EAI ends year in the black, for its first profit Company operates 9 Baltimore schools

September 21, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Making good on its claim that a private company could manage public schools and turn a profit, Education Alternatives Inc. released a report yesterday showing the company was in the black for its 1993 fiscal year.

The Minneapolis-based company, which manages nine Baltimore schools, reported profits of $617,000 on revenues of $8.3 million for the fourth quarter, which ended June 30. The quarterly profit helped EAI earn $1.1 million on revenues of $30.1 million for the year.

While the profit margins were tight, the results represented the company's first profitable fiscal year in its seven-year history. The year before, the company lost $1.6 million on revenues of just $2.9 million.

"We are very pleased and proud of the results. I've always said that our profit margins would be thin -- like a utility's. That's the nature of our business," EAI Chief Executive Officer John T. Golle said.

Last year, EAI signed a five-year, $133 million contract to manage the nine Baltimore schools. The company is working with auditor KPMG Peat Marwick and physical plant specialists Johnson Controls Inc. to improve the schools' purchasing, financial and educational standards.

After initial opposition from teachers, EAI has won acceptance and praise for refurbishing the schools. An EAI study also showed that students were learning more with their computer-oriented,hands-on approach.

Pamela Lund, an analyst with John G. Kinnard & Co. Inc., said the company exceeded estimates because it was able to invest some money it made from a stock offering. The investments brought in an unexpected $255,000.

The bonus increased per-share earnings to 8 cents for the quarter. Zacks Investment Research of Chicago reported that analysts had predicted that the company would make 5 cents a share for the quarter.

Yesterday's report helped boost EAI's stock to $35.50, up $1.125.

Ms. Lund said part of the reason the stock was trading so high was that investors were anticipating another big contract. In a telephone conference yesterday, Mr. Golle said he was working on 14 initiatives.

The most promising was a plan to manage three school districts in Arkansas, but EAI has hit snags in the negotiations. While not all three school districts support EAI, Arkansas officials said that all three must be managed together, or none at all.

For now, the Baltimore contract was estimated to account for most of the company's revenues. It is worth approximately $26 million a year.

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