Exhibit 99.1
ITT EDUCATIONAL SERVICES, INC. TO RESTATE ITS CONSOLIDATED STATEMENTS OF CASH FLOWS TO REPOSITION RESTRICTED CASH AND THE TAX BENEFIT FROM STOCK OPTION EXERCISES
CARMEL, IN January 30, 2006 – ITT Educational Services, Inc. (NYSE: ESI), a leading provider of technology-oriented postsecondary degree programs, today announced that it will restate its Consolidated Statements of Cash Flows contained in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and in its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June 30 and September 30 of 2005. The restatement will correct errors in how the company reported restricted cash and where the company reported the tax benefit from stock option exercises on its Consolidated Statements of Cash Flows. The restatement will not affect any of the Company’s previously issued Consolidated Balance Sheets, Consolidated Statements of Income or Consolidated Statements of Shareholders’ Equity.
In prior periods, the company reported restricted cash with cash and cash equivalents in the beginning and ending balances reconciled on its Consolidated Statements of Cash Flow. In the restatement, the company will report restricted cash under a separate caption in the Cash flows from operating activities section on its Consolidated Statements of Cash Flows. The effect of the change in how the company reports restricted cash on its Consolidated Statements of Cash Flows is shown in the restated Consolidated Statements of Cash Flows attached to this release. The change in how the company reports restricted cash on its Consolidated Statements of Cash Flows has no effect on: (a) any of the Company’s previously issued Consolidated Balance Sheets, Consolidated Statements of Income or Consolidated Statements of Shareholders’ Equity; or (b) the company’s free cash flow in any prior periods. The company’s previously issued financial statements reported restricted cash under a separate caption in the Current assets section on its Consolidated Balance Sheets, which is not being changed as part of the restatement. The reconciliation of free cash flow, which is not a measurement under generally accepted accounting principles, to the company’s Consolidated Statements of Cash Flows is provided on the table attached to this release.
In prior periods, the company reported the amount of tax benefit from stock option exercises under the Exercise of stock options caption in the Cash flows from financing activities section on its Consolidated Statements of Cash Flows. In the restatement, the company will report the tax benefit from stock option exercises under a new Tax benefit of stock options exercised caption in the Cash flows from operating activities section on its Consolidated Statements of Cash Flows. The effect of the change in where the tax benefit from stock option exercises is reported on the company’s interim and annual Consolidated Statements of Cash Flows is shown in the restated Consolidated Statements of Cash Flows attached to this release. The change in where the company reports the tax benefit from stock option exercises on its Consolidated Statements of Cash Flows has no effect on: (a) any of the Company’s previously issued Consolidated Balance Sheets, Consolidated Statements of Income or Consolidated Statements of Shareholders’ Equity; (b) the company’s free cash flow in any prior period; or (c) the amount of cash and cash equivalents at the end of the
-8-
period that is reported on any of the company’s previously issued Consolidated Statements of Cash Flows.
The company’s restated results are subject to the completion of audit procedures by PricewaterhouseCoopers LLP, the company’s independent registered public accounting firm.
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. 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; 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 access by the company's students to lenders for student loans; the results of the shareholder derivative lawsuits filed against the company which, if adversely determined, could have a material adverse affect on the company's financial condition and results of operations; 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.
FOR FURTHER INFORMATION:
COMPANY: | WEB SITE: |
| |
Nancy Brown | www.ittesi.com | ||
Director Corporate Relations |
| ||
(317) 706-9260
-9-
ITT EDUCATIONAL SERVICES, INC. |
| ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||
(Dollar amounts in thousands) |
| ||||
|
| ||||
| RESTATED | ||||
| For the Three Months Ended |
| For the Six Months Ended |
| For the Nine Months Ended |
| March 31, 2005 |
| June 30, 2005 |
| September 30, 2005 |
Cash flows from operating activities: |
|
|
|
|
|
Net income | $15,028 |
| $37,429 |
| $71,842 |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
from operating activities: |
|
|
|
|
|
