News Column

Education Management focusing on costs, scholarships to improve results

February 6, 2014

By John D. Oravecz, The Pittsburgh Tribune-Review



Feb. 06--Education Management Corp. is focused on reducing costs and giving scholarships to students to increase enrollment and retention after reporting a much lower profit on lower revenue.

CEO Edward H. West told analysts in a conference call on Thursday that the company expects total cost reduction of $100 million to $125 million for the year ending June 30, up $25 million from its previous estimate.

Education Management stock fell 12.6 percent at midday on Thursday, trading at $5.41, down 78 cents. The stock has declined 46.4 percent so far this year.

The Downtown-based company is the nation's second-biggest operator of for-profit post-secondary schools.

West said a positive sign is a 1.5 percent improvement in new students at the The Art Institutes, its biggest operating unit, including the Art Institute of Pittsburgh. In the June-December period, students at those schools received $48 million in scholarships, up 35 percent from the same period a year ago, he said. Overall, however average enrollment fell 7 percent from the year before.

At all of its schools, Education Management gave $70 million in scholarships, up 50 percent, during the period. For the year ending June 30, its expects to give $140 million, up 45 percent, West said.

"New students who receive scholarships are retained much more often," he said, estimating the difference at about 10 percent. They average about $750 per student over each three-month period, based on need and merit, he said.

Chief Financial Officer Mick J. Beekhuizen said operating costs for the quarter were $545.2 million, down 4.5 percent, or $25.6 million, because of actions to cut costs and improve productivity.

"We continued to make the tough decisions to adjust staffing levels to the reality of current enrollment," Beekhuizen said, with cuts coming in administrative areas such as registration and financial aid processing. The company previously said several hundred positions were eliminated.

On Wednesday, Education Management said net income for the October-December quarter fell to $1.1 million, or 1 cent a share, compared with $31.1 million, or 25 cents a share, a year ago. Revenue fell 9.3 percent to $593.7 million, with enrollment declining 6.5 percent.

The October-December results included expenses for restructuring, settlements and asset write downs of $19.3 million. Its schools recorded 23,820 new students in the quarter, a decrease of 0.7 percent from 23,980 a year ago.

The company operates 110 schools in 32 states and Canada. Average total enrollment over the quarter fell to 122,990 from 131,480 a year earlier.

John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or joravecz@tribweb.com.

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Source: Pittsburgh Tribune-Review (PA)


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