Computer Learning Centers, Inc. History

Company Perspectives:

Computer Learning Centers grew up with the computer field. We started training technical professionals more than 40 years ago--long before computers became a way of life at home and in business. We have been at the forefront of technology for a long time, but most importantly, we have developed the most advanced methods for teaching people how to use it. Tens of thousands of our graduates have joined the work force during the past four decades. CLC is one of the country's oldest and largest school systems devoted solely to the training of computer professionals.

Company History:

Computer Learning Centers, Inc. (CLC) provides information technology and computer-related education and training to adults seeking entry-level jobs in information technology. CLC designs programs and courses to meet current information technology education needs, offering instruction in rapidly growing technologies such as client/server programming, databases, network engineering, information technology support, and computer systems. Through its accredited career programs, CLC offers associate degrees and non-degree diplomas in several primary areas of study, including business applications; electronics, systems and hardware; programming; networking; information technology support; and business applications with networking. CLC's Advantec Institute division offers customized ongoing training programs to corporate clients that focus on current and emerging technologies in information technology.

The Early Years--Acquisitions and Mergers

Located in Fairfax, Virginia, the original Computer Learning Centers was founded in 1967 and taught systems management, data entry, and computer operations to computer center operations personnel. Its first 20 years were ones of repeated acquisitions and mergers. In 1968, it acquired International Tabulation Institutes, a Los Angeles-based training school founded in 1957. In 1970, the company merged with the Washington School for Secretaries. Three years later, MCD Enterprises, a construction company located in Maryland, bought CLC and combined the Learning Center institutions with its own schools. In 1976 Airco, Inc., a business whose primary interests were in welding gases, medical products, and alloy production, acquired CLC from MCD.

By 1983, Airco had increased the number of CLC schools to 25. It was about that time that Airco merged with British Oxygen to form the $3 billion British Oxygen Group, whose core interests were in medical products and industrial gases. Then, in 1987, British Oxygen Group made the decision to divest six of the schools to Connecticut-based General Atlantic Partners. Reid Bechtle was retained by the new owners of CLC in 1991 to review the business for possible sale. Bechtle instead advised General Atlantic to invest in the fledgling information technology business and became the corporate chief executive officer and president of Computer Learning Centers in 1991. Charles L. Cosgrove, who came with Bechtle from Planning Research Corporation became vice-president and chief financial officer in 1992, while Harry H. Gaines became its chairman. The company, by this time, also had operations in the United Kingdom, where it was known as Comprehensive Learning Concepts.

Expansion in the Mid-1990s

Bechtle, Cosgrove, and Gaines proved good leaders for CLC in the highly fragmented post-secondary adult education and training market of the 1990s. The market for such programs and services was characterized by rapidly changing requirements, with no single institution or company holding a dominant share. CLC thus had to compete for students not just with other vocational and technical training schools, but also with degree-granting colleges and universities, and continuing education and commercial training programs. CLC met this challenge by designing a series of programs intended to meet the needs of adult learners pursuing information technology-related careers, offering programs which could be completed in as little as seven to 18 months; flexible class schedules; monthly start dates; and financial aid eligibility for qualified students.

Steady enrollment increases fueled the company's growth throughout the 1990s. In 1995, CLC had about $40 million in annual revenue and eight schools serving about 6,500 students in California, Illinois, Pennsylvania, and Virginia. Yet CLC was still a small fry when compared with companies such as National Educational Corporation, with $241 million in annual sales, and DeVry, with $228 million. (Other competitors included Sylvan Learning Systems, Apollo Group, and ITT Educational Services.) When the company went public on May 31, 1995, it sold 2.2 million shares of common stock and brought in net proceeds of about $14.9 million. This left it relatively debt free, although still with reported losses of $1.3 million from discontinued operations. After that point, CLC grew steadily, proving Chairman Gaines correct, when he said in 1995 that the market for information technology training was due to "explode."

