This Index tracks the performance of seven publicly traded higher-education companies. The index was developed for The Chronicle by the Center for Research in Security Prices at the University of Chicago’s Graduate School of Business.
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ANNUAL REVENUE
Company
Annual revenue
Increase over previous year
Fiscal year ending
Apollo Group
$2.5-billion
10.0%
Aug. 31, 2006
Career Education
$2.04-billion
18.0%
Dec. 31, 2005
Corinthian
$966.6-million
0.3%
June 30, 2006
Laureate
$875.4-million
35.0%
Dec. 31, 2005
DeVry
$843.3-milion
7.9%
June 30, 2006
ITT
$688.0-million
11.4%
Dec. 31, 2005
Strayer
$220.5-million
20.0%
Dec. 31, 2005
This Index tracks the performance of seven publicly traded higher-education companies. The index was developed for The Chronicle by the Center for Research in Security Prices at the University of Chicago’s Graduate School of Business.
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A Roundup of Recent Developments in the For-Profit Higher-Education Industry.
GOING PUBLIC: Some 18 months after it making an initial public offering, Capella Education Company, owner of all-online Capella University, is moving ahead. The deal involves investors’ selling off about one-quarter of their shares in the company to outsiders, with a return of as much as $72-million. The investors include Capella’s founder, Stephen G. Shank, and several private-equity firms. About 84 percent of Capella’s 16,000-plus students are enrolled in master’s or doctoral programs.
COLLEGE CLOSED: The New York Education Department, which has already imposed a moratorium on new for-profit colleges in the state and is cracking down on existing ones, has ordered one institution to close down altogether. In September the department announced it was ordering the two-year Taylor Business Institute to close by January 2007. The department ordered Taylor closed after a review committee found that “the institute operates more as a high-school-equivalency preparation enterprise than as a college.”
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UP FOR SALE: Leaders of the nonprofit Touro University have confirmed that they have hired an investment bank to help them find a buyer for the institution’s 6,000-student distance-education division, Touro International University. Touro International, which was founded in 1998 and is separately accredited, generates annual revenue of about $40-million and is profitable. This deal, along with the Capella IPO, will be the first tests of the market value of stand-alone online institutions since Congress made it easier this year for institutions that offer only distance-education courses to participate in federal student-aid programs.
OUT THE DOOR: Barely a year after joining Career Education Corporation as chief legal officer, Janice L. Block abruptly left in September. The company is facing several legal and regulatory issues, including an investigation by the U.S. Justice Department involving its admissions procedures, and the continued probation of one of its holdings, American Intercontinental University, by its accreditor, the Southern Association of Colleges and Schools. No reason was given for Ms. Block’s departure. Weeks later, the company abruptly announced that John M. Larson, its founder, had stepped down as president and chief executive officer. He remains chairman.
NEWSWEEKLY U.: Kaplan Inc., which is owned by the Washington Post Company, is teaming up with a sister company, Newsweek, in a new M.B.A. program that will use material from the weekly magazine and will feature lectures by Allan Sloan, Fareed Zakaria, and other well-known journalists at Newsweek. The new all-online degree program, dubbed the Kaplan University/Newsweek M.B.A., will be delivered by the Graduate School of Management of Kaplan University, which already offers two other M.B.A. programs online. The university enrolls more than 26,000 students in its undergraduate and graduate online programs.
HEALTH-CARE PLAY: With demand growing for technology-literate personnel in health-care fields, ITT Educational Services Inc. has added a sixth school, in health sciences, to its ITT Technical Institute. The first degree to be offered by the new school is an associate degree in health-information technology. The degree involves a more rigorous curriculum than those of the more common medical-assistant degree programs that are the bread and butter of many for-profit and community colleges.
PUBLIC RELATIONS: Although the University of Phoenix does not have a football team, it now has its name on a football stadium, thanks to a 20-year, $154.5-million deal with the NFL’s Arizona Cardinals. The university, an arm of Apollo Group Inc., bought naming rights to the new, 63,400-seat, $455-million stadium as part of a broader campaign to increase the institution’s name recognition.
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Other recent unrelated actions, however, may have provided Phoenix with a bit more name recognition, in the way of negative publicity, than it was looking for. The first came days after the stadium deal was announced, when the U.S. Equal Employment Opportunity Commission sued the university in federal court, accusing it of discriminating against recruiting officials who are not Mormon.
Another blow came in October, when lawyers for the two former recruiters who are suing the university in a whistle-blower lawsuit — which could cost the company billions of dollars in damages — disclosed that Apollo had obtained documents about the case under questionable circumstances. The company received the documents, including memos about legal strategy and interviews with witnesses, from the U.S. Department of Education under the Freedom of Information Act. The department has not explained why it released confidential documents that its officials had deemed “privileged.”
The matter came to light about a month after a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit ruled against Phoenix and reinstated the federal case. In late October, the court rejected Phoenix’s appeal of the ruling.
STOCK-OPTION INQUIRIES: In early November, the Apollo Group announced that the special committee investigating its practices in awarding stock options to top employees had identified “various deficiencies” in the procedures it used. The company also announced that its treasurer and chief financial officer, Kenda B. Gonzales, has resigned for “personal reasons” and that its chief accounting officer, Daniel E. Bachus, had been placed on administrative leave. Apollo Group is one of more than 100 companies now undergoing a review of its stock-options practices in the wake of news reports by The Wall Street Journal and other news organizations that questioned whether the companies had backdated stock-option grants to periods when their stock prices had dipped. Corinthian Colleges Inc. is the only other publicly traded higher-education company to acknowledge an internal investigation of its option-granting practices.
CALIFORNIA SCRUTINY: The scope of an investigation into how Corinthian Colleges Inc. reports its graduation rates and job-placement rates to the public has widened. The company, which had previously disclosed that the California Attorney General was looking into practices at three of its institutions, revealed in September that the inquiry would include all of its colleges in the state. The company said that if it was unable to settle the issue with state officials, a lawsuit against it was likely.
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CAMPUS SELL-OFF: DeVry Inc., which has been criticized by investors for owning too many of its campuses outright, sold one of its Southern California locations in September and pledged to continue to review its real-estate portfolio with an eye toward selling more under a new strategy. The sale of the West Hills site would result in a net gain of $11.8-million after taxes, the company said. DeVry officials said the company owns about 20 sites, and that about one-third of them might be immediately suitable for sale. They are located in hot real-estate markets and in places with relatively weak enrollments, where the company could realize more income by selling the properties and leasing other spaces.
The veteran reporter Goldie Blumenstyk writes a weekly newsletter, The Edge, about the people, ideas, and trends changing higher education. Find her on Twitter @GoldieStandard. She is also the author of the bestselling book American Higher Education in Crisis? What Everyone Needs to Know.