Having toiled as a university professor and department head, I imagine it's difficult to run a for-profit institution of higher learning successfully. After all, there are facilities costs, marketing charges, and instructor salaries to be accounted for, along with a pool of prospective students that logic says should be relatively finite over a given period of time.
My suspicion along those lines seems to be verified by Learning Tree International's (NASDAQ:LTRE) apparent struggles to achieve ongoing profitability. The company is not alone; currently, its group is anything but the darling of the financial community. Apollo Group (NASDAQ:APOL) is rated a hold by 19 of the 22 analysts who follow it; Career Education Corp. has been accorded the same neutral rating by 13 of its 20 active analysts; and DeVry (NYSE:DV) is a hold with 10 of its 13 analysts.
Learning Tree's results for its quarter and year ended Sept. 29, 2006, are still being finalized, but management has released expected results for both periods yesterday. For the quarter, management expects revenues of $38.7 million, a 6% increase from the same quarter a year ago. Income from operations for the quarter is anticipated to be approximately $20,000, compared with a loss from operations of $80,000 last year.
For the full year, revenues are expected to be $154 million, up 1.5% from fiscal 2005's $151.6 million. The loss from operations for the full 2006 year is likely to be about $1.9 million, up from a $1.6 million loss for fiscal 2005. The results for all of the periods except for the most recent quarter reflect a restatement -- announced earlier by the company -- to correct the accounting for lease termination costs related to the company's cessation of use of its United Kingdom Education Center. Management expects the restatement to adversely affect the 2005 loss by approximately $50,000, and to adversely affect the company's loss for the first nine months of fiscal 2006 by about $90,000.
So Learning Tree trudges on, restatement and all. While it does appear to be a reputable company, with its array of information technology and management classes, many of its peers are backpeddling as angry graduates file lawsuits claiming that they were led astray regarding job opportunities or the acceptability of their courses at other colleges, universities, or graduate programs. It's a somewhat surprising conundrum: We might have anticipated a few years ago that for-profit education would be the wave of the future, as the residents of more than a few states began to express frustration over the numbers of their tax dollars being funneled into the support of public institutions of higher learning.
And it similarly wasn't long ago that the for-profit education resonated on Wall Street, attracting investors from far and wide. But that time is clearly past, at least for now. At present, I can't think of single company in the group in which Fools could invest without risking a costly education.
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Fool contributor David Lee Smith, an erstwhile and unrepentant professor, does not own shares in any of the companies discussed. He welcomes your comments or questions.