By 1996, the Washington Post listed CLC among that paper's top-rated 100 companies with 1995 revenues of $46.1 million and profits of $1.9 million. The Post reported that CLC continued to increase enrollment, especially in its newer, associate degree programs, and had received approval from state regulators. In 1997, it had revenues of $64 million and profits of $5.6 million, and earnings per share at a little more than a dollar. The eight schools had grown to 19 schools, enrollment was up 32 percent over the previous year, and the company started a program of specialized courses geared to working adults, called the Advantec Institute. CLC was again featured by the Post as "one of the area's hottest stock performers" in 1996. In order to raise capital to open new facilities and expand programs, the company offered up 1.3 million shares in its second public offering in October 1996.

By 1998, CLC had 12,000 students at its 23 schools nationwide in the United States and three in Canada, up from about 8,500 in 1997, and $25 million in new computers and facilities. The company grossed $97 million in the fiscal year ending January 31 and netted $9.6 million. Stock prices reached a record almost $39 per share in March after adjusting for two stock splits, prompting traders to speculate that the company was in for an adjustment some time soon and leading critics to short sell four million shares of CLC stock. Bechtle, in an act of some bravado, taunted the "shorts" publicly, saying, "Every dollar the stock goes up is $4 million [they] take out of their bank accounts," and continued CLC's acquisition spree. The company had acquired Boston Education Corporation, a privately held Boston, Massachusetts provider of information technology education and training, which served nearly 650 students, in late December 1997 and, in January 1998, Markerdowne Corporation, a privately held provider of information technology education and training based in Paramus, New Jersey, serving approximately 800 students a year. In March 1998, it closed the deal on Delta College, a Montreal, Quebec-based, privately held information technology training firm serving 800 students.

Legal and Regulatory Problems

Yet, while the company was reveling in its steady growth spurt in enrollment, stock prices, and earnings (more than 50 percent in its latest fiscal year), trouble was brewing on several CLC campuses. As early as 1991 through 1993, student default rates on federally financed student loans had reached "unacceptable" levels of 25 percent, according to the U.S. Department of Education, prompting this body to suspend CLC's eligibility from some of its Title IV programs from September 1996 until October 1997 when it showed a reduced student loan default rate.

In December 1997, 11 students at the company's Alexandria, Virginia campus filed complaints with the Virginia Council of Higher Education that CLC had misrepresented students' future career prospects. In March 1998, the attorney general of the state of Illinois sued CLC in a civil lawsuit and asked the judge to shut down operations on the school's Schaumburg campus, alleging that the company had violated seven provisions of the state's consumer fraud and private vocational school laws by misrepresenting course offerings and employment prospects to students at its Schaumburg school. CLC officials responded to the Illinois attorney general's allegations by signing an agreement which "affirms that there were legitimate grounds for certain students to voice complaints," but they denied any violation of state laws. A few months later, the company agreed to a settlement that entailed creating a program to promptly address student complaints; establishing a program to provide $95,000 worth of software to nonprofit institutions; and contributing $90,000 to the attorney general's consumer education fund. CLC also agreed to hire more faculty, install new computers, and revamp its student recruiting efforts. Finally, the company said that it would hire an independent arbitrator whose role would be to determine whether a student's restitution would be in the form of cash or free classes.

To complicate matters further, the Illinois State Board of Education (BOE) ordered the Schaumburg school to suspend marketing and to stop enrolling students on its campus. Thirty days later, the state lifted the Schaumburg suspension after CLC agreed to change its advertising, admissions, and student complaint procedures, and to tighten faculty qualifications--but not before a two-day sell-off by investors and speculators which slashed the company's share price by more than 49 percent. In the wake of these actions, seven lawsuits were filed in federal courts on behalf of stockholders who had lost money because of the dip in stock prices, accusing CLC executives of violating securities laws and making millions of dollars by short selling stock before it nosedived.

