 View printer-friendly version | | << Back | | ITT Educational Services, Inc. Reports 2009 First Quarter Results: New Student Enrollment Increased 36.8%; EPS Increased 47.2% to $1.59 |  | | CARMEL, Ind., April 23 /PRNewswire-FirstCall/ -- ITT Educational Services,
Inc. (NYSE: ESI), a leading provider of technology-oriented postsecondary
degree programs, today reported that new student enrollment in the first
quarter of 2009 increased a record 36.8% to 18,935 students compared to 13,844
in the same period in 2008. Total student enrollment increased 21.1% to
65,620 as of March 31, 2009 compared to 54,194 as of March 31, 2008.
Earnings per share ("EPS") in the first quarter of 2009 increased 47.2% to
$1.59 compared to $1.08 in the first quarter of 2008. Revenue in the three
months ended March 31, 2009 increased 22.6% to $288.0 million compared to
$234.9 million in the three months ended March 31, 2008. Operating margin
increased 550 basis points to 34.8% in the first quarter of 2009 compared to
29.3% in the same period in 2008.
The company provided the following information for the three months ended
March 31, 2009 and 2008:
Financial and Operating Data For The Three Months Ended March 31st,
Unless Otherwise Indicated
(Dollars in millions, except per share and per student data)
Increase/
2009 2008 (Decrease)
Revenue $288.0 $234.9 22.6%
Operating Income $100.1 $68.7 45.8%
Operating Margin 34.8% 29.3% 550 basis points
Net Income $61.9 $42.6 45.3%
Earnings Per Share (diluted) $1.59 $1.08 47.2%
New Student Enrollment 18,935 13,844 36.8%
Continuing Students 46,685 40,350 15.7%
Total Student Enrollment
as of March 31st 65,620 54,194 21.1%
Quarterly Persistence Rate (A) 75.3% 76.1% (80) basis points
Revenue Per Student $4,647 $4,429 4.9%
Cash and Cash Equivalents,
Restricted Cash and Investments
as of March 31st $365.7 $309.1 18.3%
Bad Debt Expense as a Percentage
of Revenue 4.9% 3.0% 190 basis points
Days Sales Outstanding as
of March 31st 16.1 days 5.8 days 10.3 days
Deferred Revenue as of
March 31st $133.1 $203.6 (34.6)%
Debt as of March 31st $150.0 $150.0
Weighted Average Diluted
Shares of Common
Stock Outstanding 39,062,000 39,513,000
Shares of Common Stock 527,833(B) 865,000(C)
Repurchased
Land and Building
Purchases and Renovations $1.1 (D) $6.3(E) (82.9)%
Number of New Colleges in
Operation 1 3
Capital Expenditures, Net $4.6 $2.5 84.0%
(A) Represents the number of Continuing Students in the academic quarter,
divided by the Total Student Enrollment in the immediately preceding
academic quarter.
(B) For approximately $64.4 million or at an average price of $121.93 per
share.
(C) For approximately $71.8 million or at an average price of $83.01 per
share.
(D) Represents costs associated with purchasing, renovating, expanding or
constructing buildings at eight of the company's locations.
(E) Represents costs associated with purchasing one parcel of real estate
on which the company built a facility, and costs associated with
purchasing, renovating, expanding or constructing buildings at 12 of the
company's locations.
Kevin M. Modany, Chairman and CEO of ITT/ESI, said, "Our faculty,
management and staff delivered another quarter of exceptional performance for
our organization, and we could not be more proud of them for the remarkable
effort that went into producing these fantastic results. We applaud them for
their hard work and dedication in helping a record number of our students
prepare for the 21st Century workforce at a time in our nation's history when
a high-quality, career-based education is so important."
Modany continued, "As we entered the second quarter of 2009, the interest
in our programs of study remained incredibly strong. The prospective students
recognize the importance of learning new, and upgrading existing, skills in
order to improve their career prospects. As a result of our exceptional
performance in the first quarter and our continued optimism with regard to the
anticipated operating environment in the remainder of 2009, we are raising our
internal goal for 2009 EPS from the range of $6.50 to $6.75 to a revised range
of $7.00 to $7.25."
