CARMEL, Ind., July 23 /PRNewswire-FirstCall/ -- ITT Educational
Services, Inc. (NYSE:ESI), a leading provider of
technology-oriented postsecondary degree programs, today reported
that new student enrollment in the second quarter of 2009 increased
33.5% to 19,692 compared to 14,751 in the same period in 2008.
Total student enrollment increased 26.2% to 69,127 as of June 30,
2009 compared to 54,793 as of June 30, 2008. Earnings per share
("EPS") in the second quarter of 2009 increased 55.8% to $1.87
compared to $1.20 in the second quarter of 2008. Revenue in the
three months ended June 30, 2009 increased 28.7% to $317.1 million
compared to $246.4 million in the three months ended June 30, 2008.
Operating margin increased 600 basis points to 37.0% in the second
quarter of 2009 compared to 31.0% in the same period in 2008. The
company provided the following information for the three and six
months ended June 30, 2009 and 2008: Financial and Operating Data
for the Three Months Ended June 30th, Unless Otherwise Indicated
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(Dollars in millions, except per share and per student data) 2009
2008 Increase/(Decrease) ---- ---- ------------------- Revenue
$317.1 $246.4 28.7% Operating Income $117.3 $76.3 53.7% Operating
Margin 37.0% 31.0% 600 basis points Net Income $71.9 $47.1 52.6%
Earnings Per Share (diluted) $1.87 $1.20 55.8% New Student
Enrollment(A) 19,692 14,751 33.5% Continuing Students(A) 49,435
40,042 23.5% Total Student Enrollment as of June 30th (A) 69,127
54,793 26.2% Quarterly Persistence Rate(A)(B) 75.3% 73.9% 140 basis
points Revenue Per Student $4,833 $4,547 6.3% Cash and Cash
Equivalents, Restricted Cash and Investments as of June 30th $284.8
$249.4 14.2% Bad Debt Expense as a Percentage of Revenue 5.9% 3.9%
200 basis points Days Sales Outstanding as of June 30th 20.0 10.8
9.2 days Deferred Revenue as of June 30th $126.9 $138.3 (8.3)% Debt
as of June 30th $150.0 $150.0 Weighted Average Diluted Shares of
Common Stock Outstanding 38,425,000 39,167,000 Shares of Common
Stock Repurchased 622,200(C) -- Land and Building Purchases and
Renovations(D) $0.8(E) $6.9(F) (88.7)% Number of New Colleges in
Operation 1(G) 2 Capital Expenditures, Net $7.4 $5.3 40.0%
Financial and Operating Data for the Six Months Ended June 30th
---------------------------------------------------------------
(Dollars in millions, except per share and per student data) 2009
2008 Increase/(Decrease) ---- ---- ------------------- Revenue
$605.2 $481.3 25.7% Operating Income $217.4 $145.0 49.9% Operating
Margin 35.9% 30.1% 580 basis points Net Income $133.9 $89.8 49.1%
Earnings Per Share (diluted) $3.45 $2.28 51.3% Bad Debt Expense as
a 190 basis points Percentage of Revenue 5.4% 3.5% Revenue Per
Student $9,480 $8,976 5.6% Weighted Average Diluted Shares of
Common Stock Outstanding 38,742,000 39,339,000 Shares of Common
Stock Repurchased 1,150,033(H) 865,000(I) Land and Building
Purchases and Renovations(D) $1.9(E) $13.2(J) (86.0)% Number of New
Colleges in Operation 2(G) 5 Capital Expenditures, Net $12.0 $7.8
54.1% (A) Excludes students enrolled at Daniel Webster College. (B)
Represents the number of Continuing Students in the academic
quarter, divided by the Total Student Enrollment in the immediately
preceding academic quarter. (C) For approximately $60.0 million or
at an average price of $96.39 per share. (D) Excludes all land and
buildings of Daniel Webster College that the company acquired. (E)
Represents costs associated with renovating, expanding or
constructing buildings at 10 of the company's locations. (F)
Represents costs associated with purchasing, renovating, expanding
or constructing buildings at 11 of the company's locations. (G)
Excludes Daniel Webster College. (H) For approximately $124.3
million or at an average price of $108.11 per share. (I) For
approximately $71.8 million or at an average price of $83.01 per
share. (J) Represents costs associated with purchasing one parcel
of real estate on which the company built a facility for one of the
company's colleges, and costs associated with purchasing,
renovating, expanding or constructing buildings at 15 of the
company's locations. Kevin M. Modany, Chairman and CEO of ITT/ESI,
said, "Interest in our programs across all six schools of study was
incredibly strong during the second quarter of 2009, which led to
an impressive increase in new student enrollment compared to the
prior year. As we entered the third quarter of 2009, inquiries from
prospective students for our high-quality, career-based programs of
study remained robust, and we believe that the economic conditions
that are stimulating this extraordinary demand may persist
throughout the remainder of 2009." Modany added, "As a result of
our exceptional results in the second quarter of 2009 and our
