For-profit company 'Career Ed' facing turnaround
Despite all the claims being made on behalf of for-profit and private education companies, things are not going well in the area. The most recent problems have arisen at "Career Ed" of Schaumberg Illinois, which is going to do a "turnaround" according to a report this week in "Crain's Chicago Business."
Career Ed cutting 900 jobs, closing 23 campuses
Career Education Corp. is closing 23 campuses and eliminating 900 jobs as the for-profit education provider continues to struggle with sinking enrollment.
The Schaumburg-based company disclosed the plan today as it reported a third-quarter loss of $33.1 million. It posted a $10.6 million profit the same quarter last year. Third-quarter revenue fell 22 percent to $332.8 million, from $428.4 million.
The company has 22 percent fewer students, 81,600, than it did at the end of last year's third quarter. New enrollment fell 23 percent in the third quarter from a year ago.
Career Education did not specify which of its campuses would close eventually but said the majority would cease operations by the end of March 2014.
"A key component to the company's long-term strategy is to invest in a smaller number of institutions that have the strongest likelihood of delivering strong student outcomes, operational efficiency and strength in their market," the company said in a document filed with the Securities and Exchange Commission.
The company said the 23 campuses, representing roughly one-third of worldwide locations, are too expensive to operate.
"These campuses are expected to contribute approximately $124.3 million of revenue and approximately $62.0 million of operating loss for the year ending December 31, 2012," the company said in the SEC filing.
Career Education owns 11 schools, including Le Cordon Bleu and the International Academy of Design and Technology, which has a location in Chicago.
The job cuts, representing 7 percent of Career Education's total workforce, will take place over the next three months and save the company $45 million to $55 million. They will result in a fourth-quarter pre-tax severance charge of $7 million.
Steven Lesnik, Career Education's president and chief executive officer, warned earlier this year that 2012 would be "difficult financially."
The company disclosed in the third-quarter filing that it has yet to find a replacement for the $185 million U.S. credit agreement that expired on Oct. 31.
Career Education, like its peers in the private-education sector, has experienced declining enrollment as the higher cost of education has potential students wondering if it's worth the financial burden if they can't get a job upon graduation. Career Education was hit especially hard after an internal investigation in 2011 uncovered improper practices on how it was reporting job-placement figures.
The company was once atrisk of losing federal funding if it failed to meet U.S. Education Department standards for gainful employment until a federal judge struck down the proposed language.
Career Education has embarked on a companywide restructuring to regain footing. It cut the number of business units in half, to three, and recently hired several new executives to help turn things around.