Greetings, ladies and gentlemen, and welcome to the ITT Educational Services, Inc. 2015 Second Quarter Earnings Conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded.

Joining us today from the management of ITT Educational Services, we have Kevin Modany, Chief Executive Officer; and Dan Fitzpatrick, Executive Vice President and Chief Financial Officer. Before we begin, ITT Educational Services, Inc. wishes to remind you that this conference call may include forward-looking information.

Actual results may differ from the information presented during this call. For additional information, please review the section on forward-looking information contained in the news release dated July 30, 2015 or in the company's public filings with the US Securities and Exchange Commission. Thank you, Mr. Modany. You may begin..

Thank you, Operator. Good morning, ladies and gentlemen and thank you for joining us on this conference call to review our 2015 second quarter financial and operating results. Joining me on the call this morning is our Executive Vice President and Chief Financial Officer, Dan Fitzpatrick.

On the call today, we will discuss the financial and operating results that we released this morning. We’ll also take a bit of time this morning to highlight some of our relationships with importers that are our graduates.

We value our relationships with companies that hire our grads and believe these working relationships between our institution and high quality employers demonstrate the value ITT Technical Institute brings to the market place. Let me share a little bit of color on those relationships.

Now, before I hand the call over to Dan, so that he can provide some comments here on the financial results, I would like to take a moment to recognizing for his un-laboring commitment for this organization over the last ten years.

As we reported back in April, Dan advised lots of his intention to retire from his position of EVP and Chief Financial Officer. This morning we announced that as part of the leadership transition, Dan will step down from his position effective on the business day after we file our second quarter 2015 Form 10-Q.

We should note that we currently expect to file the second quarter 10-Q in the next few days. Dan has been a significant contributor to our organization and anyone that knows him understands that there is not a more committed and dedicated individual than Dan.

His accomplishments always are unselfish contributions to the organization, during what recently can only be described as challenging times emphasize his commitment to our mission of helping men and women improve their values through the pursuit of high quality career based education.

Dan has consistently put the interest for the organization, for employees, our students and the employers who hire them above his own and for that we’re grateful beyond limits. There is no way my brief words on this call will do justice to the positive impact he has had on this organization.

But all of us who’ve had the pleasure to work with him over the past decade know what a good man he really is and we just want to thank you Dan for all of your accomplishments and contributions.

I know that I represent the sediments in the entire organization when I say we all wish you and your family the absolute best of luck as you move on to the next phase of life and that we’ll miss you very much.

As we also reported this morning, the Board of Directors has elected Rocco Tarasi as the company’s interim Executive Vice President, Chief Financial Officer to be effective on the business day immediately following the date on which we file the second quarter Form 10-Q.

Rocco has served as the company’s Senior Vice President, President - center for professional development since January 2013. He served as the company’s Vice President Finance, Corporate Strategy and Development from October 2011 to January 2013.

While he held several other positions prior to joining the company as reported in this morning’s release, Rocco began his professional career Arthur Andersen and held various positions in the firm's audit practice for more than five years, including senior auditor and audit manager and he’s a certified public accountant [inactive].

Rocco has been a material contributor to the organization since his arrival back in October 2011 and the board has recognized his contributions with this appointment and we’re very excited to have him step into the role as our interim Chief Financial Officer.

As we reported in this morning’s release, Dan will remain with the company as an employee for the first 30 days of Rocco’s tenure as interim Chief Financial Officer. Dan will serve as a special barge [ph] assisting with this leadership transition.

Once again we’re very pleased to have Rocco take on this new role and believe that he will be a significant contributor for the future achievements of the company’s goals and objectives.

With all that said, I’d like to turn the call over one last time to Dan Fitzpatrick, our Executive Vice President and Chief Financial Officer for a brief review of the financial results we released earlier this morning..

Thanks, Kevin and thank you for the very kind words. I truly enjoyed my time with the organization and I would definitely miss all the good friends that I’ve made here at the company over the past decade.

We tremendous group of people that are truly dedicated to helping individuals improve their lives through the pursuit of a high quality career based education that we offer at ITT Technical Institute. I miss working with them towards the consistent achievement of the singular objective student success.

At this point I’d like to review the financial statement highlights for the second quarter of 2015. Revenue decreased 23.9 million or 10% to 214.2 million in the three months ended June 30, 2015 compared to 238.1 million in the three months ended June 30, 2014.

Revenue in the PEAKS Trust decreased 1 million to 2.2 million in the three months ended June 30, 2015 compared to 3.2 million in the three months ended June 30, 2014. Revenue of CUSO was 1.2 million in the three months ended June 30, 2015.

No CUSO revenue was included in our consolidated financial statements in the three months ended June 30, 2014 because the CUSO consolidation was effective September 30, 2014.

The primary factors that contributed to the year-over-year decrease in consolidated revenue in the second quarter included, 10.4% decrease in student enrollment as of March 31, 2015 compared to March 31, 2014 and 13.7% decrease in total student enrollment as of June 30, 2015 compared to June 30, 2014.

The decrease in consolidated revenue resulting from decreases in total student enrollment was partially offset by a decrease in the average amount of institutional scholarships rewards provided for students in the three months ended June 30, 2015 compared to the three months ended June 30, 2014.

