ITT Educational Services, Inc. Reports 2013 First Quarter Results

CARMEL, Ind., April 25, 2013 /PRNewswire/ -- ITT Educational Services, Inc. (NYSE:  ESI), a leading proprietary provider of postsecondary degree programs in the United States, today reported that new student enrollment in the first quarter of 2013 decreased 3.6% to 17,412 compared to 18,067 in the same period in 2012.  Total student enrollment decreased 14.2% to 61,039 as of March 31, 2013 compared to 71,123 as of March 31, 2012. 

The company provided the following information for the three months ended March 31, 2013 and 2012:

Financial and Operating Data for the Three Months Ended March 31st, Unless Otherwise Indicated

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



2013


2012


Increase/
(Decrease)








Revenue


$287.7


$341.8


(15.8)%

Operating Income


$52.7


$100.6


(47.6)%

Operating Margin


18.3%


29.4%


(1,110) basis points

Net Income


$31.1


$61.1


(49.0)%

Earnings Per Share (diluted)


$1.33


$2.38


(44.1)%

New Student Enrollment


17,412


18,067


(3.6)%

Continuing Students


43,627


53,056


(17.8)%

Total Student Enrollment as of March 31st


61,039


71,123


(14.2)%

Persistence Rate as of March 31st (A)


71.5%


72.4%


(90) basis points

Revenue Per Student


$4,712


$4,666


1.0%

Cash and Cash Equivalents, Restricted Cash and  Investments as of March 31st


$210.7


$294.4


(28.4)%

Bad Debt Expense as a Percentage of Revenue


6.9%


4.6%


230 basis points

Days Sales Outstanding as of March 31st


32.6 days


14.5 days


18.1 days

Deferred Revenue as of March 31st


$120.6


$180.1


(33.0)%

Debt as of March 31st


$150.0


$175.0



Weighted Average Diluted Shares of Common
Stock Outstanding


23,481,000


25,636,000



Shares of Common Stock Repurchased


0


2,097,200

(B)


Number of New Colleges in Operation


0


4



Capital Expenditures, Net


$1.4


$4.5


(68.6)%








(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 $146.7 million or at an average price of $69.93 per share.

 

ITT Educational Services, Inc. will conduct a conference call with financial analysts to discuss its 2013 first 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.

WEB SITE:
www.ittesi.com

 

ITT EDUCATIONAL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)









As of


March 31, 2013


December 31, 2012


March 31, 2012


(unaudited)




(unaudited)

Assets






Current assets:






     Cash and cash equivalents

$210,012


$246,342


$178,476

     Short-term investments

0


0


114,806

     Restricted cash

719


601


1,123

     Accounts receivable, net

104,077


77,313


54,411

     Deferred income taxes

29,513


44,547


12,566

     Prepaid expenses and other current assets

18,651


16,162


17,832

          Total current assets

362,972


384,965


379,214







Property and equipment, net

184,123


189,890


198,493

Deferred income taxes

56,858


56,112


34,081

Other assets

39,033


41,263


49,516

     Total assets

$642,986


$672,230


$661,304







Liabilities and Shareholders' Equity






Current liabilities:






     Accounts payable

$63,713


$63,304


$77,664

     Accrued compensation and benefits

15,425


21,023


13,323

     Other current liabilities

34,807


86,722


50,920

     Deferred revenue

120,628


135,900


180,147

          Total current liabilities

234,573


306,949


322,054







Long-term debt

150,000


140,000


175,000

Other liabilities

100,138


98,327


72,629

     Total liabilities

484,711


545,276


569,683







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

204,219


206,703


194,027

    Retained earnings

990,202


959,072


884,230

    Accumulated other comprehensive (loss)

(7,835)


(7,930)


(9,316)

    Treasury stock, 13,706,781, 13,744,395 and 12,934,377

      shares at cost

(1,028,682)


(1,031,262)


(977,691)

        Total shareholders' equity

158,275


126,954


91,621

        Total liabilities and shareholders' equity

$642,986


$672,230


$661,304

 

 

ITT EDUCATIONAL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)







Three Months


Ended March 31,


(unaudited)


2013


2012





Revenue

$287,711


$341,794





Costs and expenses:




Cost of educational services

125,221


134,941

Student services and administrative expenses 

106,282


106,266

Loss related to private student loan programs 

3,464


0

Total costs and expenses

234,967


241,207





Operating income

52,744


100,587

Interest income

34


681

Interest (expense)

(1,152)


(547)

Income before provision for income taxes

51,626


100,721

Provision for income taxes

20,496


39,650





Net income

$31,130


$61,071





Earnings per share:




     Basic

$1.33


$2.40

     Diluted

$1.33


$2.38





Supplemental Data:




Cost of educational services

43.5%


39.5%

Student services and administrative expenses

36.9%


31.1%

Loss related to private student loan programs

1.2%


0.0%

Operating margin

18.3%


29.4%

Student enrollment at end of period 

61,039


71,123

Campuses at end of period

147


145

Shares for earnings per share calculation:




     Basic

23,397,000


25,420,000

     Diluted

23,481,000


25,636,000









Effective tax rate

39.7%


39.4%

 

 

ITT EDUCATIONAL SERVICES, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)







Three Months


Ended March 31,


(unaudited)


2013


2012

Cash flows from operating activities:




    Net income

$31,130


$61,071

    Adjustments to reconcile net income to net cash flows




        from operating activities:




           Depreciation and amortization

7,292


7,420

           Provision for doubtful accounts

19,885


15,601

           Deferred income taxes

13,211


(3,742)

           Excess tax benefit from stock option exercises

0


(805)

           Stock-based compensation expense

3,093


4,483

           Settlement cost

(46,000)


0

           Other

294


(339)

           Changes in operating assets and liabilities:




               Restricted cash

(118)


1,005

               Accounts receivable

(46,649)


(21,906)

               Accounts payable

409


(1,212)

               Other operating assets and liabilities

(10,693)


22,166

               Deferred revenue

(15,272)


(46,396)

Net cash flows from operating activities

(43,418)


37,346





Cash flows from investing activities:




     Facility expenditures and land purchases

(100)


(132)

     Capital expenditures, net

(1,418)


(4,518)

     Proceeds from sales and maturities of investments and repayment

        of notes

215


98,955

     Purchase of investments and note advances

(1,241)


(63,545)

Net cash flows from investing activities

(2,544)


30,760





Cash flows from financing activities:




     Excess tax benefit from stock option exercises

0


805

     Proceeds from exercise of stock options

0


4,668

     Debt issue costs

0


(1,525)

     Proceeds from revolving borrowings

10,000


175,000

     Repayments of revolving borrowings

0


(150,000)

     Repurchase of common stock and shares tendered for taxes

(368)


(147,571)

Net cash flows from financing activities

9,632


(118,623)





Net change in cash and cash equivalents

(36,330)


(50,517)





Cash and cash equivalents at beginning of period

246,342


228,993





Cash and cash equivalents at end of period

$210,012


$178,476

 

SOURCE ITT Educational Services, Inc.



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