On the heels of the Illinois BOE's action, the U.S. Department of Education launched an investigation of CLC schools. In a public letter, officials of the DOE notified the company that it was tightening oversight of federal student aid programs and ordered the schools to produce the names of all students who had received federal aid in the past two years. This move carried potentially serious ramifications, since approximately 75 percent of CLC's revenue came from federal student loans. According to the Washington Post, the Federal Trade Commission, which has jurisdiction over the marketing practices of private career schools, also began gathering information on CLC's testing and recruiting of potential students and the quality of its classes. However, according to CLC, the FTC had never contacted them for an investigation.

Rebounding from Difficulty

Although these regulatory and legal problems cut into CLC's first-quarter 1998 profits by roughly 25 percent, in the wake of their settlement, stock prices once again climbed, back up to almost $29 in July 1998. However, the company's rollercoaster ride was not over yet. In that month, a private detective working for shareholders' plaintiff attorneys announced that he had found thousands of pages of discarded student records in a dumpster outside the Virginia campus. These pages allegedly included some of those sought by the DOE. Stock prices plunged one more time as a result. They turned upward again once Bechtle dismissed the importance of the discarded documents as "waste in the normal operations of our business," and two independent analysts dismissed the importance of the discarded documents as well. Still, the Washington Post reported in late August that there was an ongoing FTC investigation into the marketing of the school's computer courses and that this investigation had been expanded based on allegations that CLC threw out records just before the federal review began.

As the company headed into 1999, it sought to recover from its drop in earnings attributed to a sharp falloff in enrollment at campuses in the Washington and Chicago areas and the cost of settling the consumer fraud lawsuit filed by the state of Illinois. By August 1998, the Illinois settlement had cost CLC more then $300,000 in penalties and another $500,000 in legal fees and in lost student fees. More importantly, it had led to a situation in which CLC was having trouble attracting students. In that month, the company disclosed expected second quarter profits of only four to five cents a share rather than the 16 cents that analysts had earlier projected.

CLC predicted that its ability to rebound from its difficulties and meet its future operating and financial goals would depend upon its ability to shed its bad publicity and to implement a successful growth strategy which included the establishment of new learning centers in new locations; the development of new and/or the enhancement of existing programs; the expansion of the Advantec Institute; the improvement of student outcomes through academic services and job placement assistance; the increased availability of associate degree programs at its various centers; and the acquisition of assets and programs complementary to the company's actions. The company's objective overall at the end of 1998 was to strengthen and expand its position as one of the leading providers of information technology education and training programs for adults in the upcoming years.

Further Reading:

• Behr, Peter, "CLC's Profits up 50 Percent," Washington Post, March 13, 1998, p. F03.
• "Class Action Commenced by Kaufman Malchman Kirby & Squire, LLP. and Futterman Howard Chtd.," PR Newswire, March 23, 1998.
• Cullotta, Karen Ann, "Computer School Still Aims to Hire Ombudsman," Chicago Tribune, July 20, 1998, p. 1.
• "Digest," Washington Post, June 3, 1995, p. C01.
• Holt, Douglas, and Karen Cullotta Krause, "Tales, Charges of Fraud Plague Computer School; State Expands Probe of Sites in Schaumburg, Downtown," Chicago Tribune, May 21, 1998, p. 1.
• Knight, Jerry, "CLC Settles Fraud Suit in Illinois," Washington Post, June 9, 1998, p. F03.
• ------, "Computer Learning Centers Faces Suit; Officials in Illinois Allege Fairfax-Based Vocational Chain Defrauded Students," Washington Post, March 11, 1998, p. C10.
• ------, "Computer Learning Faces Inspection; Student Loan Program in Va. Under Scrutiny," Washington Post, May 8, 1998, p. D01.
• ------, "Computer Learning Suffers Big Stock Hit," Washington Post, August 29, 1998, p. E03.
• ------, "An Education in Computer Learning Centers' Stock Flight," Washington Post, March 9, 1998, p. F07.
• ------, "Suit Says School Dumped Records Sought in Probe," Washington Post, August 13, 1998, p. E01.
• ------, "U.S. Probes Computer Learning Centers; Education Dept., FTC Seek Data," Washington Post, April 8, 1998, p. C11.

Source: International Directory of Company Histories, Vol. 26. St. James Press, 1999.

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