Cost of educational services decreased 14.4 million or 12.4% to 101.9 million in the three months ended June 30, 2015 compared to 116.3 in the three months ended June 30, 2014.

The primary factors that contributed to this decrease was a decrease in compensation cost resulting from fewer employees and a decrease in core supplies and electronic devices as a result of lower total student enrollment.

Student services and administrative expenses decreased 6.1 million or 6.3% to 91.4 million in the three months ended June 30, 2015 compared to 97.5 million in the three months ended June 30, 2014. The principle causes of this decrease were decreases in bad debt expense, media advertising expenses and compensation cost.

Approximately 0.5 million of expenses of the PEAKS Trust and 0.5 million of expenses of CUSO were included with students service and administrative expenses in the three months ended June 30, 2015 compared to 1.2 million of PEAKS Trust expenses in the three months ended June 30, 2014.

No CUSO expenses were included in our consolidated financial statements in the three months ended June 30, 2014 because the CUSO consolidation was effective September 30, 2014.

Legal and professional fees related to certain law suits, investigations and accounting matters decreased 2.4 million to 6 million in the three months ended June 30, 2015 compared to 8.4 million in the three months ended June 30, 2014.

The provision for private education losses of 3.3 million in the three months ended June 30, 2015, represented the increase in the allowance for loan losses on the private education loans that occurred from April 1, 2015 to June 30, 2015.

We recorded a provision for private education loan losses of approximately 9.1 million in the three months ended June 30, 2014. Operating income increased 4.8 million or 70.6% to 11.6 million in the three months ended June 30, 2015 compared to 6.8 million in the three months ended June 30, 2014.

Our operating margin increased to 5.4% in the three months ended June 30, 2015 compared to 2.9% in the three months ended June 30, 2014. Diluted earnings per share in the three months ended June 30, 2015 was $0.03 compared to $0.02 per diluted share in the three months ended June 30, 2014.

Now, turning to the balance sheet, cash and cash equivalents were 124.6 million as of June 30, 2015 compared to 135.9 million as in December 31, 2014 and 225 million as of June 30, 2014.

A 11.3 million decrease in cash and cash equivalents as of June 30, 2015 compared to December 31, 2014 was primarily due to net cash flows and operating activities of 32 million offset by repayments on the RSA obligations and the term loan that resulted in a principle reduction totaling approximately 25 million related to the PEAKS senior debt, 10.4 million related the CUSO secured borrowing obligation and 5 million under the financial agreement.

Based upon various assumptions including historical and projected performance and collections of the PEAKS Trust and CUSO’s student loans, we believe that we’ll make payments under the PEAKS and CUSO guarantees of approximately 10.3 million in the six months ended December 31, 2015, 27 million in 2016, 16.2 million in 2017 and 84.6 million in 2018 and beyond.

These amounts are net of an estimated 5.5 million of recoveries under the CUSO RSA that we expect to use as offsets. Of the amounts estimated to be paid in 2018 and beyond approximately 15.3 million relates to the PEAKS guarantee and approximately 69.3 million net of estimated recoveries relates to the CUSO RSA.

We believe that the 15.3 million related to the PEAKS guarantee will be paid in 2020. We believe that the vast majority of this 69.3 million net of estimated payments projected will be paid after 2017 under the CUSO RSA will be made by us in 2018.

If however, we’re not able to make those payments as discharge payments under the CUSO RSA, we estimate that we’ll make approximately 93.8 million of regular payments under the CUSO RSA in 2018 to approximately 2026. This would raise the total estimated payments under both the PEAKS and CUSO guarantees in 2018 and beyond to 109.1 million.

We also have debt services and principle repayment obligations under our financial agreement. We estimate in the six months ended December 31, 2015 the amount of those cash payments will be approximately 9.6 million.

At this point I’d like to hand the call back over to Kevin, who will provide us with a quick look at the operating results for the second quarter of 2015 and an update on the business outlook for the reminder of the year..

Thanks, Dan. Turning to a quick look at new student enrollment, as we reported in this morning’s release, new student enrollment in the second quarter of 2015 decreased 18.6% to 12,638 compared to 15,523 in the same period of 2014. Total student enrollment decreased 13.7% to 47,874 as of June 30, 2015 compared to 55,485 as of June 30, 2014.

In our June 2 conference call of investment analyst, we noted that we believe the new student enrollment for the second quarter of 2015 would be down between 14% and 18% compared to the same period in 2014. Obviously we came in slightly below the lower end of our expected range.

As of July 26, 2015 new student applications net of cancellations for students beginning their studies with us, starting with the upcoming September 2015 academic period we’re down 15% compared to the same point in the prior year for students who began their program to study in the September 2014 academic period.

Keeping in mind the lack of visibility in new student enrollment trends, we estimate new student enrollment for the third quarter of 2015 may be down 15% to 20% compared to the same period in 2014. Unfortunately we continue to experience headwinds and volatility in new student enrollment and the lack of transparency in the front end of our business.

