News Releases

ITT Educational Services, Inc. Reports 50 Percent Increase in EPS in Second Quarter 2003, New Student Increase of 15.8 Percent

PRNewswire-FirstCall
INDIANAPOLIS
Jul 17, 2003

ITT Educational Services, Inc. (NYSE: ESI), a leading provider of technology-oriented postsecondary degree programs, today reported that earnings per share ("EPS") in the second quarter of 2003 increased 50.0 percent to $0.21 compared to $0.14 in the second quarter of 2002. New student enrollment in the second quarter of 2003, excluding international enrollments and enrollments at two of its institutes that have stopped recruiting new students and are gradually ceasing operations, increased 15.8 percent to 8,665 compared to 7,485 in the same period of 2002. Total student enrollment as of June 30, 2003, excluding international enrollments and enrollments at the two institutes that are gradually ceasing operations, increased 6.6 percent to 33,153 compared to 31,113 as of June 30, 2002. The Company provided the following information for the three and six months ending June 30, 2003:

      Three Months Ending June 30th Financial and Operating Results
 (Dollars in millions, except earnings per share and revenue per student)

                                    2003            2002 Increase/(Decrease)

  Revenues (A)                     $124.8          $108.3         15.2%
  Operating Income                  $15.5           $10.1         52.8%
  Operating Margin                  12.4%            9.3%  310 basis points
  Net Income                         $9.8            $6.8         45.8%
  EPS (diluted)                     $0.21           $0.14         50.0%
  Return on Equity (TTM) (B)        57.3%           52.7%  460 basis points
  New Student Enrollment ©        8,665           7,485         15.8%
  Continuing Students ©          24,488          23,628          3.6%
  Total Student Enrollment as
   of June 30th ©                33,153          31,113          6.6%
  Online Course Registrations (D)     868 (E)          97 (F)    895.0%
  Revenue Per Student              $3,863          $3,496         10.5%
  Cash, Cash Equivalents
   and Marketable
   Debt Securities as
   of June 30th                    $168.4          $125.1         34.7%
  Bad Debt Expense as a Percent
   of Revenues                       1.2%            1.3%  (10) basis points
  Days Sales Outstanding as of
   June 30th                          6.1             9.4      (3.3) days
  Deferred Tuition Revenue as of
   June 30th                        $95.0           $77.4         22.8%
  Debt                               $0.0            $0.0            --
  Fully Diluted Shares of
   Common Stock
   Outstanding                 45,921,000      47,155,000            --
  Shares of Common Stock
   Repurchased                     28,000 (G)           0            --
  Land and Building Purchases        $9.7 (H)        $0.0            --
  Number of New Colleges Opened         1 (I)           1 (J)        --
  Capital Expenditures               $4.3            $6.2       (31.1)%


       Six Months Ending June 30th Financial and Operating Results
             (Dollars in millions, except earnings per share)

                                     2003           2002         Increase/
                                                                 (Decrease)

  Revenues (A)                     $243.8          $213.4         14.2%
  Operating Income                  $29.1           $20.0         45.6%
  Operating Margin                  12.0%            9.4%  260 basis points
  Net Income                        $18.5           $13.2         40.8%
  EPS (diluted)                     $0.40           $0.28         42.9%
  Shares of Common Stock
   Repurchased                  1,078,000 (K)   1,150,000 (L)       --
  Land and Building Purchases       $17.3 (M)        $0.0           --
  Capital Expenditures               $6.0            $9.3        (35.5)%
  New Student Enrollment (N)       15,878          14,199         11.8%

