ER looked very good to me, beat estimates again, increased guidance again, has been buying back stock. Maybe it didn't meet whisper #'s?, or probably just corrected along with the market. Anyway looks to be rebounding now. Strong volume Friday. Thinking about buying, still short on UTI.
http://stockcharts.com/h-sc/ui?s=ESI&p=D&b=5&g=0&id=p96979177857
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ITT Educational Services Inc.
13000 North Meridian Street
Carmel, IN 46032-1404
United States - Map
Phone: 317-706-9200
Fax: 317-594-4284
Web Site: http://www.ittesi.com
DETAILS
Index Membership: S&P 400 MidCap
S&P 1500 Super Comp
Sector: Services
Industry: Education & Training Services
Full Time Employees: 3,500
BUSINESS SUMMARY
ITT Educational Services, Inc. provides postsecondary degree programs in the United States. It offers diploma, associate, bachelor, and master degree programs in the fields of information technology, electronics technology, drafting and design, business, criminal justice, and health sciences. As of September 27, 2007, the company owned and operated 94 ITT Technical Institutes in 34 states, which primarily offered career-focused degree programs of study to approximately 47,000 students. ITT Educational Services was founded in 1946 and is headquartered in Carmel, Indiana.
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ITT Educational Services, Inc. Reports Results for the 2007 Third Quarter, Total Student Enrollment Increased 11.5%
CARMEL, Ind., Oct. 25 /PRNewswire-FirstCall/ -- ITT Educational Services, Inc. (NYSE: ESI - News), a leading provider of technology-oriented postsecondary degree programs, today reported that total student enrollment increased 11.5% to a record 53,675 students as of September 30, 2007 compared to 48,155 as of September 30, 2006. New student enrollment in the third quarter of 2007 increased 8.8% to 18,270 compared to 16,789 in the same period of 2006. The quarterly student persistence rate increased 120 basis points to 72.4% in the three months ended September 30, 2007 compared to 71.2% in the same prior year period.
Earnings per share ("EPS") in the third quarter of 2007 increased 27.3% to $0.98 compared to $0.77 in the third quarter of 2006. Revenue in the three months ended September 30, 2007 increased 14.9% to $217.9 million compared to $189.7 million in the three months ended September 30, 2006. Operating margin increased 190 basis points to 28.9% in the third quarter of 2007 compared to 27.0% in the same period in 2006.
The company provided the following information for the three and nine months ended September 30, 2007 and 2006:
Financial and Operating Data For The Three Months Ended September 30th,
Unless Otherwise Indicated
(Dollars in millions, except per share and per student data)
2007 2006 Increase/
(Decrease)
Revenue $217.9 $189.7 14.9%
Operating Income $62.9 $51.1 23.0%
Operating Margin 28.9% 27.0% 190 basis points
Net Income $39.7 $33.1 20.0%
Earnings Per Share (diluted) $0.98 $0.77 27.3%
New Student Enrollment 18,270 16,789 8.8%
Continuing Students 35,405 31,366 12.9%
Total Student Enrollment as
of September 30th 53,675 48,155 11.5%
Quarterly Persistence Rate (a) 72.4% 71.2% 120 basis points
Revenue Per Student $4,459 $4,308 3.5%
Cash and Cash Equivalents,
Restricted Cash and Investments
as of September 30th $273.3 $188.6 44.9%
Bad Debt Expense as a
Percentage of Revenue 1.8% 1.1% 70 basis points
Days Sales Outstanding as
of September 30th 6.9 days 5.9 days 1.0 days
Deferred Revenue as of
September 30th $192.7 $199.7 (3.5)%
Debt $150.0 $-- --
Weighted Average Diluted
Shares of Common Stock
Outstanding 40,572,000 42,703,000 (5.0)%
Shares of Common Stock
Repurchased 829,100 (B) 1,153,900 © --
Land and Building Purchases $2.8 (D) $5.9 (D) (53.6)%
Number of New Colleges
in Operation 2 -- --
Number of New Learning
Sites in Operation -- 1 --
Capital Expenditures, Net $4.4 $7.6 (42.1)%
Financial and Operating Data For The Nine Months Ended September 30th
(Dollars in millions, except per share and per student data)
2007 2006 Increase/
(Decrease)
Revenue $639.1 $551.6 15.9%
Operating Income $164.7 $118.0 39.6%
Operating Margin 25.8% 21.4% 440 basis points
Net Income $103.1 $77.6 32.8%
Earnings Per Share (diluted) $2.51 $1.76 42.6%
Bad Debt Expense as a
Percentage of Revenue 2.2% 1.4% 80 basis points
Revenue Per Student $13,215 $12,640 4.5%
Weighted Average Diluted
Shares of Common Stock
Outstanding 41,087,000 44,181,000 (7.0)%
Shares of Common Stock
Repurchased 2,359,000 (E) 5,040,100 (F) --
Land and Building
Purchases $11.5 (G) $16.8 (H) (31.6)%
Number of New Colleges
in Operation 8 3 --
Number of New Learning
Sites in Operation -- 4 --
Capital Expenditures, Net $11.3 $20.7 (45.4)%
(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 $87.3 million or at an average price of $105.31 per
share.