These factors continue to make it very difficult to predict our new student enrollment for future periods. With that in mind, factoring in the currently available data, we believe the new student enrollment for the full year of 2015 may range between down 15% to down 18% compared to the full year of 2014.

Assuming our new student enrollment estimates are realized and there are no material changes in our student retention metrics for the remainder of 2015 as compared to 2014, we reiterate our previous projection for earnings before interest, taxes, appreciation and amortization, EBITDA for the 12 months ended December 31, 2015 to be in the range of $90 million to $110 million.

Please note that projected EBITDA as a non-GAAP financial measure and as a reconciliation to projected net income is on our website at www.itesi.com. We’re projecting new student enrollment for the full year of ‘15 is down from our original estimate of between down 10% to down 15% compared to the full year ‘14.

We believe that we can offset the related impact on our financial results with additional institutional efficiencies. At this point I’d like to drag you with a brief update on our graduate employment metrics.

As of July 19, 2015 the graduate employment rate of 2015 ITT Technical Institute employable graduates was approximately 101 basis points higher than the graduate employment rate of our 2014 ITT Technical Institute employable graduates as of the same date in 2014.

As of July 19, 2015 the average annual salary reported by our 2015 ITT Technical Institute employed graduates increased approximately 4% compared to the average annual salary reported by our 2014 ITT Technical Institute employed graduates as of the same date in 2014.

We continue to see positive trends in our employer engagement with our national and campus career services professionals and then the total number of job orders that we’re receiving from our employers from network.

To add a little color, I’d like to highlight a few of many of our marketing employers for the assistance meeting their talent acquisition goals and objectives. Employers currently engaged with our career services professionals include Nucor, Driven, Compact Car Equipment, UPS, NCR, Strength and [indiscernible], just to name a few.

All of these firms have worked with one or more ITT Technical Institute campuses to provide them with qualified candidates for entry level positions within their organization. We would like to thank them for their ongoing interest in exploring employment relationships with our graduates.

Many of these firms had complimented us on the quality of graduates and the level of support and service they’ve received from ITT Technical Institute and as a result they come back again and again and consider us to be a vital component of their workforce management initiatives.

Obviously, third party and poor validation of ITT Technical Institutes academic programs in career services offering creates a great deal to our employees, students and alumni.

We’re very proud of our relationships with these employers and we thank them for the opportunity they present our graduates for consideration or employment opportunities at these outstanding companies.

Further, I’d like to highlight a few recent employer engagements that are represented of our efforts to assist employers in meeting their workforce needs in an increasingly competitive labor market. One such example is our work with EMC. We had a longstanding relationship with EMC, a Fortune 500 firm and a global leader in cloud computing.

EMC has hired graduates of our associate and bachelor degree IT programs for their Global Service Associate Programs, GSAP. The EMC GSAP is a program of paid training as a direct hire, as an EMC associate customer engineer. This is a longstanding relationship that has been ongoing for several years and has recently been fairly active.

Another example of our employer relationships is evident in our work with Ericsson. Ericsson works directly with our ITT Tech on a paid 26 week internship program designed to develop field service technicians within their organization.

These are competitively paid positions that our electronics program student’s working under the mentorship of a current Ericsson field service technician. Upon graduation just the interns are converted to the right type [ph] of technician.

This program has been in place for several years now and continues to grow and we’re extremely proud to be a part of the talent acquisition process at this outstanding organization.

We’re also proud of the long and successful relationships that we’ve enjoyed for many years assisting agencies of the federal government including, but not limited to the Federal Bureau of Investigations with their entry level hiring needs.

We’ve been proud to support highly selective federal agencies for more than a decade as they hire from electronics and IT programs. Representatives from noted federal agencies meet with our corporate career services staff routine.

They also regularly come to our campuses to both present information about employment opportunities and conduct candid interviews and represent to us how much they appreciate our working relationship and the role we play in helping them identify qualified individuals to fill their employment vacancies.

To put it in the word of an FBI recruiting professional [indiscernible], I would like to take a moment to again thank you an ITT Technical Institute career services professional and your incredible team for the continuing support that you give us in our recruitment efforts.

Not more than ever we must see talented applicants with the skill set that is needed for our ever changing mission, people with the character to get beyond the call and most are asked to do. Thanks to you and your fantastic team.

We’ve currently met our current hiring though and have hired on very noteworthy ITT graduates with the skills and character that we truly need. I have no doubt that they’ll continue - that they’ll contribute substantially to our program.

We could now possibly be more proud of this longstanding and mutually beneficial public, private working arrangement and further to have many of our alumni among their talented group of employees as they protect our national interest working both domestically and across the globe.

In closing, we reiterate that the new student enrollment environment continues to be challenging and difficult to predict, but our view of the entire market seems to suggest that this is phenomenal and not unique to ITT Technical Institute.

That said, we continue to see strong engagement with the employers who hire our graduates and continue to view this as an indication of the value of the education that we provide to our students.

We’ll continue to stay focused on our number one objective of increasing student success rates while maintaining our focus on institutional quality and efficiency over the long hope [ph]. With all that said, we would like to thank you for your time today and your interest in our institution and we look forward to talking with you very soon.

Operator, you may disconnect the line..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..