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 January 26, 2012.
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Financial and Operating Data for the Three Months Ended December 31st, Unless Otherwise Indicated
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(Dollars in millions, except per share and per student data)
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Increase/
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2011
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2010
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(Decrease)
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Revenue
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$ | 368.3 | $ | 410.1 | (10.2 | )% | ||||||
Operating Income
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$ | 126.6 | $ | 162.4 | (22.1 | )% | ||||||
Operating Margin
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34.4 | % | 39.6 | % |
(520) basis points
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Net Income
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$ | 76.0 | $ | 97.5 | (22.0 | )% | ||||||
Earnings Per Share (diluted)
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$ | 2.87 | $ | 3.14 | (8.6 | )% | ||||||
New Student Enrollment
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15,125 | 17,722 | (14.7 | )% | ||||||||
Continuing Students
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58,130 | 66,964 | (13.2 | )% | ||||||||
Total Student Enrollment as of December 31st
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73,255 | 84,686 | (13.5 | )% | ||||||||
Persistence Rate as of December 31st (A)
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73.4 | % | 76.1 | % |
(270) basis points
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Revenue Per Student
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$ | 4,649 | $ | 4,660 | (0.2 | )% | ||||||
Cash and Cash Equivalents, Restricted Cash and
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Investments as of December 31st
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$ | 379.6 | $ | 313.2 | 21.2 | % | ||||||
Bad Debt Expense as a Percentage of Revenue
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4.7 | % | 4.6 | % |
10 basis points
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Days Sales Outstanding as of December 31st
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12.0 days
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15.5 days
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(3.5) days
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Deferred Revenue as of December 31st
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$ | 226.5 | $ | 244.4 | (7.3 | )% | ||||||
Debt as of December 31st
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$ | 150.0 | $ | 150.0 | ||||||||
Weighted Average Diluted Shares of Common Stock Outstanding
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26,527,000 | 31,025,000 | ||||||||||
Shares of Common Stock Repurchased
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570,000 | (B) | 1,930,000 | (C) | ||||||||
Land and Building Purchases and Renovations
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$ | 0.9 | (D) | $ | 1.8 | (E) | (47.2 | )% | ||||
Number of New Colleges in Operation
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5 | 4 | ||||||||||
Capital Expenditures, Net
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$ | 6.8 | $ | 6.2 | 10.5 | % |
Financial and Operating Data for the Twelve Months Ended December 31st
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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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$ | 1,500.0 | $ | 1,596.5 | (6.0 | )% | ||||||
Operating Income
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$ | 507.1 | $ | 613.5 | (17.4 | )% | ||||||
Operating Margin
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33.8 | % | 38.4 | % |
(460) basis points
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Net Income
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$ | 307.8 | $ | 374.2 | (17.7 | )% | ||||||
Earnings Per Share (diluted)
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$ | 11.13 | $ | 11.17 | (0.4 | )% | ||||||
Bad Debt Expense as a Percentage of Revenue
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4.1 | % | 5.4 | % |
(130) basis points
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Revenue Per Student
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$ | 18,370 | $ | 18,897 | (2.8 | )% | ||||||
Weighted Average Diluted Shares of Common Stock Outstanding
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27,655,000 | 33,501,000 | ||||||||||
Shares of Common Stock Repurchased
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4,040,000 | (F) | 5,657,500 | (G) | ||||||||
Land and Building Purchases and Renovations
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$ | 4.1 | (H) | $ | 6.1 | (I) | (33.8 | )% | ||||
Number of New Colleges in Operation
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11 | 9 | ||||||||||
Capital Expenditures, Net
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$ | 26.9 | $ | 26.8 | 0.1 | % |
(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 $34.6 million or at an average price of $60.71 per share.
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(C)
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For approximately $119.7 million or at an average price of $62.02 per share.
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(D)
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Represents costs associated with renovating, expanding or constructing buildings at 12 of the company’s locations.
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(E)
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Represents costs associated with renovating, expanding or constructing buildings at seven of the company’s locations.
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(F)
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For approximately $282.7 million or at an average price of $69.98 per share.
