Patmo Posted March 5, 2016 Share Posted March 5, 2016 To YE16 To YE17 To YE18 To YE19 To YE20 To YE21 Beg Cash 131 50 50 50 50 50 Cash flow 66 43 43 45 52 37 PEAKS -23 -8 -8 -10 -15 CUSO -20 -20 -20 -20 -22 -22 Contingencies -15 -15 -15 -15 -15 -15 Cerberus -89 End Cash 50 50 50 50 50 50 I don't know man, look at the cash flow projections here, I'm trying to find the lowest cash flows possible to maintain a 50mil cash balance given the debt principal repayments. Forget about interest savings, think of what kind of revenues are necessary at 10% cash flow margin for this to happen...... They can drop 50% of their 2015 revenues before stabilizing and still be able to clear off their debt in full ... You'd need scorched earth years back to back for this to happen, and STILL your debt ends up repaid in full.... I'm sure I'm missing something, I'd be grateful if you add some spice here First year is 5 quarters (includes q4 2015). I'm sorry if formatting hurts Assumptions: PEAKS/CUSO assets valued at 0 15mil a year in off-BS items are factored in Estimated principal repayments for PEAKS/CUSO are 20% higher than they show on BS Used schedules from filings for timing on CUSO/PEAKS Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 15, 2016 Share Posted March 15, 2016 ESI reported tonight, 10-K to be filed tomorrow. Numbers aren't bad on a cash flow basis, but the enrollment drops are eye-opening. Continued 10-15% declines in 2016. They cut a ton of expenses in 2015 and basically increased operating margins, but I am not sure if they will be able to cut the same amount in 2016. I don't think the will go under, but.... Link to comment Share on other sites More sharing options...
Patmo Posted March 15, 2016 Share Posted March 15, 2016 I made a HUGE mistake. Multiply all the oversights I've made so far in this thread and all others by 10, and you get the resulting mistake. For some reason I always assumed that the letter of credit was rolled into restricted cash for reporting purposes. I know I know, I'm not going to bother listing the reasons of how silly thinking that for even 1 second is, let alone for as long as I have. However I've never been as giddy for doing something this dumb before. Why are we even talking the need for refinancing, let alone the possibility of going under ? Roark, to survive until 2020 and unlock the HCM collateral, ITT needs to pay down 123mil of debt, 130mil of which is already in the bank account, at which point the collateral will be enough to retire the remaining debt. They could lose 15% enrollments per year until 75% of their current revenue base is gone and this stock will still be worth a multiple of its current price... 2016 alone will generate enough cash to cover all the upcoming litigation contingencies + capex until 2020... What in heck makes you so queazy at the long term prospects of this co? Are you betting on this high return on capital company which has proven the scalability of its cash flows to suddenly turn massively cash flow negative, just because they are losing a few students again? Link to comment Share on other sites More sharing options...
Guest Grey512 Posted March 15, 2016 Share Posted March 15, 2016 Agreed. I'm nibbling at these levels. The buyout of APOL made me perk my ears up and revisit this beaten down name. Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 15, 2016 Share Posted March 15, 2016 I don't see it going bankrupt as I once thought it might or it won't in the near future, but at some point operating leverage kicks in on the reverse side, and they can't cut expenses anymore. Not sure when that happens... Link to comment Share on other sites More sharing options...
Patmo Posted March 20, 2016 Share Posted March 20, 2016 Do they have that much operating leverage though? Revenues are 55% off their peak, and so are expenses - they have been moving up and down in lockstep through the years. That is, if you add back the scholarship program costs to compare today's costs to say, 2010's. Today's margins are more representative of what to expect going forward as these scholarship expenses got to stay, but you still have to compare apples to apples. To me that is evidence that the business is scalable and just a highish margin business rather than high operating leverage. Honestly I could be wrong and the freight train might be coming in 2018 or something, even then, I feel the share price is so low that it provides an attractive bet on enrollment trend turning around with the "straightening" efforts which will have a lag time in between them. Not that it's even necessary if I am right about operating leverage, but it is if I am not. Also, once they pay down Cerberus they can sell/leaseback a bunch of properties for an extra liquidity kick. The deal that fell through in 2014 because of financial reporting issues was for $120mil for 24 of 42 properties. Link to comment Share on other sites More sharing options...
