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ITT Educational Services Inc. Reports Operating Results (10-Q)

October 21, 2011 | About:
10qk

10qk

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ITT Educational Services Inc. (ESI) filed Quarterly Report for the period ended 2011-09-30.

Itt Educational Services Inc. has a market cap of $1.68 billion; its shares were traded at around $62.07 with a P/E ratio of 5.3 and P/S ratio of 1. Itt Educational Services Inc. had an annual average earning growth of 35.5% over the past 10 years. GuruFocus rated Itt Educational Services Inc. the business predictability rank of 4.5-star.

Highlight of Business Operations:

Operating income decreased $41.5 million, or 27.4%, to $109.9 million in the three months ended September 30, 2011 compared to $151.4 million in the three months ended September 30, 2010, 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 30.5% in the three months ended September 30, 2011 compared to 37.8% in the three months ended September 30, 2010, primarily due to the impact of the factors discussed above.

Interest income increased $0.1 million, or 12.9%, to $0.7 million in the three months ended September 30, 2011 compared to $0.6 million in the three months ended September 30, 2010, primarily due to amortization of the discount on the Subordinated Note. Interest expense decreased $0.1 million, or 22.9%, to $0.4 million in the three months ended September 30, 2011 compared to $0.5 million in the three months ended September 30, 2010, primarily due to a lower effective interest rate on our revolving credit facilities.

Student services and administrative expenses increased to 29.1% of revenue in the nine months ended September 30, 2011 compared to 28.0% of revenue in the nine months ended September 30, 2010. The principal causes of this increase were the decline in revenue and an increase in media expenses and compensation, which were substantially offset by a decrease in bad debt expense. Bad debt expense as a percentage of revenue decreased to 3.9% in the nine months ended September 30, 2011 compared to 5.7% in the nine months ended September 30, 2010. The primary factor that contributed to the decrease in bad debt expense as a percentage of revenue was a decrease in the amount of internal student financing that we provided to our students in the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. The decrease in the amount of internal student financing was primarily due to the amount of institutional scholarships and other awards and the private education loan programs available to our students in the nine months ended September 30, 2011. We believe that our bad debt expense as a percentage of revenue will be in the range of 4.0% to 6.0% in 2011.

Operating income decreased $70.7 million, or 15.7%, to $380.5 million in the nine months ended September 30, 2011 compared to $451.2 million in the nine months ended September 30, 2010, 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 33.6% in the nine months ended September 30, 2011 compared to 38.0% in the nine months ended September 30, 2010, primarily due to the impact of the factors discussed above.

Cash and cash equivalents were $172.6 million as of September 30, 2011 compared to $163.8 million as of December 31, 2010 and $120.0 million as of September 30, 2010. We also had short-term investments of $146.8 million as of September 30, 2011 compared to $149.2 million as of December 31, 2010 and $142.5 million as of September 30, 2010. In total, our cash and cash equivalents and short-term investments were $319.4 million as of September 30, 2011 compared to $312.9 million as of December 31, 2010 and $262.4 million as of September 30, 2010. Cash and cash equivalents and short-term investments as of September 30, 2011:

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