ITT Educational Services, Inc. Reports 2009 Third Quarter Results, New Student Enrollment Increased 27.2%; EPS Increased 56.3% to $2.00

• Press Release
• Source: ITT Educational Services, Inc.
• On 7:30 am EDT, Thursday October 22, 2009

CARMEL, Ind., Oct. 22 /PRNewswire-FirstCall/ -- ITT Educational Services, Inc. (NYSE: ESI - News), a leading provider of technology-oriented postsecondary degree programs, today reported that new student enrollment in the third quarter of 2009 increased 27.2% to 27,738 compared to 21,807 in the same period in 2008. Total student enrollment increased 28.7% to 79,208 as of September 30, 2009 compared to 61,556 as of September 30, 2008.

Earnings per share ("EPS") in the third quarter of 2009 increased 56.3% to $2.00 compared to $1.28 in the third quarter of 2008. Revenue in the three months ended September 30, 2009 increased 33.6% to $339.6 million compared to $254.3 million in the three months ended September 30, 2008. Operating margin increased 430 basis points to 36.1% in the third quarter of 2009 compared to 31.8% in the same period in 2008.

The company provided the following information for the three and nine months ended September 30, 2009 and 2008:

    Financial and Operating Data for the Three Months Ended September 30th,
                          Unless Otherwise Indicated
         (Dollars in millions, except per share and per student data)

                                              2009         2008     Increase/
                                                                    (Decrease)

    Revenue                                  $339.6        $254.3       33.6%
    Operating Income                         $122.7         $80.8       52.0%
    Operating Margin                          36.1%         31.8%    430 basis
                                                                       points
    Net Income                                $75.4         $50.2       50.2%
    Earnings Per Share (diluted)              $2.00         $1.28       56.3%
    New Student Enrollment                   27,738 (A)    21,807       27.2%
    Continuing Students                      51,470 (B)    39,749       29.5%
    Total Student Enrollment as of
     September 30th                          79,208 ©    61,556       28.7%
    Persistence Rate as of September
     30th (D)                                 73.6%         72.5%    110 basis
                                                                       points
    Revenue Per Student                      $4,852        $4,641        4.5%
    Cash and Cash Equivalents,
     Restricted Cash and Investments as
     of September 30th                       $280.8        $286.7      (2.0)%
    Bad Debt Expense as a Percentage
     of Revenue                                6.8%          5.0%    180 basis
                                                                       points
    Days Sales Outstanding as of
     September 30th                       25.4 days     12.1 days   13.3 days
    Deferred Revenue as of
     September 30th                          $146.2        $142.0        2.9%
    Debt as of September 30th                $150.0        $150.0
    Weighted Average Diluted
     Shares of Common Stock Outstanding  37,763,000    39,195,000
    Shares of Common Stock
     Repurchased                            827,842 (E)   184,700 (F)
    Land and Building Purchases
     and Renovations                           $0.7 (G)      $3.9 (H) (83.2)%
    Number of New Colleges in Operation           5             1
    Capital Expenditures, Net                  $3.9          $4.3      (8.8)%

     Financial and Operating Data for the Nine Months Ended September 30th
           (Dollars in millions, except per share and per student data)

                                               2009         2008     Increase/
                                                                    (Decrease)

    Revenue                                  $944.8         $735.5     28.5%
    Operating Income                         $340.2         $225.8     50.7%
    Operating Margin                          36.0%          30.7%  530 basis
                                                                      points
    Net Income                               $209.2         $140.0     49.5%
    Earnings Per Share (diluted)              $5.45          $3.56     53.1%
    Bad Debt Expense as a Percentage
     of Revenue                                5.9%           4.0%  190 basis
                                                                      points
    Revenue Per Student                     $14,332        $13,617      5.3%
    Weighted Average Diluted Shares
     of Common Stock Outstanding         38,412,000     39,291,000
    Shares of Common Stock
     Repurchased                          1,977,875 (I)  1,049,700 (J)
    Land and Building Purchases and
     Renovations                               $2.5 (K)      $17.1(L)(85.3)%
    Number of New Colleges in Operation           7 (M)          6
    Capital Expenditures, Net                 $15.9          $12.1     31.5%


