0001383838-14-000014.txt : 20140318
0001383838-14-000014.hdr.sgml : 20140318
20140318171712
ACCESSION NUMBER: 0001383838-14-000014
CONFORMED SUBMISSION TYPE: SC 13D
PUBLIC DOCUMENT COUNT: 3
FILED AS OF DATE: 20140318
DATE AS OF CHANGE: 20140318
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: CORINTHIAN COLLEGES INC
CENTRAL INDEX KEY: 0001066134
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200]
IRS NUMBER: 330717312
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: SC 13D
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-56245
FILM NUMBER: 14701852
BUSINESS ADDRESS:
STREET 1: 6 HUTTON CENTRE DR
STREET 2: SUITE 400
CITY: SANTA ANA
STATE: CA
ZIP: 92707
BUSINESS PHONE: 7144273000
MAIL ADDRESS:
STREET 1: 6 HUTTON CENTER DR
STREET 2: SUITE 400
CITY: SANTA ANA
STATE: CA
ZIP: 92707
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: SHAH CAPITAL MANAGEMENT
CENTRAL INDEX KEY: 0001383838
IRS NUMBER: 201804775
STATE OF INCORPORATION: NC
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: SC 13D
BUSINESS ADDRESS:
STREET 1: 8601 SIX FORKS ROAD
STREET 2: SUITE 630
CITY: RALEIGH
STATE: NC
ZIP: 27615
BUSINESS PHONE: 919 719 6360
MAIL ADDRESS:
STREET 1: 8601 SIX FORKS ROAD
STREET 2: SUITE 630
CITY: RALEIGH
STATE: NC
ZIP: 27615
SC 13D
1
schedule13d.txt
FILING 13D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
SCHEDULE 13D
CORINTHIAN COLLEGES INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
218868107
(CUSIP Number)
Shah Capital Management
8601 Six Forks Road, Suite 630
Raleigh, NC 27615
Tel. No.: (919) 719-6360
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
March 11, 2014
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition that is the subject of this Schedule
13D, and is filing this schedule because of 240.13d 1(e), 240.13d 1(f)
or 240.13d 1(g), check the following box.
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d 7
for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be filed for the purpose of section 18 of the Securities Exchange
Act of 1934 (Act) or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
(1) Names of reporting persons:
Shah Capital Management
(2) Check the appropriate box if a member of a group:
(a)
(b)
(3) SEC use only
(4) Source of funds (see instructions)
OO
(5) Check if disclosure of legal proceedings is required pursuant
to Items 2(d) or 2(e) of Schedule 13D
N/A
(6) Citizenship or place of organization
NORTH CAROLINA
Number of shares beneficially owned by each reporting person with:
(7) Sole voting power
0
(8) Shared voting power
4,719,699
(9) Sole dispositive power
0
(10) Shared dispositive power
4,719,699
(11) Aggregate amount beneficially owned by each reporting person
4,719,699
(12) Check if the aggregate amount in Row (11) excludes certain shares
(see instructions)
N/A
(13) Percent of class represented by amount in Row (11)
5.35%
(14) Type of reporting person (see instructions)
IA
(1) Names of reporting persons:
Shah Capital Opportunity Fund LP
(2) Check the appropriate box if a member of a group:
(a)
(b)
(3) SEC use only
(4) Source of funds (see instructions)
OO
(5) Check if disclosure of legal proceedings is required pursuant
to Items 2(d) or 2(e) of Schedule 13D
N/A
(6) Citizenship or place of organization
DELAWARE
Number of shares beneficially owned by each reporting person with:
(7) Sole voting power
0
(8) Shared voting power
3,510,700
(9) Sole dispositive power
0
(10) Shared dispositive power
3,510,700
(11) Aggregate amount beneficially owned by each reporting person
3,510,700
(12) Check if the aggregate amount in Row (11) excludes certain shares
(see instructions)
N/A
(13) Percent of class represented by amount in Row (11)
3.98%
(14) Type of reporting person (see instructions)
PN
(1) Names of reporting persons:
Himanshu H. Shah
(2) Check the appropriate box if a member of a group:
(a)
(b)
(3) SEC use only
(4) Source of funds (see instructions)
PF
(5) Check if disclosure of legal proceedings is required pursuant
to Items 2(d) or 2(e) of Schedule 13D
N/A
(6) Citizenship or place of organization
UNITED STATES
Number of shares beneficially owned by each reporting person with:
(7) Sole voting power
250,000
(8) Shared voting power
4,969,699
(9) Sole dispositive power
250,000
(10) Shared dispositive power
4,969,699
(11) Aggregate amount beneficially owned by each reporting person
4,969,699
(12) Check if the aggregate amount in Row (11) excludes certain shares
(see instructions)
N/A
(13) Percent of class represented by amount in Row (11)
5.64%
(14) Type of reporting person (see instructions)
IN
SCHEDULE 13D
Item 1. Security and Issuer
Common Stock of CORINTHIAN COLLEGES INC.
