ITT EDUCATIONAL SERVICES, INC. 
By
Earnings per share ("EPS") in the fourth quarter of 2008 increased 34.2%
to
The company provided the following information for the three and 12 months
ended
Financial and Operating Data For The Three Months Ended December
31st, Unless Otherwise Indicated
(Dollars in millions, except per share and per student data)
Increase/
2008 2007 (Decrease)
Revenue $279.8 $230.4 21.4%
Operating Income $102.1 $77.3 32.0%
Operating Margin 36.5% 33.6% 290 basis points
Net Income $63.0 $48.5 30.0%
Earnings Per Share (diluted) $1.61 $1.20 34.2%
New Student Enrollment 14,911 11,542 29.2%
Continuing Students 47,072 41,485 13.5%
Total Student Enrollment as 61,983 53,027 16.9%
of December 31st
Quarterly Persistence Rate (A) 76.5% 77.3% (80) basis points
Revenue Per Student $4,545 $4,293 5.9%
Cash and Cash Equivalents,
Restricted Cash and Investments
as of December 31st $375.9 $317.2 18.5%
Bad Debt Expense as a Percentage
of Revenue 4.9% 2.1% 280 basis points
Days Sales Outstanding as of
December 31st 9.8 days 6.0 days 3.8 days
Deferred Revenue as of
December 31st $162.2 $213.1 (23.9)%
Debt as of December 31st $150.0 $150.0
Weighted Average Diluted
Shares of Common Stock
Outstanding 39,100,000 40,278,000
Shares of Common Stock
Repurchased -- 300,300 (B)
Land and Building Purchases $1.0 (C ) $1.1 (D) (12.7)%
Number of New Colleges in Operation 2 2
Number of New Learning Sites
in Operation -- --
Capital Expenditures, Net $5.4 $4.2 28.9%
Financial and Operating Data For The 12 Months Ended December 31st
(Dollars in millions, except per share and per student data)
Increase/
2008 2007 (Decrease)
Revenue $1,015.3 $869.5 16.8%
Operating Income $327.9 $242.0 35.5%
Operating Margin 32.3% 27.8% 450 basis points
Net Income $203.0 $151.6 33.9%
Earnings Per Share (diluted) $5.17 $3.71 39.4%
Bad Debt Expense as a
Percentage of Revenue 4.3% 2.1% 220 basis points
Revenue Per Student $18,162 $17,508 3.7%
Weighted Average Diluted
Shares of Common Stock
Outstanding 39,243,000 40,883,000
Shares of Common Stock
Repurchased 1,049,700 (E) 2,659,300 (F)
Land and Building Purchases $18.1 (G) $12.6 (H) 43.7%
Number of New Colleges in Operation 8 10
Number of New Learning Sites
in Operation -- --
Capital Expenditures, Net $17.5 $15.5 13.1%
(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
(C ) Represents costs associated with purchasing, renovating, expanding or constructing buildings at 10 of the company's locations.
(D) Represents costs associated with purchasing, renovating, expanding or constructing buildings at 11 of the company's locations.
(E) For approximately
(F) For approximately
(G) Represents costs associated with purchasing one parcel of real estate on which the company built a facility for one of the company's colleges, and costs associated with purchasing, renovating, expanding or constructing buildings at 19 of the company's locations.
(H) Represents costs associated with purchasing one parcel of real estate on which the company built a facility for one of the company's colleges, and costs associated with purchasing, renovating, expanding or constructing buildings at 17 of the company's locations.
Modany continued, "As a result of our terrific performance in the fourth
quarter and optimistic outlook regarding the operating environment in 2009, we
have set our internal goal for 2009 EPS in the range of
Modany observed, "During the three months ended
Modany noted, "During the fourth quarter of 2008, we began operations at
our 104th college in
Modany added, "In 2008, we added a total of 190 new degree programs throughout our network of 105 colleges and nine learning sites compared to 246 programs in 2007 and 142 programs in 2006. We have several new degree programs in various stages of research and development. During 2009, we plan to continue this important part of our growth strategy by offering a number of new technology and non-technology programs of study at the associate and bachelor degree levels that are taught both online and in residence. Our goal in 2009 is to add approximately 250 new programs across our network."
Modany commented, "Student persistence declined 80 basis points in the
fourth quarter of 2008 to 76.5% compared to 77.3% in the fourth quarter of
2007, primarily due to a sizable increase in the number of graduates in the
three months ended
Modany said, "We did not observe any further disruption in the ability of
our students to access federal or private student financing during the fourth
quarter of 2008. In addition, we do not expect any additional disruption in
this area during 2009 that could have a significant adverse impact on the
ability of our students to access the financing they need to pay the cost of
their
Modany concluded, "We are entering the new year excited about our opportunity to build long-term shareholder value by continuing to execute on our proven growth strategy, and we believe that we are extremely well positioned to achieve our internal operating and financial goals for fiscal 2009."
