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ITT Educational Services, Inc. Reports 2012 First Quarter Results


News provided by

ITT Educational Services, Inc.

Apr 26, 2012, 07:30 ET

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CARMEL, Ind., April 26, 2012 /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 2012 decreased 17.0% to 18,067 compared to 21,761 in the same period in 2011.  Total student enrollment decreased 15.4% to 71,123 as of March 31, 2012 compared to 84,030 as of March 31, 2011. 

The company provided the following information for the three months ended March 31, 2012 and 2011:


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

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



2012



2011



Increase/
(Decrease)










Revenue


$341.8



$383.2



(10.8)%

Operating Income


$100.6



$140.7



(28.5)%

Operating Margin


29.4%



36.7%



(730) basis points

Net Income


$61.1



$85.4



(28.5)%

Earnings Per Share (diluted)


$2.38



$2.91



(18.2)%

New Student Enrollment


18,067



21,761



(17.0)%

Continuing Students


53,056



62,269



(14.8)%

Total Student Enrollment as of  March 31st


71,123



84,030



(15.4)%

Persistence Rate as of  March 31st (A)


72.4%



73.5%



(110) basis points

Revenue Per Student


$4,666



$4,525



3.1%

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


$294.4



$342.4



(14.0)%

Bad Debt Expense as a Percentage of Revenue


4.6%



3.3%



130 basis points

Days Sales Outstanding as of  March 31st


14.5 days



14.0 days



0.5 days

Deferred Revenue as of  March 31st


$180.1



$265.5



(32.2)%

Debt as of March 31st


$175.0



$150.0




Weighted Average Diluted Shares of Common
Stock Outstanding


25,636,000



29,312,000




Shares of Common Stock Repurchased


2,097,200

(B)


2,000,000

(C)



Land and Building Purchases and Renovations


$0.1

(D)


$0.5

(E)


(73.7)%

Number of New Colleges in Operation


4



0




Capital Expenditures, Net


$4.5



$4.7



(3.9)%

                                               

(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.

(C)    For approximately $139.1 million or at an average price of $69.55 per share.

(D)    Represents costs associated with renovating, expanding or constructing buildings at four of the company's locations.

(E)    Represents costs associated with renovating, expanding or constructing buildings at eight of the company's locations.

The Company adjusted its 2012 internal goal for earnings per share from the range of $7.50 to $8.50 to an adjusted range of $8.00 to $9.00.

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

ITT EDUCATIONAL SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)









As of


March 31, 2012


December 31, 2011


March 31, 2011


(unaudited)




(unaudited)

Assets






Current assets:






     Cash and cash equivalents

$178,476


$228,993


$187,922

     Short-term investments

114,806


148,488


152,612

     Restricted cash

1,123


2,128


1,820

     Accounts receivable, net

54,411


48,106


59,798

     Deferred income taxes

12,566


9,759


5,402

     Prepaid expenses and other current assets

17,832


18,814


24,388

          Total current assets

379,214


456,288


431,942







Property and equipment, net

198,493


201,257


196,579

Deferred income taxes

34,081


33,267


28,125

Other assets

49,516


38,006


44,869

     Total assets

$661,304


$728,818


$701,515







Liabilities and Shareholders' Equity






Current liabilities:






     Accounts payable

$77,664


$78,876


$72,689

     Accrued compensation and benefits

13,323


21,438


19,345

     Other current liabilities

50,920


18,190


61,321

     Deferred revenue

180,147


226,543


265,540

          Total current liabilities

322,054


345,047


418,895







Long-term debt

175,000


150,000


150,000

Other liabilities

72,629


64,972


52,151

     Total liabilities

569,683


560,019


621,046







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

194,027


189,573


177,594

    Retained earnings

884,230


827,675


607,765

    Accumulated other comprehensive (loss)

(9,316)


(9,479)


(4,563)

    Treasury stock, 12,934,377, 10,969,425 and
       8,999,196 shares, at cost

(977,691)


(839,341)


(700,698)

        Total shareholders' equity

91,621


168,799


80,469

        Total liabilities and shareholders' equity

$661,304


$728,818


$701,515

ITT EDUCATIONAL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)







Three Months


Ended March 31,


(unaudited)


2012


2011





Revenue

$341,794


$383,171





Costs and expenses:




Cost of educational services

134,941


137,926

Student services and administrative expenses 

106,266


104,583

Total costs and expenses

241,207


242,509





Operating income

100,587


140,662

Interest income

681


835

Interest (expense)

(547)


(557)

Income before provision for income taxes

100,721


140,940

Provision for income taxes

39,650


55,554





Net income

$61,071


$85,386





Earnings per share:




     Basic

$2.40


$2.94

     Diluted

$2.38


$2.91





Supplemental Data:




Cost of educational services

39.5%


36.0%

Student services and administrative expenses

31.1%


27.3%

Operating margin

29.4%


36.7%

Student enrollment at end of period 

71,123


84,030

Campuses at end of period

145


130

Shares for earnings per share calculation:




     Basic

25,420,000


29,085,000

     Diluted

25,636,000


29,312,000









Effective tax rate

39.4%


39.4%

ITT EDUCATIONAL SERVICES, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)







Three Months


Ended March 31,


(unaudited)


2012


2011

Cash flows from operating activities:




    Net income

$61,071


$85,386

    Adjustments to reconcile net income to net cash flows




        from operating activities:




           Depreciation and amortization

7,420


6,842

           Provision for doubtful accounts

15,601


12,667

           Deferred income taxes

(3,742)


(2,685)

           Excess tax benefit from stock option exercises

(805)


(351)

           Stock-based compensation expense

4,483


3,914

           Other

(339)


(1,430)

           Changes in operating assets and liabilities:




               Restricted cash

1,005


(1,565)

               Accounts receivable

(21,906)


(3,528)

               Accounts payable

(1,212)


4,769

               Other operating assets and liabilities

22,166


56,922

               Deferred revenue

(46,396)


21,178

Net cash flows from operating activities

37,346


182,119





Cash flows from investing activities:




     Facility expenditures and land purchases

(132)


(502)

     Capital expenditures, net

(4,518)


(4,699)

     Proceeds from sales and maturities of investments and repayment of notes

98,955


142,085

     Purchase of investments and note advances

(63,545)


(158,589)

Net cash flows from investing activities

30,760


(21,705)





Cash flows from financing activities:




     Excess tax benefit from stock option exercises

805


351

     Proceeds from exercise of stock options

4,668


3,028

     Debt issue costs

(1,525)


0

     Proceeds from revolving borrowings

175,000


0

     Repayments of revolving borrowings

(150,000)


0

     Repurchase of common stock and shares tendered for taxes

(147,571)


(139,650)

Net cash flows from financing activities

(118,623)


(136,271)





Net change in cash and cash equivalents

(50,517)


24,143





Cash and cash equivalents at beginning of period

228,993


163,779





Cash and cash equivalents at end of period

$178,476


$187,922

SOURCE ITT Educational Services, Inc.

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