Depreciation and amortization | 4,296 |
| 8,738 |
| 12,781 |
Provision for doubtful accounts | 2,871 |
| 5,899 |
| 8,830 |
Deferred income taxes | (3,604) |
| (2,420) |
| (1,404) |
Tax benefit of stock options exercised | 2,005 |
| 2,969 |
| 3,821 |
Changes in operating assets and liabilities: |
|
| - |
| - |
Restricted cash | 8,194 |
| 8,194 |
| 8,194 |
Short-term investments | - |
| - |
| - |
Accounts receivable | (5,226) |
| (9,191) |
| (16,280) |
Prepaids and other assets | (9,482) |
| (9,130) |
| (6,279) |
Direct marketing costs, net | (896) |
| (1,784) |
| (2,139) |
Accounts payable and accrued liabilities | 5,666 |
| 5,724 |
| 5,365 |
Deferred revenue | (6,129) |
| (16,446) |
| (4,461) |
Net cash flows from operating activities | 12,723 |
| 29,982 |
| 80,270 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Facility expenditures and land purchases | (9,584) |
| (19,816) |
| (23,534) |
Capital expenditures, net | (3,146) |
| (10,005) |
| (14,117) |
Proceeds from sales and maturities of investments | 193,747 |
| 310,078 |
| 429,519 |
Purchase of investments | (180,559) |
| (286,934) |
| (467,059) |
Net cash flows from investing activities | 458 |
| (6,677) |
| (75,191) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Purchase of treasury stock | - |
| - |
| - |
Exercise of stock options | 3,005 |
| 4,589 |
| 5,598 |
Net cash flows from financing activities | 3,005 |
| 4,589 |
| 5,598 |
|
|
|
|
|
|
Net change in cash and cash equivalents | 16,186 |
| 27,894 |
| 10,677 |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | 9,389 |
| 9,389 |
| 9,389 |
|
|
|
|
|
|
Cash and cash equivalents at end of period | $25,575 |
| $37,283 |
| $20,066 |
-10- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||||
(Dollar amounts in thousands) |
| ||||||
|
| ||||||
|
| AS PREVIOUSLY PRESENTED IN 2005 SEC FILINGS | |||||
|
| For the Three Months Ended |
| For the Six Months Ended |
| For the Nine Months Ended | |
|
| March 31, 2005 |
| June 30, 2005 |
| September 30, 2005 | |
Cash flows from operating activities: |
|
|
|
|
|
| |
Net income |
| $15,028 |
| $37,429 |
| $71,842 | |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
| |
from operating activities: |
|
|
|
|
|
| |
Depreciation and amortization |
| 4,296 |
| 8,738 |
| 12,781 | |
Provision for doubtful accounts |
| 2,871 |
| 5,899 |
| 8,830 | |
Deferred income taxes |
| (3,604) |
| (2,420) |
| (1,404) | |
Tax benefit of stock options exercised |
| - |
| - |
| - | |
Changes in operating assets and liabilities: |
|
|
| - |
| - | |
Restricted cash |
| - |
| - |
| - | |
Short-term investments |
| - |
| - |
| - | |
Accounts receivable |
| (5,226) |
| (9,191) |
| (16,280) | |
Prepaids and other assets |
| (9,482) |
| (9,130) |
| (6,279) | |
Direct marketing costs, net |
| (896) |
| (1,784) |
| (2,139) | |
Accounts payable and accrued liabilities |
| 5,666 |
| 5,724 |
| 5,365 | |
Deferred revenue |
| (6,129) |
| (16,446) |
| (4,461) | |
Net cash flows from operating activities |
| 2,524 |
| 18,819 |
| 68,255 | |
|
|
|
|
|
|
| |
Cash flows from investing activities: |
|
|
|
|
|
| |
Facility expenditures and land purchases |
| (9,584) |
| (19,816) |
| (23,534) | |
Capital expenditures, net |
| (3,146) |
| (10,005) |
| (14,117) | |
Proceeds from sales and maturities of investments |
| 193,747 |
| 310,078 |
| 429,519 | |
Purchase of investments |
| (180,559) |
| (286,934) |
| (467,059) | |
Net cash flows from investing activities |
| 458 |
| (6,677) |
| (75,191) | |
|
|
|
|
|
|
| |
Cash flows from financing activities: |
|
|
|
|
|
| |
Purchase of treasury stock |
| - |
| - |
| - | |
Exercise of stock options |
| 5,010 |
| 7,558 |
| 9,419 | |
Net cash flows from financing activities |
| 5,010 |
| 7,558 |
| 9,419 | |
|
|
|
|
|
|
| |
Net change in cash, cash equivalents and restricted cash |
| 7,992 |
| 19,700 |
| 2,483 | |
|
|
|
|
|
|
| |
Cash, cash equivalents and restricted cash at beginning of period |
| 17,583 |
| 17,583 |
| 17,583 | |
|
|
|
|
|
|
| |
Cash, cash equivalents and restricted cash at end of period |
| $25,575 |
| $37,283 |
| $20,066 | |
-11- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||
(Dollar amounts in thousands) |
| ||||
|
| ||||
| RESTATED | ||||
| For the Three Months Ended | ||||
| March 31, 2005 |
| June 30, 2005 |
| September 30, 2005 |
Cash flows from operating activities: |
|
|
|
|
|
Net income | $15,028 |
| $22,401 |
| $34,413 |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
from operating activities: |
|
|
|
|
|
Depreciation and amortization | 4,296 |
| 4,442 |
| 4,043 |
Provision for doubtful accounts | 2,871 |
| 3,028 |
| 2,931 |
Deferred income taxes | (3,604) |
| 1,184 |
| 1,016 |
Tax benefit of stock options exercised | 2,005 |
| 964 |
| 852 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Restricted cash | 8,194 |
| - |
| - |
Short-term investments | - |
| - |
| - |
