EXHIBIT 99.1
ITT EDUCATIONAL SERVICES, INC. REPORTS YEAR-END RESULTS
INDIANAPOLIS, IN, JANUARY 11, 1999--ITT Educational Services, Inc. (NYSE:ESI), a
leading proprietary provider of technology-oriented postsecondary degree
programs, today reported record annual revenues of $291.4 million for 1998, an
increase of 11.4 percent over the $261.6 million for 1997. Net income for fiscal
year 1998 was $13.9 million, or $0.51 per share, compared with $19.1 million, or
$0.71 per share, for 1997. Previously announced one-time expenses for the year
include proposed student litigation settlement costs, expenses associated with a
secondary stock offering in June 1998 and expenses associated with a change in
control of ESI in February 1998. The combined total of these one-time expenses
amounted to approximately $9.2 million after tax, or approximately $0.34 per
share. Excluding these one-time expenses, net income for 1998 would have been
$23.2 million, or $0.85 per share. Operating margins, excluding the one-time
expenses, increased significantly during 1998, rising to 11.4 percent from 10.0
percent in 1997.
For the three months ended December 31, 1998, ESI reported net income of $5.2
million, or $0.19 per share, compared with net income of $3.8 million, or $0.14
per share, for the fourth quarter of 1997. Revenues for the fourth quarter of
1998 were $72.3 million, an increase of 10 percent, compared with $65.7 million
for the same period in 1997.
ESI's quarterly results of operations tend to fluctuate significantly within a
fiscal year because of differences in the number of weeks of earned tuition
revenue in each fiscal quarter and the timing of student matriculations. The
first and third fiscal quarters have 13 weeks of earned tuition revenue, while
the second and fourth quarters have only 11 weeks of earned tuition revenue
because of two-week breaks in June and December.
ESI previously reported that new student enrollment at its ITT Technical
Institutes for the December 1998 term increased approximately 7 percent to 4,053
compared with 3,799 for the December 1997 term. As of December 31, 1998, total
student enrollment increased approximately 5 percent to 25,608 from 24,498 a
year ago.
"Excluding the one-time expenses, we delivered annual results in line with
expectations," said Rene R. Champagne, chairman, president and chief executive
officer. "With continued growth in enrollments, we should be able to realize
further improvement in our profit margins over time. We will continue adding
bachelor's degree programs and other new programs at our existing ITT Technical
Institutes, which can also improve our returns. For the coming year, as
previously announced, we plan to add 35 program offerings at our existing
institutes. Our Computer Network Systems Technology program should be introduced
at approximately 27 institutes in 1999."
Champagne concluded, "We remain focused on executing our growth plans. In
addition to introducing our new IT-related programs this year, we are preparing
for new institute openings in the Syracuse, Richmond, New Orleans and Boston
areas."
ITT EDUCATIONAL SERVICES, INC.
Analysis of One-Time Expenses
Twelve Months
Ended December 31
--------------------------------------
1998 1997
----------------- -----------------
Per Per
Amount Share Amount Share
----------------- -----------------
Net income $ 13,941 $ 0.51 $ 19,123 $ 0.71
Legal settlement
(after tax) 7,715 0.28
Offering expense
(after tax) 1,048 0.02
Change in control
and other one-time
expenses (after-tax) 453 0.04
----------------- -----------------
Net income before
one-time expenses $ 23,157 $ 0.85 $ 19,123 $ 0.71
================= =================
ESI operates 65 ITT Technical Institutes in 27 states which provide
career-focused postsecondary programs of study in fields of technology to
approximately 25,000 students.
ESI has filed a registration statement with the Securities and Exchange
Commission, which is not yet effective, relating to a proposed underwritten
public offering of 7,000,000 shares together with a potential over-allotment of
950,000 shares of ESI common stock held by ITT Corporation (the "Offering").
These securities may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This announcement shall not
constitute an offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
A copy of the written prospectus relating to the Offering may be obtained from
the managers of the Offering through the Prospectus Department--Credit Suisse
First Boston, 11 Madison Avenue, New York, NY 10010 or Salomon Smith Barney,
140 58th Street, 8th Floor, Brooklyn, NY 11220.