Guest roark33 Posted March 23, 2016 Share Posted March 23, 2016 The variable nature of their expenses is always something that struck me as impressive, across the entire for-profit sector. In reality, all that means is that they are cutting costs that might be vital to the business, but when it comes to a choice between losing money and providing an even worse product, it isn't a hard choice for management. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted June 8, 2016 Share Posted June 8, 2016 Hey all: Big developments in ESI today... Stock is now trading at $1.90 and is down $.26/share today. Appears that the government has sent them a letter demanding that they be able to refund students if so required. This amount is over $100MM. Additionally, they need to come up with $44mm fairly quickly. https://consumerist.com/2016/06/07/is-itt-tech-headed-for-a-collapse-school-required-to-set-aside-funds-just-in-case/ They are also at risk of losing their accreditation. Additionally, there are 19 states investigating them for fraud. This looks strikingly similar to COCO... I've said for years, MOST of these "for profit" places need to be put out of business. They are terrible net negative on society and ruin the lives of many, many people. Once the "for profit" space is shaken out, time to move onto "non-profit" educators... Link to comment Share on other sites More sharing options...
Guest roark33 Posted June 8, 2016 Share Posted June 8, 2016 Agreed: this is a very similar approach. It will be interesting how Cerberus approaches this situation. Link to comment Share on other sites More sharing options...
Patmo Posted June 8, 2016 Share Posted June 8, 2016 Won't trip the cerberus loan if that's what you mean, as per the 8k. I disagree that most FPE needs to die, long ago they were strongly incentivized to shit the bed so it naturally happened. A lot of government officials have to blame themselves as well to let this show happen in the first place with poorly thought out plans. What needs to happen is to incentivize them to be net positive value, to use your wording. A lot of work has been done (eg via regulations) and they should keep in that direction. I also agree that "not for profit" (hah) schools need to be reined in as well. As far as the increased escrow amount and accreditation thing, it looks like I have been wrong with regards to regulators' aims. I initially thought these guys wouldn't let ESI fail due to the crapshow that was COCO, but they are still pushing for them to fail, even more than ever. Only now they're trying to salvage the affected students while doing it. This reduces the likelihood of this bet working out significantly. We'll get an answer before 2019, Im not taking my money out as i expected the chance of a 0 to begin with, just less optimistic of the chances. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted June 8, 2016 Share Posted June 8, 2016 Won't trip the cerberus loan if that's what you mean, as per the 8k. I disagree that most FPE needs to die, long ago they were strongly incentivized to shit the bed so it naturally happened. A lot of government officials have to blame themselves as well to let this show happen in the first place with poorly thought out plans. What needs to happen is to incentivize them to be net positive value, to use your wording. A lot of work has been done (eg via regulations) and they should keep in that direction. I also agree that "not for profit" (hah) schools need to be reined in as well. As far as the increased escrow amount and accreditation thing, it looks like I have been wrong with regards to regulators' aims. I initially thought these guys wouldn't let ESI fail due to the crapshow that was COCO, but they are still pushing for them to fail, even more than ever. Only now they're trying to salvage the affected students while doing it. This reduces the likelihood of this bet working out significantly. We'll get an answer before 2019, Im not taking my money out as i expected the chance of a 0 to begin with, just less optimistic of the chances. Patmo: If "for profit" education can educate/train people, do it at a reasonable cost, and have a generally POSITIVE effect on their graduates and society as a whole, then they deserve to make money by THE TRAINLOAD. Same thing for the "non-profits". Unfortunately, this is frequently (not always) the case. I got burned once by "non-profit" education, and have twice been well served by "for profit" educators. The "for profit" places were continuing education and "cram" schools for licensing. One thing I always wonder....where did all the money go? Most for profit educators pay little to no dividends. They pay MOST of their instructors relative peanuts (especially compared to non-profit). I would guess that it went to administrator salaries and bloated cost structures (leases & advertising). Link to comment Share on other sites More sharing options...
