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Published in Print: May 27, 1998, as Edison Schools Predict 'Watershed Year' Ahead

Edison Schools Predict 'Watershed Year' Ahead

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The Edison Project will nearly double its revenues and number of schools next school year, its fourth in operation, company officials said last week.

"We think this is a big watershed year," Christopher Whittle, the founder and president of the Edison Project, said in an interview.

On the Move
The Edison Project will run 47 schools in 24 locations in the fall, up from 25 schools in 13 locations this year.
Current
Edison locations:
New
Edison locations:
Boston; Colorado Springs, Colo.; Chula Vista, Calif.; Detroit; Duluth, Minn.; Flint, Mich.; Lansing, Mich.; Miami; Mount Clemens, Mich.; San Antonio; Sherman, Texas; Wichita, Kan.; and Worcester, Mass. Air Force Academy, Colo.; Battle Creek, Mich.; Denver; Goldsboro, N.C.; Hamden, Conn.; Minneapolis; Napa Valley, Calif.; Pontiac, Mich.; Trenton, N.J.; Washington; and West Covina, Calif.

Edison is a privately financed, for-profit company that operates public schools, either under contract with districts or under charters from districts and states, for roughly the same per-pupil cost as traditional public schools.

Officials said the number of Edison schools will grow from 25 this year to at least 47 next year. Enrollment in the schools will nearly double from 12,500 this year to 23,000. And annual revenues are expected to leap to $127 million, from the current $68 million.

The New York City-based company plans to announce those figures formally this week along with news about more than $35 million in philanthropic support that has been pledged to help districts hire Edison.

The funding is designed to help districts in areas of the country where per-pupil spending is lower than necessary to support an Edison Project school, company officials said.

"This is our low-spend model," Mr. Whittle said.

The largest contribution for that effort is coming from the family foundation of Donald G. Fisher, the founder of the San Francisco-based apparel retailer Gap Inc. The foundation has pledged $25 million to allow public schools in the San Francisco Bay area to hire Edison.

But the most remarkable development may be that a company that almost folded after three years and more than $40 million spent on research for its innovative school and curriculum design now seems poised to leap to the forefront of the growing education-services industry.

Bank Financing

Edison's growth is coming in part through charter school arrangements, including those in which districts themselves have issued charters to the company to run the publicly funded but largely independent schools.

Edison has a pool of $20 million in low-cost bank and developer financing to pay for charter school facilities, which can be a big expense for smaller charter operators. Banks finally seem comfortable lending money for charter schools, Mr. Whittle said last week.

The Edison Project should reach "static state profitability" in the next year, he said, meaning its existing schools would be run at a profitable level if the company chose to suspend growth and its related costs. Mr. Whittle acknowledged that an overall profit for the company is still several years off.

The company is confident its schools will number "in the hundreds" within the next few years, although Mr. Whittle declined to set a specific target.

He said he didn't want to make the same mistake he did in 1991, when he predicted that Edison would run 200 private, for-profit schools by 1996 and 1,000 by 2010. The company later shifted its focus to operating public schools.

Michael T. Moe, an analyst who follows education companies for Nationsbanc Montgomery Securities Inc. in San Francisco, said Edison "is really kind of breaking out with the momentum in its business plan."

"It's starting to seem like they are everywhere," he said. "I believe this can be a profitable enterprise."

Satisfied Customers

Edison is still relying on private capital for growth over the next couple of years, but Mr. Whittle said the company may be prepared to go public after that.

Edison officials say that its new customers have been impressed by the company's early academic results, in which students at some of its schools have outperformed students in control schools.

Edison's academic claims came under criticism this month when the American Federation of Teachers issued a report arguing that the schools' achievement results are less impressive than Edison presents them. Edison responded swiftly with a lengthy counterattack on the AFT report. ("AFT Report Disputes Claims by Edison Project," May 13, 1998.)

Mr. Whittle said the most telling statistic about Edison's progress is that not a single district that has turned a school over to the company has ended its relationship.

"We're completing our third year, and we haven't lost a client yet," he said.

Vol. 17, Issue 37, Page 5

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