Pre-holiday rush?
In the rush to file its delayed 10-K, not to mention a 10-Q and an 8-K that released the results of a historical look at the company’s stock options grants (for more on that story see here) before the Thanksgiving dead-zone, it seems that the accountants at Corinthian Colleges (COCO) made a bit of a mistake when it came to what percentage of its revenues were directly tied to federal Stafford loans.
So late yesterday, it filed this amended 10-K that corrected that little piece of information. Turns out that the actual number was 46.6% of revenue, or more than double the 22.1% reported in Wednesday’s filing. The error, the company said, was due to the fact that the original number didn’t include unsubsidized Stafford loans, which are not need-based and where interest accrues even while the student is still in school (see here for a quick explanation of the difference between subsidized and unsubsidized loans).
Granted everyone makes mistakes, including yours truly, but given Corinthian’s track record, it’s hard to cut them some slack. Dumping three significant filings just before a holiday is bad enough. But making a mistake in the rush to dump is problematic for a company that’s been trying to get back on track. I first footnoted the company about a month after I started the blog — back when the stock was trading near $30. Meanwhile, as the Wall Street Journal reported back in July, Corinthian was one of the companies that doled out options to top managers in the wake of the Sept. 11th attacks, creating a hefty windfall. In a story in Friday’s Journal (behind wall), a Corinthian spokesman said "there was no deliberate attempt to take advantage of the Sept. 11 attacks, because the process used to pick the grant dates was the same in all four cases."
While Corinthian managers have done very well, the past few years haven’t been good for Corinthian shareholders. Investors deserve to be treated better than this.
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November 29th, 2006 at 2:35 pm
I agree. Nasty stock to try and trade. Even more so after that mentioned sharp drop. Seems to be a leader top in triggering pin action off any of its many flaws. Couple others in this camp are also spoiled goods. Too much room for abuse if not plain fraud.
These things make airline stocks look good.
Glad to see someone add a reminder of their track record.
November 30th, 2006 at 1:27 am
the guys responsible for 9/11 - heartless terrorists
the guys abusing 9/11 for handing out cheap options - heartless terrorists disguised as “shareholder friendly” executives
Infact, I am sorry I have to put it this way, but I just don’t see the difference between these two groups of people given all the abuses over the last few years.
November 30th, 2006 at 4:15 pm
It is about time Corinthian Colleges (COCO) is looked at through otherwise than a “rose-colored lens.” It has been the favorite of many analysts (apologists) for too long, and yet now that it is struggling a bit, it is looked at more closely. Predicatable. In the interest of full discloure, I am a former employee of Corinthian Colleges (have not worked there for several years); I have not much of chip on my shoulder, but should disclose this outright.
Years ago when I was employed by them, it was clear that management was very much motivated through a system of bonuses–campus managers would receive bonuses based on reaching goals relating to placement, retention, student starts, and budget percentages (what they called “making budget”); this was not unlike what happens at most companies–when one meets certain benchmarks, then one gets rewarded with a bonus.
The problem is that this often gives incentive to fudge the numbers a bit. COCO was one of the more honest corporations I have ever worked for, but I always suspected a bit of legal “fudging” of the numbers in order for management to claim that they made those benchmarks. Efforts to manipulate the numbers on occassion bordered on the unreasonable, although I never witnessed any blatantly illegal and unethical practices, as press (and sometimes official) investigations have revealed about Career Education Corporation and other companies in the for-profit education sector.
Those not meeting these benchmarks were often placed on probation (”performance improvement plans”), and if they did not turn things around, were shown the door. I surmise that this is ok if one is selling cars and there are plenty of leads, but when it is in the field of education, and one has criminal justice, surgical assistant, or medical assisting programs that notoriously enroll students with plenty of personal baggage beyond anyone’s control (criminal justice students disappearing, only later having been found out as having gone back to jail; medical assisting students dropping because they themselves have medical problems)–then it becomes easy to justify “fudging the numbers.” Given that many COCO commercials can be found supporting programs such as Judge Judy and Jerry Springer, this should come to no one’s surprise. And regional and upper management have no problem firing people who don’t make their numbers, despite the fact they are in an industry where low retention and variability in numbers are due mainly to consumer choices beyond the control of any marketing arm, or local campus management for that matter.
For anyone considering investing in the education industry, one indicator to look for (or ask if not demand) is employee retention, recruiting cost, and other costs associated with employees leaving an organization. In my mind, these are indicators of upper management struggling to make the numbers, and to find employees who either can make things happen (which would be great!) or employees leaving or being fired due to factors, in part, not under their own control. When upper management is struggling to fudge the numbers, which COCO seems to be doing, then I think this is a very bad sign. And until indicators of employee retention improve (and I recognize I may be wrong about COCO on this, for I truly do not know), I wouldn’t touch this company, or anything in its sector, with a ten-foot pole.