Edison tries to reassure state board of education

Schools operator upbeat despite stock price dip

October 30, 2002|By Liz Bowie | Liz Bowie,SUN STAFF

Christopher H. Whittle, chief executive officer of Edison Schools Inc., assured the Maryland school board yesterday that despite gloomy forecasts for his company, Edison will still be alive when the last bell rings in June at the three Baltimore schools it operates.

Edison, which has struggled financially, saw its stock close at 51 cents a share yesterday on the Nasdaq.

"Although our stock price may be down, our actual [financial] performance is much better," said Whittle, the founder of Edison, an 8-year-old company that is trying to make a profit by managing public and charter schools. Edison operates 150 schools, with 80,000 students, in 23 states.

"The company has a very strong balance sheet. ... It has cash on hand," Whittle said.

He detailed the company's financial picture yesterday, saying that Edison's bottom line should improve this year. For the fiscal year ending June 30, Edison reported a net loss of $86 million.

Among the steps that Edison has taken, Whittle said, has been to end its relationship with some schools elsewhere that had drained the firm's resources.

"We feel fine about the current year we are in," Whittle said.

The company, he said, had never closed a school down. "We are very careful to make sure the operation of the school continues."

Edison is in the third year of a five-year contract with the state board to run Gilmor, Montebello and Furman L. Templeton elementary schools for about $15 million annually. The schools were taken over by the state school board after years of failing scores on state tests.

Concerns have been raised because Edison stock, which plummeted from $12 a share in April, could be delisted by the Nasdaq if its stock price does not rise to over $1 by Nov. 25.

If the company's stock is delisted, it could still apply to have the stock traded on the Nasdaq small-cap market.

"It is not a death knell," said Jeff Silber, an education industry analyst at Gerard Klauer Mattison. However, Silber added, "from a perception perspective, it is a public company, but a lot of the big institutions would not be investing."

Philadelphia school leaders had held back a $4.8 million payment to Edison, which took over 20 of that city's schools this fall, until the company guaranteed that the city, rather than creditors, would receive assets, including textbooks, computers and other equipment in those schools, if the company collapses or quits in the middle of the year.

Philadelphia made its first payment to Edison yesterday.

Maryland school officials said that the state has some financial safeguards in place in its deal with Edison. The state pays Edison every two months, and it withholds 10 percent of the total contract until the schools that the company runs meet goals that include student achievement and teacher certification.

In addition, the state board has a performance bond, which acts like an insurance policy. If the company were to collapse, that bond would pay up to $1.5 million, according to Valerie Cloutier, general counsel for the state board.

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