Exhibit 99.1
ITT EDUCATIONAL SERVICES, INC. REPORTS 2009 FOURTH QUARTER AND FULL YEAR RESULTS, NEW STUDENT ENROLLMENT INCREASED 31.2%; EPS INCREASED 59.0% TO $2.56
CARMEL, IN, January 21, 2010—ITT Educational Services, Inc. (NYSE: ESI), a leading provider of technology-oriented postsecondary degree programs, today reported that new student enrollment in the fourth quarter of 2009 increased 31.2% to 19,563 compared to 14,911 in the same period in 2008. Total student enrollment increased 30.3% to 80,766 as of December 31, 2009 compared to 61,983 as of December 31, 2008.
Earnings per share (“EPS”) in the fourth quarter of 2009 increased 59.0% to $2.56 compared to $1.61 in the fourth quarter of 2008. Revenue in the three months ended December 31, 2009 increased 33.8% to $374.4 million compared to $279.8 million in the three months ended December 31, 2008. Operating margin increased 440 basis points to 40.8% in the fourth quarter of 2009 compared to 36.4% in the same period in 2008.
The company provided the following information for the three and twelve months ended December 31, 2009 and 2008:
Financial and Operating Data for the Three Months Ended December 31st, Unless Otherwise Indicated | ||||||||||||
| (Dollars in millions, except per share and per student data) | ||||||||||||
| 2009 | 2008 | (A) | Increase/ (Decrease) | |||||||||
| Revenue | $ | 374.4 | $ | 279.8 | 33.8 | % | ||||||
| Operating Income | $ | 152.9 | $ | 101.8 | 50.2 | % | ||||||
| Operating Margin | 40.8 | % | 36.4 | % | 440 basis points | |||||||
| Net Income | $ | 93.7 | $ | 62.8 | 49.0 | % | ||||||
| Earnings Per Share (diluted) | $ | 2.56 | $ | 1.61 | 59.0 | % | ||||||
| New Student Enrollment | 19,563 | 14,911 | 31.2 | % | ||||||||
| Continuing Students | 61,203 | 47,072 | 30.0 | % | ||||||||
Total Student Enrollment as of December 31st | 80,766 | 61,983 | 30.3 | % | ||||||||
Persistence Rate as of December 31st (B) | 77.3 | % | 76.5 | % | 80 basis points | |||||||
| Revenue Per Student | $ | 4,727 | $ | 4,545 | 4.0 | % | ||||||
Cash and Cash Equivalents, Restricted Cash and Investments as of December 31st | $ | 274.1 | $ | 375.4 | (27.0 | )% | ||||||
| Bad Debt Expense as a Percentage of Revenue | 6.9 | % | 4.9 | % | 200 basis points | |||||||
Days Sales Outstanding as of December 31st | 21.0 days | 9.8 days | 11.2 days | |||||||||
Deferred Revenue as of December 31st | $ | 171.9 | $ | 162.2 | 6.0 | % | ||||||
Debt as of December 31st | $ | 150.0 | $ | 150.0 | ||||||||
| Weighted Average Diluted Shares of Common Stock Outstanding | 36,549,000 | 39,100,000 | ||||||||||
| Shares of Common Stock Repurchased | 1,500,000 | (C) | -- | |||||||||
| Land and Building Purchases and Renovations | $ | 1.7 | (D) | $ | 1.0 | (E) | 74.4 | % | ||||
| Number of New Colleges in Operation | 3 | 2 | ||||||||||
| Number of Learning Sites Converted to Colleges | 5 | -- | ||||||||||
| Capital Expenditures, Net | $ | 8.1 | $ | 5.4 | 48.5 | % | ||||||
| Financial and Operating Data for the Twelve Months Ended December 31st | ||||||||||||
| (Dollars in millions, except per share and per student data) | ||||||||||||
| 2009 | 2008 | (A) | Increase/ (Decrease) | |||||||||
| Revenue | $ | 1,319.2 | $ | 1,015.3 | 29.9 | % | ||||||
| Operating Income | $ | 488.8 | $ | 325.5 | 50.2 | % | ||||||
| Operating Margin | 37.1 | % | 32.1 | % | 500 basis points | |||||||
| Net Income | $ | 300.3 | $ | 201.5 | 49.0 | % | ||||||
| Earnings Per Share (diluted) | $ | 7.91 | $ | 5.13 | 54.2 | % | ||||||
| Bad Debt Expense as a Percentage of Revenue | 6.2 | % | 4.3 | % | 190 basis points | |||||||
| Revenue Per Student | $ | 19,059 | $ | 18,162 | 4.9 | % | ||||||
| Weighted Average Diluted Shares of Common Stock Outstanding | 37,942,000 | 39,243,000 | ||||||||||
| Shares of Common Stock Repurchased | 3,477,875 | (F) | 1,049,700 | (G) | ||||||||
| Land and Building Purchases and Renovations | $ | 4.2 | (H) | $ | 18.1 | (I) | (76.8 | )% | ||||
| Number of New Colleges in Operation | 10 | (J) | 8 | |||||||||