Accounts receivable | (5,226) |
| (3,965) |
| (7,089) |
Prepaids and other assets | (9,482) |
| 352 |
| 2,851 |
Direct marketing costs, net | (896) |
| (888) |
| (355) |
Accounts payable and accrued liabilities | 5,666 |
| 58 |
| (359) |
Deferred revenue | (6,129) |
| (10,317) |
| 11,985 |
Net cash flows from operating activities | 12,723 |
| 17,259 |
| 50,288 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Facility expenditures and land purchases | (9,584) |
| (10,232) |
| (3,718) |
Capital expenditures, net | (3,146) |
| (6,859) |
| (4,112) |
Proceeds from sales and maturities of investments | 193,747 |
| 116,331 |
| 119,441 |
Purchase of investments | (180,559) |
| (106,375) |
| (180,125) |
Net cash flows from investing activities | 458 |
| (7,135) |
| (68,514) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Purchase of treasury stock | - |
| - |
| - |
Exercise of stock options | 3,005 |
| 1,584 |
| 1,009 |
Net cash flows from financing activities | 3,005 |
| 1,584 |
| 1,009 |
|
|
|
|
|
|
Net change in cash and cash equivalents | 16,186 |
| 11,708 |
| (17,217) |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | 9,389 |
| 25,575 |
| 37,283 |
|
|
|
|
|
|
Cash and cash equivalents at end of period | $25,575 |
| $37,283 |
| $20,066 |
-12- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||
(Dollar amounts in thousands) |
| ||||
|
| ||||
| AS PREVIOUSLY PRESENTED IN 2005 SEC FILINGS | ||||
| For the Three Months Ended | ||||
| March 31, 2005 |
| June 30, 2005 |
| September 30, 2005 |
Cash flows from operating activities: |
|
|
|
|
|
Net income | $15,028 |
| $22,401 |
| $34,413 |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
from operating activities: |
|
|
|
|
|
Depreciation and amortization | 4,296 |
| 4,442 |
| 4,043 |
Provision for doubtful accounts | 2,871 |
| 3,028 |
| 2,931 |
Deferred income taxes | (3,604) |
| 1,184 |
| 1,016 |
Tax benefit of stock options exercised | - |
| - |
| - |
Changes in operating assets and liabilities: |
|
|
|
|
|
Restricted cash | - |
| - |
| - |
Short-term investments | - |
| - |
| - |
Accounts receivable | (5,226) |
| (3,965) |
| (7,089) |
Prepaids and other assets | (9,482) |
| 352 |
| 2,851 |
Direct marketing costs, net | (896) |
| (888) |
| (355) |
Accounts payable and accrued liabilities | 5,666 |
| 58 |
| (359) |
Deferred revenue | (6,129) |
| (10,317) |
| 11,985 |
Net cash flows from operating activities | 2,524 |
| 16,295 |
| 49,436 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Facility expenditures and land purchases | (9,584) |
| (10,232) |
| (3,718) |
Capital expenditures, net | (3,146) |
| (6,859) |
| (4,112) |
Proceeds from sales and maturities of investments | 193,747 |
| 116,331 |
| 119,441 |
Purchase of investments | (180,559) |
| (106,375) |
| (180,125) |
Net cash flows from investing activities | 458 |
| (7,135) |
| (68,514) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Purchase of treasury stock | - |
| - |
| - |
Exercise of stock options | 5,010 |
| 2,548 |
| 1,861 |
Net cash flows from financing activities | 5,010 |
| 2,548 |
| 1,861 |
|
|
|
|
|
|
Net change in cash, cash equivalents and restricted cash | 7,992 |
| 11,708 |
| (17,217) |
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period | 17,583 |
| 25,575 |
| 37,283 |
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period | $25,575 |
| $37,283 |
| $20,066 |
-13- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||
(Dollar amounts in thousands) |
| ||||
| RESTATED | ||||
| For the Three Months Ended |
| For the Six Months Ended |
| For the Nine Months Ended |
| March 31, 2004 |
| June 30, 2004 |
| September 30, 2004 |
Cash flows from operating activities: |
|
|
|
|
|
Net income | $9,026 |
| $23,006 |
| $41,466 |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
from operating activities: |
|
|
|
|
|
Depreciation and amortization | 4,867 |
| 9,788 |
| 13,708 |
Provision for doubtful accounts | 2,501 |
| 4,901 |
| 7,704 |
Deferred income taxes | (3,922) |
| (1,753) |
| (1,812) |
Tax benefit of stock options exercised | 4,259 |
| 4,466 |
| 5,743 |
Changes in operating assets and liabilities: |
|
| - |
| - |
Restricted cash | 8,496 |
| 8,496 |
| 8,496 |
Short-term investments | (2,074) |
| 11,343 |
| 4,448 |
Accounts receivable | (1,622) |
| (6,823) |
| (12,347) |
Prepaids and other assets | (3,488) |
| (3,424) |
| (2,116) |
Direct marketing costs, net | (1,135) |
| (2,082) |
| (2,969) |
Accounts payable and accrued liabilities | 2,765 |
| 22,714 |
| 23,453 |
Deferred revenue | (2,679) |
| (7,843) |
| 5,730 |
Net cash flows from operating activities | 16,994 |
| 62,789 |
| 91,504 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Facility expenditures and land purchases | - |
| (6,798) |
| (8,635) |
Capital expenditures, net | (3,024) |
| (9,951) |
| (16,085) |
Proceeds from sales and maturities of investments | 240,986 |
| 626,433 |
