Operating Career College Lucrative Vocation for CEO

Everybody says education is a good investment. And that couldn’t be more true for David G. Moore.

Eight years ago, struggling National Education Centers Inc. auctioned off its chain of private colleges. Moore figured he could do better with the franchise, so he put up $100,000 to join a management buyout of 12 of the cast-off schools.

That was the beginning of Corinthian Colleges Inc., a Santa Ana-based company that has grown into one of the nation’s biggest for-profit postsecondary school operators. As chairman and chief executive -- and the company’s largest individual shareholder -- Moore has seen his modest investment mushroom into a stake worth more than $100 million.

“When I started this company I was convinced that ... we could serve a market that wasn’t being served, have a good time and at the same time make some money,” said Moore, 64, a former Army colonel and longtime education industry executive.

Corinthian went public in 1999 at $4.50 a share. About a year later, Wall Street warmed to the company and a handful of rivals in the for-profit college and career schooling business. Corinthian’s shares have jumped 52% this year, after closing Friday at $57.59, up $3.19, on Nasdaq.

“I don’t think any of us initially believed that it would get this big this quickly, even in our wildest dreams,” said Frank McCord, 60, a Corinthian co-founder and early investor, who retired as chief financial officer in 2000.

The company operates 125 private colleges and technical schools, along with 17 corporate training centers in the United States and Canada. Its 52,000 students are enrolled in everything from airplane repair to business administration.

Corinthian’s size and diverse offerings probably will help it weather the big hit that many other smaller vocational schools in California are expected to take from the state’s workers’ compensation reform. The measure, which passed the Legislature on Friday, does away with a program that gave injured workers as much as $16,000 for career counseling, retraining and living expenses.

These days, one of Corinthian’s hottest fields is providing health-care courses to students looking for entry-level jobs. But Moore -- who served from 1992 to 1994 as president of DeVry Institute of Technology in Los Angeles -- said Corinthian would limit health care from growing much past 50% of total enrollment “so that we’re not heavily invested in any one sector, in case anything happens.”

He’s mindful of how other single-industry schools, most notably in technology, took a hit after the dot-com bust. DeVry, for example, lost nearly 60% of its share value in six months during 2002, before regaining ground.

Moore and his fellow investors struck it rich thanks to the boom in demand for postsecondary vocational training. With the tough economy, more people have sought to improve their job chances with additional schooling.

The for-profit postsecondary school business is estimated to be a $12-billion to $15-billion-a-year industry. Although growing, it remains a tiny share of the overall $290-billion post-high-school education market -- with state- and endowment-funded schools claiming 96% of the business.

Wall Street has been kind to Corinthian and seven other key players in the field.

Phoenix-based Apollo Group, which runs the ubiquitous University of Phoenix system, is the largest of the for-profit chains with about 187,000 students. Apollo Group’s stock has climbed 51% this year. Another beneficiary has been Arlington, Va.-based Strayer Education Inc., whose shares have risen 66% in 2003.

Wall Street is encouraged by the Department of Education’s projections that the number of high school graduates nationwide each year will grow by as much as 20%. Thus, the pool of potential recruits for Corinthian and other schools looks vast.

“The for-profit piece has been growing rapidly,” said Lehman Bros. analyst Gary Bisbee. As a group, revenue for these schools has grown by 12% a year for the last five years, he said, noting that it’s partly because of population trends.

“With the baby boom echo -- the children of the baby boomers -- you’ve got more kids going to college and each year the number is growing,” Bisbee said.

This year, Corinthian’s enrollment is up 26%, with 56% of the students taking courses to earn diplomas that will lead to entry-level jobs in health care. Many attend the chain’s Bryman College, most of which are in urban areas in California.

An additional 30% of Corinthian students take classes in business or criminal justice, including at the company’s National Institute of Technology. Other fields range from aviation technology and plumbing to the chain’s growing online program.

The company has tried to spur growth through acquisitions, adding programs and opening branches of existing schools. The number of campuses has nearly doubled -- to 125 from 69 last fiscal year.

Some analysts, such as Kelly Flynn of UBS Investment Research, are concerned that Corinthian relies too much on health care and that too many of its students are in short-term programs. Other analysts worry that when the economy improves, Corinthian’s enrollment will shrink as potential students go straight into the workforce.

Moore, who’s been in education for nearly a quarter-century, sees himself as a patient man. He says that Corinthian is the fastest-growing company in the field, and despite the stock’s run-up, he believes the shares are undervalued compared with rivals’.

Looking back at his original hopes for the company, Moore said he never imagined that his grubstake would soar to $100 million.

“I thought $5 million, $10 million maybe,” he said.