| Number of Learning Sites Converted to Colleges | 5 | -- | ||||||||||
| Capital Expenditures, Net | $ | 24.0 | $ | 17.5 | 36.8 | % | ||||||
| (A) | Financial data is adjusted from amounts reported in prior periods for the change in accounting for direct costs related to the enrollment of new students. |
| (B) | Represents the number of Continuing Students in the academic term, divided by the Total Student Enrollment in the immediately preceding academic term. |
| (C) | For approximately $139.3 million or at an average price of $92.86 per share. |
| (D) | 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. |
| (E) | Represents costs associated with renovating, expanding or constructing buildings at 10 of the company’s locations. |
| (F) | For approximately $348.1 million or at an average price of $100.10 per share. |
| (G) | For approximately $87.8 million or at an average price of $83.62 per share. |
| (H) | Represents costs associated with renovating, expanding or constructing buildings at 19 of the company’s locations, but it excludes all land and buildings of Daniel Webster College that the company acquired. |
| (I) | Represents costs associated with purchasing a parcel of land on which the company constructed a building, and purchasing, renovating, expanding or constructing buildings at 19 of the company's locations. |
| (J) | Excludes Daniel Webster College. |
The following table sets forth information provided by the company regarding its 2010 internal goals for the metrics indicated:
2010 Internal Goal Range
Days Sales Outstanding at December 31st 10 days to 15 days
Bad Debt Expense as a Percentage of Revenue 4% to 6%
Earnings Per Share (diluted) $10.00 to $10.50
Kevin M. Modany, Chairman and Chief Executive Officer of ITT/ESI, said, "We are very pleased with our results in the final quarter and full year of 2009. As we begin the New Year, we believe that we are well positioned to achieve our internal financial and operating goals for 2010."
ITT Educational Services, Inc. will conduct a conference call with financial analysts to discuss its 2009 fourth quarter 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.
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 exposure under its guarantees related to private student loan programs; 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 U.S. 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:
Lauren Littlefield, Manager of Communications www.ittesi.com
(317) 706-9200
| ITT EDUCATIONAL SERVICES, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Dollars in thousands, except per share data) | ||||||||
| As of | ||||||||
| December 31, 2009 | December 31, 2008 (a) | |||||||
| (unaudited) | (unaudited) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 128,788 | $ | 226,255 | ||||
| Short-term investments | 143,407 | 138,709 | ||||||
| Restricted cash | 1,891 | 10,405 | ||||||
| Accounts receivable, net | 85,426 | 29,779 | ||||||
| Deferred income taxes | 13,799 | 12,104 | ||||||
| Prepaid expenses and other current assets | 17,651 | 13,793 | ||||||
| Total current assets | 390,962 | 431,045 | ||||||
| Property and equipment, net | 195,449 | 166,671 | ||||||
| Deferred income taxes | 6,416 | 7,462 | ||||||
| Other assets | 23,878 | 3,170 | ||||||
| Total assets | $ | 616,705 | $ | 608,348 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 61,275 | $ | 54,815 | ||||
| Accrued compensation and benefits | 26,323 | 21,133 | ||||||
| Accrued income taxes | 10,218 | 14,976 | ||||||
| Other accrued liabilities | 15,043 | 11,423 | ||||||
| Deferred revenue | 171,933 | 162,206 | ||||||
| Total current liabilities | 284,792 | 264,553 | ||||||
| Long-term debt | 150,000 | 150,000 | ||||||
| Other liabilities | 25,328 | 19,951 | ||||||
| Total liabilities | 460,120 | 434,504 | ||||||
| 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 | 154,495 | 135,655 | ||||||
| Retained earnings | 1,006,903 | 718,100 | ||||||
