National Education Will Close 14 Schools : Restructuring: It will cut 600 jobs in the next two years and expand the kinds of training offered at 33 remaining facilities.
National Education Corp. said Thursday it will shut down 14 of its 47 vocational schools and eliminate about 600 jobs over the next two years.
That and other restructuring efforts will mean a $32.5-million pretax charge against earnings for the current quarter, the company said.
After taxes and a one-time gain of $21.3 million from an April stock offering by one of the company’s successful subsidiaries, the net write-off will be just under $2 million. And with a loss of $7.9 million already on the books for the first half, NEC is not expected to be profitable this year.
Still, investors greeted Thursday’s news with guarded enthusiasm, pushing the company’s stock price to $6.75 a share, up 38 cents, in moderate trading on the New York Stock Exchange.
“The stock isn’t trading on performance but on the expectation that the company will turn around its training group or shut it down,” said John T. Mahoney, an analyst with investment bank Raymond, James & Associates in St. Petersburg, Fla.
Jerome W. Cwiertnia, NEC’s president and chief executive, said about $8.4 million of the $32.5 million charge will be paid out over the next three years for supplies, teacher salaries and facility leases at the schools to be closed.
Cwiertnia would not identify the locations of the schools except to say that most of them are in low-income suburban areas.
The company has locations throughout California and in the central and eastern states. The schools teach everything from construction and machine operating skills to data processing. Cwiertnia said the schools to be closed will stop accepting new students but will continue operating until those now enrolled complete their courses. Some schools could be closed within six months, while others would remain open for two years.
The schools to be closed accounted for about $13.8 million, or 8%, of the company’s $172.2 million in revenue for the first half of 1993 and tallied aggregate operating losses of $82,000. Cwiertnia said he expects those losses to continue and even escalate until the schools are closed.
As part of the restructuring, the company’s Education Centers division, which operates the schools, will expand the kinds of training offered at the remaining schools to include more trade skills and some academic programs, he said.
The schools have been hard hit in the past year by changes in government student loan guarantee programs. Those revisions have cut deeply into the financial assistance available to many of the students who use programs such as NEC’s.
NEC’s other problem area is its corporate training group. The company said that $9.2 million of its pretax write-off is connected with its acquisition of a training company called Deltak in 1986. The training group provides educational products and consulting services to employees of governments and businesses. But it spent most of the 1980s concentrating on materials that were not compatible with the personal computer networks that have become the standard tool in the workplace of the 1990s.
Deltak and other training companies acquired by NEC during a buying spree in the 1980s “had the wrong products for the industry,” analyst Mahoney said. “When the world went to the PC, their products were obsolete.”
Cwiertnia agreed, but said the training group is about to bring out new products that will work with today’s technologies.
Two other NEC units--International Correspondence Schools and Steck-Vaughn Publishing, which produces textbooks and other materials--have continued turning in extremely strong performances during the recession, Mahoney said. In April, NEC realized a gain of almost $21.3 million in the initial public offering of 18% of its Steck-Vaughn stock.
Cwiertnia would not comment on NEC’s financial outlook for the full year but said the company expects a turnaround at both its schools division and the training group.