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(G)
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For approximately $434.7 million or at an average price of $76.83 per share.
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(H)
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Represents costs associated with renovating, expanding or constructing buildings at 14 of the company’s locations.
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(I)
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Represents costs associated with renovating, expanding or constructing buildings at 18 of the company’s locations.
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ITT EDUCATIONAL SERVICES, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(Dollars in thousands, except per share data)
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As of
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December 31, 2011
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December 31, 2010
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(unaudited)
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Assets
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Current assets:
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Cash and cash equivalents
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$ | 228,993 | $ | 163,779 | ||||
Short-term investments
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148,488 | 149,160 | ||||||
Restricted cash
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2,128 | 255 | ||||||
Accounts receivable, net
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48,106 | 68,937 | ||||||
Deferred income taxes
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9,759 | 9,079 | ||||||
Prepaid expenses and other current assets
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18,814 | 22,887 | ||||||
Total current assets
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456,288 | 414,097 | ||||||
Property and equipment, net
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201,257 | 198,213 | ||||||
Deferred income taxes
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33,267 | 21,814 | ||||||
Other assets
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38,006 | 40,656 | ||||||
Total assets
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$ | 728,818 | $ | 674,780 | ||||
Liabilities and Shareholders' Equity
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Current liabilities:
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Accounts payable
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$ | 78,876 | $ | 67,920 | ||||
Accrued compensation and benefits
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21,438 | 28,428 | ||||||
Other current liabilities
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18,190 | 15,441 | ||||||
Deferred revenue
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226,543 | 244,362 | ||||||
Total current liabilities
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345,047 | 356,151 | ||||||
Long-term debt
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150,000 | 150,000 | ||||||
Other liabilities
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64,972 | 40,559 | ||||||
Total liabilities
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560,019 | 546,710 | ||||||
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 | ||||||
Common stock, $.01 par value, 300,000,000 shares authorized, 37,068,904 issued
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371 | 371 | ||||||
Capital surplus
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189,573 | 173,935 | ||||||
Retained earnings
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827,675 | 524,678 | ||||||
Accumulated other comprehensive (loss)
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(9,479 | ) | (4,509 | ) | ||||
Treasury stock, 10,969,425 and 7,075,563 shares at cost
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(839,341 | ) | (566,405 | ) | ||||
Total shareholders' equity
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168,799 | 128,070 | ||||||
Total liabilities and shareholders' equity
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$ | 728,818 | $ | 674,780 |
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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Twelve Months
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Ended December 31,
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Ended December 31,
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(unaudited)
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(unaudited)
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2011
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2010
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2011
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2010
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Revenue
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$ | 368,263 | $ | 410,126 | $ | 1,499,949 | $ | 1,596,529 | ||||||||
Costs and expenses:
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Cost of educational services
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131,605 | 135,232 | 553,065 | 537,855 | ||||||||||||
Student services and administrative expenses
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110,087 | 112,505 | 439,808 | 445,125 | ||||||||||||
Total costs and expenses
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241,692 | 247,737 | 992,873 | 982,980 | ||||||||||||
Operating income
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126,571 | 162,389 | 507,076 | 613,549 | ||||||||||||
Interest income
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561 | 628 | 2,902 | 2,504 | ||||||||||||
Interest (expense)
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(383 | ) | (494 | ) | (1,825 | ) | (1,918 | ) | ||||||||
Income before provision for income taxes
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126,749 | 162,523 | 508,153 | 614,135 | ||||||||||||
Provision for income taxes
