Exhibit 99.1
ITT EDUCATIONAL SERVICES, INC. REPORTS 2009 THIRD QUARTER RESULTS,
NEW STUDENT ENROLLMENT INCREASED 27.2%; EPS INCREASED 56.3% TO $2.00
CARMEL, IN, October 22, 2009—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 2009 increased 27.2% to 27,738 compared to 21,807 in the same period in 2008. Total student enrollment increased 28.7% to 79,208 as of September 30, 2009 compared to 61,556 as of September 30, 2008.
Earnings per share (“EPS”) in the third quarter of 2009 increased 56.3% to $2.00 compared to $1.28 in the third quarter of 2008. Revenue in the three months ended September 30, 2009 increased 33.6% to $339.6 million compared to $254.3 million in the three months ended September 30, 2008. Operating margin increased 430 basis points to 36.1% in the third quarter of 2009 compared to 31.8% in the same period in 2008.
The company provided the following information for the three and nine months ended September 30, 2009 and 2008:
Financial and Operating Data for the Three Months Ended September 30th, Unless Otherwise Indicated | ||||||||||||
| (Dollars in millions, except per share and per student data) | ||||||||||||
| 2009 | 2008 | Increase/ (Decrease) | ||||||||||
| Revenue | $ | 339.6 | $ | 254.3 | 33.6 | % | ||||||
| Operating Income | $ | 122.7 | $ | 80.8 | 52.0 | % | ||||||
| Operating Margin | 36.1 | % | 31.8 | % | 430 basis points | |||||||
| Net Income | $ | 75.4 | $ | 50.2 | 50.2 | % | ||||||
| Earnings Per Share (diluted) | $ | 2.00 | $ | 1.28 | 56.3 | % | ||||||
| New Student Enrollment | 27,738 | (A) | 21,807 | 27.2 | % | |||||||
| Continuing Students | 51,470 | (B) | 39,749 | 29.5 | % | |||||||
Total Student Enrollment as of September 30th | 79,208 | (C) | 61,556 | 28.7 | % | |||||||
Persistence Rate as of September 30th (D) | 73.6 | % | 72.5 | % | 110 basis points | |||||||
| Revenue Per Student | $ | 4,852 | $ | 4,641 | 4.5 | % | ||||||
Cash and Cash Equivalents, Restricted Cash and Investments as of September 30th | $ | 280.8 | $ | 286.7 | (2.0 | )% | ||||||
| Bad Debt Expense as a Percentage of Revenue | 6.8 | % | 5.0 | % | 180 basis points | |||||||
Days Sales Outstanding as of September 30th | 25.4 days | 12.1 days | 13.3 days | |||||||||
Deferred Revenue as of September 30th | $ | 146.2 | $ | 142.0 | 2.9 | % | ||||||
Debt as of September 30th | $ | 150.0 | $ | 150.0 | ||||||||
| Weighted Average Diluted Shares of Common Stock Outstanding | 37,763,000 | 39,195,000 | ||||||||||
| Shares of Common Stock Repurchased | 827,842 | (E) | 184,700 | (F) | ||||||||
| Land and Building Purchases and Renovations | $ | 0.7 | (G) | $ | 3.9 | (H) | (83.2 | )% | ||||
| Number of New Colleges in Operation | 5 | 1 | ||||||||||
| Capital Expenditures, Net | $ | 3.9 | $ | 4.3 | (8.8 | )% | ||||||
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| Financial and Operating Data for the Nine Months Ended September 30th | ||||||||||||
| (Dollars in millions, except per share and per student data) | ||||||||||||
| 2009 | 2008 | Increase/ (Decrease) | ||||||||||
| Revenue | $ | 944.8 | $ | 735.5 | 28.5 | % | ||||||
| Operating Income | $ | 340.2 | $ | 225.8 | 50.7 | % | ||||||
| Operating Margin | 36.0 | % | 30.7 | % | 530 basis points | |||||||
| Net Income | $ | 209.2 | $ | 140.0 | 49.5 | % | ||||||
| Earnings Per Share (diluted) | $ | 5.45 | $ | 3.56 | 53.1 | % | ||||||
| Bad Debt Expense as a Percentage of Revenue | 5.9 | % | 4.0 | % | 190 basis points | |||||||
| Revenue Per Student | $ | 14,332 | $ | 13,617 | 5.3 | % | ||||||
| Weighted Average Diluted Shares of Common Stock Outstanding | 38,412,000 | 39,291,000 | ||||||||||
| Shares of Common Stock Repurchased | 1,977,875 | (I) | 1,049,700 | (J) | ||||||||
| Land and Building Purchases and Renovations | $ | 2.5 | (K) | $ | 17.1 | (L) | (85.3 | )% | ||||
| Number of New Colleges in Operation | 7 | (M) | 6 | |||||||||
| Capital Expenditures, Net | $ | 15.9 | $ | 12.1 | 31.5 | % | ||||||
| (A) | Includes 223 students enrolled at Daniel Webster College. |
| (B) | Includes 647 students enrolled at Daniel Webster College. |
| (C) | Includes 870 students enrolled at Daniel Webster College. |
| (D) | Represents the number of Continuing Students in the academic term, divided by the Total Student Enrollment in the immediately preceding academic term. |
| (E) | For approximately $84.5 million or at an average price of $102.06 per share. |
| (F) | For approximately $16.0 million or at an average price of $86.47 per share. |
| (G) | Represents costs associated with renovating, expanding or constructing buildings at nine of the company’s locations, but it excludes all land and buildings of Daniel Webster College that the company acquired. |
| (H) | Represents costs associated with renovating, expanding or constructing buildings at 14 of the company’s locations. |
| (I) | For approximately $208.8 million or at an average price of $105.58 per share. |
| (J) | For approximately $87.8 million or at an average price of $83.62 per share. |
| (K) | Represents costs associated with renovating, expanding or constructing buildings at 15 of the company’s locations, but it excludes all land and buildings of Daniel Webster College that the company acquired. |
| (L) | Represents costs associated with purchasing a parcel of land on which the company constructed a building, and purchasing, renovating, expanding or constructing buildings at 17 of the company's locations. |
| (M) | Excludes Daniel Webster College. |
ITT Educational Services, Inc. will conduct a conference call with financial analysts to discuss its third quarter 2009 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.