    (A)  Includes 223 students enrolled at Daniel Webster College.
    (B)  Includes 647 students enrolled at Daniel Webster College.
    ©  Includes 870 students enrolled at Daniel Webster College.
    (D)  Represents the number of Continuing Students in the academic term,
         divided by the Total Student Enrollment in the immediately preceding
         academic term.
    (E)  For approximately $84.5 million or at an average price of $102.06 per
         share.
    (F)  For approximately $16.0 million or at an average price of $86.47 per
         share.
    (G)  Represents costs associated with renovating, expanding or
         constructing buildings at nine of the company's locations, but it
         excludes all land and buildings of Daniel Webster College that the
         company acquired.
    (H)  Represents costs associated with renovating, expanding or
         constructing buildings at 14 of the company's locations.
    (I)  For approximately $208.8 million or at an average price of $105.58
         per share.
    (J)  For approximately $87.8 million or at an average price of $83.62 per
         share.
    (K)  Represents costs associated with renovating, expanding or
         constructing buildings at 15 of the company's locations, but it
         excludes all land and buildings of Daniel Webster College that the
         company acquired.
    (L)  Represents costs associated with purchasing a parcel of land on which
         the company constructed a building, and purchasing, renovating,
         expanding or constructing buildings at 17 of the company's locations
    (M)  Excludes Daniel Webster College.

ITT Educational Services, Inc. will conduct a conference call with financial analysts to discuss its third quarter 2009 earnings at 11:00 am (ET) this morning. The public is invited to listen to a live webcast of the conference call. The webcast may be accessed by following the "Live Webcast" directions on ITT/ESI's website at www.ittesi.com.

FOR FURTHER INFORMATION:

COMPANY:

Lauren Littlefield, Manager of Communications, (317) 706-9200

WEB SITE:

www.ittesi.com

                             ITT EDUCATIONAL SERVICES, INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                     (Dollars in thousands, except per share data)

                                                         As of
                                           Sept. 30,    Dec. 31,    Sept. 30,
                                              2009       2008          2008
                                           (unaudited)             (unaudited)
    Assets
    Current assets:
         Cash and cash equivalents          $130,971    $226,255    $136,698
         Short-term investments              144,146     138,709     150,000
         Restricted cash                       5,723      10,405          17
         Accounts receivable, net             93,819      29,779      33,309
         Deferred income taxes                16,328      12,104      13,012
         Prepaid expenses and other
          current assets                      19,106      13,793      12,980
              Total current assets           410,093     431,045     346,016

    Property and equipment, net              192,341     166,671     166,140
    Direct marketing costs, net               27,222      22,973      22,694
    Other assets                              20,705       3,170      19,481
         Total assets                       $650,361    $623,859    $554,331

    Liabilities and Shareholders' Equity
    Current liabilities:
         Current portion of long-term debt  $150,000         $--         $--
         Accounts payable                     67,183      54,815      58,781
         Accrued compensation and benefits    23,340      21,133      28,574
         Accrued income taxes                  7,917      14,976       1,753
         Other accrued liabilities            15,884      11,423      12,274
         Deferred revenue                    146,203     162,206     142,044
              Total current liabilities      410,527     264,553     243,426

    Long-term debt                                --     150,000     150,000
    Deferred income taxes                      4,092       1,504      10,108
    Other liabilities                         22,262      19,951      19,207
         Total liabilities                   436,881     436,008     422,741

    Shareholders' equity:
        Preferred stock, $.01 par value,
         5,000,000 shares authorized,
         none issued                              --          --          --
        Common stock, $.01 par value,
         300,000,000 shares authorized,
         54,068,904 issued                       541         541         541
        Capital surplus                      151,653     135,655     133,723
        Retained earnings                    929,907     732,107     670,073
        Accumulated other
         comprehensive (loss)                (12,558)    (13,384)     (3,417)
        Treasury stock, 17,123,838,
         15,352,376 and 15,376,719
         shares, at cost                    (856,063)   (667,068)   (669,330)
            Total shareholders' equity       213,480     187,851     131,590
            Total liabilities and
             shareholders' equity           $650,361    $623,859    $554,331

                            ITT EDUCATIONAL SERVICES, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (Dollars in thousands, except per share data)

                                        Three Months           Nine Months
                                   Ended September 30,     Ended September 30,
                                        (unaudited)            (unaudited)
                                      2009      2008      2009      2008

    Revenue                         $339,643   $254,273   $944,816   $735,533

    Costs and expenses:
       Cost of educational services  116,730     95,011    328,609    282,219
       Student services and
       administrative expenses       100,187     78,500    276,044    227,535
         Total costs and expenses    216,917    173,511    604,653    509,754

