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Corinthian Colleges' earnings drop sharply

Enrollment problems and stock option probes drag down results. Revenue increases less than 1%.

January 31, 2007|From Bloomberg News

Corinthian Colleges Inc., the operator of more than 120 for-profit colleges in the U.S. and Canada, said Tuesday that fiscal second-quarter earnings fell 76% on sagging enrollment and costs related to stock option probes.

The company lowered its full-year forecast to 35 cents to 39 cents a share. Net income fell to $2.58 million, or 3 cents a share, for the quarter that ended Dec. 31, from $10.7 million, or 12 cents, a year earlier, the Santa Ana-based company said. Revenue increased less than 1%.

Delays during the switch to a new enrollment and financial-aid system have weakened demand at Corinthian's schools, especially its WyoTech automotive-training campuses. The company also is seeking to resolve probes of its stock option compensation practices.

"I think we're bumping along the bottom here and things are not going to get materially worse, but there's no sign of a resurgence yet in the enrollment numbers," said Trace Urdan, an analyst in San Francisco with Signal Hill Capital Group.

Shares of Corinthian declined 6 cents Tuesday to $13.34.

Second-quarter earnings excluding some items matched the average estimate of 10 cents a share of analysts surveyed by Bloomberg.

The company cut its forecast for the fiscal year ending June 30 from an already reduced projection of 47 cents to 52 cents a share. Corinthian cited factors including underperformance of its WyoTech schools, costs related to the stock option reviews and other legal expenses.

Earnings for the third quarter probably will be 14 cents to 16 cents a share, the company said. A write-down for the value of brands the company acquired in the past also may lower earnings further before the end of the fiscal year, Chief Financial Officer Kenneth Ord said.

Second-quarter enrollment dropped to 65,431 from 66,319 a year earlier, while the number of students starting courses rose to 21,554 from 21,376, Corinthian said.

Urdan said new enrollment was less than the 3.5% increase he had forecast. Quarterly revenue rose to $245 million from $244.5 million a year earlier.

Corinthian in November completed an internal review of its stock option practices.

A special committee of independent directors, with outside legal assistance, found no evidence of fraud or willful misconduct, the company said in November.

Second-quarter costs for related legal expenses were $3.5 million, or 2 cents a share, Corinthian said.

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