FOR FURTHER INFORMATION:
COMPANY: WEB SITE:
Lauren Littlefield www.ittesi.com
Manager of Communications
(317) 706-9200
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| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||
| As of | ||||||||||||
| September 30, 2009 | December 31, 2008 | September 30, 2008 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 130,971 | $ | 226,255 | $ | 136,698 | ||||||
| Short-term investments | 144,146 | 138,709 | 150,000 | |||||||||
| Restricted cash | 5,723 | 10,405 | 17 | |||||||||
| Accounts receivable, net | 93,819 | 29,779 | 33,309 | |||||||||
| Deferred income taxes | 16,328 | 12,104 | 13,012 | |||||||||
| Prepaid expenses and other current assets | 19,106 | 13,793 | 12,980 | |||||||||
| Total current assets | 410,093 | 431,045 | 346,016 | |||||||||
| Property and equipment, net | 192,341 | 166,671 | 166,140 | |||||||||
| Direct marketing costs, net | 27,222 | 22,973 | 22,694 | |||||||||
| Other assets | 20,705 | 3,170 | 19,481 | |||||||||
| Total assets | $ | 650,361 | $ | 623,859 | $ | 554,331 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Current portion of long-term debt | $ | 150,000 | $ | -- | $ | -- | ||||||
| Accounts payable | 67,183 | 54,815 | 58,781 | |||||||||
| Accrued compensation and benefits | 23,340 | 21,133 | 28,574 | |||||||||
| Accrued income taxes | 7,917 | 14,976 | 1,753 | |||||||||
| Other accrued liabilities | 15,884 | 11,423 | 12,274 | |||||||||
| Deferred revenue | 146,203 | 162,206 | 142,044 | |||||||||
| Total current liabilities | 410,527 | 264,553 | 243,426 | |||||||||
| Long-term debt | -- | 150,000 | 150,000 | |||||||||
| Deferred income taxes | 4,092 | 1,504 | 10,108 | |||||||||
| Other liabilities | 22,262 | 19,951 | 19,207 | |||||||||
| Total liabilities | 436,881 | 436,008 | 422,741 | |||||||||
| 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 | 151,653 | 135,655 | 133,723 | |||||||||
| Retained earnings | 929,907 | 732,107 | 670,073 | |||||||||
| Accumulated other comprehensive (loss) | (12,558 | ) | (13,384 | ) | (3,417 | ) | ||||||
| Treasury stock, 17,123,838, 15,352,376 and 15,376,719 | ||||||||||||
| shares, at cost | (856,063 | ) | (667,068 | ) | (669,330 | ) | ||||||
| Total shareholders' equity | 213,480 | 187,851 | 131,590 | |||||||||
| Total liabilities and shareholders' equity | $ | 650,361 | $ | 623,859 | $ | 554,331 | ||||||
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| 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) | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Revenue | $ | 339,643 | $ | 254,273 | $ | 944,816 | $ | 735,533 | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of educational services | 116,730 | 95,011 | 328,609 | 282,219 | ||||||||||||
| Student services and administrative expenses | 100,187 | 78,500 | 276,044 | 227,535 | ||||||||||||
| Total costs and expenses | 216,917 | 173,511 | 604,653 | 509,754 | ||||||||||||
| Operating income | 122,726 | 80,762 | 340,163 | 225,779 | ||||||||||||
| Interest income | 716 | 1,565 | 2,827 | 4,774 | ||||||||||||
| Interest (expense) | (191 | ) | (1,012 | ) | (593 | ) | (3,588 | ) | ||||||||
| Income before provision for income taxes | 123,251 | 81,315 | 342,397 | 226,965 | ||||||||||||
| Provision for income taxes | 47,891 | 31,129 | 133,185 | 87,017 | ||||||||||||
| Net income | $ | 75,360 | $ | 50,186 | $ | 209,212 | $ | 139,948 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 2.02 | $ | 1.29 | $ | 5.51 | $ | 3.59 | ||||||||
| Diluted | $ | 2.00 | $ | 1.28 | $ | 5.45 | $ | 3.56 | ||||||||
| Supplemental Data: | ||||||||||||||||
| Cost of educational services | 34.4 | % | 37.4 | % | 34.8 | % | 38.4 | % | ||||||||
| Student services and administrative expenses | 29.5 | % | 30.8 | % | 29.2 | % | 30.9 | % | ||||||||
