ITT EDUCATIONAL SERVICES, INC.
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(Exact name of registrant as specified in its charter)
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Delaware
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1-13144
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36-2061311
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(State or other
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(Commission
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(IRS Employer
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jurisdiction of
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File Number)
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Identification No.)
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incorporation)
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13000 North Meridian Street
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Carmel, Indiana 46032-1404
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (317) 706-9200
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02.
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Results of Operations and Financial Condition.
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(d)
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Exhibits:
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99.1
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Text of Press Release issued by the Registrant dated April 21, 2011.
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Financial and Operating Data for the Three Months Ended March 31st, Unless Otherwise Indicated
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(Dollars in millions, except per share and per student data)
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2011
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2010
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Increase/
(Decrease)
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Revenue
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$ | 383.2 | $ | 384.0 | (0.2 | )% | ||||||
Operating Income
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$ | 140.7 | $ | 142.6 | (1.4 | )% | ||||||
Operating Margin
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36.7 | % | 37.1 | % |
(40) basis points
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Net Income
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$ | 85.4 | $ | 87.5 | (2.4 | )% | ||||||
Earnings Per Share (diluted)
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$ | 2.91 | $ | 2.46 | 18.3 | % | ||||||
New Student Enrollment
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21,761 | 23,064 | (5.6 | )% | ||||||||
Continuing Students
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62,269 | 61,491 | 1.3 | % | ||||||||
Total Student Enrollment as of March 31st
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84,030 | 84,555 | (0.6 | )% | ||||||||
Persistence Rate as of March 31st (A)
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73.5 | % | 76.1 | % |
(260) basis points
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Revenue Per Student
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$ | 4,525 | $ | 4,754 | (4.8 | )% | ||||||
Cash and Cash Equivalents, Restricted Cash and Investments as of March 31st
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$ | 342.4 | $ | 327.0 | 4.7 | % | ||||||
Bad Debt Expense as a Percentage of Revenue
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3.3 | % | 5.9 | % |
(260) basis points
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Days Sales Outstanding as of March 31st
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14.0 days
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20.7 days
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(6.7) days
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Deferred Revenue as of March 31st
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$ | 265.5 | $ | 191.8 | 38.4 | % | ||||||
Debt as of March 31st
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$ | 150.0 | $ | 150.0 | ||||||||
Weighted Average Diluted Shares of Common Stock Outstanding
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29,312,000 | 35,499,000 | ||||||||||
Shares of Common Stock Repurchased
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2,000,000 | (B) | 952,500 | (C) | ||||||||
Land and Building Purchases and Renovations
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$ | 0.5 | (D) | $ | 0.8 | (E) | (40.2 | )% | ||||
Number of New Colleges in Operation
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0 | 2 | ||||||||||
Capital Expenditures, Net
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$ | 4.7 | $ | 5.3 | (11.3 | )% |
(A)
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Represents the number of Continuing Students in the academic term, divided by the Total Student Enrollment in the immediately preceding academic term.
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(B)
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For approximately $139.1 million or at an average price of $69.55 per share.
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(C)
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For approximately $95.0 million or at an average price of $99.76 per share.
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(D)
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Represents costs associated with renovating, expanding or constructing buildings at eight of the company’s locations.
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(E)
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Represents costs associated with renovating, expanding or constructing buildings at nine of the company’s locations.
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ITT EDUCATIONAL SERVICES, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(Dollars in thousands, except per share data)
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As of
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March 31, 2011
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December 31, 2010
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March 31, 2010
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(unaudited)
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(unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 187,922 | $ | 163,779 | $ | 165,544 | ||||||
Short-term investments
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152,612 | 149,160 | 56,143 | |||||||||
Restricted cash
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1,820 | 255 | 5,298 | |||||||||
Accounts receivable, net
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59,798 | 68,937 | 88,290 | |||||||||
Deferred income taxes
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5,402 | 9,079 | 13,321 | |||||||||
Prepaid expenses and other current assets
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24,388 | 22,887 | 19,735 | |||||||||
Total current assets
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431,942 | 414,097 | 448,331 | |||||||||
Property and equipment, net
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196,579 | 198,213 | 191,438 | |||||||||
Deferred income taxes
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28,125 | 21,814 | 9,720 | |||||||||
Other assets
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44,869 | 40,656 | 27,900 | |||||||||
Total assets
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$ | 701,515 | $ | 674,780 | $ | 677,389 | ||||||
Liabilities and Shareholders' Equity
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Current liabilities:
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Accounts payable
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$ | 72,689 | $ | 67,920 | $ | 68,474 | ||||||
Accrued compensation and benefits
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19,345 | 28,428 | 17,465 | |||||||||
Other current liabilities
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61,321 | 15,441 | 65,851 | |||||||||
Deferred revenue
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265,540 | 244,362 | 191,795 | |||||||||
Total current liabilities
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418,895 | 356,151 | 343,585 | |||||||||
Long-term debt