| 921,513 |
Purchase of investments | (279,177) |
| (702,131) |
| (1,017,030) |
Net cash flows from investing activities | (41,215) |
| (92,447) |
| (120,237) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Purchase of treasury stock | - |
| - |
| - |
Exercise of stock options | 4,235 |
| 4,583 |
| 7,682 |
Net cash flows from financing activities | 4,235 |
| 4,583 |
| 7,682 |
|
|
|
|
|
|
Net change in cash and cash equivalents | (19,986) |
| (25,075) |
| (21,051) |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | 43,042 |
| 43,042 |
| 43,042 |
|
|
|
|
|
|
Cash and cash equivalents at end of period | $23,056 |
| $17,967 |
| $21,991 |
-14- |
ITT EDUCATIONAL SERVICES, INC. |
| |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| |||||||||
(Dollar amounts in thousands) |
| |||||||||
| AS PREVIOUSLY PRESENTED IN 2005 SEC FILINGS | |||||||||
| For the Three Months Ended |
| For the Six Months Ended |
| For the Nine Months Ended | |||||
| March 31, 2004 |
| June 30, 2004 |
| September 30, 2004 | |||||
Cash flows from operating activities: |
|
|
|
|
| |||||
Net income | $9,026 |
| $23,006 |
| $41,466 | |||||
Adjustments to reconcile net income to net cash |
|
|
|
|
| |||||
from operating activities: |
|
|
|
|
| |||||
Depreciation and amortization | 4,867 |
| 9,788 |
| 13,708 | |||||
Provision for doubtful accounts | 2,501 |
| 4,901 |
| 7,704 | |||||
Deferred income taxes | (3,922) |
| (1,753) |
| (1,812) | |||||
Tax benefit of stock options exercised | - |
| - |
| - | |||||
Changes in operating assets and liabilities: |
|
| - |
| - | |||||
Restricted cash | - |
| - |
| - | |||||
Short-term investments | (2,074) |
| 11,343 |
| 4,448 | |||||
Accounts receivable | (1,622) |
| (6,823) |
| (12,347) | |||||
Prepaids and other assets | (3,488) |
| (3,424) |
| (2,116) | |||||
Direct marketing costs, net | (1,135) |
| (2,082) |
| (2,969) | |||||
Accounts payable and accrued liabilities | 2,765 |
| 22,714 |
| 23,453 | |||||
Deferred revenue | (2,679) |
| (7,843) |
| 5,730 | |||||
Net cash flows from operating activities | 4,239 |
| 49,827 |
| 77,265 | |||||
|
|
|
|
|
| |||||
Cash flows from investing activities: |
|
|
|
|
| |||||
Facility expenditures and land purchases | - |
| (6,798) |
| (8,635) | |||||
Capital expenditures, net | (3,024) |
| (9,951) |
| (16,085) | |||||
Proceeds from sales and maturities of investments | 240,986 |
| 626,433 |
| 921,513 | |||||
Purchase of investments | (279,177) |
| (702,131) |
| (1,017,030) | |||||
Net cash flows from investing activities | (41,215) |
| (92,447) |
| (120,237) | |||||
|
|
|
|
|
| |||||
Cash flows from financing activities: |
|
|
|
|
| |||||
Purchase of treasury stock | - |
| - |
| - | |||||
Exercise of stock options | 8,494 |
| 9,049 |
| 13,425 | |||||
Net cash flows from financing activities | 8,494 |
| 9,049 |
| 13,425 | |||||
|
|
|
|
|
| |||||
Net change in cash, cash equivalents and restricted cash | (28,482) |
| (33,571) |
| (29,547) | |||||
|
|
|
|
|
| |||||
Cash, cash equivalents and restricted cash at beginning of period | 51,538 |
| 51,538 |
| 51,538 |
| ||||
|
|
|
|
|
| |||||
Cash, cash equivalents and restricted cash at end of period | $23,056 |
| $17,967 |
| $21,991 | |||||
-15- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||
(Dollar amounts in thousands) |
| ||||
|
| ||||
| RESTATED | ||||
| For the Three Months Ended | ||||
| March 31, 2004 |
| June 30, 2004 |
| September 30, 2004 |
Cash flows from operating activities: |
|
|
|
|
|
Net income | $9,026 |
| $13,980 |
| $18,460 |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
from operating activities: |
|
|
|
|
|
Depreciation and amortization | 4,867 |
| 4,921 |
| 3,920 |
Provision for doubtful accounts | 2,501 |
| 2,400 |
| 2,803 |
Deferred income taxes | (3,922) |
| 2,169 |
| (52) |
Tax benefit of stock options exercised | 4,259 |
| 207 |
| 1,277 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Restricted cash | 8,496 |
| - |
| - |
Short-term investments | (2,074) |
| 13,161 |
| (6,895) |
Accounts receivable | (1,622) |
| (5,201) |
| (5,524) |
Prepaids and other assets | (3,488) |
| 64 |
| 1,308 |
Direct marketing costs, net | (1,135) |
| (947) |
| (887) |
Accounts payable and accrued liabilities | 2,765 |
| 19,949 |
| 732 |
Deferred revenue | (2,679) |
| (5,164) |
| 13,573 |
Net cash flows from operating activities | 16,994 |
| 45,539 |
| 28,715 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Facility expenditures and land purchases | - |
| (6,798) |
| (1,837) |
Capital expenditures, net | (3,024) |
| (6,927) |
| (6,134) |
Proceeds from sales and maturities of investments | 240,986 |
| 385,447 |
| 295,080 |
Purchase of investments | (279,177) |
| (422,698) |
| (314,899) |
Net cash flows from investing activities | (41,215) |
| (50,976) |
| (27,790) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Purchase of treasury stock | - |
| - |