| Operating margin | 36.1 | % | 31.8 | % | 36.0 | % | 30.7 | % | ||||||||
| Student enrollment at end of period | 79,208 | 61,556 | 79,208 | 61,556 | ||||||||||||
| Campuses at end of period * | 112 | 103 | 112 | 103 | ||||||||||||
| Shares for earnings per share calculation: | ||||||||||||||||
| Basic | 37,324,000 | 38,777,000 | 37,950,000 | 38,938,000 | ||||||||||||
| Diluted | 37,763,000 | 39,195,000 | 38,412,000 | 39,291,000 | ||||||||||||
| Effective tax rate | 38.9 | % | 38.3 | % | 38.9 | % | 38.3 | % | ||||||||
| * Does not include the Daniel Webster College campus. | ||||||||||||||||
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| 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) | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 75,360 | $ | 50,186 | $ | 209,212 | $ | 139,948 | ||||||||
| Adjustments to reconcile net income to net cash flows | ||||||||||||||||
| from operating activities: | ||||||||||||||||
| Depreciation and amortization | 6,276 | 5,077 | 18,204 | 16,335 | ||||||||||||
| Provision for doubtful accounts | 23,183 | 12,839 | 56,012 | 29,457 | ||||||||||||
| Deferred income taxes | 1,471 | (1,948 | ) | (2,344 | ) | (7,251 | ) | |||||||||
| Excess tax benefit from stock option exercises | (1,385 | ) | (686 | ) | (5,272 | ) | (773 | ) | ||||||||
| Stock-based compensation expense | 2,891 | 1,628 | 10,247 | 5,731 | ||||||||||||
| Other | 113 | -- | (309 | ) | -- | |||||||||||
| Changes in operating assets and liabilities, net of acquisition: | ||||||||||||||||
| Restricted cash | (5,743 | ) | 181 | 2,581 | 6,039 | |||||||||||
| Accounts receivable | (47,255 | ) | (16,950 | ) | (119,255 | ) | (47,634 | ) | ||||||||
| Direct marketing costs, net | (1,234 | ) | (731 | ) | (4,249 | ) | (2,127 | ) | ||||||||
| Accounts payable | 4,763 | 4,375 | 10,819 | 13,661 | ||||||||||||
| Accrued income taxes | (2,432 | ) | (2,982 | ) | (1,308 | ) | (3,467 | ) | ||||||||
| Other operating assets and liabilities | (377 | ) | 4,331 | 1,007 | 11,214 | |||||||||||
| Deferred revenue | 19,325 | 3,706 | (17,631 | ) | (71,083 | ) | ||||||||||
| Net cash flows from operating activities | 74,956 | 59,026 | 157,714 | 90,050 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Facility expenditures and land purchases | (664 | ) | (3,944 | ) | (2,516 | ) | (17,107 | ) | ||||||||
| Capital expenditures, net | (3,907 | ) | (4,286 | ) | (15,913 | ) | (12,103 | ) | ||||||||
| Acquisition of college, net of cash acquired | -- | -- | (20,792 | ) | -- | |||||||||||
| Proceeds from sales and maturities of investments | 57,352 | 492,760 | 142,741 | 964,565 | ||||||||||||
| Purchase of investments | (56,543 | ) | (472,260 | ) | (147,362 | ) | (811,205 | ) | ||||||||
| Issuance of note receivable, net of repayments | (71 | ) | -- | (13,991 | ) | -- | ||||||||||
| Net cash flows from investing activities | (3,833 | ) | 12,270 | (57,833 | ) | 124,150 | ||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Excess tax benefit from stock option exercises | 1,385 | 686 | 5,272 | 773 | ||||||||||||
| Proceeds from exercise of stock options | 2,756 | 1,996 | 8,750 | 2,271 | ||||||||||||
| Repurchase of common stock and shares tendered for taxes | (84,497 | ) | (15,971 | ) | (209,187 | ) | (87,774 | ) | ||||||||
| Net cash flows from financing activities | (80,356 | ) | (13,289 | ) | (195,165 | ) | (84,730 | ) | ||||||||
| Net change in cash and cash equivalents | (9,233 | ) | 58,007 | (95,284 | ) | 129,470 | ||||||||||
| Cash and cash equivalents at beginning of period | 140,204 | 78,691 | 226,255 | 7,228 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 130,971 | $ | 136,698 | $ | 130,971 | $ | 136,698 | ||||||||
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