belief that favorable operating conditions will continue through
the second half of 2009, we are raising our internal goal for 2009
EPS from the range of $7.00 to $7.25 to a revised range of $7.55 to
$7.85." Modany observed, "During the three months ended June 30,
2009, marketing expenditures increased 1% compared to the same
quarter in 2008 as we continued to experience a buyer's market for
advertising. We believe that these favorable conditions were due to
a decline in the overall demand for advertising as a result of the
recession, and are likely to persist throughout the remainder of
2009 and, potentially, into 2010." Modany noted, "During the second
quarter, we began operations at one college in Charlotte, NC. The
addition of this college brings to two the number of ITT Technical
Institutes operating in Charlotte and represents our second new
college opening during the first six months of 2009. As a reminder,
our goal is to open six to eight new locations in 2009." Modany
said, "We are pleased to report that we successfully completed the
acquisition of Daniel Webster College in the second quarter of 2009
and look forward to integrating this high-quality institution into
our organization. The operating information that we are reporting
today for the second quarter of 2009 does not include any operating
results of Daniel Webster College. The inclusion of this
acquisition in our second quarter financial results had an
immaterial impact." Modany continued, "Our quarterly persistence
rate increased 140 basis points in the second quarter of 2009 to
75.3% compared to 73.9% in the second quarter of 2008, primarily
due to solid increases in student retention. We believe that our
quarterly persistence rate in the third and fourth quarters of 2009
will be fairly consistent with the quarterly persistence rate in
the same periods in 2008, excluding the impact of a year-over-year
increase in the number of graduates in each of those quarters."
Modany commented that, "The period for measuring the employment
success of our 2008 graduates ended in the second quarter.
Approximately 77% of our 2008 employable graduates obtained
employment in positions using skills taught in their programs of
study by April 30, 2009 compared to 82% of our 2007 employable
graduates by April 30, 2008. The average annual salary reported by
our 2008 employed graduates increased to approximately $32,800
compared to the $32,400 average annual salary reported by our 2007
employed graduates." Modany concluded, "The nearly 9,000 men and
women employed at the 107 ITT Technical Institutes across the
nation, approximately 1,600 of whom are in positions that were
newly created in the past 12 months, entered the second half of
2009 committed to our mission to help people improve their lives
through the delivery of a high-quality, career-based postsecondary
education. We are very mindful of the critical role that we play in
helping to educate the nation's workforce during this time of
recession and high unemployment. The faculty, staff and
administration of the ITT Technical Institutes and, now, Daniel
Webster College are dedicated to the goal of improving student
outcomes with the ultimate focus on increasing the value
proposition of a postsecondary education for our graduates." Daniel
M. Fitzpatrick, Executive Vice President and CFO of ITT/ESI, said,
"The impressive operating results during the second quarter of 2009
surpassed our most optimistic internal projections and led to
historic levels of growth in revenue, operating margin and net
income." Fitzpatrick noted, "The unexpectedly strong increase in
new student enrollment and the healthy advances in student
retention generated unprecedented total student enrollment as of
June 30, 2009. While the strength of the increase was very good
news, it caused our students' need for private education loans to
far exceed the amount of those loans that was made available during
the quarter under the new private education loan program offered to
our students. As a result, the amount of internal student financing
that we provided during the second quarter increased significantly,
leading to days sales outstanding as of June 30, 2009 of 20 days
compared to 10.8 days as of the same point in the prior year.
Consequently, bad debt expense as a percentage of revenue in the
second quarter of 2009 increased 200 basis points to 5.9% compared
to 3.9% in the second quarter of 2008." Fitzpatrick continued,
"Should demand for our programs of study during the second half of
2009 continue at levels that significantly exceed our historical
rates, we believe that days sales outstanding at December 31, 2009
could be in the range of 25 to 35 days and bad debt expense as a
percentage of revenue could be in the range of 5% to 7%."
