Education Management posts a $284 million quarterly loss
For-profit school operator Education Management Corp. posted a loss of $284 million in the January-March quarter, mainly because of non-cash accounting charges and lower revenue.
The Downtown-based company's revenue fell 9 percent to $639 million from $702 million. Student enrollments declined across its schools by 9.5 percent, compared with the year earlier.
EDMC is the nation's second-largest for-profit educator, with 110 schools in 32 states and Canada, including the Art Institute of Pittsburgh. The company employs 23,000 people, including 2,400 in Pittsburgh.
The quarterly loss, equal to a loss of $2.28 a share, was narrower than the $417 million deficit, or $3.31 a share, the year earlier.
EDMC booked a charge of $295 million during the quarter to write down the value of goodwill on its books. Spokeswoman Jacquelyn Muller said the company took the charge because the company stock price had fallen below its book value at the end of the quarter.
The impairment charge lowered the value of goodwill to $669 million as of March 31 from $964 million as of Dec. 31.
Goodwill is the price, or premium, that is paid for an asset above its true value. EDMC recorded $2.6 billion in goodwill in connection with its 2006 acquisition by private equity firms led by Providence Equity Partners, Goldman Sachs Capital Partners and Leeds Equity Partners, according to securities filings.
EDMC received a subpoena in late March from the Securities and Exchange Commission seeking documents and information related to the corporation's valuation of goodwill and its allowances for bad student loans.
Muller declined to comment about the probe.
EDMC shares closed at $5.71 Wednesday, up 4 cents. Earnings were released after markets closed.
The company also faces federal lawsuits by former employees and the Justice Department that seek to recover about $11 billion in federal and state student aid it received. The claimants argue Education Management obtained the money by violating a federal ban on paying recruiters based on the number of students they enrolled. The company denies the claim.
Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or at firstname.lastname@example.org.