UPDATE 1-Corinthian fails to arrest enrollment slide, shares fall

Thu Jan 31, 2013 1:42pm EST

* Third-quarter EPS forecast $0.04-$0.06 vs est $0.13

* Second-quarter EPS from continuing operations $0.05 vs est $0.06

* Says received subpoena from the California Attorney General

* Shares down as much as 5 pct

Jan 31 (Reuters) - For-profit education provider Corinthian Colleges Inc forecast a lower-than-expected third-quarter profit, saying it expects a 4 percent to 6 percent fall in new student sign-ups.

Corinthian's shares, which gained 7 percent in the three months to Wednesday's close, were down 5 percent at $2.50 on the Nasdaq.

The company's second-quarter results also missed expectations as new student enrollments fell by more than 4 percent to 23,703.

Enrollments at Corinthian have taken a hit since the U.S. government started a crackdown on for-profit colleges over high student debt two years ago.

U.S. colleges were forced to change their practices after the government introduced new rules that would cut financial aid if student debt remained high.

Corinthian on Thursday said it received a subpoena from the California Attorney General, requiring it to produce documents related to matters such as default rates, marketing, admissions, enrollment and financial aid processes.

In November, the U.S. Department of Education gave Corinthian a financial responsibility score below the minimum requirement the company needs to allow its students access to federal student loans.

If Corinthian is unable to convince the department to reconsider its score, it will be forced to post a letter of credit with the department equivalent to at least $175.7 million, depending on the level of monitoring it is willing to accept.

Corinthian said the matter is still being reviewed and it is pursuing alternative sources of financing to be able to post a letter of credit, if required.

Corinthian reported earnings from continuing operations of $4.3 million, or 5 cents per share, in the second quarter, up from $3.9 million, or 5 cents per share, a year earlier.

Analysts on average were expecting earnings of 6 cents per share, according to Thomson Reuters I/B/E/S.

For the third quarter, the company forecast earnings of 4 to 6 cents per share, on revenue of between $400 million and $410 million. Analysts on average were looking for 13 cents per share and revenue of $422.5 million.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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