  (A)  In an effort to improve revenue comparability to its peers, the
        Company reported that, effective June 30, 2003, it began classifying
        tuition and fee refunds resulting from student withdrawals as a
        reduction of revenue.  Previously, the Company included tuition and
        fees from withdrawing students in Revenues and recorded an
        offsetting expense in Cost of educational services.  The new
        classification had no impact on the Company's Net income.
   (B)  Represents return on equity for the trailing 12 months.
   ©  Excludes international enrollments and enrollments at the two ITT
        Technical Institutes that are gradually ceasing operations.  In the
        three months ending June 30, 2003, there were 12 new student
        enrollments at those two colleges compared to 88 in the three months
        ending June 30, 2002.  As of June 30, 2003, the combined total
        student enrollment at those two colleges was 290 compared to 444 as
        of June 30, 2002.
   (D)  Represents the number of online courses that students were
        registered to take.
   (E)  As of June 30, 2003.
   (F)  As of June 30, 2002.
   (G)  For approximately $0.8 million or at an average price of $27.28 per
        share.
   (H)  Represents one of the Company's colleges and its corporate offices.
   (I)  Duluth (Atlanta), Georgia commenced its first class in June 2003.
   (J)  Springfield, Virginia (Washington, D.C.) commenced its first class
        in June 2002.
   (K)  For approximately $28.7 million or at an average price of $26.65 per
        share.
   (L)  For approximately $24.6 million or at an average price of $21.35 per
        share.
   (M)  Represents three of the Company's colleges and its corporate
        offices.
   (N)  Excludes international enrollments and enrollments at the two ITT
        Technical Institutes that are gradually ceasing operations.  In the
        six months ending June 30, 2003, the combined new student enrollment
        at those two colleges was 32 compared to 192 in the same period in
        2002.

Rene R. Champagne, chairman and CEO of ITT/ESI said, "We experienced yet another strong financial performance in the second quarter of 2003 that resulted in a 50.0 percent increase in EPS. Our EPS of $0.21 in the second quarter of 2003 exceeded analysts' consensus estimates by 2 cents per share. This performance was driven primarily by increased total student enrollment, tuition increases and greater leveraging of the Company's operating costs. Lead generation in the second quarter remained strong and our lead conversion rate continued to improve, as evidenced by a 15.8 percent increase in new student enrollment. New student enrollment and total student enrollment in the first six months of 2003, excluding international enrollments and enrollments at the two institutes that are gradually ceasing operations, increased 11.8 percent compared to the same period in 2002 and 5.9 percent, respectively."

Omer Waddles, president and COO of ITT/ESI said, "We continue to both increase the number of our colleges that are approved to award bachelor degrees and introduce new bachelor degree programs of study. As of June 30, 2003, a total of 44 ITT Technical Institutes were approved to offer bachelor degree programs and we continue to receive regulatory approvals to offer new bachelor degree programs at these colleges. In the first six months of 2003, we received 89 new program approvals. We plan to open our 76th college in Hilliard (Columbus), Ohio in September 2003 and our 77th college in Eden Prairie (Minneapolis), Minnesota in December 2003, assuming all of the required regulatory approvals are obtained in a timely fashion. Our 2+1 hybrid delivery model is now being used at 15 of our colleges. Under this model, full-time students take two courses in traditional classroom and lab settings on campus and a third course online during an academic quarter. In addition to increasing the appeal of our programs to working adults, the 2+1 model increases the capacity of our facilities, leading to improvements in our operating margin. As of June 30, 2003, 51 of our colleges had received the requisite regulatory approvals to offer the 2+1 hybrid delivery model. Our new master's degree program in business administration has received all of the requisite regulatory approvals and we have begun marketing this program for a fall class. We can offer this online MBA program in 34 states at this time."

Kevin M. Modany, senior vice president and CFO said, "In the second quarter of 2003, operating margin increased 310 basis points primarily as a result of our greater leveraging of overhead costs, increased student enrollment, tuition price increases and various cost containment projects. We currently believe that we will achieve or exceed the high end of our previously announced goal of increasing 2003 operating margin in the range of 120 to 150 basis points over our operating margin of 14.7 percent for the full year of 2002. Other key metrics to note in the second quarter of 2003 include a 10.5 percent increase in revenue per student and a 460 basis point improvement of our Return on Equity over the trailing twelve months."

