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Corinthian Back From School-Buying Break

Corinthian Back From School-Buying Break

Santa Ana-based Corinthian Colleges Inc.,which has bought 47 campuses since 1995,took the past year or so off. Now the for-profit college operator has started buying again.

In March, Corinthian made its first deal in 11 months, buying National School of Technology Inc., which operates three campuses in the greater Miami area. In a recent investor presentation, the company said it is looking to make more “selective” buys.

“Our fundamental strategy when we started the company was that we were going to principally grow through acquisitions,” said David Moore, Corinthian’s chief executive. “We are simply executing that fundamental strategy.”

Corinthian paused its buying a year ago as it evaluated its strategy, Moore said. It decided to take a harder look at prospective deals.

“In the past, we were willing to buy a cash cow as well as a growth company,” Moore said. “Today, growth is more important to us.”

Corinthian has been among the fastest growing for-profit colleges. Last year, some analysts started to wonder whether the company’s growth just was due to acquisitions and not internal growth. Acquiring small colleges throughout the country and consolidating them into Corinthian was more of a rollup strategy, some analysts figured.

Changing that perception was Corinthian’s challenge.

Without making any buys for almost a year, Corinthian did manage to grow,at a remarkable pace. For the quarter ended Dec. 30, Corinthian saw a 34% rise in revenue to $81.6 million. Operating profits grew 39% to $14.7 million.

“What we have been able to demonstrate over the last 12 months is we clearly are a growth company, whether we do acquisitions or not,” Moore said. “We have maintained our growth rate of 30% to 40% on the top and bottom lines without doing any acquisitions.”

Corinthian now is following a mixed strategy of internal growth and acquisitions.

“We have a balanced strategy now,” said Dennis Beal, the company’s chief financial officer. “We can do no acquisitions. We can do a lot of acquisitions. But our preference is some kind of middle ground.”

Corinthian hasn’t diluted equity in its buying sprees. Up to this point, all acquisitions that Corinthian has made were paid for through internally generated funds.

“We have no debt and have not used equity,” Moore said.

For the fiscal year ended in June, the company spent $22 million in acquisitions, Moore said.

“The best guidance (for 2003) we can give is probably that the past is a good indicator of the future,” he said.

The company would continue to grow by 20% to 25% yearly without making any acquisitions, taking on debt or selling equity, he said. If Corinthian does acquire more schools this year, the growth would be higher, he said.

,Rajiv Vyas

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