National Education Will Sell Training Centers, Lay Off 40 : Divestiture: Company will take $40-million loss on troubled division, continue operating three others.
National Education Corp. said Tuesday it is selling its troubled National Educational Centers division to an unidentified buyer, laying off about 40 headquarters employees and recording a $40-million loss on the transaction.
The company, based in Irvine, said it will stop admitting new students at six nationwide locations, which eventually will be closed. It plans to sell 27 remaining post-secondary school training centers to a buyer it did not identify in a deal that it said could be completed by late summer.
The company will continue to operate its three other divisions, which provide computer training, independent study programs and educational materials.
“We’ve had losses in our (computer training division) but our other two divisions are having record years,” said Jerome W. Cwiertnia, the company’s president and chief executive officer.
National Education laid off about 25% of the troubled division’s corporate staff employees in Irvine. About 80 more employees will be laid off when the six centers close. There were no layoffs at the company’s three remaining divisions.
Students enrolled at all of National Education’s schools, which offer courses such as medical and dental assistantship, electronics, computer technology and automotive repair, will be allowed to complete their course work, company executives said.
“We are not going to leave any students stranded,” Cwiertnia said. “We have proposed keeping the schools open so that, under any circumstance, they can complete their educations.”
At the end of May, National Education had 10,500 students enrolled at 33 schools nationwide. About 1,850 students are attending classes at the six locations to be closed, including 225 at a Long Beach site.
Schools in Anaheim, Los Angeles, Rosemead, Sacramento, San Francisco, San Jose, San Bernardino and Winnetka, Ill., will remain open and will continue to accept new students.
National Education has struggled for several years to right the troubled division. But Cwiertnia said Tuesday that an “increasingly restrictive regulatory environment” made it difficult for the company to turn a profit.
“This business doesn’t look as promising as it did four or five years ago,” Cwiertnia said. “The outlook has been impacted enough by regulations that we no longer want to be in it.”
The schools have been hurt by federal regulations adopted three years ago to curtail skyrocketing student loan default rates, Cwiertnia said. The regulations prohibit an institution’s current students from participating in some federal loan programs if a relatively high percentage of graduates have failed to pay back their loan obligations.
In 1993, National Education attempted to lower its alumni default rate by closing 14 education centers where a relatively high percentages of graduates had failed to pay back loans.
Recently adopted federal regulations have also made it difficult to attract students in a cost-effective manner, Cwiertnia said. “Our business is a lot like the airlines,” Cwiertnia said. “We’ve got a lot of available seats and the fixed costs are there, regardless of whether we’re at 10% capacity or 98% capacity.”
NEC’s stock lost 37.5 cents a share to close at $5.50 in Tuesday’s New York Stock Exchange trading. The stock traded as high as $30.875 in 1988.
National Education reported a $2.9-million net loss for the quarter ended March 31, compared to a $4.3-million loss for the same period a year earlier. First-quarter revenue fell to $77 million from $83 million.
