When Edison Schools filed its 2002 annual report with the Securities and Exchange Commission on September 30, the world learned two things: that the firm's financial situation was unsteady and that there have been changes to its board of directors. The report revealed that Edison could have some financial problems if the company does not meet certain "financial ratios" specified by Merrill Lynch and School Services, which currently provide Edison with a $55 million credit line. If Edison fails to meet the requirements, it will no longer have access to the credit and would have to pay back any borrowed money immediately. The report also disclosed the resignations of three members of the board of directors, William Weld, Jeffrey Leeds, and Jonathan Newcomb. Leeds, Weld, and Co., a company in which all three men are partners, participated in the $40 million financing that Edison announced in August.
As of earlier this week, Edison was having troubled collecting $3 million from the Philadelphia School District because the company has not yet submitted to the district certain financial documents and a legal agreement allowing Philadelphia to keep all supplies purchased by the company should Edison quit or go out of business. In lieu of this agreement, the district has filed papers in Delaware (where Edison is incorporated) to ensure ownership of supplies in case of an Edison collapse. Edison says it will provide the necessary documents to Philadelphia as soon as it works out some details with its financial backers.
In the last few weeks, Philadelphia schools chief Paul Vallas has vetoed some Edison management decisions and has prevented the firm from moving its administrative staff into one of the schools it is managing. Still, Vallas and Edison maintain that they have a stable working relationship. Vallas says that Edison has most of its Philadelphia schools under control, but Gillespie Middle School is an exception; the district recently deployed five police officers and 15 non-teaching assistants there after a meeting between district officials, teachers, and Edison's Philadelphia operations manager. Edison's financial concerns may continue to make news, but many, including Vallas, are withholding judgment of the company until they see whether Edison's schools in Philadelphia will demonstrate improved student achievement.
"In fiscal filing with SEC, Edison cites cash concern," by Martha Woodall, Dale Mezzacappa, and Susan Snyder, The Philadelphia Inquirer, October 1, 2002 (available for a fee at www.philly.com/inquirer)
"School District Withholds Edison Money," Associated Press, October 2, 2002
"Edison Schools gets demerit for tardy disclosure," by Michael Erman, Reuters Company News, October 2, 2002
"District delays Edison's pay; police, aides sent to school," by Martha Woodall and Dale Mezzacappa, The Philadelphia Inquirer, October 5, 2002
"Edison, Philly schools chief out to rocky start," Associated Press, October 7, 2002