Fitzpatrick added, "During the 2009 second quarter, we repurchased
622,200 shares of our common stock for $60.0 million or at an
average price of $96.39 per share. There are approximately 2.8
million shares remaining to be repurchased under our current share
repurchase program. Depending on market conditions, we intend to
repurchase additional shares of our common stock during the second
half of 2009." Fitzpatrick further noted, "Cash and cash
equivalents, restricted cash and investments as of June 30, 2009
increased 14.2% to $284.8 million compared to $249.4 million as of
the same date in the prior year, primarily due to the 145% increase
in cash flows from operating activities in the second quarter of
2009 compared to the same period in 2008." Fitzpatrick closed by
noting, "The company concluded the first half of 2009 in excellent
financial condition and very well positioned to achieve its 2009
internal goals, which we believe will deliver value to our
shareholders over the long term." Except for the historical
information contained herein, the matters discussed in this press
release are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Forward-looking
statements are made based on the current expectations and beliefs
of the company's management concerning future developments and
their potential effect on the company. The company cannot assure
you that future developments affecting the company will be those
anticipated by its management. These forward-looking statements
involve a number of risks and uncertainties. Among the factors that
could cause actual results to differ materially are the following:
business conditions and growth in the postsecondary education
industry and in the general economy; changes in federal and state
governmental regulations with respect to education and
accreditation standards, or the interpretation or enforcement
thereof, including, but not limited to, the level of government
funding for, and the company's eligibility to participate in,
student financial aid programs utilized by the company's students;
the company's failure to comply with the extensive education laws
and regulations and accreditation standards that it is subject to;
effects of any change in ownership of the company resulting in a
change in control of the company, including, but not limited to,
the consequences of such changes on the accreditation and federal
and state regulation of its institutes; the company's ability to
implement its growth strategies; the company's failure to maintain
or renew required regulatory authorizations or accreditation of its
institutes; receptivity of students and employers to the company's
existing program offerings and new curricula; loss of access by the
company's students to lenders for education loans; the company's
ability to collect internal student financing from its students;
the company's ability to successfully defend litigation and other
claims brought against it; and other risks and uncertainties
detailed from time to time in the company's filings with the U.S.
Securities and Exchange Commission. The company undertakes no
obligation to update or revise any forward-looking information,
whether as a result of new information, future developments or
otherwise. FOR FURTHER INFORMATION: COMPANY: WEB SITE: Lauren
Littlefield http://www.ittesi.com/ Manager of Communications (317)
706-9200 ITT EDUCATIONAL SERVICES, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (Dollars in thousands, except per share data) As of
----- June 30, 2009 December 31, 2008 June 30, 2008 -------------
---------------- ------------- (unaudited) (unaudited) Assets
Current assets: Cash and cash equivalents $140,204 $226,255 $78,691
Short-term investments 144,500 138,709 170,500 Restricted cash 72
10,405 200 Accounts receivable, net 69,747 29,779 29,198 Deferred
income taxes 14,132 12,104 11,776 Prepaid expenses and other
current assets 15,978 13,793 10,571 ------ ------ ------ Total
current assets 384,633 431,045 300,936 Property and equipment, net
194,046 166,671 162,987 Direct marketing costs, net 25,988 22,973
21,963 Other assets 20,235 3,170 18,675 ------ ----- ------ Total
assets $624,902 $623,859 $504,561 ======== ======== ========
Liabilities and Shareholders' Equity Current liabilities: Accounts
payable 62,420 54,815 54,409 Accrued compensation and benefits
21,016 21,133 20,823 Accrued income taxes 11,742 14,976 5,443 Other
accrued liabilities 15,464 11,423 13,198 Deferred revenue 126,878
162,206 138,338 ------- ------- ------- Total current liabilities
237,520 264,553 232,211 Long-term debt 150,000 150,000 150,000
Deferred income taxes 167 1,504 10,818 Other liabilities 21,948
19,951 18,486 ------ ------ ------ Total liabilities 409,635
436,008 411,515 ------- ------- ------- Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, none
