Education

Edison Outlines Strategies To Reassure Wall Street

By Mark Walsh — August 07, 2002 3 min read
  • Save to favorites
  • Print

Edison Schools Inc., facing a potentially make-or-break school year, sought last week to reassure Wall Street that it was taking aggressive steps to become profitable by cutting money-losing contracts and speeding development of new business areas.

Christopher Whittle, the chief executive officer of the nation’s largest private manager of public schools, told an investors’ conference here Aug. 1 that the company was undergoing “a corporate gut check” after a series of setbacks last spring that included a tumbling stock price and a Securities and Exchange Commission inquiry into one of its accounting practices.

“It was a perfect storm we went through in the spring,” Mr. Whittle said. But the weather brightened for the company last week as it reached an agreement with Philadelphia’s school reform commission to manage 20 city schools serving more than 13,000 students, beginning this fall. (“Phila. Lines Up Outside Groups to Run Schools,” this issue.)

The Philadelphia situation has dominated the company’s attention in recent months, and Edison had raised expectations that it might be awarded management of as many as 45 schools there, along with a separate consulting role for the whole district. When Edison won just 20 schools, its stock price plummeted and has been trading in recent weeks for just around $1 per share.

More recently, the state of Pennsylvania and the five-member reform commission have been haggling over a number of issues that delayed final contracts with the providers of school management services. Edison was to receive the largest number of schools. On July 31, all sides reached an agreement.

Edison and the other providers will now undertake the nation’s largest experiment yet in private management of public schools. “What is really being created there,” Mr. Whittle said, “is a market.”

New Capital

Amid questions in recent months about whether it was financially viable, Edison last week also announced the completion of a $40 million round of new financing. As previously announced, Merrill Lynch will extend its current line of credit to the company by an additional $20 million. But instead of New York City-based Chelsea Capital providing the other $20 million, that investment will now come from School Services Inc., an affiliate of the investment firm Leeds Weld & Co., also based here.

The final details were being ironed out even as Edison was holding its investor meeting at a hotel here. Several Edison executives said they had pulled all-night sessions working on the Philadelphia negotiations, the financing round, or both.

The company apparently did not want to postpone its meeting with investors, which it had already done in June.

Chip Delaney, an Edison board member now formally joining the firm as vice chairman, has already been working there informally the past 60 days, conducting a financial review that he dubbed a “re- engineering” of the company.

Edison will be ending a number of unprofitable school contracts, he said, several of which have already been disclosed, such as in Boston, Mount Clemens, Mich., and San Antonio.

The company says it will devote increased marketing efforts to a new line of business it calls the “affiliates program,” in which smaller districts, with less than 10,000 students, may hire Edison only for curriculum and teacher-development services.

Edison is also interested once again in the overseas market, and company officials say it has been in serious discussion with a local education authority in Britain to pilot a school design geared to that country’s education system by next spring.

In the Penalty Box

Analysts attending the New York meeting said that they had been hoping for more concrete financial estimates than were discussed at the conference. They said, however, that Edison’s bad news appeared to be behind it, for a least a while.

“Thank God they got the Philadelphia contract done,” said Jeffrey M. Silber, a managing director who follows Edison for the New York City-based investment firm Gerard Klauer Mattison. “It is the biggest contract in the company’s, and the industry’s, history, but it’s been nothing but a disappointment to investors.”

Trace Urdan, an analyst who follows Edison for ThinkEquity Partners in San Francisco, said the company appears to have resolved, for now, doubts that it is viable.

“From the stock market perspective, though, they are going to be in the penalty box for some time to come,” he said. Edison stock stirred little after the positive announcements. On Aug. 1, it closed at 94 cents a share, down 4 cents for the day.