© For approximately $77.1 million or at an average price of $66.84 per
share.
(D) Represents costs associated with purchasing, renovating, expanding or
constructing buildings at eight of the company's locations.
(E) For approximately $228.1 million or at an average price of $96.68 per
share.
(F) For approximately $323.8 million or at an average price of $64.24 per
share.
(G) Represents costs associated with purchasing, renovating, expanding or
constructing buildings at 14 of the company's locations.
(H) Represents costs associated with purchasing, renovating, expanding or
constructing buildings at 13 of the company's locations.
Kevin M. Modany, CEO and President of ITT/ESI, said, "We are extremely pleased with the outstanding third quarter financial and operating results produced by our management team and with their continued success in executing our growth strategy. This strong performance exceeded our expectations and, as a result, we are once again raising our internal goal for 2007 EPS from the range of $3.45 to $3.55 to a revised range of $3.65 to $3.68."
Modany continued, "As planned, our marketing expenditures increased 20.2% in the third quarter compared to the same period in 2006, primarily due to incremental advertising associated with introducing new programs and opening new colleges. Advertising rates charged by certain media sources in the third quarter of 2007 were not as high as in the second quarter and remained at an acceptable level as we entered the final quarter of the year. The response to the marketing of our programs of study has been very strong so far in the fourth quarter, and we are optimistic that we can continue producing solid results in line with our internal goals. We believe that the year-over-year percentage increase in marketing expenditures in the fourth quarter of 2007 will be similar to the year-over-year percentage increase in marketing expenditures that we experienced in the third quarter, as we continue to promote new locations and new programs of study."
Modany observed that, "Our quarterly persistence rate increased 120 basis points to 72.4% in the third quarter compared to 71.2% in the same period in 2006. We believe that the higher student persistence is directly related to the modifications that we made to our hybrid delivery model and the dedication and commitment of our college management and faculty to improve student success rates. We believe that the quarterly persistence rate can continue to increase year-over-year in future quarters, but at a more moderate rate."
Modany added, "We have obtained the requisite regulatory approvals to begin offering our new:
-- associate degree program in Visual Communications in residence at 24 of
our colleges;
-- associate degree program in Web Design online through our college in
Indianapolis; and
-- associate degree program in Computer Forensics online through our
college in Indianapolis.
We expect to start classes in these new programs at select colleges in the academic quarter that begins in December 2007."
Modany reported that, "Operations at our 94th college in Chattanooga, TN and our 95th college in Atlanta, GA began in the third quarter of 2007. During the first nine months of 2007, we began operations at eight new colleges. Operations at our 96th college in High Point, NC near Greensboro began in the fourth quarter of 2007, bringing to nine the total number of new colleges that we have opened in 2007. As a result, we have exceeded our internal goal of opening between six and eight new locations in 2007."