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150,000 | 150,000 | 150,000 | |||||||||
Other liabilities
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52,151 | 40,559 | 28,294 | |||||||||
Total liabilities
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621,046 | 546,710 | 521,879 | |||||||||
Shareholders' equity:
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Preferred stock, $.01 par value,
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5,000,000 shares authorized, none issued
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0 | 0 | 0 | |||||||||
Common stock, $.01 par value, 300,000,000 shares authorized,
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37,068,904, 37,068,904 and 54,068,904 issued
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371 | 371 | 541 | |||||||||
Capital surplus
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177,594 | 173,935 | 160,371 | |||||||||
Retained earnings
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607,765 | 524,678 | 1,090,413 | |||||||||
Accumulated other comprehensive (loss)
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(4,563 | ) | (4,509 | ) | (9,851 | ) | ||||||
Treasury stock, 8,999,196, 7,075,563 and 19,531,095 shares at cost
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(700,698 | ) | (566,405 | ) | (1,085,964 | ) | ||||||
Total shareholders' equity
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80,469 | 128,070 | 155,510 | |||||||||
Total liabilities and shareholders' equity
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$ | 701,515 | $ | 674,780 | $ | 677,389 |
ITT EDUCATIONAL SERVICES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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(Dollars in thousands, except per share data)
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Three Months
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Ended March 31,
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(unaudited)
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2011
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2010
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Revenue
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$ | 383,171 | $ | 383,957 | ||||
Costs and expenses:
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Cost of educational services
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137,926 | 134,382 | ||||||
Student services and administrative expenses
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104,583 | 106,960 | ||||||
Total costs and expenses
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242,509 | 241,342 | ||||||
Operating income
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140,662 | 142,615 | ||||||
Interest income
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835 | 709 | ||||||
Interest (expense)
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(557 | ) | (420 | ) | ||||
Income before provision for income taxes
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140,940 | 142,904 | ||||||
Provision for income taxes
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55,554 | 55,453 | ||||||
Net income
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$ | 85,386 | $ | 87,451 | ||||
Earnings per share:
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Basic
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$ | 2.94 | $ | 2.50 | ||||
Diluted
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$ | 2.91 | $ | 2.46 | ||||
Supplemental Data:
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Cost of educational services
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36.0 | % | 35.0 | % | ||||
Student services and administrative expenses
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27.3 | % | 27.9 | % | ||||
Operating margin
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36.7 | % | 37.1 | % | ||||
Student enrollment at end of period
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84,030 | 84,555 | ||||||
Campuses at end of period
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130 | 123 | ||||||
Shares for earnings per share calculation:
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Basic
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29,085,000 | 35,028,000 | ||||||
Diluted
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29,312,000 | 35,499,000 | ||||||
Effective tax rate
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39.4 | % | 38.8 | % |
ITT EDUCATIONAL SERVICES, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Dollars in thousands)
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Three Months
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Ended March 31,
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(unaudited)
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2011
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2010
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Cash flows from operating activities:
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Net income
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$ | 85,386 | $ | 87,451 | ||||
Adjustments to reconcile net income to net cash flows
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from operating activities:
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Depreciation and amortization
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6,842 | 6,758 | ||||||
Provision for doubtful accounts
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12,667 | 22,765 | ||||||
Deferred income taxes
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(2,685 | ) | (2,978 | ) | ||||
Excess tax benefit from stock option exercises
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(351 | ) | (921 | ) | ||||
Stock-based compensation expense
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3,914 | 4,813 | ||||||
Other
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(1,430 | ) | 156 | |||||
Changes in operating assets and liabilities:
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Restricted cash
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(1,565 | ) | (3,407 | ) | ||||
Accounts receivable
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(3,528 | ) | (25,629 | ) | ||||
Accounts payable
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4,769 | 7,199 | ||||||
Other operating assets and liabilities
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56,922 | 43,051 | ||||||
Deferred revenue
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21,178 | 19,862 | ||||||
Net cash flows from operating activities
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182,119 | 159,120 | ||||||
Cash flows from investing activities:
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Facility expenditures and land purchases
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(502 | ) | (839 | ) | ||||
Capital expenditures, net
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(4,699 | ) | (5,298 | ) | ||||
Proceeds from sales and maturities of investments and repayment of notes
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142,085 | 84,698 | ||||||
Purchase of investments and note advances
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(158,589 | ) | (107,172 | ) | ||||
Net cash flows from investing activities
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(21,705 | ) | (28,611 | ) | ||||
Cash flows from financing activities:
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Excess tax benefit from stock option exercises
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351 | 921 | ||||||
Proceeds from exercise of stock options
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3,028 | 1,026 | ||||||
Repurchase of common stock and shares tendered for taxes
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(139,650 | ) | (95,700 | ) | ||||
Net cash flows from financing activities
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(136,271 | ) | (93,753 | ) | ||||
Net change in cash and cash equivalents
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24,143 | 36,756 | ||||||
Cash and cash equivalents at beginning of period
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163,779 | 128,788 | ||||||
Cash and cash equivalents at end of period
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$ | 187,922 | $ | 165,544 |