Champagne concluded, "Based on our strong student enrollment increases and financial performance in the first six months of 2003, we are increasing our internal EPS goal for the full year of 2003 to a range of $1.20 to $1.21 from our previous goal of $1.16 to $1.19. We are also announcing that it is our internal goal for 2004 EPS to be in the range of $1.44 to $1.48 compared to current analysts' consensus estimates of $1.39."

ITT/ESI intends to conduct a conference call and a live webcast open to the public today at 11:00 a.m. EDT to discuss this release. The webcast may be accessed on ITT/ESI's web site, located at www.ittesi.com and will also be available for replay.

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 upon the current expectations and beliefs of the company's management concerning future developments and their potential effect on the Company. There can be no assurance 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: business conditions and growth in the postsecondary education industry and in the general economy; changes in federal and state governmental regulations with respect to education and accreditation standards, or the interpretation or enforcement thereof, 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; the results of the qui tam action brought under the False Claims Act, 31 U.S.C. Section 3730, in which the Company is a defendant which, if adversely determined, could result in a demand for repayment of federal student financial aid funds, trebled under the False Claims Act, and penalties; 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 the institutes; the Company's ability to implement its growth strategies; receptivity of students and employers to the Company's existing program offerings and new curricula; loss of lender access to the Company's students for student loans; and other risks and uncertainties detailed from time to time in the Company's filings with the 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.
                       CONSOLIDATED STATEMENTS OF INCOME
             (In thousands, except per share and operating data)
                                 (unaudited)

                                    Three Months Ended   Six Months Ended
                                          June 30,            June 30,
                                       2003      2002      2003      2002
  Revenues (a)                       $124,831  $108,325  $243,831  $213,437

  Costs and Expenses (a)
  Cost of educational services         72,449    65,508   140,782   128,963
  Student services and
   administrative expenses             36,924    32,698    73,922    64,475
       Total costs and expenses       109,373    98,206   214,704   193,438

  Operating income                     15,458    10,119    29,127    19,999

  Interest income, net                    550       808       998     1,295

  Income before income taxes           16,008    10,927    30,125    21,294

  Income taxes                          6,163     4,174    11,598     8,134

  Net income                           $9,845    $6,753   $18,527   $13,160

  Earnings per common share (b):
       Basic                            $0.22     $0.15     $0.41     $0.29
       Diluted                          $0.21     $0.14     $0.40     $0.28

  Supplemental Data:
  Cost of educational services          58.0%     60.5%     57.7%     60.4%
  Student services and
   administrative expenses              29.6%     30.2%     30.3%     30.2%
  Operating margin                      12.4%      9.3%     12.0%      9.4%
  Student enrollment at end of
   period                              33,443    31,557    33,443    31,557
  Technical institutes at end of
   period                                  75        71        75        71
  Shares for earnings per share
   calculation (b):
     Basic                             44,830    45,925    44,922    46,037
     Diluted                           45,921    47,155    45,982    47,199

   (a) The reclassification with respect to withdrawing students reduced
       revenues and costs and expenses by $2,681 and $6,080 in the three and
       six month periods ended June 30, 2003, and by $2,505 and $4,936 in
       the three and six month periods ended June 30, 2002.

   (b) Earnings per common share and the number of shares in all prior
       periods have been restated to reflect the two-for-one stock split
       declared on May 10, 2002 that became effective on June 6, 2002.


                       ITT EDUCATIONAL SERVICES, INC.
                         CONSOLIDATED BALANCE SHEETS
                    (In thousands, except per share data)

                                         June 30,  December 31,  June 30,
                                           2003        2002        2002
                                       (unaudited)             (unaudited)
  Assets
  Current assets
       Cash and cash equivalents          $156,212    $123,934     $99,817
       Restricted cash                          --       7,103          --
       Marketable debt securities           12,188      25,671      25,235
       Accounts receivable, net              8,322       8,973      11,191
       Deferred and prepaid income tax       3,125       1,988       3,139
       Prepaids and other current
        assets                               5,619       5,597       8,292
            Total current assets           185,466     173,266     147,674
  Property and equipment, net               74,885      62,584      48,140
  Direct marketing costs                    10,618      10,609      10,918
  Other assets                                 789       1,248         882
       Total assets                       $271,758    $247,707    $207,614