    Operating income                 122,726     80,762    340,163    225,779
       Interest income                   716      1,565      2,827      4,774
       Interest (expense)               (191)    (1,012)      (593)    (3,588)
       Income before provision for
        income taxes                 123,251     81,315    342,397    226,965
       Provision for income taxes     47,891     31,129    133,185     87,017

    Net income                       $75,360    $50,186   $209,212   $139,948

    Earnings per share:
         Basic                         $2.02      $1.29      $5.51      $3.59
         Diluted                       $2.00      $1.28      $5.45      $3.56

    Supplemental Data:
    Cost of educational services       34.4%      37.4%      34.8%      38.4%
    Student services and
     administrative expenses           29.5%      30.8%      29.2%      30.9%
    Operating margin                   36.1%      31.8%      36.0%      30.7%
    Student enrollment at end
     of period                        79,208     61,556     79,208     61,556
    Campuses at end of period  *         112        103        112        103
    Shares for earnings per share
     calculation:
         Basic                    37,324,000 38,777,000 37,950,000 38,938,000
         Diluted                  37,763,000 39,195,000 38,412,000 39,291,000


    Effective tax rate                 38.9%      38.3%      38.9%      38.3%

    * Does not include the Daniel Webster College campus.

                             ITT EDUCATIONAL SERVICES, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Dollars in thousands)

                                      Three Months          Nine Months
                                     Ended September 30, Ended September 30,
                                        (unaudited)         (unaudited)
                                      2009      2008      2009       2008
    Cash flows from operating
     activities:
        Net income                   $75,360   $50,186  $209,212   $139,948
        Adjustments to reconcile
         net income to net cash flows
         from operating activities:
               Depreciation and
                amortization           6,276     5,077    18,204     16,335
               Provision for
                doubtful accounts     23,183    12,839    56,012     29,457
               Deferred income taxes   1,471    (1,948)   (2,344)    (7,251)
               Excess tax benefit
                from stock option
                exercises             (1,385)     (686)   (5,272)      (773)
               Stock-based
                compensation expense   2,891     1,628    10,247      5,731
               Other                     113        --      (309)        --
               Changes in operating
                assets and
                liabilities, net of
                acquisition:
                   Restricted cash    (5,743)      181     2,581      6,039
                   Accounts
                    receivable       (47,255)  (16,950) (119,255)   (47,634)
                   Direct marketing
                    costs, net        (1,234)     (731)   (4,249)    (2,127)
                   Accounts payable    4,763     4,375    10,819     13,661
                   Accrued income
                    taxes             (2,432)   (2,982)   (1,308)    (3,467)
                   Other operating
                     assets and
                     liabilities        (377)    4,331     1,007     11,214
                   Deferred revenue   19,325     3,706   (17,631)   (71,083)
    Net cash flows from operating
     activities                       74,956    59,026   157,714     90,050

    Cash flows from investing
     activities:
         Facility expenditures and
          land purchases                (664)   (3,944)   (2,516)   (17,107)
         Capital expenditures,
          net                         (3,907)   (4,286)  (15,913)   (12,103)
         Acquisition of college,
          net of cash acquired            --         --  (20,792)        --
         Proceeds from sales and
          maturities of investments   57,352   492,760   142,741    964,565
         Purchase of investments     (56,543) (472,260) (147,362)  (811,205)
         Issuance of note
          receivable, net of
          repayments                     (71)       --   (13,991)        --

    Net cash flows from investing
     activities                       (3,833)   12,270   (57,833)   124,150

    Cash flows from financing
     activities:
         Excess tax benefit from
          stock option exercises       1,385       686     5,272        773
         Proceeds from exercise of
          stock options                2,756     1,996     8,750      2,271
         Repurchase of common stock
          and shares tendered for
          taxes                      (84,497)  (15,971) (209,187)   (87,774)
    Net cash flows from financing
     activities                      (80,356)  (13,289) (195,165)   (84,730)

    Net change in cash and cash
     equivalents                      (9,233)   58,007   (95,284)   129,470

    Cash and cash equivalents
     at beginning of period          140,204    78,691   226,255      7,228

    Cash and cash equivalents at
     end of period                  $130,971  $136,698  $130,971   $136,698

Buzz up!