Reflecting the burgeoning demand for job-skills training, Corinthian Colleges Inc. said Wednesday it will buy a Los Angeles trade school operator with four campuses, adding to its rapid nationwide expansion.
Santa Ana-based Corinthian said its pending purchase of privately held Educorp Inc. would give it 49 campuses in 18 states, securing its position as one of the nation's largest operators of private vocational schools and colleges.
Financial terms were not disclosed.
Educorp, with schools in Los Angeles, Long Beach, Ontario and Whittier, trains workers from medical technicians and massage therapists to plumbers and telecommunications employees.
Corinthian, which has seen its profit and stock price soar this year, concentrates on such high-growth Sun Belt states as Florida and Texas, and recently acquired companies in the Phoenix and the Atlanta areas. It has 14 sites in California.
The company's aggressive expansion, which includes moving schools to larger facilities and opening new campuses, has positioned Corinthian as a major source of post-secondary education for high school graduates and working people looking to improve their job skills and employment opportunities.
"The future looks bright" for Corinthian, Credit Suisse First Boston analyst Gregory W. Cappelli said in a report last week. He predicted the company will continue to open at least two new branches a year, and is likely to continue to make more acquisitions. He raised his rating on the stock from "buy" to "strong buy" in June.
Credit Suisse underwrote Corinthian's initial public offering in February 1999, but Cappelli is hardly alone in his opinion. Indeed, the six analysts that follow Corinthian all have either "buy" or "strong buy" recommendations, according to Bloomberg News.
The company's stock, which had been sluggish for much of the time since it went public, has more than tripled since April on such bullish comments. It lost $1.56 Wednesday to close at $54.50 a share in Nasdaq trading.
The run-up in stock price reflects a big payoff for Corinthian's bet that the $220-billion market for post-secondary education, especially vocational training, will continue to grow. In some ways, the strategy is counterintuitive: Vocational training schools should be more in demand during a recession, but Corinthian has prospered during economic good times.
The company is counting on such trends as increased demand for skilled labor, rising numbers of high school graduates and higher numbers of older adults interested in vocational programs.
In addition to health care and information technology, Corinthian also emphasizes business administration.
Corinthian's Rhodes Colleges and Florida Metropolitan University subsidiaries grant associate and bachelor's degrees in 10 states, but not in California.
Locally, the company is best known for Bryman College, a vocational school that trains medical and dental technicians in El Monte, Gardena, Los Angeles, Anaheim and Reseda. It also operates San Bernardino's Skadron College.
Last week, the company reported record results for its latest fiscal year, which ended June 30. Revenue was up 28% at $171 million, with profit of $15.4 million--more than triple the preceding year.
Corinthian Chief Executive David Moore, a former community college president, said the company had 19,565 students as of June 30, up 22% from a year earlier. Though the company opened or acquired seven new campuses during the year, that wasn't the only factor in the growth: Existing schools signed up 10.6% more students than in the previous year.
The average tuition rose about 10% as well, in part reflecting higher rates the company is able to charge for its courses in computer networking and Microsoft office systems, Moore said.
He said the company evaluates 50 or more acquisition targets each year and seriously considers as many as 10. Last year many of those companies were holding out for sums Moore considered far too high, but he said they have since tempered their expectations.
"It's a lot of interesting targets," Moore said. "Now we find prices dropping back to a much more attractive level."
One unknown is the continued health of the economy. The length of the prosperous period has coincided with the history of Corinthian, which was opened in July 1995 by Moore and several other former employees of National Education Centers Inc. in Irvine.
"One thing we've been doing since we started . . . is operating in an environment of continuing declining unemployment," said Paul R. St. Pierre, Corinthian's vice president of marketing. "We've never known any other kind of environment."
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Growth in Education
Corinthian Colleges Inc. in Santa Ana has grown rapidly since its founding in 1995, by acquiring vocational schools and colleges, opening new branches and expanding old ones.
Net Sales in millions:
Sep. '98: $30.30 June '00: $46.03
From the time it went public in February 1999 until recently, Corinthian's stock languished, trading as low as $16 a share in April before taking off this summer and soaring above $50.
Apr. 4: $16.00
Sep. 6: $54.50
Corinthian Colleges Inc. ...at a Glance:
Business: Operator of private vocational schools and colleges
Headquarters: Santa Ana
Employees: 3,000; 135 in Orange County
Major schools: Bryman College, Orange; Florida Metropolitan University; Kee Business College, Virginia; National Institute of Technology, Michigan, Texas, West Virginia.
Chief Executive: David G. Moore
Annual Profit: $15.4 million
Annual Revenue: $171 million
Sources: Bloomberg News and Corinthian Colleges Inc.; Company reports