Daniel M. Fitzpatrick, Senior Vice President and CFO of ITT/ESI, said, "Our third quarter financial results were exceptionally strong and exceeded our internal goals. Revenue increased 14.9% to $217.9 million in the three months ended September 30, 2007 compared to $189.7 million in the same period in 2006. The increase in revenue was primarily due to increases in student enrollment, tuition rates and student persistence. The revenue increase was partially offset by lower laptop computer sales to our students. Revenue per student, excluding laptop computer sales, increased 4.9% in the third quarter of 2007 compared to the same period in the prior year."
Fitzpatrick continued, "Operating margin in the three months ended September 30, 2007 increased 190 basis points to 28.9% compared to 27.0% in the third quarter of 2006. This increase was primarily due to further leveraging of our fixed operating costs and additional operating efficiencies related to our delivery of educational services."
Fitzpatrick further noted, "In the three months ended September 30, 2007, we repurchased 829,100 shares of our common stock at an average purchase price of $105.31 per share, or $87.3 million in total. There are approximately 5.3 million shares of our common stock remaining to be repurchased under our current share repurchase program. We intend to continue repurchasing our shares subject to market conditions and maintaining compliance with the U.S. Department of Education's financial responsibility ratios."
Fitzpatrick added, "On September 27, 2007, President Bush signed into law the College Cost Reduction and Access Act ("CCRAA"). The new law increases the maximum Pell Grant award available to eligible students by approximately 25% over the next five years to $5,400 per academic year. We are very pleased with the CCRAA and applaud Congress and the President for increasing access to higher education. In addition, we recently entered into a new agreement with an unaffiliated lender to provide supplemental loans to our students to help them pay the cost of their education that federal and state financial aid does not cover. We believe that the increased Pell Grant awards under the CCRAA and our new agreement that provides supplemental education loans to our students will help eligible students access sufficient financial aid to pay the cost of their ITT Technical Institute education."
Fitzpatrick said, "Bad debt expense as a percentage of revenue increased to 1.8% in the three months ended September 30, 2007 compared to 1.1% in the same period in 2006. We believe that our bad debt expense will continue to be in the historical range of 1.0% to 3.0% of revenue. Days sales outstanding as of September 30, 2007 were 6.9 days, a 1.0 day increase, compared to 5.9 days at the same point in 2006."
Fitzpatrick closed by noting, "The fundamentals of the company remain extremely strong, and we are on track to achieve our internal operating goals for 2007."
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; 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 student loans; 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
September December September
30, 2007 31, 2006 30, 2006
(unaudited) (unaudited)
Assets
Current assets:
Cash and cash equivalents $10,322 $161,905 $4,661
Short-term investments 261,760 195,007 183,464
Accounts receivable, net 16,351 9,367 12,172
Deferred income taxes 10,216 4,771 5,538
Prepaid expenses and other
current assets 11,825 9,902 11,385
Total current assets 310,474 380,952 217,220
Property and equipment, net 153,394 148,411 149,751
Direct marketing costs, net 21,195 21,628 20,560
Other assets 12,285 9,329 19,734
Total assets $497,348 $560,320 $407,265
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $42,857 $-- $--
Accounts payable 57,658 47,948 53,875
Accrued compensation and
benefits 16,515 13,899 9,760
Other accrued liabilities 12,947 20,496 17,902
Deferred revenue 192,673 202,162 199,741
Total current liabilities 322,650 284,505 281,278
Long-term debt 107,143 150,000 --