| - |
Exercise of stock options | 4,235 |
| 348 |
| 3,099 |
Net cash flows from financing activities | 4,235 |
| 348 |
| 3,099 |
|
|
|
|
|
|
Net change in cash and cash equivalents | (19,986) |
| (5,089) |
| 4,024 |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | 43,042 |
| 23,056 |
| 17,967 |
|
|
|
|
|
|
Cash and cash equivalents at end of period | $23,056 |
| $17,967 |
| $21,991 |
-16- |
ITT EDUCATIONAL SERVICES, INC. |
| |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| |||||||||
(Dollar amounts in thousands) |
| |||||||||
|
| |||||||||
| AS PREVIOUSLY PRESENTED IN 2005 SEC FILINGS |
| ||||||||
| For the Three Months Ended |
| ||||||||
| March 31, 2004 |
| June 30, 2004 |
| September 30, 2004 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
| ||||
Net income | $9,026 |
| $13,980 |
| $18,460 |
| ||||
Adjustments to reconcile net income to net cash |
|
|
|
|
|
| ||||
from operating activities: |
|
|
|
|
|
| ||||
Depreciation and amortization | 4,867 |
| 4,921 |
| 3,920 |
| ||||
Provision for doubtful accounts | 2,501 |
| 2,400 |
| 2,803 |
| ||||
Deferred income taxes | (3,922) |
| 2,169 |
| (52) |
| ||||
Tax benefit of stock options exercised | - |
| - |
| - |
| ||||
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||||
Restricted cash | - |
| - |
| - |
| ||||
Short-term investments | (2,074) |
| 13,161 |
| (6,895) |
| ||||
Accounts receivable | (1,622) |
| (5,201) |
| (5,524) |
| ||||
Prepaids and other assets | (3,488) |
| 64 |
| 1,308 |
| ||||
Direct marketing costs, net | (1,135) |
| (947) |
| (887) |
| ||||
Accounts payable and accrued liabilities | 2,765 |
| 19,949 |
| 732 |
| ||||
Deferred revenue | (2,679) |
| (5,164) |
| 13,573 |
| ||||
Net cash flows from operating activities | 4,239 |
| 45,332 |
| 27,438 |
| ||||
|
|
|
|
|
|
| ||||
Cash flows from investing activities: |
|
|
|
|
|
| ||||
Facility expenditures and land purchases | - |
| (6,798) |
| (1,837) |
| ||||
Capital expenditures, net | (3,024) |
| (6,927) |
| (6,134) |
| ||||
Proceeds from sales and maturities of investments | 240,986 |
| 385,447 |
| 295,080 |
| ||||
Purchase of investments | (279,177) |
| (422,698) |
| (314,899) |
| ||||
Net cash flows from investing activities | (41,215) |
| (50,976) |
| (27,790) |
| ||||
|
|
|
|
|
|
| ||||
Cash flows from financing activities: |
|
|
|
|
|
| ||||
Purchase of treasury stock | - |
| - |
| - |
| ||||
Exercise of stock options | 8,494 |
| 555 |
| 4,376 |
| ||||
Net cash flows from financing activities | 8,494 |
| 555 |
| 4,376 |
| ||||
|
|
|
|
|
|
| ||||
Net change in cash, cash equivalents and restricted cash | (28,482) |
| (5,089) |
| 4,024 |
| ||||
|
|
|
|
|
|
| ||||
Cash, cash equivalents and restricted cash at beginning of period | 51,538 |
| 23,056 |
| 17,967 | |||||
|
|
|
|
|
|
| ||||
Cash, cash equivalents and restricted cash at end of period | $23,056 |
| $17,967 |
| $21,991 |
| ||||
-17- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||
(Dollar amounts in thousands) |
| ||||
|
| ||||
| RESTATED | ||||
| Year Ended December 31, | ||||
| 2004 |
| 2003 |
| 2002 |
Cash flows from operating activities: |
|
|
|
|
|
Net income | $75,263 |
| $58,858 |
| $43,854 |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
from operating activities: |
|
|
|
|
|
Depreciation and amortization | 18,249 |
| 21,190 |
| 21,117 |
Provision for doubtful accounts | 11,996 |
| 6,134 |
| 6,872 |
Deferred income taxes | 5,290 |
| (2,835) |
| 2,156 |
Tax benefit of stock options exercised | 6,355 |
| 12,295 |
| 3,308 |
Changes in operating assets and liabilities: |
|
|
|
|
|
Restricted cash | 302 |
| (1,393) |
| (1,641) |
Short-term investments | 13,347 |
| 12,197 |
| 15,397 |
Accounts receivable | (13,028) |
| (6,559) |
| (3,166) |
Prepaids and other assets | (1,952) |
| 2,400 |
| 1,541 |
Direct marketing costs, net | (3,869) |
| (235) |
| (89) |
Accounts payable and accrued liabilities | 4,501 |
| 33,647 |
| 13,304 |
Deferred revenue | 26,428 |
| 27,367 |
| 25,845 |
Net cash flows from operating activities | 142,882 |
| 163,066 |
| 128,498 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Facility expenditures and land purchases | (16,376) |
| (25,718) |
| (19,843) |
Capital expenditures, net | (19,116) |
| (14,391) |
| (14,265) |
Proceeds from sales and maturities of investments | 1,128,172 |
| 179,230 |
| - |
Purchase of investments | (1,277,816) |
| (368,392) |
| - |
Net cash flows from investing activities | (185,136) |
| (229,271) |
| (34,108) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Purchase of treasury stock | - |
| (28,726) |
| (44,451) |
Exercise of stock options | 8,601 |
| 14,039 |
| 10,293 |
Net cash flows from financing activities | 8,601 |
| (14,687) |
| (34,158) |
|
|
|
|
|
|
Net change in cash and cash equivalents | (33,653) |
| (80,892) |
| 60,232 |
|
|
|
|
|
|
Cash and cash equivalents at beginning of period | 43,042 |
