Attached files
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| 8-K - FORM 8-K - ITT EDUCATIONAL SERVICES INC | form8_k.htm |
Exhibit 99.1
ITT EDUCATIONAL SERVICES, INC. REPORTS 2011 THIRD QUARTER RESULTS
CARMEL, IN, October 20, 2011—ITT Educational Services, Inc. (NYSE: ESI), a leading provider of technology-oriented postsecondary degree programs, today reported that new student enrollment in the third quarter of 2011 decreased 14.1% to 22,909 compared to 26,664 in the same period in 2010. Total student enrollment decreased 10.0% to 79,219 as of September 30, 2011 compared to 88,004 as of September 30, 2010.
The company provided the following information for the three and nine months ended September 30, 2011 and 2010:
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Financial and Operating Data for the Three Months Ended September 30th, Unless Otherwise Indicated
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||||||
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(Dollars in millions, except per share and per student data)
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Increase/
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2011
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2010
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(Decrease)
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Revenue
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$360.6
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$400.6
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(10.0)%
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Operating Income
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$109.9
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$151.4
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(27.4)%
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Operating Margin
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30.5%
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37.8%
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(730) basis points
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Net Income
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$67.3
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$93.2
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(27.8)%
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Earnings Per Share (diluted)
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$2.48
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$2.82
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(12.1)%
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New Student Enrollment
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22,909
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26,664
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(14.1)%
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Continuing Students
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56,310
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61,340
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(8.2)%
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Total Student Enrollment as of September 30th
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79,219
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88,004
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(10.0)%
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Persistence Rate as of September 30th (A)
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71.5%
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72.4%
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(90) basis points
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Revenue Per Student
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$4,580
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$4,730
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(3.2)%
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Cash and Cash Equivalents, Restricted Cash and
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Investments as of September 30th
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$319.8
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$262.5
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21.8%
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Bad Debt Expense as a Percent of Revenue
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3.8%
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5.5%
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(170) basis points
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Days Sales Outstanding as of September 30th
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14.3 days
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19.6 days
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(5.3) days
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Deferred Revenue as of September 30th
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$226.0
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$195.2
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15.8%
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Debt as of September 30th
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$150.0
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$150.0
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Weighted Average Diluted Shares of Common Stock Outstanding
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27,098,000
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33,011,000
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Shares of Common Stock Repurchased
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370,000 (B)
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1,775,000 (C)
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Land and Building Purchases and Renovations
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$1.5 (D)
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$1.8 (E)
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(18.1)%
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Number of New Colleges in Operation
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5
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1
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Capital Expenditures, Net
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$7.8
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$8.1
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(3.3)%
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1
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Financial and Operating Data for the Nine Months Ended September 30th
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(Dollars in millions, except per share and per student data)
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2011
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2010
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Increase/
(Decrease)
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Revenue
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$1,131.7
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$1,186.4
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(4.6)%
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Operating Income
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$380.5
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$451.2
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(15.7)%
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Operating Margin
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33.6%
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38.0%
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(440) basis points
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Net Income
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$231.7
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$276.7
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(16.3)%
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Earnings Per Share (diluted)
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$8.27
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$8.06
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2.6%
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Bad Debt Expense as a Percentage of Revenue
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3.9%
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5.7%
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(180) basis points
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Revenue Per Student
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$13,721
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$14,237
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(3.6)%
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Weighted Average Diluted Shares of Common
Stock Outstanding
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28,035,000
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34,336,000
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Shares of Common Stock Repurchased
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3,470,000 (F)
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3,727,500 (G)
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Land and Building Purchases and Renovations
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$3.1 (H)
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$4.4 (I)
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(28.4)%
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Number of New Colleges in Operation
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6
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5
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Capital Expenditures, Net
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$20.0
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$20.6
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(3.0)%
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_________________
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(A)
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Represents the number of Continuing Students in the academic term, divided by the Total Student Enrollment in the immediately preceding academic term.
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(B)
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For approximately $29.6 million or at an average price of $79.94 per share.
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(C)
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For approximately $114.9 million or at an average price of $64.73 per share.
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(D)
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Represents costs associated with renovating, expanding or constructing buildings at eight of the company’s locations.
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(E)
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Represents costs associated with renovating, expanding or constructing buildings at seven of the company’s locations.
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(F)
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For approximately $248.1 million or at an average price of $71.50 per share.
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(G)
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For approximately $315.0 million or at an average price of $84.49 per share.
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(H)
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Represents costs associated with renovating, expanding or constructing buildings at 11 of the company’s locations.
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(I)
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Represents costs associated with renovating, expanding or constructing buildings at 17 of the company’s locations.
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The Company adjusted its 2011 internal goal for earnings per share from the range of $10.00 to $10.50 to an adjusted range of $10.40 to $10.60.
