Enrollments fuel Corinthian Colleges net income

Corinthian Colleges income up nearly sixfold as enrollments jump, bad loan costs drop

• On 10:07 am EDT, Thursday October 29, 2009

SANTA ANA, Calif. (AP) -- Corinthian Colleges Inc. said Thursday that unemployment near 10 percent drove more students to its schools, boosting fiscal first-quarter profit by nearly sixfold.

The for-profit education company also raised its guidance for its 2010 fiscal year, sending its shares higher.

Corinthian said total students grew by almost 26 percent from the year-ago period to 93,493. High unemployment and a tight job market drives the unemployed and underemployed to seek additional degrees and career-training classes at education providers like Corinthian.

The company said net income rose to $32.9 million, or 37 cents per share, from $5.5 million, or 6 cents per share in the same period last year. Sales rose 34.2 percent to $388.5 million from $289.6 million.

Analysts polled by Thomson Reuters expected earnings per share of 28 cents and sales of $377.9 million for the period ended Sept. 30.

In morning trading, shares of Corinthian advanced $1.13, or 6.8 percent, to $17.83. The stock has ranged from $12.26 to $21.73 over the past year.

Corinthian managed to grow its total student population while bringing down marketing and administrative expenses as a percentage of revenue.

"The recession helps drive enrollment growth, but it also creates challenges in terms of career placement and student loan repayment," said Corinthian CEO Peter Waller.

The company specializes in shorter, non-degree programs which attract younger, poorer students. In order to fuel its enrollments, it offers internal financing for tuition to help offset tight lending standards at banks.

In the first quarter, Corinthian said bad-debt expense was 6.4 percent of sales, or about $24.9 million, down from 8.9 percent in the same period last year, or $25.8 million. Bad-debt expenses are the student loans and tuition Corinthian writes off as uncollectable due to students dropping classes or being unable to repay loans.

A recent acquisition of Heald College, focused in northern California, is expected to add to Corinthian's growth in the second half of the fiscal year. Online enrollments, new programs at existing campuses and a high school recruiting program, which cuts advertising costs, are also expected to contribute to higher profit.

Earlier this week, the Securities and Exchange Commission said it was looking into for-profit education provider Apollo Group Inc.'s revenue accounting practices, raising the question of whether other schools would be subject to regulatory scrutiny.

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