| 123,934 |
| 63,702 |
|
|
|
|
|
|
Cash and cash equivalents at end of period | $9,389 |
| $43,042 |
| $123,934 |
-18- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ||||
(Dollar amounts in thousands) |
| ||||
|
| ||||
| AS PREVIOUSLY PRESENTED IN 2004 10-K FILING | ||||
| Year Ended December 31, | ||||
| 2004 |
| 2003 |
| 2002 |
Cash flows from operating activities: |
|
|
|
|
|
Net income | $75,263 |
| $58,858 |
| $43,854 |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
from operating activities: |
|
|
|
|
|
Depreciation and amortization | 18,249 |
| 21,190 |
| 21,117 |
Provision for doubtful accounts | 11,996 |
| 6,134 |
| 6,872 |
Deferred income taxes | 5,290 |
| (2,835) |
| 2,156 |
Tax benefit of stock options exercised | - |
| - |
| - |
Changes in operating assets and liabilities: |
|
|
|
|
|
Restricted cash | - |
| - |
| - |
Short-term investments | 13,347 |
| 12,197 |
| 15,397 |
Accounts receivable | (13,028) |
| (6,559) |
| (3,166) |
Prepaids and other assets | (1,952) |
| 2,400 |
| 1,541 |
Direct marketing costs, net | (3,869) |
| (235) |
| (89) |
Accounts payable and accrued liabilities | 4,501 |
| 33,647 |
| 13,304 |
Deferred revenue | 26,428 |
| 27,367 |
| 25,845 |
Net cash flows from operating activities | 136,225 |
| 152,164 |
| 126,831 |
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Facility expenditures and land purchases | (16,376) |
| (25,718) |
| (19,843) |
Capital expenditures, net | (19,116) |
| (14,391) |
| (14,265) |
Proceeds from sales and maturities of investments | 1,128,172 |
| 179,230 |
| - |
Purchase of investments | (1,277,816) |
| (368,392) |
| - |
Net cash flows from investing activities | (185,136) |
| (229,271) |
| (34,108) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Purchase of treasury stock | - |
| (28,726) |
| (44,451) |
Exercise of stock options | 14,956 |
| 26,334 |
| 13,601 |
Net cash flows from financing activities | 14,956 |
| (2,392) |
| (30,850) |
|
|
|
|
|
|
Net change in cash, cash equivalents and restricted cash | (33,955) |
| (79,499) |
| 61,873 |
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period | 51,538 |
| 131,037 |
| 69,164 |
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of period | $17,583 |
| $51,538 |
| $131,037 |
-19- |
Free Cash Flow Reconciliation
Free cash flow represents changes in the Company’s cash and cash equivalents, restricted cash and investments over a period of time, excluding facility purchases and equity activity. Free cash flow is not a measurement under generally accepted accounting principles in the United States and may not be similar to free cash flow measures used by other companies. The Company’s management utilizes free cash flow as a measure of cash generated from operations and it believes that free cash flow provides useful information to investors regarding the amount of cash that the Company generates from operations. The Company believes that free cash flow before special legal and other investigation costs provides useful information to its management and investors by improving their ability to compare the Company’s free cash flow without the special legal and other investigation costs for a particular fiscal period with the corresponding period in the prior year. Free cash flow can be reconciled to the Company’s consolidated statements of cash flows for the particular fiscal period, as follows:
-20- |
ITT EDUCATIONAL SERVICES, INC. |
| ||||||
FREE CASH FLOW RECONCILIATION |
| ||||||
(Dollar amounts in thousands) |
| ||||||
(Unaudited) |
| ||||||
| RESTATED | ||||||
| For the |
| For the |
| For the | ||
| Three Months Ended |
| Three Months Ended |
| Three Months Ended | ||
| March 31, 2005 |
| June 30, 2005 |
| September 30, 2005 | ||
|
|
|
|
|
|
| |
Cash flows from operating activities |
| $12,723 |
| $17,259 |
| $50,288 | |
Cash flows from investing activities |
| 458 |
| (7,135) |
| (68,514) | |
Cash flows from financing activities |
| 3,005 |
| 1,584 |
| 1,009 | |
Increase in cash and cash equivalents |
| 16,186 |
| 11,708 |
| (17,217) | |
Adjust for: |
|
|
|
|
|
| |
Change in short-term investments |
| - |
| - |
| - | |
Change in restricted cash |
| (8,194) |
| - |
| - | |
Proceeds from sales and maturities |
|
|
|
|
|
| |
of investments |
| (193,747) |
| (116,331) |
| (119,441) | |
Purchase of investments |
| 180,559 |
| 106,375 |
| 180,125 | |
Facility purchases |
| 9,584 |
| 10,232 |
| 3,718 | |
Exercise of stock options |
| (3,005) |
| (1,584) |
| (1,009) | |
Tax benefit of stock options exercised |
| (2,005) |
| (964) |
| (852) | |
Purchase of treasury stock |
| - |
| - |
| - | |
Free Cash Flow |
| (622) |
| 9,436 |
| 45,324 | |
Special legal and other investigation costs - |
|
|
|
|
|
| |
Change in accrual |
| - |
| - |
| - | |
Charge |
| 7,712 |
| - |
| (6,493) | |
Free Cash Flow (excluding special legal and other investigation costs) |
