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ITT Educational Services, Inc. Reports 2012 Third Quarter Results

      ITT Educational Services, Inc. Reports 2012 Third Quarter Results

PR Newswire

CARMEL, Ind., Oct. 25, 2012

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     65,662       79,219        (17.1)%
of September 30^th
Persistence Rate as of          69.8%        71.5%         (170) basis points
September 30^th ^(A)
Revenue Per Student            $4,740       $4,580        3.5%
Cash and Cash Equivalents,
Restricted Cash and             $175.2       $319.8        (45.2)%
 Investments as of
September 30^th
Bad Debt Expense as a           7.3%         3.8%           350 basis points
Percentage of Revenue
Days Sales Outstanding as of     26.1 days   14.3 days    11.8
September 30^th                                            days
Deferred Revenue as of          $119.1       $226.0        (47.3)%
September 30^th
Debt as of September 30^th      $140.0       $150.0
Weighted Average Diluted
Shares of Common                23,443,000   27,098,000
 Stock Outstanding
Shares of Common Stock          0            370,000 ^(B)
Repurchased
Number of New Colleges in       1            5
Operation
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             5.8%               3.9%           190 basis
Percentage of Revenue                                              points
Revenue Per Student               $14,043            $13,721       2.3%
Weighted Average Diluted
Shares of Common                  24,200,000         28,035,000
 Stock Outstanding
Shares of Common Stock            3,025,700 ^ (C)    3,470,000 ^
Repurchased                                          (D)
Number of New Colleges in         6                  6
Operation
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,  December 31,  September 30,
                                    2012           2011          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     18,331         18,814        19,565
current assets
 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       19,729         21,438        16,772
benefits
 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            0              0             0
authorized, none issued
 Common stock, $.01 par value,
300,000,000
 shares authorized,         371            371           371
37,068,904 issued
 Capital surplus                 203,095        189,573       186,009
 Retained earnings               968,545        827,675       751,705
 Accumulated other comprehensive (8,970)        (9,479)       (4,498)
(loss)
 Treasury stock, 13,744,474,
10,969,425 and                      (1,031,266)    (839,341)     (805,125)
 10,405,882 shares, at
cost
 Total shareholders' equity  131,775        168,799       128,462
 Total liabilities and       $585,050       $728,818      $686,754
shareholders' equity



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                  110,046     109,512     327,779     329,721
 expenses
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                          69,857      110,202     247,244     381,404
 taxes
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                  35.0%       30.4%       33.2%       29.1%
 expenses
Operating margin                22.5%       30.5%       25.2%       33.6%
Student enrollment at end of    65,662      79,219      65,662      79,219
period
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          6,930      6,486     22,045     20,368
amortization
 Provision for doubtful    22,873     13,864    57,480     44,018
accounts
 Deferred income taxes     (6,021)    (5,831)   (16,097)   (13,008)
 Excess tax benefit from   (3)        (167)     (1,382)    (1,145)
stock option exercises
 Stock-based compensation  4,291      4,166     13,046     12,838
expense
 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       (5,758)    5,035     1,008      29,071
assets and liabilities
 Deferred revenue      (2,784)    (40,801)  (107,454)  (18,316)
Net cash flows from operating        19,717     49,078    18,767     291,819
activities
Cash flows from investing
activities:
 Facility expenditures and land  (108)      (1,454)   (493)      (3,129)
purchases
 Capital expenditures, net       (3,185)    (7,827)   (14,820)   (20,013)
 Proceeds from sales and
maturities of investments            553        52,317    216,724    312,709
 and repayment of notes
 Purchase of investments and     0          (48,613)  (63,545)   (330,306)
note advances
Net cash flows from investing        (2,740)    (5,577)   137,866    (40,739)
activities
Cash flows from financing
activities:
 Excess tax benefit from stock   3          167       1,382      1,145
option exercises
 Proceeds from exercise of stock 254        303       8,345      5,286
options
 Debt issue costs                0          0         (1,525)    0
 Proceeds from revolving         0          0         175,000    0
borrowings
 Repayments of revolving         (10,000)   0         (185,000)  0
borrowings
 Repurchase of common stock and
shares tendered                      (10)       (29,629)  (209,370)  (248,713)
 for taxes
Net cash flows from financing        (9,753)    (29,159)  (211,168)  (242,282)
activities
Net change in cash and cash          7,224      14,342    (54,535)   8,798
equivalents
Cash and cash equivalents at         167,234    158,235   228,993    163,779
beginning of period
Cash and cash equivalents at end of  $174,458   $172,577  $174,458   $172,577
period





SOURCE ITT Educational Services, Inc.

Website: http://www.ittesi.com
Contact: Lauren Littlefield, Director of Communications, +1-317-706-9200
 
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