6 HUTTON CENTRE DRIVE
SUITE 400
SANTA ANA CA 92707
Item 2. Identity and Background
(a). Name: SHAH CAPITAL MANAGEMENT.
(b). Business Address: 8601 Six Forks Road, Suite 630, Raleigh, NC 27615
(c). Principal business: Asset management
(d). During the last five years, the reporting person has not been convicted
in a criminal proceeding.
(e). During the last five years, the reporting person has not been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction.
(f). N/A
Item 3. Source and Amount of Funds or Other Consideration
The source of funding for the purchase of the shares of Common Stock
was derived from investment capital of SCM clients, including the
Fund.
Item 4. Purpose of the Transaction
The Reporting Person originally purchased the Common Stock based on
their belief that the shares of Common Stock, when purchased, were
undervalued and represented an attractive investment opportunity.
The Reporting Person intends to review their investment in the Issuer
on a continuing basis and in connection therewith, intend to discuss
with the Issuer ways in which such undervaluation can be rectified.
The Reporting Person also intends to engage the Issuer in discussions
regarding the assets, business, strategy, financial condition and/or
operations of the Issuer and how to maximize shareholder value.
Subject to applicable law and regulations, and, depending upon certain
factors, including without limitation, general market and investment
conditions, the financial performance and strategic direction of the
Issuer, and the availability of shares of Common Stock at prices that
would make the purchase of such shares desirable, the Reporting Person
may, among other things, increase their position in the Issuer through
the purchase of shares of Common Stock on the open market or in private
transactions or otherwise, on such terms and at such times as the
Reporting Person deems advisable.
In addition, the Reporting Person may, from time to time and at any
time, acquire other equity, debt, notes, instruments or other securities
of the Issuer (collectively with the Common Stock, Securities) in the
open market or otherwise. The Reporting Person reserves the right
to dispose of any or all of their Securities in the open market or
otherwise, at any time and from time to time, and to engage in any
hedging or similar transactions with respect to the Securities.
In addition, based on the above discussions with the Issuer and subject
to the factors described above, the Reporting Person may have discussions
with other stockholders and potential nominees to the Board; make
proposals to the Issuer concerning changes to the strategy, capitalization,
governance, ownership structure, operations, or Articles of
Incorporation or Bylaws of the Issuer; or change their intention
with respect to any and all matters referred to in this Item 4.
Item 5. Interest in Securities of the Issuer
(a) Aggregate number of shares owned:
(b) Percentage of class of securities owned:
(c) Number of Shares to which reporting person has:
(i) Sole Voting Power
(ii) Shared Voting Power
(iii) Sole Dispositive Power
(iv) Shared Dispositive Power
SCM Shah Capital Opportunity Himanshu
Fund LP
(a) 4,719,699 3,510,700 250,000
(b) 5.35% 3.98% 5.64%
(i) N/A N/A 250,000
(ii) 4,719,699 3,510,700 4,969,699
(iii) N/A N/A 250,000
(iv) 4,719,699 3,510,700 4,969,699
(c) The Reporting Person has effected transactions
relating to the Ordinary Shares during the past sixty (60)
days
(d) to (e). Not Applicable
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
Not Applicable
Item 7. Material to be Filed as Exhibits
Letter to Company BOD dt. October 18, 2013
Letter to Company BOD dt. March 18, 2014
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true,
complete and correct.
Date: March 19, 2014
Signature: Himanshu H. Shah/Sd.
Name/Title: Himanshu H. Shah, President and CIO
EX-1
2
october13letter.txt
LETTER TO BOARD OF DIRECTORS
October 18, 2013
A Letter to the Board of Directors of Corinthian Colleges Inc.
Board of Directors, Corinthian Colleges Inc.
Santa Ana, California
To All Members of the Board:
We would like to start by sharing that we have been loyal shareholders
of the company for around 3 years and currently hold over 2.2%
(top 10 shareholders) of the companys outstanding shares. We believe
Corinthians story is a noble one and it is doing a service to
its students and respective communities. We also want to be clear
that we carry respect for the current management team and realize
they have worked hard. Sadly, the vast majority of these efforts
have either not materialized or have been in vain. Management
along with everyone reading this letter undoubtedly must share
many of our disappointments, frustrations and concerns.
As a long-term shareholder, it has been quite concerning to
see the companys stock price languish over such a prolonged
period of time. We acknowledge that management has not been
dealt an easy hand over the years and some of its troubles are
indeed out of their control. However, we have become increasingly
concerned, about the long term viability of the company unless
swift and meaningful actions are taken. Despite managements
efforts to weather challenging industry dynamics through marginal
cost cutting, the addition of new programs, and tuition reductions,
our stock price is now approaching one of the lowest levels in
the history of its listing.