| $7,090 |
| $9,436 |
| $38,831 | |
| AS PREVIOUSLY PRESENTED | ||||||
| For the |
| For the |
| For the | ||
| Three Months Ended |
| Three Months Ended |
| Three Months Ended | ||
| March 31, 2005 |
| June 30, 2005 |
| September 30, 2005 | ||
|
|
|
|
|
| ||
Cash flows from operating activities | $2,524 |
| $16,295 |
| $49,436 | ||
Cash flows from investing activities | 458 |
| (7,135) |
| (68,514) | ||
Cash flows from financing activities | 5,010 |
| 2,548 |
| 1,861 | ||
Increase in cash and cash equivalents | 7,992 |
| 11,708 |
| (17,217) | ||
Adjust for: |
|
|
|
|
| ||
Change in short-term investments | - |
| - |
| - | ||
Change in restricted cash | - |
| - |
| - | ||
Proceeds from sales and maturities |
|
|
|
|
| ||
of investments | (193,747) |
| (116,331) |
| (119,441) | ||
Purchase of investments | 180,559 |
| 106,375 |
| 180,125 | ||
Facility purchases | 9,584 |
| 10,232 |
| 3,718 | ||
Exercise of stock options | (5,010) |
| (2,548) |
| (1,861) | ||
Tax benefit of stock options exercised | - |
| - |
| - | ||
Purchase of treasury stock | - |
| - |
| - | ||
Free Cash Flow | (622) |
| 9,436 |
| 45,324 | ||
Special legal and other investigation costs - |
|
|
|
|
| ||
Change in accrual | - |
| - |
| - | ||
Charge | 7,712 |
| - |
| (6,493) | ||
Free Cash Flow (excluding special legal and other investigation costs) | $7,090 |
| $9,436 |
| $38,831 | ||
-21- |
-22- |
ITT EDUCATIONAL SERVICES, INC. |
| |||||||||
FREE CASH FLOW RECONCILIATION |
| |||||||||
(Dollar amounts in thousands) |
| |||||||||
(Unaudited) |
| |||||||||
| RESTATED | |||||||||
| For the Three Months Ended March 31, 2004 |
| For the Three Months Ended June 30, 2004 |
| For the Three Months Ended September 30, 2004 |
| For the Three Months Ended December 31, 2004 |
| For the Year Ended December 31, 2004 | |
|
|
|
|
| ||||||
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
| $16,994 |
| $45,539 |
| $28,715 |
| $51,634 |
| $142,882 |
Cash flows from investing activities |
| (41,215) |
| (50,976) |
| (27,790) |
| (65,155) |
| (185,136) |
Cash flows from financing activities |
| 4,235 |
| 348 |
| 3,099 |
| 919 |
| 8,601 |
Increase in cash and cash equivalents |
| (19,986) |
| (5,089) |
| 4,024 |
| (12,602) |
| (33,653) |
Adjust for: |
|
|
|
|
|
|
|
|
|
|
Change in short-term investments |
| 2,074 |
| (13,161) |
| 6,895 |
| (9,155) |
| (13,347) |
Change in restricted cash |
| (8,496) |
| - |
| - |
| 8,194 |
| (302) |
Proceeds from sales and maturities |
|
|
|
|
|
|
|
|
|
|
of investments |
| (240,986) |
| (385,447) |
| (295,080) |
| (206,659) |
| (1,128,172) |
Purchase of investments |
| 279,177 |
| 422,698 |
| 314,899 |
| 261,042 |
| 1,277,816 |
Facility purchases |
| - |
| 6,798 |
| 1,837 |
| 7,741 |
| 16,376 |
Exercise of stock options |
| (4,235) |
| (348) |
| (3,099) |
| (919) |
| (8,601) |
Tax benefit of stock options exercised |
| (4,259) |
| (207) |
| (1,277) |
| (612) |
| (6,355) |
Purchase of treasury stock |
| - |
| - |
| - |
| - |
| - |
Free Cash Flow |
| 3,289 |
| 25,244 |
| 28,199 |
| 47,030 |
| 103,762 |
Special legal and other investigation costs - |
|
|
|
|
|
|
|
|
|
|
Change in accrual |
| (9,541) |
| 4,021 |
| (590) |
| 1,396 |
| (4,714) |
Charge |
| 9,700 |
| 5,606 |
| 9,837 |
| - |
| 25,143 |
Free Cash Flow (excluding special legal and other investigation costs) |
| $3,448 |
| $34,871 |
| $37,446 |
| $48,426 |
| $124,191 |
| AS PREVIOUSLY PRESENTED | ||||||||||||||
| For the Three Months Ended March 31, 2004 |
| For the Three Months Ended June 30, 2004 |
| For the Three Months Ended September 30, 2004 |
| For the Three Months Ended December 31, 2004 |
| For the Year Ended December 31, 2004 | ||||||
|
|
|
|
| |||||||||||
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||
Cash flows from operating activities |
| $4,239 |
| $45,332 |
| $27,438 |
| $59,216 |
| $136,225 | |||||
Cash flows from investing activities |
| (41,215) |
| (50,976) |
| (27,790) |
| (65,155) |
| (185,136) | |||||
Cash flows from financing activities |
| 8,494 |
| 555 |
| 4,376 |
| 1,531 |
| 14,956 | |||||
Increase in cash and cash equivalents |
| (28,482) |
| (5,089) |
| 4,024 |
| (4,408) |
| (33,955) | |||||
Adjust for: |
|
|
|
|
|
|
|
|
|
| |||||
Change in short-term investments |
| 2,074 |
| (13,161) |
| 6,895 |
| (9,155) |
| (13,347) | |||||
Change in restricted cash |
| - |
| - |
| - |
| - |
| - | |||||
Proceeds from sales and maturities |
|
|
|
|
|
|
|
|
|
| |||||
of investments |
| (240,986) |
| (385,447) |
| (295,080) |
| (206,659) |
| (1,128,172) | |||||
Purchase of investments |
| 279,177 |
| 422,698 |
| 314,899 |
| 261,042 |
| 1,277,816 | |||||
Facility purchases |
| - |
| 6,798 |
| 1,837 |
| 7,741 |
| 16,376 | |||||
Exercise of stock options |
| (8,494) |
| (555) |
| (4,376) |
| (1,531) |
| (14,956) | |||||
Tax benefit of stock options exercised |
| - |
| - |
| - |
| - |
| - | |||||