  Liabilities and Shareholders' Equity
  Current liabilities
       Accounts payable                    $41,531     $18,162     $26,642
       Accrued compensation and
        benefits                            10,979       9,196       6,197
       Other accrued liabilities            17,785      12,140       6,592
       Deferred revenue                     95,027     102,997      77,384
            Total current liabilities      165,322     142,495     116,815
  Deferred income tax                        3,895       6,204       6,365
  Minimum pension liability                  8,041       8,041       3,022
  Other liabilities                          2,561       1,943       1,583
       Total liabilities                   179,819     158,683     127,785

  Shareholders' equity
       Preferred stock, $.01 par value,
          5,000,000 shares authorized,
          none issued or outstanding            --          --          --
       Common stock, $.01 par value,
          150,000,000 shares authorized,
          54,068,904 issued                    540         540         540
      Capital surplus                       45,657      40,393      40,065
      Retained earnings                    190,342     184,409     154,288
      Accumulated other comprehensive
       income (loss)                        (4,888)     (4,888)     (1,837)
      Treasury stock, 9,214,990,
       8,986,267 and 8,056,264
       shares, at cost                    (139,712)   (131,430)   (113,227)
          Total shareholders' equity        91,939      89,024      79,829
          Total liabilities and
           shareholders' equity           $271,758    $247,707    $207,614


                        ITT EDUCATIONAL SERVICES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (unaudited)

                                         Three Months        Six Months
                                        Ended June 30,     Ended June 30,
                                         2003     2002      2003     2002
  Cash flows provided by (used for)
   operating activities:
      Net income                         $9,845   $6,753   $18,527  $13,160
      Adjustments to reconcile net
       income to net cash
       provided by operating
       activities:
             Depreciation and
              amortization                5,597    5,503    11,013   10,765
             Provision for doubtful
              accounts                    1,540    1,457     3,542    3,520
             Deferred taxes              (1,939)     134    (3,446)     537
             Increase/decrease in
              operating assets and
              liabilities:
                   Marketable debt
                    securities           16,076   (9,725)   13,483   15,833
                   Accounts receivable     (700)  (1,089)   (2,891)  (2,032)
                   Direct marketing
                    costs                   (63)    (435)       (9)    (398)
                   Accounts payable
                    and accrued
                    liabilities          31,917      298    31,424   11,519
                   Prepaids and other
                    assets                3,531    4,414       437     (788)
                   Deferred revenue      (3,296)    (495)   (7,970)     232
  Net cash provided by (used for)
   operating activities                  62,508    6,815    64,110   52,348

  Cash flows provided by (used for)
   investing activities:
       Facility purchases                (9,662)       --  (17,303)       --
       Capital expenditures, net         (4,254)  (6,174)   (6,011)  (9,312)
  Net cash provided by (used for)
   investing activities                 (13,916)  (6,174)  (23,314)  (9,312)

  Cash flows provided by (used for)
   financing activities:
       Purchase of treasury stock          (768)       --  (28,726) (24,551)
       Exercise of stock options          1,937    3,869    13,105   12,168
  Net cash provided by (used for)
   financing activities                   1,169    3,869   (15,621) (12,383)

  Net increase (decrease) in cash,
   cash equivalents and restricted
   cash                                  49,761    4,510    25,175   30,653

  Cash, cash equivalents and
   restricted cash at beginning of
   period                               106,451   95,307   131,037   69,164

  Cash, cash equivalents and
   restricted cash at end of period    $156,212  $99,817  $156,212  $99,817

SOURCE: ITT Educational Services, Inc.

CONTACT: Martin Grossman, Senior Vice President, +1-317-706-9207, or
Nancy Brown, Director Corporate Relations, +1-317-706-9260, both of ITT
Educational Services, Inc.

Web site: http://www.ittesi.com/