CARMEL, Ind., May 29, 2015 /PRNewswire/ -- ITT Educational
Services, Inc. (NYSE: ESI), a leading provider of
technology-oriented postsecondary degree programs, announced that
the audit of its 2014 financial statements has been completed, and
that the company has filed its Annual Report on Form 10-K for its
fiscal year ended December 31,
2014.
The company's full financial statements and related disclosures
are contained in the company's 2014 Form 10-K, which readers of
this press release should review in its entirety to gain a full
perspective of the company's results and financial position.
The company also provides select financial data in this press
release, as follows:
Financial and
Operating Data for the Twelve Months Ended December
31st, Unless Otherwise Indicated
|
(Dollars in millions,
except per share data)
|
|
|
2014
|
|
2013
|
|
Increase/
(Decrease)
|
|
|
|
|
|
|
|
Revenue
|
|
$961.8
|
|
$1,072.3
|
|
(10.3)%
|
Operating
Income
|
|
$61.3
|
|
$61.2
|
|
0.1%
|
Operating
Margin
|
|
6.4%
|
|
5.7%
|
|
70 basis
points
|
Net Income
(Loss)
|
|
$29.3
|
|
$(27.0)
|
|
N/A
|
Earnings (Loss) Per
Share (diluted)
|
|
$1.23
|
|
$(1.15)
|
|
N/A
|
Bad Debt Expense as a
Percentage of Revenue
|
|
6.6%
|
|
6.3%
|
|
30 basis
points
|
Cash and Cash
Equivalents as of December 31st
|
|
$135.9
|
|
$215.8
|
|
(37.0)%
|
Restricted Cash as of
December 31st
|
|
$6.0
|
|
$5.6
|
|
7.2%
|
Collateral Deposits
as of December 31st
|
|
$97.9
|
|
$8.6
|
|
1,035.3%
|
Private Education
Loans, Less Allowance for Loan Losses
|
|
$90.9
|
|
$84.2
|
|
7.9%
|
Financing
Agreement/Credit Agreement (current and long-term) as of December 31st
(A)
|
|
$96.3
|
|
$50.0
|
|
92.7%
|
|
|
|
|
|
|
|
PEAKS Trust Senior
Debt (current and long-term) as of
December 31st (B)
|
|
$76.2
|
|
$229.2
|
|
(66.8)%
|
|
|
|
|
|
|
|
CUSO Obligation,
(current and long-term) as of December 31st (C)
|
|
$121.0
|
|
$116.9
|
|
3.6%
|
Weighted Average
Diluted Shares of Common
Stock Outstanding
|
|
23,762,000
|
|
23,412,000
|
|
|
_________________
(A)
|
With respect to the
company's Financing Agreement as of December 31, 2014, the amount
included $9.6 million classified as current, and $86.7 million
classified as non-current. With respect to the company's Credit
Agreement as of December 31, 2013, the full $50.0 million was
classified as current.
|
(B)
|
With respect to the
PEAKS Trust Senior Debt as of December 31, 2014, the amount
included $37.5 million classified as current, and $38.7 million
classified as non-current. With respect to the PEAKS Trust
Senior Debt as of December 31, 2013, the amount included $157.9
million classified as current, and $71.3 million classified as
non-current.
|
(C)
|
As of December 31,
2014, this amount represented the CUSO secured borrowing obligation
recorded on the company's balance sheet, and as of December 31,
2013, this amount represented the contingent liability amount
recorded on the company's balance sheet related to the company's
guarantee obligations under the CUSO risk sharing agreement.
Beginning on September 30, 2014, the CUSO was consolidated in the
company's consolidated financial statements, resulting in the
elimination of the contingent liability accrual related to the CUSO
risk sharing agreement that the company had previously recorded,
and resulting in the company instead recording the estimated amount
of the CUSO's obligations to its owners related to their
participation interests in the private education loans made under
the CUSO program.
|
The company reported that it believes, based on its 2014 fiscal
year consolidated financial statements, that its institutions'
composite score was above 2.0 in 2014. An institution's
composite score is a significant financial responsibility
measurement of the U.S. Department of Education (the "ED"), and
must be at least 1.5 for the institution to be deemed financially
responsible by the ED without the need for further oversight.
The company also announced that in the aggregate, it derived
approximately 80% of its revenue in 2014 and 82% of its revenue in
2013 from Title IV programs under the ED's 90/10 Rule
calculation. In addition, based on the current status of its
efforts to complete the 2014 compliance audits of its institutions'
administration of the Title IV programs in which they participate,
the company believes that the 2014 compliance audits should be
completed prior to the ED's June 30,
2015 deadline.
The company further reported its 2015 internal estimates
for:
- new student enrollment in 2015 compared to 2014 in the range of
a decrease of 10% to a decrease of 15%; and
- earnings before interest, taxes, depreciation and amortization
("EBITDA") in 2015 compared to 2014 in the range of $90 million to $110 million, which amounts
include an estimated $20 million of
legal and professional fees related to certain lawsuits,
investigations and accounting matters.
The projected new student enrollment, EBITDA and EBITDA
component amounts are subject to various risks and uncertainties,
and do not guarantee actual results for the period indicated.
Factors, risks and uncertainties that could cause actual results to
differ materially from those projected include those discussed in
the documents that the company files with the U.S. Securities and
Exchange Commission. The company undertakes no obligation to update
or revise any of the projections, whether as a result of new
information, future developments or otherwise.
Projected EBITDA is an estimate of the company's net income plus
interest, taxes, depreciation and amortization for the twelve
months ended December 31, 2015.
