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Corinthian Profit Up as Revenue Soars 56%

September 02, 2004|Dana Calvo | Special to The Times

Corinthian Colleges Inc. reported a 6% increase in quarterly net income Wednesday despite heavy spending on its schools and turmoil caused by a federal investigation and several lawsuits.

The Santa Ana-based education company's earnings were slightly better than Wall Street's recently diminished expectations, pushing its shares up $2.64, or 23%, to $14.01 on Nasdaq.

For its fiscal fourth quarter ended June 30, Corinthian earned $19.1 million, or 20 cents a share, compared with $18 million, also 20 cents, in the same quarter last year, when the company had fewer shares outstanding. The latest quarter included a charge of $2.1 million, or about 2 cents a share, related to the closure of two Southern California campuses.

Revenue for the quarter rose 56% to $217.1 million.

Analysts surveyed by Thomson First Call had expected Corinthian to earn 19 cents a share. Before the company warned last month that earnings would be hurt by an advertising campaign to combat recent bad publicity, analysts had expected profit of 25 cents a share.

For the year, Corinthian's earnings increased 24% to $81.6 million, or 87 cents a share, from $65.9 million, or 72 cents. Revenue for the latest year was $804.3 million, up 56% from $517.3 million in fiscal 2003.

Chief Financial Officer Dennis Beal said the company still expected to hit its previously announced first-quarter earnings target of 17 cents to 19 cents a share.

Since March, three class-action lawsuits have been filed against the company by former students at one of its schools, Florida Metropolitan University. The complaints allege that the school misrepresented its accreditation, leaving students with credits that don't transfer to other educational institutions.

In a conference call with investors Wednesday, Corinthian Chief Executive David G. Moore said the lawsuits brought "negative publicity" to the school "affected our ability to operate effectively" there.

In addition, a review by the U.S. Education Department found violations of federal loan application rules at Corinthian's Bryman College campus in San Jose, the company said in June. Corinthian has denied allegations that campus officials helped students file faulty applications to boost financial aid, and the department has found no evidence of fraud.

Corinthian's stock has fallen from a high this year of $36.19, prompting several shareholder lawsuits.

Corinthian operates a network of 130 trade and technical colleges as well as corporate training centers across the United States and Canada. In addition to adding 10 campuses, the company expanded or remodeled 35 campuses in the latest fiscal year, causing capital spending to more than double to $64.7 million from $30.8 million in the previous year.

"Branch campuses are a key driver to financial growth," Moore said, adding that company executives were disappointed by significant student attrition and lukewarm new-student enrollment.

The company has hired a student retention specialist, he said.

Total enrollment was 64,810 on June 30, a 50% increase compared with a year ago.

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