Purchase of treasury stock |
| - |
| - |
| - |
| - |
| - | |||||
Free Cash Flow |
| 3,289 |
| 25,244 |
| 28,199 |
| 47,030 |
| 103,762 | |||||
Special legal and other investigation costs - |
|
|
|
|
|
|
|
|
|
| |||||
Change in accrual |
| (9,541) |
| 4,021 |
| (590) |
| 1,396 |
| (4,714) | |||||
Charge |
| 9,700 |
| 5,606 |
| 9,837 |
| - |
| 25,143 | |||||
Free Cash Flow (excluding special legal and other investigation costs) |
| $3,448 |
| $34,871 |
| $37,446 |
| $48,426 |
| $124,191 | |||||
-23- |
ITT EDUCATIONAL SERVICES, INC. |
| |||||||||
FREE CASH FLOW RECONCILIATION |
| |||||||||
(Dollar amounts in thousands) |
| |||||||||
(Unaudited) |
| |||||||||
| RESTATED | |||||||||
| For the Three Months Ended March 31, 2003 |
| For the Three Months Ended June 30, 2003 |
| For the Three Months Ended September 30, 2003 |
| For the Three Months Ended December 31, 2003 |
| For the Year Ended December 31, 2003 | |
|
|
|
|
| ||||||
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
| $13,505 |
| $63,177 |
| $32,134 |
| $54,250 |
| $163,066 |
Cash flows from investing activities |
| (9,398) |
| (33,869) |
| (73,870) |
| (112,134) |
| (229,271) |
Cash flows from financing activities |
| (21,590) |
| 500 |
| 4,707 |
| 1,696 |
| (14,687) |
Increase in cash and cash equivalents |
| (17,483) |
| 29,808 |
| (37,029) |
| (56,188) |
| (80,892) |
Adjust for: |
|
|
|
|
|
|
|
|
|
|
Change in short-term investments |
| 2,593 |
| (16,076) |
| 7,687 |
| (6,401) |
| (12,197) |
Change in restricted cash |
| (7,103) |
| - |
| - |
| 8,496 |
| 1,393 |
Proceeds from sales and maturities |
|
|
|
|
|
|
|
|
|
|
of investments |
| - |
| (7,400) |
| (32,220) |
| (139,610) |
| (179,230) |
Purchase of investments |
| - |
| 27,353 |
| 97,278 |
| 243,761 |
| 368,392 |
Facility purchases |
| 7,641 |
| 9,662 |
| 3,766 |
| 4,649 |
| 25,718 |
Exercise of stock options |
| (6,368) |
| (1,268) |
| (4,707) |
| (1,696) |
| (14,039) |
Tax benefit of stock options exercised |
| (4,800) |
| (669) |
| (4,330) |
| (2,496) |
| (12,295) |
Purchase of treasury stock |
| 27,958 |
| 768 |
| - |
| - |
| 28,726 |
Free Cash Flow |
| $2,438 |
| $42,178 |
| $30,445 |
| $50,515 |
| $125,576 |
| AS PREVIOUSLY PRESENTED | ||||||||||||||
| For the Three Months Ended March 31, 2003 |
| For the Three Months Ended June 30, 2003 |
| For the Three Months Ended September 30, 2003 |
| For the Three Months Ended December 31, 2003 |
| For the Year Ended December 31, 2003 | ||||||
|
|
|
|
| |||||||||||
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||
Cash flows from operating activities |
| $1,602 |
| $62,508 |
| $27,804 |
| $60,250 |
| $152,164 | |||||
Cash flows from investing activities |
| (9,398) |
| (33,869) |
| (73,870) |
| (112,134) |
| (229,271) | |||||
Cash flows from financing activities |
| (16,790) |
| 1,169 |
| 9,037 |
| 4,192 |
| (2,392) | |||||
Increase in cash and cash equivalents |
| (24,586) |
| 29,808 |
| (37,029) |
| (47,692) |
| (79,499) | |||||
Adjust for: |
|
|
|
|
|
|
|
|
|
| |||||
Change in short-term investments |
| 2,593 |
| (16,076) |
| 7,687 |
| (6,401) |
| (12,197) | |||||
Change in restricted cash |
| - |
| - |
| - |
| - |
| - | |||||
Proceeds from sales and maturities |
|
|
|
|
|
|
|
|
|
| |||||
of investments |
| - |
| (7,400) |
| (32,220) |
| (139,610) |
| (179,230) | |||||
Purchase of investments |
| - |
| 27,353 |
| 97,278 |
| 243,761 |
| 368,392 | |||||
Facility purchases |
| 7,641 |
| 9,662 |
| 3,766 |
| 4,649 |
| 25,718 | |||||
Exercise of stock options |
| (11,168) |
| (1,937) |
| (9,037) |
| (4,192) |
| (26,334) | |||||
Tax benefit of stock options exercised |
| - |
| - |
| - |
| - |
| - | |||||
Purchase of treasury stock |
| 27,958 |
| 768 |
| - |
| - |
| 28,726 | |||||
Free Cash Flow |
| $2,438 |
| $42,178 |
| $30,445 |
| $50,515 |
| $125,576 | |||||
ITT EDUCATIONAL SERVICES, INC. |
| |||||||||
FREE CASH FLOW RECONCILIATION |
| |||||||||
(Dollar amounts in thousands) |
| |||||||||
(Unaudited) |
| |||||||||
| RESTATED |
| AS PREVIOUSLY PRESENTED | |||||||
|
| For the Year Ended December 31, 2002 |
| For the Year Ended December 31, 2002 | ||||||
|
| |||||||||
|
| |||||||||
|
|
|
|
|
| |||||
Cash flows from operating activities |
| $128,498 |
| $126,831 |
| |||||
Cash flows from investing activities |
| (34,108) |
| (34,108) |
| |||||
Cash flows from financing activities |
| (34,158) |
| (30,850) |
| |||||
Increase in cash and cash equivalents |
| 60,232 |
| 61,873 |
| |||||
Adjust for: |
|
|
|
|
| |||||
Change in short-term investments |
| (15,397) |
| (15,397) |
| |||||
Change in restricted cash |
| 1,641 |
| - |
| |||||
Facility purchases |
| 19,843 |
| 19,843 |
| |||||
Exercise of stock options |
| (10,293) |
| (13,601) |
| |||||
Tax benefit of stock options exercised |
| (3,308) |
| - |
| |||||
Purchase of treasury stock |
| 44,451 |
| 44,451 |
| |||||
Free Cash Flow |
| $97,169 |
| $97,169 |
| |||||
-24- |