Below, we have provided a list of some of our most urgent
concerns along with recommendations of immediate action.
OUR CONCERNS:
1. Recent California Attorney General Job Placement Accusation:
We fear this negative publicity will further impede Corinthians
ability to attract students and we fear more states may jump
on the bandwagon. Even more concerning, we fear that the legal
costs alone will push Corinthian dangerously close to impairment
and a failing Financial Responsibility Composite Score, thus
re-awakening the need to post a letter of credit. This dangerous
domino effect scenario must be avoided as the consequences would
be disastrous.
2. Dismal Ground School Capacity Utilization: Despite extensive
efforts by management, ground school capacity utilization remains
painfully low at 50%, with no signs of meaningful improvement
on the horizon.
3. Student/Employee Ratio Significantly Higher: Our 15,200 employees
and 81,284 students give us a student/employee ratio of 5.3 compared
to an industry average of 8.8. (Interestingly, some of the best
performing industry peers have the highest student/employee ratios.
Ie: Grand Canyon Educations ratio is 19.3 and Capellas is 12.7.)
4. Decline and Loss of Market Share in Online Students: The extended
slide in online enrollments beyond managements prior forecasts
concerns us that management either has not grasped the magnitude
of the problem, has not identified how to fix the problem, or both.
Additionally, we are becoming increasingly concerned that the online
platform, in its current state, may not be the right fit for
Corinthians target student due to the heightened hand-holding
and student/teacher interaction the Corinthian student requires
for success.
5. Depressed Valuation: Our shares continue to trade at the highest
discount to book value (30 cents on the dollar) among industry peers
as our net margins are among the lowest in the industry and no clear
plan aside from cost-cutting exists. We acknowledge that the students
requires additional hand-holding which requires additional time &
expense and we appreciate the fact that these low net margins are a
function of low capacity utilization, however, a clear operational
plan with industry-average operating margin targets must be
implemented.
6. Inefficient Marketing Budget: We are spending $100-$150Million
in advertising mainly with Television, Yellow Pages, direct mail
and newspaper advertisements, however, only 7% of enrollments
were generated through these 4 costly and somewhat inefficient
methods in 1H 2013. Conversely, 77% of our new student enrollments
came from internet and referrals. We acknowledge the fact that
all methods of advertising are inter-twined to an extent, but
it is quite clear that significant savings potential exists
here with the implementation of more effective and less
expensive marketing methods.
7. BOD among largest in peer group: With 10 members and a median
age of 66 years, our BOD is one of the largest and oldest boards
among publicly traded peers. Dell computers with $25 billion
market value just announced that they plan on having only 3
members on their Board.
OUR SUGGESTIONS:
1. Attorney General/Job Placement: We recommend an immediate
evaluation of a possible sale of Wyotech, and/or any other non-core
assets in order to free up enough cash to provide us vital breathing
room to survive this most recent crisis. We believe the company has
fallen into an increasingly dangerous position and the company is
at crossroads. Regarding job placement, we urge you to establish a
team to evaluate the quality of all existing employer relationships
as well as secure more significant employer relationships/partnerships
by degree/diploma. We must have higher quality employer relationships
than peers to provide our students the greatest job placement edge
in the for-profit education space. If we can secure relationships
with employers who request specific training, then our students
will have careers waiting for them immediately upon graduation.
This type of relationship would boost enrolments, improve job
placement, and eliminate some of the damaging political
onslaught such as the recent one.
2. A Plan to Increase Campus Capacity Utilization: Establish a
team to identify and enroll the 800,000 Latin American students
in California who have tried to attend Community College, but
cannot find a seat due to overcrowding. Another area with great
potential includes socially responsible/green diploma programs
to fill classrooms, provide students with job training for
the 21st century, and to gain the respect and admiration of
some of our biggest political adversaries. One such example
includes Natural Gas engine certificate programs which is gaining
a significant presence throughout the U.S., however it is
mainly taught at Community Colleges. Additionally, conduct
a study on the relevancy of all existing diploma and degree
programs to find which programs are most relevant and which
ones are falling out of favor among students.
3. Student/Employee Ratio: Immediate 10% headcount reduction
with internal plans for additional 5-10% in second half of 2014.
100 employees for 530 students are just outrageously high.
4. Through Review of Online Segment: Immediate in-depth
review of the online segment beyond administrative level to
address student aptitude and ability to succeed in our current
online platform. Additionally, the review should identify
and provide programs that are relevant in todays World.
