Md. officials say they have faith in Edison

For-profit company that runs 3 city schools needs cash infusion, analysts say

May 15, 2002|By Liz Bowie | Liz Bowie,SUN STAFF

Despite concerns about the financial health of Edison Schools Inc., Maryland school officials say they are confident the for-profit company will continue running three Baltimore schools in the fall.

In a telephone conversation yesterday, Edison Chief Executive Officer H. Christopher Whittle assured State Superintendent Nancy S. Grasmick "that the commitment to the three Maryland schools was not at risk," said Ronald A. Peiffer, an assistant state superintendent.

Edison, the largest private company running public schools in the nation, has 74,000 children and 7,000 teachers and has just entered into an agreement to take on 20 more schools in Philadelphia next school year.

The company had attracted investors in the past, saying that it would become profitable once it had a large enough number of schools.

But analysts have estimated that it may need a substantial infusion of cash before fall to pay for the start-up in Philadelphia and to maintain its business around the country. The company said yesterday that it is in "serious negotiations" with an investor who would put $30 million to $50 million into the company. The company hopes to complete negotiations in the next several weeks.

Edison has seen its stock price drop from $36.75 a share in February of last year to a close yesterday of $2.94 a share. In announcing third-quarter earnings yesterday, the company said its net loss was $16.9 million, or 31 cents a share.

Edison was contracted to manage Montebello Elementary, Gilmor Elementary and Furman L. Templeton Elementary schools three years ago after the state took them over because of poor performance.

Peiffer said the state reviewed the financial viability of each company that bid to run the three schools and found that Edison had the best record.

In a call with analysts and investors yesterday, company officials highlighted the academic results at its three Baltimore schools, saying they had seen "tremendous gains" in the past two years on national standardized tests.

But questions about the financial stability of the company remain.

Peiffer said yesterday that the state has always been ready in the event that a contractor might be unable to fulfill its commitment.

"There would be no time at which the schools would close down or be without management," Peiffer said.

He said the state would not return the schools to city school board control. "We made a commitment to those schools to continue to support them and help them improve, and we would continue that commitment," Peiffer said.

Meanwhile, the Securities and Exchange Commission reached a settlement with Edison yesterday, finding that the company had not accurately described the revenues that it reported. It said the company counted as revenue funds that had been spent by school districts to pay teacher salaries and other operating costs.

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