ITT Educational 3Q profit up on higher enrollment

ITT Educational profit jumps as new students pour in, but bad-debt costs increase; shares fall

• On 9:27 am EDT, Thursday October 22, 2009

CARMEL, Ind. (AP) -- ITT Educational Services Inc. said on Thursday that a big jump in new students helped propel net income up 50 percent in the third quarter, but shares tumbled as its bad-debt expenses grew.

The Carmel, Ind., company, which operates for-profit technology-oriented schools, said profit rose to $75.4 million, or $2 per share, in the three months ended Sept. 30 compared to $50.2 million, or $1.28 per share, in the same period last year. Analysts surveyed by Thomson Reuters expected net income of $1.97 per share, on average.

Sales increased 33 percent to $339.6 million from $254.3 million. Analysts expected $335.3 million.

For-profit schools have experienced big increases in new students looking to improve their resumes through the recession as unemployment rises.

New student enrollment grew 27 percent in the period, while the total number of students signed up for classes rose nearly 29 percent.

The company was more profitable, increasing revenue iper student, even as its bad-debt expenses increased and the cost of its classes and administative expenses grew.

With more students pouring in and banks tightening lending standards, the school is providing loans to students itself. As a percentage of sales, ITT said bad debt expenses jumped to 6.8 percent in the third quarter from 5 percent last year.

CFO Daniel Fitzpatrick said earlier this year that bad debt expenses could rise as high as 7 percent of sales by the end of the year.

Shares slid $5.56, or 5 percent, to $104.87 in premarket trading.

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