ITT Educational Services, Inc. Reports 2012 Third Quarter Results

25 Oct, 2012, 07:30 ET from ITT Educational Services, Inc.

CARMEL, Ind., Oct. 25, 2012 /PRNewswire/ -- 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 2012 decreased 15.8% to 19,298 compared to 22,909 in the same period in 2011.  Total student enrollment decreased 17.1% to 65,662 as of September 30, 2012 compared to 79,219 as of September 30, 2011. 

The company provided the following information for the three and nine months ended September 30, 2012 and 2011:

Financial and Operating Data for the Three Months Ended September 30th, Unless Otherwise Indicated

(Dollars in millions, except per share and per student data)

Increase/

2012

2011

(Decrease)

Revenue

$314.7

$360.6

(12.7)%

Operating Income

$70.8

$109.9

(35.6)%

Operating Margin

22.5%

30.5%

(800) basis points

Net Income

$42.9

$67.3

(36.3)%

Earnings Per Share (diluted)

$1.83

$2.48

(26.2)%

New Student Enrollment  

19,298

22,909

(15.8)%

Continuing Students  

46,364

56,310

(17.7)%

Total Student Enrollment as of September 30th

65,662

79,219

(17.1)%

Persistence Rate as of September 30th (A)

69.8%

71.5%

 (170) basis points

Revenue Per Student 

$4,740

$4,580

3.5%

Cash and Cash Equivalents, Restricted Cash and      Investments as of September 30th

$175.2

$319.8

(45.2)%

Bad Debt Expense as a Percentage of Revenue

7.3%

3.8%

  350 basis points

Days Sales Outstanding as of September 30th

  26.1 days

  14.3 days

            11.8 days

Deferred Revenue as of September 30th

$119.1

$226.0

(47.3)%

Debt as of September 30th

$140.0

$150.0

Weighted Average Diluted Shares of Common      Stock Outstanding

23,443,000

27,098,000

Shares of Common Stock Repurchased

0

370,000 (B)

Number of New Colleges in Operation

1

5

Capital Expenditures, Net

$3.2

$7.8

(59.3)%

 

Financial and Operating Data for the Nine Months Ended September 30th

(Dollars in millions, except per share and per student data)

2012

2011

Increase/ (Decrease)

Revenue

$986.4

$1,131.7

(12.8)%

Operating Income

$248.8

$380.5

(34.6)%

Operating Margin

25.2%

33.6%

(840) basis points

Net Income

$149.9

$231.7

(35.3)%

Earnings Per Share (diluted)

$6.20

$8.27

(25.0)%

Bad Debt Expense as a Percentage of Revenue

5.8%

3.9%

  190 basis points

Revenue Per Student

$14,043

$13,721

2.3%

Weighted Average Diluted Shares of Common      Stock Outstanding

24,200,000

28,035,000

Shares of Common Stock Repurchased

3,025,700 (C)

3,470,000 (D)

Number of New Colleges in Operation

6

6

Capital Expenditures, Net

$14.8

$20.0

(26.0)%

(A) Represents the number of Continuing Students in the academic term, divided by the Total Student Enrollment in the      immediately preceding academic term.

(B) For approximately $29.6 million or at an average price of $79.94 per share.

(C) For approximately $207.9 million or at an average price of $68.72 per share.

(D) For approximately $248.1 million or at an average price of $71.50 per share.

The Company adjusted its 2012 internal goal for earnings per share from the range of $8.00 to $9.00 to an adjusted range of $8.00 to $8.10.  

ITT Educational Services, Inc. will conduct a conference call with financial analysts to discuss its 2012 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.

ITT EDUCATIONAL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

As of

September 30, 2012

December 31, 2011

September 30, 2011

(unaudited)

(unaudited)

Assets

Current assets:

     Cash and cash equivalents

$174,458

$228,993

$172,577

     Short-term investments

0

148,488

146,799

     Restricted cash

720

2,128

413

     Accounts receivable, net

89,425

48,106

56,140

     Deferred income taxes

19,284

9,759

6,760

     Prepaid expenses and other current assets

18,331

18,814

19,565

          Total current assets

302,218

456,288

402,254

Property and equipment, net

194,253

201,257

201,010

Deferred income taxes

39,499

33,267

37,068

Other assets

49,080

38,006

46,422

     Total assets

$585,050

$728,818

$686,754

Liabilities and Shareholders' Equity

Current liabilities:

     Accounts payable

$76,358

$78,876

$88,825

     Accrued compensation and benefits

19,729

21,438

16,772

     Other current liabilities

19,910

18,190

12,809

     Deferred revenue

119,089

226,543

226,046

          Total current liabilities

235,086

345,047

344,452

Long-term debt

140,000

150,000

150,000

Other liabilities

78,189

64,972

63,840

     Total liabilities

453,275

560,019

558,292

Shareholders' equity:

     Preferred stock, $.01 par value,

        5,000,000 shares authorized, none issued

0

0

0

    Common stock, $.01 par value, 300,000,000

         shares authorized, 37,068,904 issued

371

371

371

    Capital surplus

203,095

189,573

186,009

    Retained earnings

968,545

827,675

751,705

    Accumulated other comprehensive (loss)

(8,970)

(9,479)

(4,498)

    Treasury stock, 13,744,474, 10,969,425 and           10,405,882 shares, at cost

(1,031,266)

(839,341)

(805,125)

        Total shareholders' equity

131,775

168,799

128,462

        Total liabilities and shareholders' equity

$585,050

$728,818

$686,754

 

ITT EDUCATIONAL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

Three Months

Nine Months

Ended September 30,

Ended September 30,

(unaudited)

(unaudited)

2012

2011

2012

2011

Revenue

$314,747

$360,638

$986,366

$1,131,686

Costs and expenses:

Cost of educational services

133,948

141,262

409,829

421,460

Student services and administrative        expenses

110,046

109,512

327,779

329,721

Total costs and expenses

243,994

250,774

737,608

751,181

Operating income

70,753

109,864

248,758

380,505

Interest income

125

716

1,308

2,341

Interest (expense)

(1,021)

(378)

(2,822)

(1,442)

Income before provision for income         taxes

69,857

110,202

247,244

381,404

Provision for income taxes

26,997

42,884

97,311

149,700

Net income

$42,860

$67,318

$149,933

$231,704

Earnings per share:

     Basic

$1.83

$2.51

$6.23

$8.34

     Diluted

$1.83

$2.48

$6.20

$8.27

Supplemental Data:

Cost of educational services

42.6%

39.2%

41.5%

37.2%

Student services and administrative       expenses

35.0%

30.4%

33.2%

29.1%

Operating margin

22.5%

30.5%

25.2%

33.6%

Student enrollment at end of period 

65,662

79,219

65,662

79,219

Campuses at end of period

147

136

147

136

Shares for earnings per share calculation:

     Basic

23,359,000

26,839,000

24,054,000

27,791,000

     Diluted

23,443,000

27,098,000

24,200,000

28,035,000

Effective tax rate

38.7%

38.9%

39.4%

39.2%

 

ITT EDUCATIONAL SERVICES, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Three Months

Nine Months

Ended September 30,

Ended September 30,

(unaudited)

(unaudited)

2012

2011

2012

2011

Cash flows from operating activities:

    Net income

$42,860

$67,318

$149,933

$231,704

    Adjustments to reconcile net income to net cash flows

        from operating activities:

           Depreciation and amortization

6,930

6,486

22,045

20,368

           Provision for doubtful accounts

22,873

13,864

57,480

44,018

           Deferred income taxes

(6,021)

(5,831)

(16,097)

(13,008)

           Excess tax benefit from stock option exercises

(3)

(167)

(1,382)

(1,145)

           Stock-based compensation expense

4,291

4,166

13,046

12,838

           Other

340

(820)

97

(3,237)

           Changes in operating assets and liabilities:

               Restricted cash

31

(26)

1,408

(158)

               Accounts receivable

(38,623)

(22,963)

(98,799)

(31,221)

               Accounts payable

(4,419)

22,817

(2,518)

20,905

               Other operating assets and liabilities

(5,758)

5,035

1,008

29,071

               Deferred revenue

(2,784)

(40,801)

(107,454)

(18,316)

Net cash flows from operating activities

19,717

49,078

18,767

291,819

Cash flows from investing activities:

     Facility expenditures and land purchases

(108)

(1,454)

(493)

(3,129)

     Capital expenditures, net

(3,185)

(7,827)

(14,820)

(20,013)

     Proceeds from sales and maturities of investments         and repayment of notes

553

52,317

216,724

312,709

     Purchase of investments and note advances

0

(48,613)

(63,545)

(330,306)

Net cash flows from investing activities

(2,740)

(5,577)

137,866

(40,739)

Cash flows from financing activities:

     Excess tax benefit from stock option exercises

3

167

1,382

1,145

     Proceeds from exercise of stock options

254

303

8,345

5,286

     Debt issue costs

0

0

(1,525)

0

     Proceeds from revolving borrowings

0

0

175,000

0

     Repayments of revolving borrowings

(10,000)

0

(185,000)

0

     Repurchase of common stock and shares tendered         for taxes

(10)

(29,629)

(209,370)

(248,713)

Net cash flows from financing activities

(9,753)

(29,159)

(211,168)

(242,282)

Net change in cash and cash equivalents

7,224

14,342

(54,535)

8,798

Cash and cash equivalents at beginning of period

167,234

158,235

228,993

163,779

Cash and cash equivalents at end of period

$174,458

$172,577

$174,458

$172,577

 

 

SOURCE ITT Educational Services, Inc.



RELATED LINKS

http://www.ittesi.com