ITT Educational Services, Inc. will conduct a conference call with financial analysts to discuss its 2011 third quarter earnings at 11:00 am (ET) this morning. The public is invited to listen to a live webcast of the conference call. The webcast may be accessed by following the “Live Webcast” directions on ITT/ESI’s website at www.ittesi.com.
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: changes in federal and state governmental laws and regulations with respect to education and accreditation standards, or the interpretation or enforcement of those laws and regulations, 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; business conditions and growth in the postsecondary education industry and in the general economy; 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 campuses; the company's ability to implement its growth strategies; the company's failure to maintain or renew required federal or state authorizations or accreditations of its campuses or programs of study; 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 internally funded financing from its students; the company’s exposure under its guarantees related to private student loan programs; 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.
2
FOR FURTHER INFORMATION:
COMPANY: WEB SITE:
Lauren Littlefield, Communications www.ittesi.com
(317) 706-9200
3
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ITT EDUCATIONAL SERVICES, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(Dollars in thousands, except per share data)
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As of
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September 30, 2011
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December 31, 2010
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September 30, 2010
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(unaudited)
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(unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 172,577 | $ | 163,779 | $ | 119,956 | ||||||
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Short-term investments
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146,799 | 149,160 | 142,483 | |||||||||
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Restricted cash
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413 | 255 | 108 | |||||||||
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Accounts receivable, net
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56,140 | 68,937 | 85,246 | |||||||||
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Deferred income taxes
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6,760 | 9,079 | 17,488 | |||||||||
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Prepaid expenses and other current assets
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19,565 | 22,887 | 17,494 | |||||||||
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Total current assets
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402,254 | 414,097 | 382,775 | |||||||||
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Property and equipment, net
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201,010 | 198,213 | 197,383 | |||||||||
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Deferred income taxes
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37,068 | 21,814 | 18,189 | |||||||||
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Other assets
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46,422 | 40,656 | 29,383 | |||||||||
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Total assets
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$ | 686,754 | $ | 674,780 | $ | 627,730 | ||||||
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Liabilities and Shareholders' Equity
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Current liabilities:
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Accounts payable
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$ | 88,825 | $ | 67,920 | $ | 79,620 | ||||||
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Accrued compensation and benefits
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16,772 | 28,428 | 19,545 | |||||||||
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Other current liabilities
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12,809 | 15,441 | 12,051 | |||||||||
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Deferred revenue
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226,046 | 244,362 | 195,168 | |||||||||
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Total current liabilities
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344,452 | 356,151 | 306,384 | |||||||||
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Long-term debt
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150,000 | 150,000 | 150,000 | |||||||||
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Other liabilities
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63,840 | 40,559 | 29,004 | |||||||||
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Total liabilities
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558,292 | 546,710 | 485,388 | |||||||||
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Shareholders' equity:
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Preferred stock, $.01 par value,
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5,000,000 shares authorized, none issued
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0 | 0 | 0 | |||||||||
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Common stock, $.01 par value, 300,000,000 shares authorized, 37,068,904, 37,068,904 and 54,068,904 issued
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371 | 371 | 541 | |||||||||
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Capital surplus
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186,009 | 173,935 | 170,699 | |||||||||
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Retained earnings
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751,705 | 524,678 | 1,270,248 | |||||||||
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Accumulated other comprehensive (loss)
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(4,498 | ) | (4,509 | ) | (9,147 | ) | ||||||
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Treasury stock, 10,405,882, 7,075,563 and 22,151,915 shares at cost
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(805,125 | ) | (566,405 | ) | (1,289,999 | ) | ||||||
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Total shareholders' equity
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128,462 | 128,070 | 142,342 | |||||||||
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Total liabilities and shareholders' equity
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$ | 686,754 | $ | 674,780 | $ | 627,730 | ||||||
4
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ITT EDUCATIONAL SERVICES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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(Dollars in thousands, except per share data)
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Three Months
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Nine Months
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Ended September 30,
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Ended September 30,
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(unaudited)
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(unaudited)
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2011
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2010
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2011
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2010
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Revenue
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$ | 360,638 | $ | 400,597 | $ | 1,131,686 | $ | 1,186,403 | ||||||||
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Costs and expenses:
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Cost of educational services
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141,262 | 134,478 | 421,460 | 402,623 | ||||||||||||
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Student services and administrative expenses
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109,512 | 114,706 | 329,721 | 332,620 | ||||||||||||
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Total costs and expenses
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250,774 | 249,184 | 751,181 | 735,243 | ||||||||||||
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Operating income
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109,864 | 151,413 | 380,505 | 451,160 | ||||||||||||
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Interest income
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716 | 634 | 2,341 | 1,876 | ||||||||||||
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Interest (expense)
