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, Ind., Jan. 21 /PRNewswire-FirstCall/ — 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%
440 basis
Operating Margin 40.8% 36.4% 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 $274.1 $375.4 (27.0)%
Investments as of
December 31st
Bad Debt Expense as a
Percentage of 200 basis
Revenue 6.9% 4.9% 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 36,549,000 39,100,000
Stock Outstanding
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%
500 basis
Operating Margin 37.1% 32.1% points
Net Income $300.3 $201.5 49.0%
Earnings Per Share
(diluted) $7.91 $5.13 54.2%
Bad Debt Expense as a 190 basis
Percentage of Revenue 6.2% 4.3% points
Revenue Per Student $19,059 $18,162 4.9%
Weighted Average Diluted
Shares of Common 37,942,000 39,243,000
Stock Outstanding
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.