| Accumulated other comprehensive (loss) | (10,093 | ) | (13,384 | ) | ||||
| Treasury stock, 18,622,809 and 15,352,376 | ||||||||
| shares, at cost | (995,261 | ) | (667,068 | ) | ||||
| Total shareholders' equity | 156,585 | 173,844 | ||||||
| Total liabilities and shareholders' equity | $ | 616,705 | $ | 608,348 | ||||
| (a) | Amounts as of December 31, 2008 have been retrospectively adjusted from amounts reported in prior periods for a change in accounting for direct costs related to the enrollment of new students (“Direct Marketing Costs”). Total shareholders' equity as of December 31, 2008 decreased by $14,007 from the previously reported amount as a result of the change in accounting for Direct Marketing Costs. |
| 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, | |||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| 2009 (a) | 2008 (b) | 2009 (a) | 2008 (b) | |||||||||||||
| Revenue | $ | 374,378 | $ | 279,799 | $ | 1,319,194 | $ | 1,015,333 | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of educational services | 121,226 | 101,550 | 449,835 | 383,769 | ||||||||||||
| Student services and administrative expenses | 100,274 | 76,436 | 380,567 | 306,099 | ||||||||||||
| Total costs and expenses | 221,500 | 177,986 | 830,402 | 689,868 | ||||||||||||
| Operating income | 152,878 | 101,813 | 488,792 | 325,465 | ||||||||||||
| Interest income | 464 | 1,730 | 3,291 | 6,505 | ||||||||||||
| Interest (expense) | (133 | ) | (1,023 | ) | (726 | ) | (4,611 | ) | ||||||||
| Income before provision for income taxes | 153,209 | 102,520 | 491,357 | 327,359 | ||||||||||||
| Provision for income taxes | 59,568 | 39,666 | 191,094 | 125,854 | ||||||||||||
| Net income | $ | 93,641 | $ | 62,854 | $ | 300,263 | $ | 201,505 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 2.59 | $ | 1.62 | $ | 8.01 | $ | 5.18 | ||||||||
| Diluted | $ | 2.56 | $ | 1.61 | $ | 7.91 | $ | 5.13 | ||||||||
| Supplemental Data: | ||||||||||||||||
| Cost of educational services | 32.4 | % | 36.3 | % | 34.1 | % | 37.8 | % | ||||||||
| Student services and administrative expenses | 26.8 | % | 27.3 | % | 28.8 | % | 30.1 | % | ||||||||
| Operating margin | 40.8 | % | 36.4 | % | 37.1 | % | 32.1 | % | ||||||||
| Student enrollment at end of period | 80,766 | 61,983 | 80,766 | 61,983 | ||||||||||||
| Campuses at end of period | 121 | (c) | 105 | 121 | (c) | 105 | ||||||||||
| Shares for earnings per share calculation: | ||||||||||||||||
| Basic | 36,125,000 | 38,712,000 | 37,490,000 | 38,881,000 | ||||||||||||
| Diluted | 36,549,000 | 39,100,000 | 37,942,000 | 39,243,000 | ||||||||||||
| Effective tax rate | 38.9 | % | 38.7 | % | 38.9 | % | 38.4 | % | ||||||||
| (a) | In the fourth quarter of 2009, we changed our accounting for Direct Marketing Costs to expense those costs in the period incurred. Previously, we capitalized Direct Marketing Costs and amortized those costs over the period during which the associated revenue was recognized. If we had not changed our accounting for Direct Marketing Costs: · in the three months ended December 31, 2009, · our net income would have been approximately $384 higher, and · our diluted earnings per share would have been $0.01 higher; and · in the twelve months ended December 31, 2009, · our net income would have been approximately $2,974 higher, and · our diluted earnings per share would have been $0.08 higher. |
| (b) | Amounts for the three and twelve months ended December 31, 2008 have been retrospectively adjusted from amounts reported in prior periods for the change in accounting for Direct Marketing Costs. The change in accounting resulted in the previously reported amounts of our: · net income decreasing by $169 in the three months ended, and $1,467 in the twelve months ended, December 31, 2008; and · diluted earnings per share decreasing by $0.04 in the twelve months ended December 31, 2008. The change in accounting did not affect our reported diluted earnings per share in the three months ended December 31, 2008. |