Deferred income taxes 11,768 13,713 13,950
Minimum pension liability -- -- 9,899
Other liabilities 15,766 8,157 7,687
Total liabilities 457,327 456,375 312,814
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 6,790 46,982 54,729
Retained earnings 613,487 508,195 467,316
Accumulated other comprehensive
(loss) (6,280) (6,533) (6,016)
Treasury stock, 14,316,212,
13,029,471 and 12,702,130
shares, at cost (574,517) (445,240) (422,119)
Total shareholders' equity 40,021 103,945 94,451
Total liabilities and
shareholders' equity $497,348 $560,320 $407,265
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)
2007 2006 2007 2006
Revenue $217,932 $189,667 $639,084 $551,551
Costs and expenses:
Cost of educational
services 88,822 84,554 270,173 267,472
Student services and
administrative expenses 66,192 53,969 204,210 166,546
Special legal and other
investigation costs -- -- -- (430)
Total costs and expenses 155,014 138,523 474,383 433,588
Operating income 62,918 51,144 164,701 117,963
Interest income, net 313 1,740 1,877 6,257
Income before provision
for income taxes 63,231 52,884 166,578 124,220
Provision for income taxes 23,563 19,832 63,455 46,583
Net income $39,668 $33,052 $103,123 $77,637
Earnings per share:
Basic $0.99 $0.79 $2.55 $1.80
Diluted $0.98 $0.77 $2.51 $1.76
Supplemental Data:
Cost of educational services 40.7% 44.6% 42.3% 48.4%
Student services and
administrative expenses 30.4% 28.4% 31.9% 30.2%
Special legal and other
investigation costs 0.0% 0.0% 0.0% 0.0%
Operating margin 28.9% 27.0% 25.8% 21.4%
Student enrollment at end
of period 53,675 48,155 53,675 48,155
Technical institutes at
end of period 95 87 95 87
Shares for earnings per
share calculation:
Basic 39,958,000 41,810,000 40,437,000 43,248,000
Diluted 40,572,000 42,703,000 41,087,000 44,181,000
Effective tax rate 37.3% 37.5% 38.1% 37.5%
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)
2007 2006 2007 2006
Cash flows from operating
activities:
Net income $39,668 $33,052 $103,123 $77,637
Adjustments to reconcile
net income to net cash
flows from operating
activities:
Depreciation and
amortization 5,030 5,115 17,770 15,109
Provision for
doubtful accounts 3,845 2,156 13,835 7,488
Deferred income
taxes (839) (1,911) (7,390) (2,769)
Excess tax benefit
from stock option
exercises (6,280) (3,302) (29,554) (10,268)
Stock-based compensation
expense 896 543 4,067 2,777
Changes in operating assets
and liabilities:
Accounts receivable (10,266) (4,592) (20,819) (5,671)
Direct marketing
costs, net 12 (968) 433 (3,070)
Accounts payable (2,459) (6,035) 9,710 (2,226)
Other operating
assets and
liabilities 23,050 7,691 30,290 5,536
Deferred revenue 281 25,676 (9,489) 24,287
Net cash flows from operating
activities 52,938 57,425 111,976 108,830
Cash flows from investing activities:
Facility expenditures and
land purchases (2,764) (5,951) (11,460) (16,764)
Capital expenditures, net (4,351) (7,601) (11,293) (20,690)
Proceeds from sales and
maturities of investments 440,766 397,799 1,625,072 1,203,920
Purchase of investments (412,241) (375,309) (1,691,825) (989,694)
Net cash flows from investing
activities 21,410 8,938 (89,506) 176,772
Cash flows from financing activities:
Excess tax benefit from
stock option exercises 6,280 3,302 29,554 10,268
Proceeds from exercise of
stock options 6,931 4,049 24,472 18,816
Repurchase of common stock (87,316) (77,126) (228,079) (323,760)
Net cash flows from financing
activities (74,105) (69,775) (174,053) (294,676)
Net change in cash and cash
equivalents 243 (3,412) (151,583) (9,074)
Cash and cash equivalents at
beginning of period 10,079 8,073 161,905 13,735
Cash and cash equivalents at
end of period $10,322 $4,661 $10,322 $4,661
I thought about buying this one, but glad I didn't. IBD explains why it's very important to use both fundamental and technical analysis when making an investment decision.
Today's IBD Daily stock Analysis; on ESI
http://www.investors.com/MediaCenter/?MediaID=760&t=V
Educational stock APOL made breakout attempt today on great ER. STRA and CPLA made nice bounces. EDU (Chinese) hugging it's 50DMA.