Modany observed, "During the three months ended March 31, 2009, we
continued to experience a very favorable advertising market, and we believe
that it will continue through the second quarter and, possibly, the remainder
of 2009. Our advertising expenditures increased 3% in the first quarter of
2009 compared to the same 2008 period, which was well below our original
estimated increase of approximately 10%. At the end of the first quarter of
2009, we had approximately 15% more recruitment representatives than we did at
the same point in 2008. As a result, we believe that we are very well
positioned to service increases in the number of inquiries regarding our
program offerings in the remainder of 2009."
Modany noted, "During the first quarter of 2009, we began operations at
our 106th college in Concord, CA (a suburb of San Francisco). We remain on
track to achieve our previously stated goal of opening between six to eight
new locations during 2009."
Modany commented, "Student persistence declined 80 basis points in the
first quarter of 2009 to 75.3% compared to 76.1% in the first quarter of 2008,
primarily as a result of a significant increase in the number of graduates in
the three months ended March 31, 2009 compared to the same period in 2008,
which we had forecasted as a result of improved student retention in prior
periods. Excluding the increase in the number of graduates, student
persistence improved modestly in the first quarter of 2009 compared to the
same period in the prior year. We believe that student persistence will
remain relatively flat in the remaining quarters of 2009 compared to the same
periods in 2008, excluding any impact of year-over-year increases in the
number of graduates in 2009."
Modany said, "We once again did not observe any further material
disruption in the ability of our students to access federal or private student
financing during the first quarter of 2009. During the first quarter, a small
number of private student loan applications were processed under a new private
education loan program for our students. The full scale implementation of
this new program was delayed, which resulted in the disbursement of an
immaterial amount of loans under the new program during the three months ended
March 31, 2009. The delay in the roll-out of the new private education loan
program resulted in days sales outstanding as of March 31, 2009 of 16.1 days,
which was slightly above the high end of our 2009 year-end goal of the range
of 10 to 15 days. The minor systems integration issues that caused the delay
are being addressed and the new program will be fully implemented in the
second quarter of 2009. We are, therefore, maintaining our internal 2009
year-end goal for days sales outstanding in the range of 10 to 15 days."
Modany concluded, "We entered the second quarter of 2009 with a high level
of confidence in our ability to efficiently execute our proven growth
strategy, and we are very excited about the prospects for achieving our 2009
internal goals."
Daniel M. Fitzpatrick, Executive Vice President and CFO of ITT/ESI, said,
"Revenue increased 22.6% to $288.0 million in the three months ended March 31,
2009 compared to $234.9 million in the same period in 2008. The increase was
a result of higher new student enrollment and improved student retention,
which combined led to a record-breaking 21.1% increase in total student
enrollment as of March 31, 2009 compared to March 31, 2008."
Fitzpatrick added, "Operating margin in the first quarter increased a very
impressive 550 basis points to 34.8% compared to 29.3% in the first quarter of
2008, due to our ability to leverage fixed operating costs on total student
enrollment that was substantially higher as of the end of the first quarter of
2009 compared to the same point in 2008."
Fitzpatrick continued, "Bad debt expense as a percentage of revenue
increased 190 basis points to 4.9% in the first quarter of 2009 compared to
3.0% in the same period in 2008. We continue to believe that our bad debt
expense as a percentage of revenue will be in the range of 3.0% to 5.0% for
the full year of 2009. Days sales outstanding as of March 31, 2009 were 16.1
days, a 10.3 day increase compared to 5.8 days as of the same date in 2008,
primarily as a result of the delay in the full implementation of the new
private education loan program. Our goal for days sales outstanding as of
December 31, 2009 remains in the range of 10 to 15 days."
Fitzpatrick further noted, "In the three months ended March 31, 2009, we
repurchased 527,833 shares of our common stock for $64.4 million or at an
average cost of $121.93 per share. There are approximately 3.5 million
shares of our common stock remaining to be repurchased under our current share
repurchase program. Depending on market conditions, we intend to repurchase
additional shares of our common stock during the remainder of 2009. Cash and
cash equivalents, restricted cash and investments as of March 31, 2009
increased 18.3% to $365.7 million compared to $309.1 million as of the same
point in 2008."
Fitzpatrick closed by noting, "The financial condition and fundamentals of
the company remain incredibly strong, and we continue to believe that we are
exceptionally well positioned to take advantage of the current market
opportunities to generate increases in shareholder value over the long-term."