Except for the historical information contained herein, the matters discussed in
this press release are forward looking statements that 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 consummation of the proposed settlements of student litigation
related to the Company's technology programs in California and the Company's
hospitality programs; 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; receptivity of students and employers to the
Company's existing program offerings and new curricula; loss of lender access to
the Company's students for student loans; a substantial increase in the shares
of Common Stock available for sale in the market if some or all of ITT
Corporation's Common Stock holdings are divested; and other risks and
uncertainties detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
-FINANCIALS TO FOLLOW-
For more information on ITT Educational Services, Inc. via facsimile at no cost,
simply dial 1-800-PRO-INFO and enter the company code ESI.
ITT EDUCATIONAL SERVICES, INC.
STATEMENTS OF INCOME
(In thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
1998 1997 1998 1997
Revenues
Tuition $ 62,400 $ 56,609 $248,399 $222,457
Other educational 9,911 9,107 42,976 39,207
--------- -------- -------- --------
Total revenues 72,311 65,716 291,375 261,664
--------- -------- -------- --------
Costs and Expenses
Cost of educational services 44,301 43,646 176,487 163,053
Student services and administrative expenses 20,759 17,237 81,522 72,388
Legal settlement -- -- 12,858 --
Offering, change in control and
other one-time expenses -- -- 1,872 --
--------- -------- -------- --------
Total costs and expenses 65,060 60,883 272,739 235,441
--------- -------- -------- --------
Operating income 7,251 4,833 18,636 26,223
Interest income, net 1,477 1,514 5,329 5,565
--------- -------- -------- --------
Income before income taxes 8,728 6,347 23,965 31,788
Income taxes 3,552 2,489 10,024 12,665
--------- -------- -------- --------
Net income $ 5,176 $ 3,858 $ 13,941 $ 19,123
========= ======== ======== ========
Earnings per common share:
Basic $ 0.19 $ 0.14 $ 0.52 $ 0.71
Diluted $ 0.19 $ 0.14 $ 0.51 $ 0.71
Supplemental Data:
Cost of educational services 61.3% 66.4% 60.6% 62.3%
Student services and administrative expenses 28.7% 26.2% 28.0% 27.7%
Legal settlements -- -- 4.4% --
Offering, change in control
and other one-time expenses -- -- 0.6% --
Operating margin 10.0% 7.4% 6.4% 10.0%
Operating losses from new institutes
(after-tax) $ 830 $ 344 $ 3,154 $ 1,899
Student enrollment at end of period 25,608 24,498 25,608 24,498
Technical institutes at end of period 65 62 65 62
Shares for earnings per share calculation:
Basic 27,006 27,000 27,002 27,000
Diluted 27,210 27,105 27,186 27,105
ITT EDUCATIONAL SERVICES, INC.
BALANCE SHEETS
(In thousands, except per share data)
December 31,
--------------------------
1998 1997
-------- --------
Assets
Current assets
Cash and cash equivalents $ 77,335 $ 29
Restricted cash 3,617 3,860
Cash invested with ITT Corporation -- 94,800
Marketable debt securities 38,316 --
Accounts receivable, net 10,772 9,680
Deferred income tax 5,969 2,019
Prepaids and other current assets 2,749 2,570
-------- --------
Total current assets 138,758 112,958
Property and equipment, net 24,985 22,886
Direct marketing costs 7,915 6,882
Other assets 3,913 3,188
-------- --------
Total assets $175,571 $145,914
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 15,992 $ 14,974
Accrued compensation and benefits 6,488 3,245
Accrued legal settlements 7,604 --
Other accrued liabilities 7,896 6,877
Deferred tuition revenue 32,261 30,850
-------- --------
Total current liabilities 70,241 55,946
Other liabilities 3,474 2,153
-------- --------
Total liabilities 73,715 58,099
-------- --------
Shareholders' equity
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued or outstanding -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 27,011,202 and 26,999,952 issued
and outstanding 270 270
Capital surplus 32,613 32,513
Retained earnings 68,973 55,032
-------- --------
Total shareholders' equity 101,856 87,815
-------- --------
Total liabilities and shareholders' equity $175,571 $145,914
======== ========