EBITDA is not a measurement under GAAP in the United States and may not be similar to
EBITDA measures of other companies. Non-GAAP financial information
should be considered in addition to, but not as a substitute for,
information prepared in accordance with GAAP. The company
believes that EBITDA provides useful information to management and
investors as an indicator of the company's operating
performance. Projected EBITDA is only an estimate and
contains forward-looking information. The company has made a
number of assumptions in preparing the projection, including
assumptions as to the components of the projected EBITDA.
These assumptions may or may not prove to be correct.
In order to provide projections with respect to EBITDA, the
company must estimate amounts for the GAAP measures that are
components of the reconciliation of projected EBITDA. By
providing these estimates, the company is in no way indicating that
it is providing projections on those GAAP components of the
reconciliation.
Projected EBITDA can be reconciled to the company's projected
net income for the period indicated, as follows:
|
PROJECTED
|
|
For the Twelve
Months Ending
December 31,
2015
|
|
Low End
of
Range
|
|
High End
of
Range
|
|
(Dollars in
thousands)
|
Net Income
|
$19,200
|
|
$31,200
|
Plus: Interest
expense
|
40,000
|
|
38,000
|
Income taxes
|
12,800
|
|
20,800
|
Depreciation and amortization
|
18,000
|
|
20,000
|
EBITDA
|
$90,000
|
|
$110,000
|
The company also announced that it has entered into a consent
agreement with its lenders under the company's financing agreement,
which consent extends to June 15,
2015, the deadline by which the company is required to
deliver to the lenders the financial statements and related
information for the company's fiscal quarter ended March 31, 2015. Based on the company's
current estimates, it believes that it may file its first quarter
2015 Form 10-Q with the Securities and Exchange Commission on or
before June 15, 2015. Due to
the uncertainty around the timing of completion of the necessary
reviews and analyses, however, the company cannot and does not
provide any assurances that the filing will be completed in the
estimated timeframe.
The company additionally disclosed that it has entered into a
second amendment to the letter agreement with its Chief Executive
Officer, Kevin M. Modany, to extend
to August 31, 2015 the period during
which he will remain in his current position.
Based on various assumptions, including the historical and
projected performance and collection of the PEAKS Trust student
loans, the company reported estimated payments under the PEAKS
guarantee of approximately:
- $29.8 million in 2015;
- $4.3 million in 2016; and
- $15.3 million in 2020.
Based on various assumptions, including the historical and
projected performance and collections of the CUSO student loans,
the company reported estimates for the regular payments and
discharge payments to the CUSO under the CUSO risk sharing
agreement (the "CUSO RSA") and for the amount of recoveries from
charged-off loans that the company expects to be paid to it by the
CUSO (or that the company may utilize to offset a portion of the
amounts of regular payments or discharge payments owed by the
company) of approximately:
Year
|
|
Estimated Regular Payments(1)
|
|
Estimated Discharge Payments(2)
|
|
Estimated Total Payments
|
|
Estimated Recoveries
|
|
|
(Dollar amounts in
thousands)
|
2015
|
|
$11,723
|
|
$2,709(3)
|
|
$14,432
|
|
$(1,393)
|
2016
|
|
15,895
|
|
0
|
|
15,895
|
|
(1,479)
|
2017
|
|
17,615
|
|
0
|
|
17,615
|
|
(1,545)
|
2018 and
later
|
|
0
|
|
78,747
|
|
78,747
|
|
(1,580)
|
|
|
$45,233
|
|
$81,456
|
|
$126,689
|
|
$(5,997)
|
________________
(1)
|
Regular payments
constitute the company's obligation under the CUSO RSA to make
monthly payments due and unpaid on the CUSO student loans that have
been charged off above a certain percentage.
|
(2)
|
Discharge payments
constitute the payments that the company may elect to make under
the CUSO RSA by accelerating the timing of certain guarantee
payments under the CUSO RSA that the company would otherwise be
required to make at a later date, in order to discharge its
guarantee obligations under the CUSO RSA related to certain CUSO
student loans that default.
|
(3)
|
Represents the
discharge payment of $2.7 million that the company made on March
19, 2015 pursuant to the terms of the Fifth Amendment to the CUSO
RSA.
|
The company reported that the vast majority of the $78.7 million of estimated payments projected to
be paid after 2017 will be made in 2018. The estimated future
payment amounts and timing related to the CUSO RSA assume, among
other factors, that the company does not make any discharge
payments in 2015, 2016 or 2017 (other than the discharge payment
made in March 2015 pursuant to the
terms of the Fifth Amendment to CUSO RSA) and does make discharge
payments to the fullest extent possible in 2018 and later years.
If the company does not make the discharge payments as
assumed in 2018 and later years, the company estimates that it
would make approximately $100.3
million of regular payments in 2018 through approximately
2026. Of this amount, approximately $18.6 million to $20.0 million would be paid
annually in each of 2018 through 2021, and approximately
$22.7 million in the aggregate, would
be paid in 2022 through 2026.
ITT Educational Services, Inc. will conduct a conference call
with financial analysts to discuss its 2014 financial results and
other matters on Tuesday, June 2,
2015 at 11:00 am (ET).
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.
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 and the
first quarter 2015 Form 10-Q; the impact of adverse actions by the
ED related to the action by the U.S. Securities and Exchange
Commission against the company, the company's failure to submit its
2013 audited financial statements and 2013 compliance audits with
the ED by the due date, and any failure to submit its 2014 audited
financial statements and 2014 compliance audits to 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.
FOR FURTHER INFORMATION:
WEB SITE:
www.ittesi.com
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visit:http://www.prnewswire.com/news-releases/itt-educational-services-inc-announces-the-filing-of-its-2014-form-10-k-reports-2014-diluted-eps-of-123-and-provides-additional-updates-300090829.html
SOURCE ITT Educational Services, Inc.