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: 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
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 institutes; the
company's ability to implement its growth strategies; the company's failure to
maintain or renew required regulatory authorizations or accreditation of its
institutes; 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 internal
student financing from its students; 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
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, December 31, March 31,
2009 2008 2008
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $219,642 $226,255 $97,013
Short-term investments 146,062 138,709 212,085
Restricted cash 11 10,405 53
Accounts receivable, net 51,513 29,779 15,072
Deferred income taxes 12,143 12,104 8,314
Prepaid expenses and
other current assets 15,960 13,793 13,594
Total current assets 445,331 431,045 346,131
Property and equipment, net 166,582 166,671 156,568
Direct marketing costs, net 24,631 22,973 21,304
Other assets 3,682 3,170 17,906
Total assets $640,226 $623,859 $541,909
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable $63,658 $54,815 $56,804
Accrued compensation and
benefits 23,670 21,133 23,319
Accrued income taxes 36,959 14,976 24,135
Other accrued liabilities 11,896 11,423 11,123
Deferred revenue 133,137 162,206 203,648
Total current liabilities 269,320 264,553 319,029
Long-term debt 150,000 150,000 150,000
Deferred income taxes 726 1,504 11,013
Other liabilities 20,810 19,951 18,171
Total liabilities 440,856 436,008 498,213
Shareholders' equity:
Preferred stock, $.01 par
value, 5,000,000 shares
authorized, none issued -- -- --
Common stock, $.01 par
value, 300,000,000 shares
authorized, 54,068,904
issued 541 541 541
Capital surplus 144,004 135,655 129,225
Retained earnings 786,684 732,107 573,876
Accumulated other
Comprehensive (loss) (13,293) (13,384) (3,417)
Treasury stock, 15,743,252,
15,352,376 and 15,238,960
shares, at cost (718,566) (667,068) (656,529)
Total shareholders' equity 199,370 187,851 43,696
Total liabilities
and shareholders' equity $640,226 $623,859 $541,909
ITT EDUCATIONAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Three Months
Ended March 31,
(unaudited)
2009 2008
Revenue $288,033 $234,850
Costs and expenses:
Cost of educational services 101,087 92,025
Student services and
administrative expenses 86,801 74,126
Total costs and expenses 187,888 166,151
Operating income 100,145 68,699
Interest income 1,233 2,033
Interest (expense) (194) (1,519)
Income before provision for
income taxes 101,184 69,213
Provision for income taxes 39,255 26,581
Net income $61,929 $42,632
Earnings per share:
Basic $1.61 $1.09
Diluted $1.59 $1.08
Supplemental Data:
Cost of educational services 35.1% 39.2%
Student services and
administrative expenses 30.1% 31.5%
Operating margin 34.8% 29.3%
Student enrollment at end of period 65,620 54,194
Technical institutes at end of period 106 100
Shares for earnings per share
calculation:
Basic 38,558,000 39,201,000
Diluted 39,062,000 39,513,000
Effective tax rate 38.8% 38.4%
ITT EDUCATIONAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months
Ended March 31,
(unaudited)
2009 2008
Cash flows from operating activities:
Net income $61,929 $42,632
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 5,772 5,494
Provision for doubtful accounts 14,209 6,933
Deferred income taxes (1,042) (1,637)
Excess tax benefit from stock
option exercises (3,793) (33)
Stock-based compensation expense 4,183 2,175
Other 135 --
Changes in operating assets and
liabilities:
Restricted cash 10,132 6,017
Accounts receivable (35,943) (6,873)
Direct marketing costs, net (1,658) (737)
Accounts payable 8,843 11,681
Accrued income taxes 26,149 18,141
Other operating assets and
liabilities 1,481 4,722
Deferred revenue (29,069) (9,479)
Net cash flows from operating activities 61,328 79,036
Cash flows from investing activities:
Facility expenditures and land purchases (1,074) (6,293)
Capital expenditures, net (4,608) (2,504)
Proceeds from sales and maturities of
investments 48,598 291,375
Purchase of investments (55,770) (200,100)
Net cash flows from investing activities (12,854) 82,478
Cash flows from financing activities:
Excess tax benefit from stock option
exercises 3,793 33
Proceeds from exercise of stock options 5,823 41
Repurchase of common stock and shares
tendered for taxes (64,703) (71,803)
Net cash flows from financing activities (55,087) (71,729)
Net change in cash and cash equivalents (6,613) 89,785
Cash and cash equivalents at beginning of period 226,255 7,228
Cash and cash equivalents at end of period $219,642 $97,013
SOURCE ITT Educational Services, Inc
CONTACT: Denise Hooker, +1-317-706-9205
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