National Education Expects Quarterly Loss of $6 Million
National Education Corp., the troubled Irvine-based vocational education company, said Thursday that it expects to report a third-quarter loss of about $6 million and that it is having difficulty obtaining necessary financing.
The company attributed the impending loss to “disappointing results” at its Applied Learning subsidiary, which was formed by merging several acquired companies and was supposed to lead the company’s charge into the corporate education arena.
But Applied Learning has suffered from serious management difficulties, including billing and computer problems, and was considered responsible for NEC’s $1.5-million loss in the second quarter.
Further, the company said, it had not yet received a commitment for a term loan it has been seeking to replace its uncommitted, demand lines of credit, and the company’s banks have indicated that they intend to call $62 million in unsecured loans if they decline to provide new financing.
NEC stock hit a new 52-week low of 11 3/4 per share in New York Stock Exchange trading but recovered to 12 before trading was suspended pending the announcement.
The stock had traded as high as $28 during the year.
David C. Jones, former chairman of the Joint Chiefs of Staff, was appointed chairman of NEC in August, and one of his first moves was to bring back Jerome Cwiertnia, who had been president of the firm before resigning in March.
H. David Bright, the former chairman and CEO, was ousted following the second-quarter loss.
Jones and Cwiertnia could not be reached for comment.
NEC also said in its statement that while it has “substantial assets available for use” in securing new financing, “there is no assurance that it would be successful in securing such funds.”
It has enlisted Kidder, Peabody & Co. to assist in “conducting a strategic review of the company’s operations.”
NEC is the nation’s largest provider of educational training services and employs about 5,200 people.
The company’s schools and educational materials have traditionally focused on vocational training in areas as diverse as telecommunications and word processing, but NEC had been looking to the corporate education market for growth.
In the second quarter, NEC had revenues of $96 million and a $1.5-million loss, against revenues of $105 million and profits of $7.6 million for the same period last year.
