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Corinthian Colleges Studies its Options

NEW YORK ( The Deal) -- For-profit educator Corinthian Colleges (COCO), weighed down by declining enrollment and regulatory scrutiny, said Tuesday it intends to retain advisers to help it explore options.

Santa Ana, Calif.-based Corinthian said it was open to alternatives as it announced fiscal third quarter results including net revenue of $349.8 million, down 11.7% from $395.9 million in the same three months a year prior. Total student population as of March 31 was 74,498, down 13.7% from 86,297 a year earlier, and new student enrollments declined by 13.1%.

The company's results fell short on guidance, which Corinthian said was due largely to weather-related school closures. Overall after-tax income from continuing operations totaled $2.4 million, compared with $4.8 million a year prior.

Meanwhile lawmakers are looking into the business, as well as the entire for-profit education sector. Corinthian in April was hit by a civil complaint filed by the Massachusetts Attorney General's office, which has been investigating the company since 2011. In Washington lawmakers have discussed legislation that would establish greater oversight of the sector, which receives about $25 billion in Federal aid annually.

Corinthian has said repeatedly it intends to "vigorously defend itself" against the Massachusetts complaint, and is cooperating with a separate probe by 16 state attorneys general. But the negative attention seems to be taking its toll.

"The company continues to face a number of challenges which have combined to decrease new student enrollments, reduce revenue and pressure margins significantly," Corinthian chairman and CEO Jack Massimino said in a statement. "In light of current market and regulatory conditions, our board has authorized management to retain an investment banking firm to help the company explore strategic alternatives and enhance shareholder value."

In the meantime, Corinthian has been taking steps to try to minimize the damage from decreasing enrollment. Massimino said that during the quarter the company began what he called "a new, major round of cost reductions and operational restructuring" to bring its operations more in line with a lower student population, and said those efforts would continue into the current quarter.

Corinthian has cut about $125 million in annual costs since January, he said. The company has cut marketing costs and admissions expenditures, cuts that Massimino said dented enrollments but insisted that "the reduction in revenue was more than offset by cost savings."

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