'll just reiterate that the way we look at growth next year -- I mean, we started 22,500 students this year under a lot of change.

Our estimate is that we will see growth next year when we look at the full year, based on the fact that we will not see change like that again in this company, probably in the industry. We have contributing new campuses. We see that the productivity of our admissions reps has picked up. Even though the rep number is lower, we will ramp up in the number of reps in 2012, again, when our spending goes back to somewhat normal levels.

And so with all of those contributing factors -- in addition to that, we feel very good about how we're managing our higher-risk students, and so we'll relax the entrance requirements a little bit. We would expect ourselves to see moderate growth in 2012. So that's the specificity that we can give you today. But much more on the year-end call.

Got it. And just as a quick follow-up, anything more you can share around the relaxing of ATB requirements, where you expect I guess the population to go for next year and longer term?

Yes, I can't comment on that specifically, but I'll just tell you that just based on -- there's probably three components that we've put in place over the last year or so, including the pre-orientation that's been in place for a while, an additional assessment of the student risk level that kind of goes along with the advising for those students, our ability to track those students, and then also our early student engagement program. All of those components have really helped us get a hold of what it takes to make an ATB student successful from day one. And we track them for a much greater period than we ever have before.

So the confidence that we've gained from the longer-term efforts that we've had in place and then the early student engagement pilots basically show us that we can open it up again. And I can't tell you exactly where the population will be or what levels we'll target at this point. But I just want you to know that we feel very confident in how we manage those students, and so that's behind our ability to open it up.

Okay, thanks.

And our next question comes from the line of Scott Schneeberger of Oppenheimer. Please proceed.

Thanks. Good morning.

Good morning.

Good morning.

Shaun, I'm going to follow up on that question, but I don't know that we're going to get the answer. Your ATB came down to about 6%, I think, and the goal had been under 10%; is that correct?

Correct.

Okay. The question is, is the goal still 10%, or are you not going to quantify?

I'm not going to quantify. I'll tell you this, Scott. The way we looked at 10% in the past was, it was a population that we felt we could manage effectively as they introduce into the general population of students. Since that time, we have found just different ways to work with those students. And so we've added student services approaches that we feel will help us be successful. I'm not sure if the 10% is still a reasonable expectation for that population or not, but I know that we can open up the door a little more than we have in the past.

So I'm not answering you specifically, because I can't give you that answer today. But just know that we've recalibrated what we feel is a manageable threshold for ATB students, which will allow us to at least open ourselves back up from the 6% level upward. Where it goes, we'll share that over time.

All right, appreciate that. Couple more. One I just wanted to clarify. It sounds like you think the starts would turn in roughly -- sometime during the first half, and total enrollment, perhaps a turn, meaning absolute levels, perhaps second half. I don't mean to -- well, I kind of do mean to pin you down. But is that what we should be inferring from this discussion?

I think it's safe to say that the enrollment numbers will lag the starts to some degree. And we feel that -- Scott, if you look back at our declines in the first and second quarter of this year, I mean, you can see where the comps sit. We feel pretty confident that we'll do well against them. So yes, I would just say this -- that we do expect start and enrollment growth in the year.

Okay. Fair enough. I appreciate that. And then, finally, the decision to temper the dividend payout and then the continuous commentary that you're looking at acquisitions -- could you just take us a little bit deeper into the decision on the cut and perhaps your priority hit list on use of cash for here or conservation of cash?

I'll let Cesar address this one.

Certainly. I think when we first declared the dividend, I think the Company did not intend this to be a one-time dividend. That is still not the intention of the Board. However, in light of the decline in student starts as we look out at 2011 and the impact into 2012, we felt that it was prudent to reduce the dividend to a more manageable level.

With that said, we still have a very clean balance sheet. We have no debt. We have a lot of availability. And so the dividend in no way impacts our ability to finance acquisitions or other initiatives that we have. So today our capability is, we have the ability to do not only acquisitions, pay the dividend, and do other initiatives such as startups, etc. However, I believe the Board felt that it was prudent at this time, in light of the guidance that we've given you for 2011 as well as -- while we haven't given you guidance for 2012, we have guided you to what we believe our revenue will be -- that it would be prudent at this time to reduce the dividend to a more manageable level.

And Scott, let me just say in regards to acquisitions, we really are taking a focused approach. Everything has to go through a new filter in this particular environment. And any acquisition we bring on we feel has to help the Company, in some way, shape, or form, manage through this new regulatory environment. So we're taking a very, I would say, focused approach versus a shotgun approach. And I hope that answers the question on acquisition.

Okay. Yes, thanks. I appreciate it, guys.

(Operator Instructions). And our next question comes from the line of Jeff Silber from BMO Capital Markets. Please proceed.

Thanks so much. I apologize; I got on late, so if you already answered this, just skip it. And this actually goes back to the dividend question that the previous analyst had asked. Should we assume that given what you know now, the dividend will remain at the current level next year, or do you think you'll be revisiting it again next quarter?

Well, I think the Board declared a quarterly dividend of $0.07 a share. I think our expectation is to continue to be a dividend-paying company. With that said, though, obviously the Board will examine what they believe our financial picture is at every single quarter and make a determination at that point whether or not they would declare a dividend.

Our expectation from the management team is that we are -- we will continue to be a dividend-paying company and we'll continue to have a dividend. However, that's predicated on our current financial position at the end of any given quarter.

Okay, I understand that. In terms of the amount that you cut it to -- and forgive me if I'm reading too much into this, but it was about a 71% cut in the quarterly payout. Should we assume that free cash flow is going down roughly in that level?

No, it really had nothing to do with free cash flow. It had more to do with the fact that it's still represented by the 3% yield, which we think is still a very attractive yield in this environment, in light of the fact that our revenue and our earnings per share has declined significantly.

Okay, great. And I just want to circle back to a question I think that Amy had asked regarding the placement rate issue of one of your competitors. The issue with that company had to do with their schools that are accredited by ACICS. I know you guys have a number of schools also accredited by the same agency. Have you heard from them at all regarding them maybe revisiting your placement rate calculations?

You know what, we have not. And I'll just reiterate what I said to Amy, Jeff. We have a great corporate management team and a thorough verification process. If we see any impropriety, we'd never hesitate to make a move on it. We feel that if there's ever an issue with a calculation, we are talking to the accrediting commission without delay.

In addition to that, we have folks within our management group that are commissioners on both committees, and so we stay very, very close to the standards of all of our accrediting agencies. And so we take it very seriously, and we've been managing to these rates for years. But we have not heard anything in addition to what we typically do from ACICS or ACCSC.

All right, that's great to hear. Thanks so much.

Thank you.

There are no more questions at this time. I'd like to now turn the call back over to your host, Shaun McAlmont. Please proceed.

Thank you very much. Well, thanks, everyone, for joining the call today. As you can see, we've taken very important steps to improve the long-term strength of our institutions and our company. We're very proud of our regulatory track record. And we continue to work within the evolving regulatory matrix that we have today to position Lincoln to be the leader in vocational and technical education. We look forward to updating you on our year-end results and our 2012 goals on our next call. Thank you and have a great day.

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