Fitzpatrick continued, "Bad debt expense as a percentage of revenue
increased 280 basis points to 4.9% in the three months ended
Fitzpatrick added, "Based on the information that we have obtained to date
regarding the current underwriting standards used by the lenders that offer
private education loans to our students, we believe that the amount of
internally funded student financing that we may need to provide to our
students in 2009 will be approximately
Fitzpatrick further noted, "In the three months ended
Fitzpatrick closed by noting, "The financial condition and fundamentals of the company are incredibly strong, and we entered the new year with a great deal of optimism for a very favorable operating environment in 2009. We believe that we are well positioned to execute on our established growth plan with the goal of increasing 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 internally funded 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
December 31, 2008 December 31, 2007
(unaudited)
Assets
Current assets:
Cash and cash equivalents $226,255 $7,228
Short-term investments 138,709 303,360
Restricted cash 10,405 6,061
Accounts receivable, net 29,779 15,132
Deferred income taxes 12,104 7,418
Prepaid expenses and other current assets 13,793 10,624
Total current assets 431,045 349,823
Property and equipment, net 166,671 153,265
Direct marketing costs, net 22,973 20,567
Other assets 3,170 17,298
Total assets $623,859 $540,953
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 54,815 45,120
Accrued compensation and benefits 21,133 16,137
Accrued income taxes 14,976 6,028
Other accrued liabilities 11,423 11,512
Deferred revenue 162,206 213,127
Total current liabilities 264,553 291,924
Long-term debt 150,000 150,000
Deferred income taxes 1,504 11,754
Other liabilities 19,951 16,717
Total liabilities 436,008 470,395
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
Capital surplus 135,655 127,017
Retained earnings 732,107 531,363
Accumulated other comprehensive (loss) (13,384) (3,417)
Treasury stock, 15,352,376 and 14,375,582
shares, at cost (667,068) (584,946)
Total shareholders' equity 187,851 70,558
Total liabilities and
shareholders' equity $623,859 $540,953
ITT EDUCATIONAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Three Months Twelve Months
Ended December 31, Ended December 31,
2008 2007 2008 2007
(unaudited) (unaudited)
Revenue $279,799 $230,424 $1,015,333 $869,508
Costs and expenses:
Cost of educational
services 101,550 88,428 383,769 358,601
Student services and
administrative expenses 76,157 64,666 303,693 268,876
Total costs and expenses 177,707 153,094 687,462 627,477
Operating income 102,092 77,330 327,871 242,031
Interest income 1,730 2,566 6,505 10,747
Interest (expense) (1,023) (1,988) (4,611) (8,292)
Income before provision
for income taxes 102,799 77,908 329,765 244,486
Provision for income taxes 39,776 29,439 126,793 92,894
Net income $63,023 $48,469 $202,972 $151,592
Earnings per share:
Basic $1.63 $1.22 $5.22 $3.77
Diluted $1.61 $1.20 $5.17 $3.71
Supplemental Data:
Cost of educational services 36.3% 38.3% 37.8% 41.3%
Student services and
administrative expenses 27.2% 28.1% 29.9% 30.9%
Operating margin 36.5% 33.6% 32.3% 27.8%
Student enrollment at end
of period 61,983 53,027 61,983 53,027
Technical institutes at
end of period 105 97 105 97
Shares for earnings per
share calculation:
Basic 38,712,000 39,765,000 38,881,000 40,268,000
Diluted 39,100,000 40,278,000 39,243,000 40,883,000
Effective tax rate 38.7% 37.8% 38.4% 38.0%
ITT EDUCATIONAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Twelve Months
Ended December 31, Ended December 31,
2008 2007 2008 2007
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $63,023 $48,469 $202,972 $151,592
Adjustments to reconcile net
income to net cash flows
from operating activities:
Depreciation
and amortization 5,895 5,479 22,230 23,249
Provision for doubtful
accounts 13,829 4,764 43,286 18,599
Deferred income taxes (1,199) 653 (8,450) (6,737)
Excess tax benefit from
stock option exercises (385) (7,926) (1,158) (37,480)
Stock-based compensation
expense 1,504 1,033 7,235 5,100
Pension settlement and
amortization of prior
service costs 1,554 -- 1,554 --
Changes in operating assets
and liabilities:
Restricted cash (10,389) (5,432) (4,350) (6,087)
Accounts receivable (10,299) (3,545) (57,933) (24,364)
Direct marketing
costs, net (279) 628 (2,406) 1,061
Accounts payable (3,966) (12,538) 9,695 (2,828)
Accrued income taxes 13,630 14,349 10,163 37,969
Other operating assets
and liabilities (10,171) (73) 1,042 7,252
Deferred revenue 20,162 20,454 (50,921) 10,965
Net cash flows from operating
activities 82,909 66,315 172,959 178,291
Cash flows from investing activities:
Facility expenditures and
land purchases (986) (1,129) (18,093) (12,589)
Capital expenditures, net (5,440) (4,221) (17,543) (15,514)
Proceeds from sales and
maturities of investments 120,994 338,375 1,085,559 1,963,447
Purchase of investments (109,275) (379,975) (920,480) (2,071,800)
Net cash flows from investing
activities 5,293 (46,950) 129,443 (136,456)
Cash flows from financing activities:
Excess tax benefit from stock
option exercises 385 7,926 1,158 37,480
Proceeds from exercise of
stock options 970 6,530 3,241 31,002
Repurchase of common stock - (36,915) (87,774) (264,994)
Net cash flows from financing
activities 1,355 (22,459) (83,375) (196,512)
Net change in cash and cash
equivalents 89,557 (3,094) 219,027 (154,677)
Cash and cash equivalents at
beginning of period 136,698 10,322 7,228 161,905
Cash and cash equivalents at
end of period $226,255 $7,228 $226,255 $7,228
SOURCE ITT Educational Services, Inc.