A version of this article appeared in the August 07, 2002 edition of Education Week as Edison Outlines Strategies To Reassure Wall Street

Events

Classroom Technology Webinar How Pandemic Tech Is (and Is Not) Transforming K-12 Schools
The COVID-19 pandemic—and the resulting rise in virtual learning and big investments in digital learning tools— helped educators propel their technology skills to the next level. Teachers have become more adept at using learning management
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Student Well-Being Webinar
Building Teacher Capacity for Social-Emotional Learning
Set goals that support adult well-being and social-emotional learning: register today!


Content provided by Panorama
Jobs October 2021 Virtual Career Fair for Teachers and K-12 Staff
Find teaching jobs and other jobs in K-12 education at the EdWeek Top School Jobs virtual career fair.

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Education Tiny Wrists in Cuffs: How Police Use Force Against Children
An investigation finds children as young as 6 and a disproportionate amount of Black children have been handled forcibly by police officers.
15 min read
Jhaimarion, 10, reacts as he listens to his mother, Krystal Archie talking with an Associated Press reporter in Chicago on Sept. 23, 2021. Archie’s three children were present when police, on two occasions, just 11 weeks apart, kicked open her front door and tore through their home searching for drug suspects. She’d never heard of the people they were hunting. Her oldest child, Savannah was 14 at the time; her youngest, Jhaimarion, was seven. They were ordered to get down on the floor.
Jhaimarion, 10, reacts as he listens to his mother, Krystal Archie talking with an Associated Press reporter in Chicago on Sept. 23, 2021. Archie’s three children were present when police, on two occasions, just 11 weeks apart, kicked open her front door and tore through their home searching for drug suspects. She’d never heard of the people they were hunting. Her oldest child, Savannah was 14 at the time; her youngest, Jhaimarion, was seven. They were ordered to get down on the floor.
Nam Y. Huh/AP
Education Gunman in 2018 Parkland School Massacre Pleads Guilty
A jury will decide whether Nikolas Cruz will be executed for one of the nation’s deadliest school shootings.
3 min read
Annika Dworet and her husband, Mitch Dworet, wipe away tears as their son's name is read aloud during Marjory Stoneman Douglas High School shooter Nikolas Cruz's guilty plea on all 17 counts of premeditated murder and 17 counts of attempted murder in the 2018 shootings, at the Broward County Courthouse in Fort Lauderdale, Fla. on Wednesday, Oct. 20, 2021. The Dworet's son, Nicholas Dworet, 17, was killed in the massacre.
Annika Dworet and her husband, Mitch Dworet, wipe away tears as their son's name is read aloud during Marjory Stoneman Douglas High School shooter Nikolas Cruz's guilty plea on all 17 counts of premeditated murder and 17 counts of attempted murder in the 2018 shootings, at the Broward County Courthouse in Fort Lauderdale, Fla. on Wednesday, Oct. 20, 2021. The Dworet's son, Nicholas Dworet, 17, was killed in the massacre.
Amy Beth Bennett/South Florida Sun Sentinel via AP
Education Briefly Stated: October 20, 2021
Here's a look at some recent Education Week articles you may have missed.
8 min read
Education Gunman in Parkland School Massacre to Plead Guilty
The gunman who killed 14 students and three staff members at a Florida high school will plead guilty to their murders, his attorneys said.
4 min read
Parkland school shooter Nikolas Cruz is sworn in before pleading guilty, Friday, Oct. 15, 2021, at the Broward County Courthouse in Fort Lauderdale, Fla., on all four criminal counts stemming from his attack on a Broward County jail guard in November 2018, Cruz's lawyers said Friday that he plans to plead guilty to the 2018 massacre at a Parkland high school.
Parkland school shooter Nikolas Cruz is sworn in before pleading guilty, Friday, Oct. 15, 2021, at the Broward County Courthouse in Fort Lauderdale, Fla., on all four criminal counts stemming from his attack on a Broward County jail guard in November 2018, Cruz's lawyers said Friday that he plans to plead guilty to the 2018 massacre at a Parkland high school.
Amy Beth Bennett/South Florida Sun Sentinel via AP