ITT Educational Services (ESI) Misses Q2 EPS by 7c; Appoints Interim CFO

ITT Educational Services (NYSE: ESI) reported Q2 EPS of $0.03, $0.07 worse than the analyst estimate of $0.10. Revenue for the quarter came in at $214.2 million versus the consensus estimate of $211.6 million.

Enrollment:

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.

Other Items:

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).

For earnings history and earnings-related data on ITT Educational Services (ESI) click here.

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