Corinthian Colleges challenged by declining enrollment

These have not been good times for Corinthian Colleges Inc. or its investors.

Founded in 1995, Corinthian is one of the world's largest for-profit college companies, with an enrollment of about 81,000 students at 111 schools in 25 states and Canada. Operating under the names Everest, Heald and WyoTech, it offers job-training programs as well as associate's, bachelor's and master's degrees.

The Santa Ana company has been under scrutiny about the way it recruits students and the high rate at which its students default on federal loans.

In June, the company disclosed that the Securities and Exchange Commission had issued a subpoena seeking information about its student recruitment, degree completion, job placement and student loan defaults.

That news followed the company's January disclosure that the California attorney general's office had issued a subpoena seeking similar information.

A report last year by Sen. Tom Harkin (D-Iowa) was highly critical of Corinthian and other for-profit colleges. Harkin said the schools charge high tuition, but many students leave without degrees and fail to repay federal loans.

The student withdrawal rates from Corinthian associate's degree programs were "among the highest analyzed by the committee staff," Harkin said in the report. More than 66% of students who signed up for associate degree programs for fiscal 2009 later withdrew, Harkin said in the report.

Moreover, the Harkin report said, Corinthian tuitions can soar above those at public schools. An associate's degree in paralegal studies costs more than $41,000 at Everest College, while the public community Santa Ana College charges $2,400.

Corinthian shares have slid 94% since peaking at $35.81 in 2004. The stock closed Friday at $2.16 and is down 12% this year.

The latest

Last month, the company said enrollment at its colleges was 81,284 as of June 30, down 11% from a year earlier.

Corinthian's chief executive, Jack Massimino, didn't sound optimistic, noting that the company's decline in new student enrollment was higher than expected in its fiscal fourth quarter.

"Given the decline in our student population, we expect fiscal year 2014 to be another challenging year," Massimino said in a news release. He declined to be interviewed for this story.

He said the company has increased staffing in its admissions offices in an attempt to boost enrollment. The company is also introducing new diploma programs and offering preparation courses for high school equivalency exams in an effort to restore revenue growth, Massimino said.


Corinthian was a pioneer in the for-profit college industry. Its student enrollment more than quadrupled to more than 113,000 in 2010 from 28,000 nine years earlier.

Despite its recent troubles, the company remains one of the largest for-profit education companies in the United States, "serving the large segment of the population seeking to acquire career-oriented education," the company said in its report for fiscal 2013, which ended June 30.

Corinthian also has managed to keep revenue steady, despite declining enrollment.

The company's revenue increased 1.2% to $1.6 billion in fiscal 2013. The increase came primarily from a 3.7% increase in the average revenue rate per student, the company said in its annual report.


The company is awaiting the outcome of regulatory investigations by the SEC and state prosecutors. It is facing a downturn in enrollment. Its stock price is depressed.

With enrollment declining, the company needs to find new revenue sources and reduce expenses, Massimino said.

"Our new student enrollment decline was higher than expected in the fourth quarter, primarily driven by underperformance in new online enrollments," Massimino said.

"We have increased staffing in online admissions and student finance, and we are implementing service center technology and a new academic model, which we believe will improve performance."

Analyst views

One analyst rated the stock a buy, six recommended holding it and two said investors should sell. They estimated, on average, that the stock will be trading at $2.33 in 12 months.

"Operating trends remain challenging at Corinthian as evidenced by [the company's recent performance] as well as cautionary guidance," analyst Peter Appert of Piper Jaffray & Co. said in a recent report.

He cited the company's "volatility in enrollments, regulatory and legal risks, competitive pressures."

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