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(378 | ) | (490 | ) | (1,442 | ) | (1,424 | ) | ||||||||
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Income before provision for income taxes
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110,202 | 151,557 | 381,404 | 451,612 | ||||||||||||
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Provision for income taxes
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42,884 | 58,380 | 149,700 | 174,944 | ||||||||||||
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Net income
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$ | 67,318 | $ | 93,177 | $ | 231,704 | $ | 276,668 | ||||||||
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Earnings per share:
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Basic
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$ | 2.51 | $ | 2.84 | $ | 8.34 | $ | 8.15 | ||||||||
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Diluted
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$ | 2.48 | $ | 2.82 | $ | 8.27 | $ | 8.06 | ||||||||
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Supplemental Data:
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Cost of educational services
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39.2 | % | 33.6 | % | 37.2 | % | 33.9 | % | ||||||||
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Student services and administrative expenses
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30.4 | % | 28.6 | % | 29.1 | % | 28.0 | % | ||||||||
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Operating margin
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30.5 | % | 37.8 | % | 33.6 | % | 38.0 | % | ||||||||
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Student enrollment at end of period
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79,219 | 88,004 | 79,219 | 88,004 | ||||||||||||
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Campuses at end of period
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136 | 126 | 136 | 126 | ||||||||||||
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Shares for earnings per share calculation:
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Basic
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26,839,000 | 32,777,000 | 27,791,000 | 33,954,000 | ||||||||||||
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Diluted
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27,098,000 | 33,011,000 | 28,035,000 | 34,336,000 | ||||||||||||
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Effective tax rate
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38.9 | % | 38.5 | % | 39.2 | % | 38.7 | % | ||||||||
5
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ITT EDUCATIONAL SERVICES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Dollars in thousands)
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Three Months
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Nine Months
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Ended September 30,
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Ended September 30,
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(unaudited)
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(unaudited)
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2011
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2010
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2011
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2010
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Cash flows from operating activities:
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Net income
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$ | 67,318 | $ | 93,177 | $ | 231,704 | $ | 276,668 | ||||||||
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Adjustments to reconcile net income to net cash flows
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from operating activities:
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Depreciation and amortization
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6,486 | 6,205 | 20,368 | 19,687 | ||||||||||||
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Provision for doubtful accounts
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13,864 | 22,151 | 44,018 | 67,950 | ||||||||||||
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Deferred income taxes
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(5,831 | ) | (6,568 | ) | (13,008 | ) | (16,031 | ) | ||||||||
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Excess tax benefit from stock option exercises
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(167 | ) | (1,313 | ) | (1,145 | ) | (3,253 | ) | ||||||||
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Stock-based compensation expense
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4,166 | 3,708 | 12,838 | 12,707 | ||||||||||||
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Other
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(820 | ) | 268 | (3,237 | ) | 758 | ||||||||||
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Changes in operating assets and liabilities:
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Restricted cash
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(26 | ) | (38 | ) | (158 | ) | 1,783 | |||||||||
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Accounts receivable
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(22,963 | ) | (9,007 | ) | (31,221 | ) | (67,770 | ) | ||||||||
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Accounts payable
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22,817 | 3,504 | 20,905 | 18,345 | ||||||||||||
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Other operating assets and liabilities
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5,035 | 6,756 | 29,071 | 29,096 | ||||||||||||
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Deferred revenue
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(40,801 | ) | (1,939 | ) | (18,316 | ) | 23,235 | |||||||||
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Net cash flows from operating activities
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49,078 | 116,904 | 291,819 | 363,175 | ||||||||||||
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Cash flows from investing activities:
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Facility expenditures and land purchases
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(1,454 | ) | (1,775 | ) | (3,129 | ) | (4,368 | ) | ||||||||
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Capital expenditures, net
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(7,827 | ) | (8,090 | ) | (20,013 | ) | (20,629 | ) | ||||||||
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Proceeds from sales and maturities of investments and repayment of notes
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52,317 | 81,517 | 312,709 | 281,343 | ||||||||||||
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Purchase of investments and note advances
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(48,613 | ) | (100,741 | ) | (330,306 | ) | (323,515 | ) | ||||||||
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Net cash flows from investing activities
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(5,577 | ) | (29,089 | ) | (40,739 | ) | (67,169 | ) | ||||||||
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Cash flows from financing activities:
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Excess tax benefit from stock option exercises
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167 | 1,313 | 1,145 | 3,253 | ||||||||||||
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Proceeds from exercise of stock options
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303 | 5,210 | 5,286 | 7,830 | ||||||||||||
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Repurchase of common stock and shares tendered for taxes
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(29,629 | ) | (114,906 | ) | (248,713 | ) | (315,921 | ) | ||||||||
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Net cash flows from financing activities
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(29,159 | ) | (108,383 | ) | (242,282 | ) | (304,838 | ) | ||||||||
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Net change in cash and cash equivalents
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14,342 | (20,568 | ) | 8,798 | (8,832 | ) | ||||||||||
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Cash and cash equivalents at beginning of period
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158,235 | 140,524 | 163,779 | 128,788 | ||||||||||||
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Cash and cash equivalents at end of period
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$ | 172,577 | $ | 119,956 | $ | 172,577 | $ | 119,956 | ||||||||
6