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50,701 | 65,025 | 200,401 | 239,969 | ||||||||||||
Net income
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$ | 76,048 | $ | 97,498 | $ | 307,752 | $ | 374,166 | ||||||||
Earnings per share:
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Basic
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$ | 2.89 | $ | 3.16 | $ | 11.22 | $ | 11.28 | ||||||||
Diluted
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$ | 2.87 | $ | 3.14 | $ | 11.13 | $ | 11.17 | ||||||||
Supplemental Data:
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Cost of educational services
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35.7 | % | 33.0 | % | 36.9 | % | 33.7 | % | ||||||||
Student services and administrative expenses
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29.9 | % | 27.4 | % | 29.3 | % | 27.9 | % | ||||||||
Operating margin
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34.4 | % | 39.6 | % | 33.8 | % | 38.4 | % | ||||||||
Student enrollment at end of period
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73,255 | 84,686 | 73,255 | 84,686 | ||||||||||||
Campuses at end of period
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141 | 130 | 141 | 130 | ||||||||||||
Shares for earnings per share calculation:
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Basic
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26,354,000 | 30,824,000 | 27,429,000 | 33,165,000 | ||||||||||||
Diluted
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26,527,000 | 31,025,000 | 27,655,000 | 33,501,000 | ||||||||||||
Effective tax rate
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40.0 | % | 40.0 | % | 39.4 | % | 39.1 | % |
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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Twelve Months
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Ended December 31,
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Ended December 31,
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(unaudited)
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(unaudited)
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2011
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2010
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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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$ | 76,048 | $ | 97,498 | $ | 307,752 | $ | 374,166 | ||||||||
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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7,518 | 7,110 | 27,886 | 26,797 | ||||||||||||
Provision for doubtful accounts
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17,290 | 18,985 | 61,308 | 86,935 | ||||||||||||
Deferred income taxes
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4,017 | 1,474 | (8,991 | ) | (14,557 | ) | ||||||||||
Excess tax benefit from stock option exercises
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(21 | ) | (130 | ) | (1,166 | ) | (3,383 | ) | ||||||||
Stock-based compensation expense
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4,236 | 3,106 | 17,074 | 15,813 | ||||||||||||
Other
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1,301 | (290 | ) | (1,936 | ) | 468 | ||||||||||
Changes in operating assets and liabilities:
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Restricted cash
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(1,715 | ) | (147 | ) | (1,873 | ) | 1,636 | |||||||||
Accounts receivable
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(9,256 | ) | (2,676 | ) | (40,477 | ) | (70,446 | ) | ||||||||
Accounts payable
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(9,949 | ) | (11,700 | ) | 10,956 | 6,645 | ||||||||||
Other operating assets and liabilities
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6,047 | 32,961 | 35,118 | 62,057 | ||||||||||||
Deferred revenue
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497 | 49,194 | (17,819 | ) | 72,429 | |||||||||||
Net cash flows from operating activities
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96,013 | 195,385 | 387,832 | 558,560 | ||||||||||||
Cash flows from investing activities:
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Facility expenditures and land purchases
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(924 | ) | (1,750 | ) | (4,053 | ) | (6,118 | ) | ||||||||
Capital expenditures, net
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(6,834 | ) | (6,182 | ) | (26,847 | ) | (26,811 | ) | ||||||||
Proceeds from sales and maturities of investments and repayment of notes
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24,323 | 103,963 | 337,032 | 385,306 | ||||||||||||
Purchase of investments and note advances
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(21,889 | ) | (128,079 | ) | (352,195 | ) | (451,594 | ) | ||||||||
Net cash flows from investing activities
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(5,324 | ) | (32,048 | ) | (46,063 | ) | (99,217 | ) | ||||||||
Cash flows from financing activities:
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Excess tax benefit from stock option exercises
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21 | 130 | 1,166 | 3,383 | ||||||||||||
Proceeds from exercise of stock options
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313 | 63 | 5,599 | 7,893 | ||||||||||||
Repurchase of common stock and shares tendered for taxes
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(34,607 | ) | (119,707 | ) | (283,320 | ) | (435,628 | ) | ||||||||
Net cash flows from financing activities
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(34,273 | ) | (119,514 | ) | (276,555 | ) | (424,352 | ) | ||||||||
Net change in cash and cash equivalents
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56,416 | 43,823 | 65,214 | 34,991 | ||||||||||||
Cash and cash equivalents at beginning of period
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172,577 | 119,956 | 163,779 | 128,788 | ||||||||||||
Cash and cash equivalents at end of period
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$ | 228,993 | $ | 163,779 | $ | 228,993 | $ | 163,779 |