ITT Educational Services, Inc. Reports 2015 Second Quarter Results And Announces Executive Leadership Developments

CARMEL, Ind., July 30, 2015 /PRNewswire/ -- ITT Educational Services, Inc. (NYSE: ESI), a leading provider of technology-oriented postsecondary degree programs, today reported that diluted earnings per share in the first six months of 2015 increased to $0.47 compared to $0.17 in the first six months of 2014.  New student enrollment in the second quarter of 2015 decreased 18.6% to 12,638 compared to 15,523 in the same period in 2014. Total student enrollment decreased 13.7% to 47,874 as of June 30, 2015 compared to 55,485 as of June 30, 2014. 

The company provided the following information for the three and six months ended June 30, 2015 and 2014:

^(A)   Represents the number of Continuing Students in the academic term, divided by the Total Student Enrollment in the immediately preceding academic term.

^(B)    With respect to the private education loans as of June 30, 2015, the amount included $9.4 million classified as current, and $69.7 million classified as non-current.  With respect to the private education loans as of June 30, 2014, the amount included $7.4 million classified as current, and $66.0 million classified as non-current.

^(C)    With respect to the PEAKS Trust Senior Debt as of June 30, 2015, the amount included $23.1 million classified as current, and $31.0 million classified as non-current.  With respect to the PEAKS Trust Senior Debt as of June 30, 2014, the amount included $132.4 million classified as current, and $58.4 million classified as non-current. 

^(D)   As of June 30, 2015, this amount represented the CUSO secured borrowing obligation recorded on the company's balance sheet, $19.8 million of which was classified as current and $91.3 million of which was classified as non-current.  As of June 30, 2014, 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 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.

^(E)   With respect to the company's Financing Agreement as of June 30, 2015, the amount included $14.5 million classified as current, and $77.6 million classified as non-current.  With respect to the company's Credit Agreement as of June 30, 2014, the full $50.0 million was classified as current.

^(F)  Represents the percentage of the ITT Technical Institutes' 2014 employable graduates who obtained employment in positions using skills taught in their programs of study as of April 30, 2015.

^(G)  Represents the percentage of the ITT Technical Institutes' 2013 employable graduates who obtained employment in positions using skills taught in their programs of study as of April 30, 2014.

^(H)  Represents the average annual salary reported by the ITT Technical Institutes' 2014 employed graduates as of April 30, 2015.

^(I)  Represents the average annual salary reported by the ITT Technical Institutes' 2013 employed graduates as of April 30, 2014.

Based on various assumptions, including the historical and projected performance and collection of the student loans held by the PEAKS Trust and the CUSO, the company reported that its current estimate of the payments it may have to make under the PEAKS guarantee and the CUSO risk sharing agreement (the "CUSO RSA"), in the aggregate, are approximately:

• $43.9 million in 2015;
• $27.0 million in 2016;
• $16.2 million in 2017; and
• $84.6 million in 2018 and later, which amount includes an approximately $15.3 million payment in 2020 under the PEAKS guarantee.

These estimated payment amounts are net of estimated aggregate recoveries of approximately $6.0 million under the CUSO RSA, which the company expects to offset against amounts due by it under the CUSO RSA over these periods.  The company urges readers to review the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 when it is filed with the U.S. Securities and Exchange Commission, which report will contain additional information regarding these estimated payment amounts, including the assumptions used, the estimates of the type of payments, regular or discharge, and estimated recoveries, under the CUSO RSA and the estimated different payment amounts if the assumptions regarding the forms of payments made under the CUSO RSA are not realized.

The company also announced that it has entered into a third amendment to the letter agreement with its Chief Executive Officer, Kevin M. Modany, to extend to December 31, 2015 the period during which he will remain in his current position.

In addition, the company announced that its Board of Directors has elected Rocco F. Tarasi, III as the Company's interim Executive Vice President, Chief Financial Officer, to be effective on the business day immediately following the date on which the company files its Quarterly Report on Form 10-Q for its quarter ended June 30, 2015 (the effective date of Mr. Tarasi's election being referred to as the "Effective Date").  The company believes that it will file the Form 10-Q within the next few days.  Daniel M. Fitzpatrick will remain in his current position as Executive Vice President, Chief Financial Officer of the company, and will continue to perform all of the functions of the company's principal financial officer, through the filing of the Form 10-Q and until the Effective Date.  Following the Effective Date, Mr. Fitzpatrick will remain employed by the company for 30 days as Special Advisor to the interim Chief Financial Officer, after which he will become a consultant to the company for a period of 18 months.

Mr. Tarasi, age 43, has served as the company's Senior Vice President, President – The Center for Professional Development since January 2013. He served as the company's Vice President, Finance – Corporate Strategy and Development from October 2011 through January 2013. Mr. Tarasi was the co-founder of BrainCredits Corporation, an education start-up, from August 2010 through October 2011, and served as managing director, policyIQ for Resources Global Professionals, a multinational professional services firm, from July 2003 through August 2010.  Mr. Tarasi began his professional career with Arthur Andersen and held various positions in the firm's audit practice for more than five years, including senior auditor and audit manager.  Mr. Tarasi is a certified public accountant (inactive).

ITT Educational Services, Inc. will conduct a conference call with financial analysts to discuss its 2015 second quarter 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.

Except for the historical information contained herein, the matters discussed in this document or in the attached 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; any inability to file the second quarter 2015 Form 10-Q in the time indicated; the impact of adverse actions by the ED related to the action by the U.S. Securities and Exchange Commission against the company and 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; the company's inability to remediate material weaknesses, or the discovery of additional material weaknesses, in the company's internal control over financial reporting; 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.

SOURCE ITT Educational Services, Inc.

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