In separate press releases Wednesday, Corinthian Colleges (NASDAQ:COCO) reported both good news and not-so-good news. (Hence, the A-.)
Not-so-good news first: Corinthian's president and chief operating officer, Anthony Digiovanni, who jumped ship from Apollo Group (NASDAQ:APOL) to join Corinthian only a year and a half ago, is departing Corinthian "to pursue other interests."
In his special report: Companies on the Road to Ruin (yours free with an also-free trial to Motley Fool Hidden Gems), fellow Fool Jeff Hwang pointed out that "many companies that are hit by hasty departures are also companies that have been, or would soon be, under SEC investigation." Now, mind you, I have heard not so much as a rumor of an SEC investigation of Corinthian. But sometimes it pays to be cautious.
That said, aside from the president's departure, everything looks great over at Corinthian. The company continues to produce bang-up results on the enrollment, revenues, and earnings fronts. (If this news sounds familiar, Jeff reported on similar results six months ago.)
Here's the rundown for Corinthian's fiscal third-quarter 2004:
- Total enrollment increased 52.7% over Q3 2003.
- Same-school enrollment increased 16.6% (this is "organic growth," not counting the students inherited when Corinthian acquired 71 new campuses in August 2003).
- Revenues grew 60.3%.
- Same-school revenues grew 26%.
- Net income rose 17.8% to $21.2 million.
- Diluted per-share earnings rose 15% to $0.23.
Stock dilution was moderate at 2.5%. While the share count did roughly double, this was mostly due to a stock split that took effect in March 2004.
Corinthian also has its student bad-debt expenses firmly under control -- unlike competitor Career Education (NASDAQ:CECO). As a percent of revenue, bad-debt losses amounted to 3.5% for the fiscal third quarter. That's down from 3.7% in the year-ago period and down even further from the 5.4% lost in 2002.
Even the one bit of bad news in Corinthian's earnings report is not necessarily bad news for investors. True, operating margins declined from 22.2% to 16.4%. However, I expect Corinthian can turn that around. About a quarter of the decline came from an impairment charge the company took in closing two continuing education centers. The rest of the inefficiencies came with the deed to the 71 campuses acquired in August. As Corinthian's management begins to turn those operations around, I expect the operating margins for the company as a whole to rise in tandem.
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Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.