| (c) | Includes the conversion of five learning sites to campuses. |
| ITT EDUCATIONAL SERVICES, INC. | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Three Months | Twelve Months | |||||||||||||||
| Ended December 31, | Ended December 31, | |||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| 2009 (a) | 2008 (b) | 2009 (a) | 2008 (b) | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||||
| Net income | $ | 93,641 | $ | 62,854 | $ | 300,263 | $ | 201,505 | ||||||||
| Adjustments to reconcile net income to net cash flows | ||||||||||||||||
| from operating activities: | ||||||||||||||||
| Depreciation and amortization | 6,704 | 5,895 | 24,908 | 22,230 | ||||||||||||
| Provision for doubtful accounts | 25,971 | 13,829 | 81,983 | 43,286 | ||||||||||||
| Deferred income taxes | 937 | (1,309 | ) | (3,066 | ) | (9,389 | ) | |||||||||
| Excess tax benefit from stock option exercises | (17 | ) | (385 | ) | (5,289 | ) | (1,158 | ) | ||||||||
| Stock-based compensation expense | 2,827 | 1,504 | 13,074 | 7,235 | ||||||||||||
| Other | (854 | ) | 1,554 | (1,163 | ) | 1,554 | ||||||||||
| Changes in operating assets and liabilities, net of acquisition: | ||||||||||||||||
| Restricted cash | 3,194 | (10,389 | ) | 5,775 | (4,350 | ) | ||||||||||
| Accounts receivable | (17,582 | ) | (10,299 | ) | (136,837 | ) | (57,933 | ) | ||||||||
| Accounts payable | (5,908 | ) | (3,966 | ) | 4,911 | 9,695 | ||||||||||
| Accrued income taxes | 2,318 | 13,630 | 1,010 | 10,163 | ||||||||||||
| Other operating assets and liabilities | 4,327 | (10,171 | ) | 5,334 | 1,042 | |||||||||||
| Deferred revenue | 27,986 | 20,162 | 10,355 | (50,921 | ) | |||||||||||
| Net cash flows from operating activities | 143,544 | 82,909 | 301,258 | 172,959 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||||
| Facility expenditures and land purchases | (1,720 | ) | (986 | ) | (4,236 | ) | (18,093 | ) | ||||||||
| Capital expenditures, net | (8,079 | ) | (5,440 | ) | (23,992 | ) | (17,543 | ) | ||||||||
| Acquisition of college, net of cash acquired | -- | -- | (20,792 | ) | -- | |||||||||||
| Proceeds from sales and maturities of investments | 99,586 | 120,994 | 242,327 | 1,085,559 | ||||||||||||
| Purchase of investments | (97,425 | ) | (109,275 | ) | (244,787 | ) | (920,480 | ) | ||||||||
| Issuance of note receivable | (1,531 | ) | -- | (18,225 | ) | -- | ||||||||||
| Proceeds from repayments of note receivable | 2,669 | -- | 5,374 | -- | ||||||||||||
| Net cash flows from investing activities | (6,500 | ) | 5,293 | (64,331 | ) | 129,443 | ||||||||||
| Cash flows from financing activities: | ||||||||||||||||
| Excess tax benefit from stock option exercises | 17 | 385 | 5,289 | 1,158 | ||||||||||||
| Proceeds from exercise of stock options | 50 | 970 | 8,800 | 3,241 | ||||||||||||
| Repurchase of common stock and shares tendered for taxes | (139,294 | ) | -- | (348,483 | ) | (87,774 | ) | |||||||||
| Net cash flows from financing activities | (139,227 | ) | 1,355 | (334,394 | ) | (83,375 | ) | |||||||||
| Net change in cash and cash equivalents | (2,183 | ) | 89,557 | (97,467 | ) | 219,027 | ||||||||||
| Cash and cash equivalents at beginning of period | 130,971 | 136,698 | 226,255 | 7,228 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 128,788 | $ | 226,255 | $ | 128,788 | $ | 226,255 | ||||||||
| (a) | Net cash flows from operating activities, investing activities and financing activities in the three and twelve months ended December 31, 2009 did not change as a result of the changes in accounting for Direct Marketing Costs. |
| (b) | Amounts for the three and twelve months ended December 31, 2008 have been retrospectively adjusted from amounts reported in prior periods for the change in accounting for Direct Marketing Costs. Net cash flows from operating activities, investing activities and financing activities in the three and twelve months ended December 31, 2008 did not change as a result of the change in accounting. |