5. Reduce Marketing Spend: Immediate reduction in traditional
marketing spending by 40-50% along with in-depth review of
our target markets. Cessation of all television, radio and
newspaper advertising in California with the exception of
Hispanic television, radio and newspapers. Appoint an in-house
online & social media team to unlock highly effective and
inexpensive methods of reaching out to our target students.
A restructuring of the team may be necessary as our online
and social media presence is significantly lagging peers.
6. Board Size: Use the Dell model if truly possible.
We would benefit immensely from the addition of
creative/innovative leaders with an entrepreneurial and
problem solving spirit as directors.
7. Opportunistic Equity Buyback: As soon as Corinthian is
cleared from the Financial Responsibility Composite Score,
we highly urge the company to issue a repurchase of 10% of
the outstanding shares over the course of calendar year 2014
to help instill investment community confidence. This timely
buyback is also quite beneficial to the long-term
shareholders like Shah Capital as it is taking place at
very depressed prices.
8. Hire of a Financial Advisor: We strongly urge the Board to
hire an advisor to unlock the true value of the Corinthian
franchise through M&A unless we are right on our above
listed 1 through 5 suggestions.
We highly recommend the management team to use the First Quarter
2014 Earnings Conference Call on November 5th 2013 as a
platform to announce the company will be conducting a comprehensive
strategic review of its entire operation.
We must bring back an entrepreneurial and start-up culture throughout
the organization to rejuvenate this venerable organization for
the 21st century!
We have decided not to make this letter public at this juncture
or start a conversation with other large (suffering) shareholders
as we respect the management team and believe you will do what
is right for the company, its students, and all shareholders.
We look forward to a constructive conversation soon.
Very sincerely,
Sd
Himanshu H. Shah
CIO & Managing Partner
EX-2
3
march14letter.txt
LETTER TO BOARD OF DIRECTORS
March 18, 2014
A Letter to the Board of Directors of Corinthian Colleges Inc.
Corinthian Colleges Inc.
6 Hutton Centre Drive, Suite 400
Santa Ana, California 92707
To Distinguished Members of the Board:
Shah Capital has been invested in Corinthian Colleges for over 3 years and
is now the second largest shareholder, owning 5.7% of the companys outstanding
shares. We have continued to increase our stake in Corinthian because we
trust the quality of the education programs provided to its students and
believe the excessive negativity surrounding the company is truly overdone.
In our opinion, Corinthian fills a major void in higher education by providing
countless students with an extra chance at earning a college education and
improving their lives after having fallen through the cracks in high school
and/or community college. We have had the opportunity to visit multiple
campuses and have learned first-hand the higher level of attention and care
the Corinthian student receives from their professors. With a lower average
student debt than the industry average, the company offers a compelling value
for students looking to improve their lives both personally and professionally.
We appreciate the constructive dialogue in the past few months with
management in regards to key fundamental issues impacting the company.
Based on our analysis and experience we would like to suggest the
following solutions:
1. Employer Partnerships: In the current economic environment,
the value of higher education is directly correlated with the opportunity
for an individual to start a career in their respective field post-completion
of their degree/diploma. Corinthians ability to secure stronger and
more specialized employer partnerships will lead to improved enrollments,
higher job placement rates, lower student debt levels, and more satisfied
regulators. We strongly urge the company to locate more companies that
will benefit from its graduates and advise the company to form closer
partnerships where it exclusively fills their partner companys employment
needs for a given field of study/profession.
2. Admissions (Online & Ground schools): Prospective students and
Corinthian would benefit from an inventive refining of the admissions
and recruiting process to one that more accurately identifies the
appropriate course path (online or ground school) for each individual
student, which could significantly improve student retention and
completion rates.
3. Investor/Regulator Education: Corinthian should properly educate
investors, analysts, and regulators on topics that have proven to be more
difficult to grasp such as third party lending relationship (ASFG).
In our view, these issues are creating unnecessary uncertainty and concern
among regulators, investors, and within the analyst community, while
further bolstering the thesis of short sellers. Additionally, we highly
recommend quarterly issuance of detailed balance sheet and cash flow
statements as this added layer of transparency would further reduce
uncertainty.
4. Board of Directors: Corinthians current Board and management
structure is largely unchanged from times when the company had a
multi-billion dollar market value. We believe a smaller, more nimble
structure reflecting the current status of the company would be more
appropriate to accomplish its strategic goals.
5. Open Market Purchase: We strongly urge all members of the Board
and top management to meaningfully purchase Corinthian stock in the
open market as it continues to trade at steep discount to its intrinsic
value.
The enhanced regulatory scrutiny is the new normal for the for-profit
education industry, and the success and failure of companies within
this industry will depend on their ability to adapt to a stricter
operating environment. We urge management and the Board to consider
and act on our above suggestions which could significantly benefit
Corinthians students, improve its reputation among regulators and
restore value to all stakeholders.
Very Sincerely,
Sd
Himanshu H. Shah