NEC Rejects Bid for Subsidiary, Reports ’89 Loss

IRVINE —  National Education Corp. on Thursday reported a record, $21.5-million loss in 1989 and said it has rejected a proposal to buy a money-losing subsidiary that is mostly responsible for the education giant’s deteriorating finances.

Revenue fell 12% for the year to $400.8 million from $457.5 million in 1988. NEC posted a profit of $46.1 million in 1988.

NEC blamed its poor performance on problems with its Applied Learning International subsidiary in Naperville, Ill. ALI, which sells educational materials and services to corporations and governments, suffered from a series of computer and sales staff problems resulting from a merger of several firms that formed the company.

ALI customers were often overbilled, undercharged or given services gratis.

“The loss in 1989 was directly attributable to (the) Applied Learning subsidiary,” NEC said in a statement.

Former ALI president William R. Roach disclosed early this week that he and a group of investors has offered to buy the troubled subsidiary. Under the proposal, NEC would maintain a minority interest in ALI.

NEC turned down the proposal Thursday, saying its directors had rejected Roach’s offer because they “did not believe that such a transaction would be in the best interest of ALI, NEC and its shareholders.”

About $15.5 million of the 1989 loss was attributed to one-time charges, including $11.5 million in employee severance pay and the closing and relocation of facilities that were part of a cost-cutting program completed early this year.

For the fourth quarter ended Dec. 31, NEC lost $20.5 million on revenue of $110.5 million. During the same period in 1988, NEC earned $19.1 million on revenue of $144.4 million.

NEC’s stock fell 12.5 cents per share Thursday to close at $6.125. The earnings announcement was made after the stock market closed.