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ITT Educational Services Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 27, 2012 02:18PM

ITT Educational Services Inc. (ESI) filed Quarterly Report for the period ended 2012-06-30. Itt Educational Services, Inc. has a market cap of $1.39 billion; its shares were traded at around $43.98 with a P/E ratio of 5.4 and P/S ratio of 0.9. Itt Educational Services, Inc. had an annual average earning growth of 31.1% over the past 10 years. GuruFocus rated Itt Educational Services, Inc. the business predictability rank of 4.5-star.



Highlight of Business Operations:

Cost of educational services as a percentage of revenue increased 600 basis points to 42.7% in the three months ended June 30, 2012 compared to 36.7% in the three months ended June 30, 2011. The primary factor that contributed to this increase was a decline in revenue, which was partially offset by a decrease in compensation costs.

Student services and administrative expenses increased to 33.8% of revenue in the three months ended June 30, 2012 compared to 29.8% of revenue in the three months ended June 30, 2011. The principal causes of this increase were a decline in revenue and an increase in bad debt expense, which were partially offset by decreases in expenses related to student scholarships and media advertising expenses. Bad debt expense as a percentage of revenue increased to 5.8% in the three months ended June 30, 2012 compared to 4.5% in the three months ended June 30, 2011, primarily as a result of an increase in the amount of internal student financing that we provided to our students in the three months ended June 30, 2012 compared to the three months ended June 30, 2011. The increase in the amount of internal student financing was primarily due to a decline in the amount of private education loans available to our students in the three months ended June 30, 2012 as a result of the expiration in 2011 of the two private education loan programs that provided the vast majority of private education loans to our students in 2011.

Operating income decreased $52.6 million, or 40.4%, to $77.4 million in the three months ended June 30, 2012 compared to $130.0 million in the three months ended June 30, 2011, primarily as a result of the impact of the factors discussed above in connection with revenue, cost of educational services, and student services and administrative expenses. Our operating margin decreased to 23.5% in the three months ended June 30, 2012 compared to 33.5% in the three months ended June 30, 2011, primarily as a result of the impact of the factors discussed above.

Student services and administrative expenses increased to 32.4% of revenue in the six months ended June 30, 2012 compared to 28.6% of revenue in the six months ended June 30, 2011. The principal causes of this increase were a decline in revenue and an increase in bad debt expense, which were partially offset by a decrease in expenses related to student scholarships. Bad debt expense as a percentage of revenue increased to 5.2% in the six months ended June 30, 2012 compared to 3.9% in the six months ended June 30, 2011, primarily as a result of an increase in the amount of internal student financing that we provided to our students in the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase in the amount of internal student financing was primarily due to a decline in the amount of private education loans available to our students in the six months ended June 30, 2012 as a result of the expiration in 2011 of the two private education loan programs that provided the vast majority of private education loans to our students in 2011.

Operating income decreased $92.6 million, or 34.2%, to $178.0 million in the six months ended June 30, 2012 compared to $270.6 million in the six months ended June 30, 2011, primarily as a result of the impact of the factors discussed above in connection with revenue, cost of educational services, and student services and administrative expenses. Our operating margin decreased to 26.5% in the six months ended June 30, 2012 compared to 35.1% in the six months ended June 30, 2011, primarily as a result of the impact of the factors discussed above.

Read the The complete Report



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