ESI

[BigSully1]

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

[BigSully1]

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

[BigSully1]

Educational stock APOL made breakout attempt today on great ER. STRA and CPLA made nice bounces. EDU (Chinese) hugging it's 50DMA.