Education Management Slides After $1.2 Billion Loss
Education Management Corp. (EDMC), the second-largest for-profit college chain by enrollment, fell the most in almost two years, a day after posting a $1.2 billion loss in the fiscal fourth quarter.
During a conference call with investors today, executives blamed the quarterly results on students’ reluctance to take on debt in a weak labor market. Last week, Tom Harkin, the Iowa Democrat who heads the U.S. Senate education committee, issued a report that attacked the for-profit college industry’s academic outcomes and student recruitment.
“Pervasive unemployment” has become “a significant barrier to higher education as individuals find it more challenging to fund their education,” Chief Executive Officer Todd Nelson said on the call.
The loss of $9.51 a share in the period ended June 30, compared with net income of $34.8 million, or 26 cents, a year earlier, Pittsburgh-based Education Management said yesterday in a statement. It reported a non-cash writedown of $1.25 billion primarily because of the diminished value of its Art Institute chain as enrollment falls.
The Justice Department has sued Education Management, alleging the company used fraud to secure federal financial aid -- allegations the company denies.
Education Management had enrollment of 124,600 as of July, down 11 percent from a year earlier. Along with the Art Institutes, it owns Argosy University, Brown Mackie College and South University. In the industry, its enrollment trails only University of Phoenix, owned by Phoenix-based Apollo Group Inc. (APOL)
Earnings, excluding the writedown related to the Art Institute chain and other items, were 10 cents a share. Analysts on average had predicted 8 cents, according to data compiled by Bloomberg.
Education Management has slid 88 percent this year.
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