Firm's directors to sell their stock

September 18, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- As Education Alternatives Inc. prepares to release the financial results for its fiscal year, two directors are planning to sell large chunks of stock.

Yesterday, president David Bennett filed with the Securities and Exchange Commission to sell 15,000 shares. Last month, board of directors member Gale Mellum sold 4,000 shares and has filed to sell another 4,500. The planned sales are the first by directors of the company in more than a year.

The planned sales come as large institutions have begun to buy the Minneapolis-based company's stock, helping to triple its price over the past year. The company has attracted national attention for its five-year contract to manage nine Baltimore schools. Its stock closed yesterday up 12.5 cents at $34.375.

Neither director was available for comment, but analysts close to the company said it was only coincidental that the two filed to sell at the same time the stock was near record highs and just before the financial results were due.

"The stock looks steady to me, so I don't think they're trying to sell before some terrible news comes out," said Kevin P. Harris, an analyst with Summit Research in Minneapolis.

Last year, EAI chief executive officer John T. Golle drew attention when he sold 100,000 shares shortly after EAI's signing of the Baltimore contract. Mr. Golle said the sale was to cover financial losses at a pilot school designed to showcase EAI's educational methods.

On Tuesday, the company is due to release its figures for its fiscal year, which ended June 30. They would be the first annual results for the company since it signed the five-year, $133 million contract to manage nine inner-city Baltimore schools.

The results are expected to show dramatically improved profitability for the company, which had been a steady money-loser before signing the Baltimore contract. Some analysts, however, have questioned the company's accounting methods, which show teachers' salaries as revenues, even though EAI has only nominal control over their pay.

But most attention has been focused on EAI's highly praised job of managing the nine Baltimore schools.

The knowledge that EAI is firmly ensconced in Baltimore has helped lure institutional investors to the company's stock, said John Teseo, an analyst with Navellier & Associates Inc. in Incline Village, Nev.

"It's a stable stock. Overall, it's in great shape," Mr. Teseo said.

Filings show that most institutional investors sank their money in the stock during the April-to-June period, around the time EAI was garnering its positive first-year reviews.

Profit-taking has knocked the stock off its record high of $36.25, set on Aug. 13, but announcements of new contracts -- as could happen shortly to manage schools in Arkansas -- would almost certainly send the stock back up again, Mr. Teseo said.

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