ITT EDUCATIONAL SERVICES INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-13144

ITT EDUCATIONAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware		36-2061311
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13000 North Meridian Street Carmel, Indiana		46032-1404
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (317) 706-9200

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

45,937,076

Number of shares of Common Stock, $.01 par value, outstanding at September 30, 2004

ITT EDUCATIONAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004		2003

Revenues	$	157,945	$	134,382	$	450,606	$	378,213

Costs and Expenses
Cost of educational services	75,033		69,681		229,536		210,463
Student services and administrative expenses	43,771		39,495		130,265		113,417
Special legal and other investigation costs	9,837		—		25,143		—
Total costs and expenses	128,641		109,176		384,944		323,880

Operating income	29,304		25,206		65,662		54,333

Interest income, net	959		551		2,316		1,549

Income before income taxes	30,263		25,757		67,978		55,882

Income taxes	11,803		9,916		26,512		21,514

Net income	$	18,460	$	15,841	$	41,466	$	34,368

Earnings per common share (basic):	$	0.40	$	0.35	$	0.91	$	0.76
Earnings per common share (diluted):	$	0.39	$	0.34	$	0.89	$	0.75

The accompanying notes are an integral part of these financial statements.

ITT EDUCATIONAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	September 30, 2004		December 31, 2003		September 30, 2003
	(unaudited)				(unaudited)
Assets
Current assets
Cash and cash equivalents	$	166,702	$	168,273	$	159,749
Restricted cash	—		8,496		—
Short-term investments	145,719		63,938		37,912
Accounts receivable, net	14,041		9,398		9,943
Deferred and prepaid income tax	4,842		2,906		2,950
Prepaids and other current assets	5,572		3,635		4,409
Total current assets	336,876		256,646		214,963
Property and equipment, net	92,515		81,503		78,910
Direct marketing costs	13,813		10,844		10,470
Investments	3,275		13,467		6,455
Other assets	989		810		811
Total assets	$	447,468	$	363,270	$	311,609

Liabilities and Shareholders’ Equity
Current liabilities

Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2004 and 2003

Consolidated Balance Sheets as of September 30, 2004 and 2003 (unaudited) and December 31, 2003

Consolidated Statements of Cash Flows (unaudited) for the three and nine months ended September 30, 2004 and 2003

Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2004, June 30, 2004 and September 30, 2004 (unaudited) and the year ended December 31, 2003

Notes to Consolidated Financial Statements