Career Education to defer search for new CEO
Career Education Corp. said it would defer its search for a new chief executive at least till the end of 2012 as the for-profit education company struggles to arrest sliding enrollment and clear regulatory hurdles.
Shares of the Schaumburg-based company, whose CEO quit in November amid findings of improper placement rate reporting, fell as much as 16 percent on Tuesday.
“We have a lot of work facing us to address the regulatory challenges and operational complexities today that are barriers to us reaching our growth and efficiency and margin potential,” interim CEO Steven Lesnik said on a conference call with analysts.
“In view of this, the board has determined that now is the time for consistency in leadership.”
The company said it has upgraded its compliance capabilities and is looking to hire a chief academic officer.
Education companies have faced declining enrollment as they tightened admission standards to comply with the U.S. Department of Education's new rules. These education rules were enforced after investigations found students from most for-profit colleges ended up with high debt and low job prospects.
Adding to this, investigations at Career Education last year found several of its colleges reporting false placement rates to attract students.
The company has revamped its placement rate reporting procedure. It is looking to improve its placement rates or cap enrollment for its programs.
The accreditation body, which requires a minimum 65 percent placement rate, has decided to defer further action on the investigation until its next regularly scheduled meeting in April 2012.
A stiff penalty can lead to closure of certain programs and schools and can further push down student enrollment and hamper profitability.
While the near-term outlook is quite murky, 2012 will be a year of transition, Career Education's interim CEO said.
Career Education, which runs the American InterContinental University, Le Cordon Bleu North America and the Sanford-Brown colleges, said it would invest in brand building and implement a new orientation program for students.
For October-December, the company posted a net loss of $1.64 a share, compared with earnings of 15 cents a share, a year ago. It said new student enrollment for the quarter fell 24 percent.
Shares of the company were down 15 percent at $9.55 in afternoon trade on the Nasdaq. The education subindex was down 7.5 percent in afternoon trade.