CARMEL, Ind., March 18, 2015 /PRNewswire/ -- ITT Educational
Services, Inc. (NYSE: ESI), a leading provider of
technology-oriented postsecondary degree programs, announced that
it did not file its Annual Report on Form 10-K for the fiscal year
ended December 31, 2014 (the "2014
Form 10-K") on or before the due date of March 16, 2015. The company has received a notice
from the New York Stock Exchange ("NYSE") that the company is
subject to the NYSE's procedures under its timely filing criteria
as a result of the company's failure to file the 2014 Form 10-K by
the due date. The issuance of such a notice is considered routine
practice in situations where there are late filings with the
Securities and Exchange Commission ("SEC"). Under NYSE rules, the
company has six months from March 16,
2015 to file the 2014 Form 10-K. Until the company files the
2014 Form 10-K and all other periodic reports with subsequent due
dates, its common stock will remain listed on the NYSE under the
symbol "ESI," with a "LF" indicator to signify late filing status.
The company can regain compliance with the NYSE listing standards
during the six-month period once it files the 2014 Form 10-K with
the SEC, but only if it has also filed all other periodic reports
with subsequent due dates.
As previously reported in Form 8-K filings, the company engaged
a new independent registered public accounting firm during the
fourth quarter of 2014. Also as previously reported, the
company will be required to consolidate into its consolidated
financial statements the variable interest entity (the "2009
Entity") in which the company holds a variable interest in
connection with a private education loan program entered into in
2009. After significant analyses and review associated with
the accounting related to that consolidation, the company now
believes that the effective date of the consolidation of the 2009
Entity is September 30,
2014. Although management of the company has been working
diligently to complete the company's consolidated financial
statements as of and for the three and nine months ended
September 30, 2014 and as of and for
the year ended December 31, 2014, the
extensive analyses and reviews related to the consolidation of the
2009 Entity have caused the delays associated with completing the
company's financial statements and related disclosures for those
periods.
Based on a preliminary, unaudited assessment of the fair values
of the 2009 Entity's assets and liabilities as of September 30, 2014 and the elimination of
intercompany transactions, the company believes that it will not
recognize a loss on the consolidation of the 2009 Entity. The
company is still evaluating and analyzing the impact of the
consolidation of the 2009 Entity on its consolidated financial
statements, but based on that same preliminary, unaudited
assessment, the company believes that it may recognize a pre-tax
gain related to the consolidation of the 2009 Entity that could be
material to its consolidated financial statements for the year
ended December 31, 2014. This
estimate of the potential pre-tax gain is preliminary and is the
result of the difference between the estimated fair values of the
assets and liabilities of the 2009 Entity as of September 30, 2014, which are subject to change.
Further, the company does not believe that the consolidation of the
2009 Entity will have a material negative impact on its ability to
comply with:
- its covenants under its financing agreement;
- the U.S. Department of Education's financial
responsibility measurements, primarily the company's institutions'
composite score;
- the financial requirements of the state education and
professional licensing authorities to which the company is subject;
or
- the financial metrics to which the company is subject
under its guarantee arrangements related to the 2009 loan program
and the PEAKS Private Student Loan Program.
However, the company is still evaluating the full impact of the
consolidation of the 2009 Entity on these matters, and therefore
cannot provide any assurance that the consolidation of 2009 Entity
will not have a material negative impact on these matters, which
could result in a material adverse effect on the company's results
of operations, financial condition and/or cash flows. Further,
the company did anticipate that it may be in noncompliance with
certain covenants under its financing agreement and certain metrics
under the risk sharing agreement it entered into with the 2009
Entity as a result of other factors, including related to the late
filing of its 2014 Form 10-K and potential late filing of its Form
10-Q for the first quarter of 2015 (the "First Quarter 2015 Form
10-Q"), and therefore it recently entered into amendments to those
agreements. For additional information regarding those
amendments and regarding the consolidation of the 2009 Entity, see
the Form 8-K filed by the company with the SEC on March 18, 2015.
The company intends to file the 2014 Form 10‑K, as well as
its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2014 (the "Third
Quarter 2014 Form 10-Q"), as soon as practicable. Based on the
company's current estimates, it believes that it may file the 2014
Form 10-K and the Third Quarter 2014 Form 10-Q on or before
May 31, 2015. Due to the
uncertainty with respect to the timing of the completion of the
necessary reviews and analyses, however, there can be no assurance
that the company will be able to file the 2014 Form 10-K, the Third
Quarter 2014 Form 10-Q or the First Quarter 2015 Form 10-Q by that
date or within the NYSE's six-month cure period. In the event the
company fails to file its 2014 Form 10-K by the expiration of the
six-month cure period, or if the company is delinquent in the
filing of any of its subsequent periodic reports at the expiration
of the six-month cure period, the NYSE may commence proceedings to
delist the company's common stock, unless the NYSE grants, in its
sole discretion, a further extension of up to six months. There can
be no assurance that the NYSE would not commence delisting
proceedings at any time with respect to the company or that it
would grant a further extension to the company.
Except for the historical information contained herein, the
matters discussed in this press release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act. Forward-looking statements are made based on the
current expectations and beliefs of the company's management
concerning future developments and their potential effect on the
company. The company cannot assure you that future developments
affecting the company will be those anticipated by its management.
These forward-looking statements involve a number of risks and
uncertainties. Among the factors that could cause actual results to
differ materially are the following: the impact of the company's
late filings with the SEC, including the 2014 Form 10-K; the impact
of the adverse actions by the U.S. Department of Education (the
"ED") related to the company's failure to submit its 2013 audited
financial statements and 2013 compliance audits with the ED by the
due date; the impact of the consolidation of variable interest
entities on the company and the regulations, requirements and
obligations that it is subject to; the inability to obtain any
required amendments or waivers of noncompliance with covenants
under the company's financing agreement; actions by the New York
Stock Exchange to delist the company's common stock; the company's
inability to remediate material weaknesses, or the discovery of
additional material weaknesses, in the company's internal control
over financial reporting; issues related to the restatement of the
company's financial statements for the first three quarters of
2013; the company's exposure under its guarantees related to
private student loan programs; the outcome of litigation,
investigations and claims against the company; the effects of the
cross-default provisions in the company's financing agreement;
changes in federal and state governmental laws and regulations with
respect to education and accreditation standards, or the
interpretation or enforcement of those laws and regulations,
including, but not limited to, the level of government funding for,
and the company's eligibility to participate in, student financial
aid programs utilized by the company's students; business
conditions in the postsecondary education industry and in the
general economy; the company's failure to comply with the extensive
education laws and regulations and accreditation standards that it
is subject to; effects of any change in ownership of the company
resulting in a change in control of the company, including, but not
limited to, the consequences of such changes on the accreditation
and federal and state regulation of its campuses; the company's
ability to implement its growth strategies; the company's ability
to retain or attract qualified employees to execute its business
and growth strategies; the company's failure to maintain or renew
required federal or state authorizations or accreditations of its
campuses or programs of study; receptivity of students and
employers to the company's existing program offerings and new
curricula; the company's ability to repay moneys it has borrowed;
the company's ability to collect internally funded financing from
its students; and other risks and uncertainties detailed from time
to time in the company's filings with the U.S. Securities and
Exchange Commission. The company undertakes no obligation to update
or revise any forward-looking information, whether as a result of
new information, future developments or otherwise.
WEB SITE: www.ittesi.com
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SOURCE ITT Educational Services, Inc.