Patmo Posted July 29, 2016 Share Posted July 29, 2016 As a result of the changes to its marketing and recruitment practices, the company now believes that new student enrollment in the second half of 2016 may decline by approximately 45% to 60% compared to the same period in 2015, which would result in a decline in full year 2016 new student enrollment of between approximately 30% and 40% compared to 2015. However, as a result of these operational changes, and assuming that new student enrollment for the second half of 2016 is in the range of the current expectations and that there are no material changes to student retention rates in the last six months of 2016 compared to the first six months of 2016, the company updated its internal goals for earnings before interest, taxes, depreciation and amortization ("EBITDA") for the year ending December 31, 2016 from the previous range of $55 million to $75 million to a revised range of $110 million to $125 million, which reflects projected net income in the range of $42 million to $48 million. The company believes that these modifications to its marketing and recruitment strategy for the ITT Technical Institutes are appropriate and prudent given the current operating environment and the company's payment obligations under U.S. Department of Education (the "ED") surety requirements, its financing agreement, its private loan program guarantees and other obligations. The company believes that these changes will lead to a smaller but more efficient postsecondary institution and, importantly, will enhance the company's focus on its students. I'm curious to read your opinions on this, there should be 3-4 fellows still following... Link to comment Share on other sites More sharing options...
Guest roark33 Posted August 1, 2016 Share Posted August 1, 2016 To me, it looks like they are slowly winding down the business. There is this chinese investment group that keeps buying the stock, so I have no clue what they see in it, but I think ESI probably survives the loan payoff, but enrollments declines are just going to kill them. Check out the capex spending, they have just cut everything to the bone. I am not short, but I would not want to be long either. Link to comment Share on other sites More sharing options...
Guest roark33 Posted August 26, 2016 Share Posted August 26, 2016 Looks like the DOE is going to put them out of business. I assume they will file for bankruptcy within a week or so. http://www.ed.gov/news/press-releases/department-education-bans-itt-enrolling-new-title-iv-students-adds-tough-new-financial-oversight The letter of credit requirement is basically twice the amount of cash on hand. Link to comment Share on other sites More sharing options...
Patmo Posted August 26, 2016 Share Posted August 26, 2016 Yikes! This one is toast. RIP Where is DTJTDE for the obligatory "told you so" taunt? It's a small blow to the wallet, and a giant uppercut to the ego... Link to comment Share on other sites More sharing options...
Guest roark33 Posted August 26, 2016 Share Posted August 26, 2016 I still don't understand the chinese group buying over 12% this year. Maybe I don't fully understand how you launder money....? Link to comment Share on other sites More sharing options...
DTEJD1997 Posted August 27, 2016 Share Posted August 27, 2016 Yikes! This one is toast. RIP Where is DTJTDE for the obligatory "told you so" taunt? It's a small blow to the wallet, and a giant uppercut to the ego... I don't feel any vindication or victory in saying "told you so". ESI, and a lot of it's compatriots are bad businesses in many different respects and need to be shut down. Once shutdown, the operators need to answer for their actions. Many, many people had their lives ruined. Mal-education (both profit & "non" profit) is starting to have a very bad effect on society. You can't have people saddled with TENS or HUNDREDS of thousands in student loans and little to no prospects of paying it back. As an aside, the ABA (American Bar Association) is in very real danger of having it's accreditation status yanked. They have not revoked the credentials of ANY law skool. They have not yanked credentials of those that admitted fraud in admission numbers NOR those skools that have bar passage rates of LESS THAN 50%! Education is going to change quite a bit in the upcoming years... Link to comment Share on other sites More sharing options...
DTEJD1997 Posted September 6, 2016 Share Posted September 6, 2016 Hey all: Well, as far as investors go, this is it. ITT Education is over & done with. Trading is suspended. All campuses will be closed immediately. Almost all employees are let go. ITT Education is shutting down. Good riddance... Now if we can just shut down most other "for profits", that will be a good start. Then we need to turn to the "non-profit" sector. They have many "schools" just begging to be made an example of. Link to comment Share on other sites More sharing options...
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