Founder of National Education Corp. to Retire : McNaughton-Led Firm Tapped Demand for Home Study, Vocational Schools

John J. McNaughton, chairman of National Education Corp., the country’s largest and most diversified network of vocational schools and training programs, said Tuesday that he will retire from the company he founded 34 years ago.

At Irvine-based NEC, McNaughton successfully tapped the mushrooming national demand for home study and vocational schools. McNaughton, who recently turned 65, said he is stepping down as of Thursday to comply with his company’s mandatory retirement rules.

NEC, which had sales of $380 million in 1987, teaches courses on everything from auto mechanics to automated computer engineering.

It has more than 35,000 students enrolled in more than 52 U.S. schools, plus 150,000 students enrolled in correspondence courses.

Move Toward Corporations

Several acquisitions in recent years have moved the company toward providing in-house technical training for corporations, a rapidly growing market that could expand to a $40-billion-a-year industry in 1988, according to David Bright, president and chief executive of NEC.

There are about 7,000 U.S. vocational schools, with an enrollment of 2.5 million students, according to the National Assn. of Trade & Technical Schools. Vocational schools, whose enrollment has grown 10% to 15% yearly through much of the 1980s, have become a $9-billion-a-year industry, Bright said.

NEC got off to an inauspicious start in Los Angeles in 1953 as the Malibu Archery Co., a mail-order house that sold Japanese bows and arrows.

“I was originally in the advertising business, and a lot of our accounts in those days were mail-order companies,” McNaughton said.

From the archery business came the idea to offer correspondence courses on forestry. While still working in the ad business, McNaughton created the North American School of Conservation and hired a retired game warden to teach students how to assist foresters in tasks such as fire watching.

Profits Used to Expand

The courses were a hit. McNaughton used the profits to buy other correspondence course operations, such as drafting, handwriting, painting and motorcycle repair.

By 1961, when the company had grown to about $3 million, McNaughton took NEC public, raising $300,000 in a stock offering.

With that money, McNaughton branched out from correspondence courses to buy several vocational schools. He quit advertising to devote full time to the business. He moved the company in 1965 from Los Angeles to Newport Beach, then in 1986 to Irvine.

In the late 1960s, NEC bought a chain of real estate licensing schools in California. The company in 1971 bought the Spartan School of Aeronautics, which teaches professional flying and flight maintenance. In 1976 the company acquired several electronics and broadcasting schools from CBS.

One reason for NEC’s rapid growth has been its ability to find jobs for graduates of its vocational school, most of them also high school graduates. Byam Stevens, an analyst with the New York brokerage house of H.G. Wellington, said 85% of graduates from NEC’s vocational schools find jobs in their field.

Perlman Outbid for Intext

In 1979, NEC outbid Ronald Perlman in a white-knight acquisition of Intext, a publisher of educational materials. The acquisition was important, Bright said, because it moved NEC into corporate training, an area the company is emphasizing for future growth.

Last fall, NEC acquired Chicago-based Advanced Systems in a stock swap valued at $250 million and merged the operation with its Deltak subsidiary, also based in Chicago. The combined subsidiaries are expected to bring in revenues of $200 million a year by providing technical training--particularly in data processing and other computer tasks--to employees of large corporations.

NEC, which trades on the New York Stock Exchange, reported earnings of 40 cents a share in 1987 but should earn $1.65 a share in 1988, Stevens said.

Expenses associated with the Advanced Systems acquisition brought last year’s earnings down from what otherwise would have been $1.25 a share, the analyst said.