issued -- -- -- Common stock, $.01 par value, 300,000,000 shares
authorized, 54,068,904 issued 541 541 541 Capital surplus 147,369
135,655 131,389 Retained earnings 858,333 732,107 620,901
Accumulated other comprehensive (loss) (12,868) (13,384) (3,417)
Treasury stock, 16,361,095, 15,352,376 and 15,235,461 shares, at
cost (778,108) (667,068) (656,368) -------- -------- -------- Total
shareholders' equity 215,267 187,851 93,046 ------- ------- ------
Total liabilities and shareholders' equity $624,902 $623,859
$504,561 ======== ======== ======== ITT EDUCATIONAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands,
except per share data) Three Months Six Months Ended June 30, Ended
June 30, (unaudited) (unaudited) --------- --------- 2009 2008 2009
2008 ---- ---- ---- ---- Revenue $317,140 $246,411 $605,173
$481,261 Costs and expenses: Cost of educational services 110,792
95,183 211,879 187,208 Student services and administrative expenses
89,056 74,910 175,857 149,036 ------ ------ ------- ------- Total
costs and expenses 199,848 170,093 387,736 336,244 ------- -------
------- ------- Operating income 117,292 76,318 217,437 145,017
Interest income 878 1,177 2,111 3,210 Interest (expense) (208)
(1,057) (402) (2,576) ---- ------ ---- ------ Income before
provision for income taxes 117,962 76,438 219,146 145,651 Provision
for income taxes 46,039 29,307 85,294 55,888 ------ ------ ------
------ Net income $71,923 $47,131 $133,852 $89,763 ======= =======
======== ======= Earnings per share: Basic $1.89 $1.21 $3.50 $2.30
Diluted $1.87 $1.20 $3.45 $2.28 Supplemental Data: Cost of
educational services 34.9% 38.6% 35.0% 38.9% Student services and
Administrative expenses 28.1% 30.4% 29.1% 31.0% Operating margin
37.0% 31.0% 35.9% 30.1% Student enrollment at end of period* 69,127
54,793 69,127 54,793 Campuses at end of period** 107 102 107 102
Shares for earnings per share calculation: Basic 37,981,000
38,842,000 38,268,000 39,020,000 Diluted 38,425,000 39,167,000
38,742,000 39,339,000 Effective tax rate 39.0% 38.3% 38.9% 38.4% *
Does not include students enrolled at Daniel Webster College. **
Does not include the Daniel Webster College campus. ITT EDUCATIONAL
SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) Three Months Six Months Ended June 30, Ended
June 30, (unaudited) (unaudited) --------- --------- 2009 2008 2009
2008 ---- ---- ---- ---- Cash flows from operating activities: Net
income $71,923 $47,131 $133,852 $89,763 Adjustments to reconcile
net income to net cash flows from operating activities:
Depreciation and amortization 6,156 5,763 11,928 11,257 Provision
for doubtful accounts 18,620 9,685 32,829 16,618 Deferred income
taxes (2,773) (3,666) (3,815) (5,303) Excess tax benefit from stock
option exercises (94) (54) (3,887) (87) Stock-based compensation
expense 3,173 1,928 7,356 4,103 Other (557) -- (422) -- Changes in
operating assets and liabilities, net of acquisition: Restricted
cash (1,808) (159) 8,324 5,858 Accounts receivable (36,057)
(23,811) (72,000) (30,684) Direct marketing costs, net (1,357)
(659) (3,015) (1,396) Accounts payable (2,787) (2,395) 6,056 9,286
Accrued income taxes (25,025) (18,626) 1,124 (485) Other operating
assets and liabilities (97) 2,160 1,384 6,882 Deferred revenue
(7,887) (65,310) (36,956) (74,789) ------ -------- --------
-------- Net cash flows from operating activities 21,430 (48,013)
82,758 31,023 ------ -------- ------ ------ Cash flows from
investing activities: Facility expenditures and land purchases
(778) (6,896) (1,852) (13,189) Capital expenditures, net (7,398)
(5,286) (12,006) (7,790) Acquisition of college, net of cash
acquired (20,792) -- (20,792) -- Proceeds from sales and maturities
of investments 36,791 180,430 85,389 471,805 Purchase of
investments (35,049) (138,845) (90,819) (338,945) Issuance of note
receivable (13,920) -- (13,920) -- ------- -------- Net cash flows
from investing activities (41,146) 29,403 (54,000) 111,881 -------
------ -------- ------- Cash flows from financing activities:
Excess tax benefit from stock option exercises 94 54 3,887 87
Proceeds from exercise of stock options 171 234 5,994 275
Repurchase of common stock and shares tendered for taxes (59,987)
-- (124,690) (71,803) ------- -------- -------- Net cash flows from
financing activities (59,722) 288 (114,809) (71,441) ------- ---
-------- -------- Net change in cash and cash equivalents (79,438)
(18,322) (86,051) 71,463 Cash and cash equivalents at beginning of
period 219,642 97,013 226,255 7,228 ------- ------ ------- -----
Cash and cash equivalents at end of period $140,204 $78,691
$140,204 $78,691 ======== ======= ======== ======= DATASOURCE: ITT
Educational Services, Inc. CONTACT: Lauren Littlefield, Manager of
Communications, ITT Educational Services, Inc., +1-317-706-9200 Web
Site: http://www.ittesi.com/
Copyright