ITT Educational Services, Inc. - Company Profile, Information, Business Description, History, Background Information on ITT Educational Services, Inc.

13000 North Meridian Street
Carmel, Indiana 46032
U.S.A.

Company Perspectives:

The mission of ITT Educational Services, Inc. is to provide a quality postsecondary education and the services that can help a diverse stu dent body to prepare for career opportunities in various fields invol ving technology. We will strive to establish an environment for stude nts and employees which promotes professional growth, encourages each person to achieve his or her highest potential and fosters ethical r esponsibility and individual creativity within a framework of equal o pportunity.

History of ITT Educational Services, Inc.

ITT Educational Services, Inc., is a private, postsecondary education provider, with 80 colleges operating in 30 states. The colleges, cal led ITT Technical Institutes, offer technology-focused, career-orient ed programs that lead primarily to associate's and bachelor's degrees . There are five schools available at ITT Technical Institutes, inclu ding: Information Technology; Drafting and Design; Electronics Techno logy; Business; and Criminal Justice. ITT's total enrollment is appro ximately 40,000, and its students attend classes year-round. ITT Educ ational remains the largest provider of technical education in the Un ited States, despite fending off a very public criminal investigation into its attendance records led by the Department of Justice in 2004 .

1960s: Building the Business

The business that was eventually to become ITT Educational Services b egan as part of Howard W. Sams and Co. Inc., an Indianapolis-based pu blisher of technical training manuals and textbooks. Sams had been in the publishing business for almost 20 years when it decided to try i ts hand at running a private trade school. It established its first s chool--Sams Technical Institute--in Indianapolis in 1963. The institu te, which taught electronics, consisted of 28 students. Sams acquired two more schools in 1965 and 1966: Teletronic Technical Institute, o f Evansville, Indiana; and Acme Institute of Technology, Inc., in Day ton, Ohio. A fourth school also was opened in Fort Wayne, Indiana, du ring that time period.

In October 1966, Howard W. Sams and Co. was purchased by ITT Corporat ion, a large, New York-based conglomerate. Two years later, ITT Corpo ration incorporated its private school subsidiary as "ITT Educational Services" and established its headquarters in Indianapolis. ITT's fi rst president was William D. Renner, who had previously been the vice -president of training for Howard W. Sams.

In 1968, with the backing of its capital-rich parent, ITT Educational embarked upon an ambitious plan for expansion that led to a flurry o f acquisitions. By the end of the year, the company had acquired seve n new schools located in Chicago, St. Louis, Boston, New York City, a nd Hempstead, New York. This brought the total number of schools in t he ITT system to ten. The company began working toward standardizing the materials and lesson plans used in the various schools' courses b y establishing curricula committees.

In 1969 ITT Educational entered the foreign market when it acquired E cole de Gaulle, a Paris-based system of five schools focusing on voca tional, business, commercial, and trade training. To hold and manage its international operations, the company established the subsidiary ITT Educational Services-Europe. Meanwhile, ITT continued to add to i ts domestic school system at a breakneck pace. Between February and e arly September of 1969, it acquired ten business and technical school s, scattered through Ohio, Michigan, Washington, Idaho, Illinois, Min nesota, and Washington, D.C. It also opened two new schools in Bethes da and Annapolis, Maryland. Both the new schools operated under the n ame "ITT Business Institute."

1970s: Leadership Changes

ITT Educational started the new decade with a series of transitions i n its leadership. Late in 1969, the company's first president, Willia m Renner, relinquished the position he had assumed only the year befo re. He was replaced in 1970 by Burton Sheff. But in May of 1972, Shef f resigned, and ITT was once again leaderless. Sheff was replaced by Neil R. Cronin, who also stayed with the company for a short time.

In 1974, however, ITT found a leader with a greater staying power: Ri chard McClintock. McClintock, who had been employed by ITT Corporatio n and its subsidiaries since 1957, had served previously as the compa ny's comptroller and treasurer. Upon taking the helm in 1974, he imme diately set about implementing new administrative structures and proc edures. Two of his first initiatives were to establish an executive c ommittee for the company and to begin establishing curriculum advisor y committees for each region.

The year 1973 marked an important milestone in ITT's growth. That yea r, the company became a part of the Federal College-based tuition gra nt and loan programs, which had until then been reserved only for tra ditional colleges and universities. Acceptance into these programs al lowed ITT to offer its students a full range of college loan and gran t programs. This meant that attending an ITT school became a viable o ption for a new pool of students--those who needed federal financial aid to pay for schooling.

1980s: Adding New Divisions

After expanding its school system so rapidly in the late 1960s, ITT h ad spent much of the 1970s refining it. By the end of the 1970s, the company had significantly pared down the bulky system by selling or p hasing out various schools, including ones in Boston, Akron, Toledo, New York, and Bethesda, Maryland. In 1980 the total number of schools was down to 21.

In 1981, however, the company began a period of controlled growth, im plementing several new expansion initiatives. One of the first was th e creation of a new division designed to target individuals who were already employed in the business world, but who wanted to improve exi sting skills or learn new ones. The new division, named the Business Division, opened its first school in Indianapolis in the spring of 19 82. More schools of the same type followed--in Chicago, Los Angeles, Tampa, and Arlington, Texas.

Three years later, ITT created still another division: Employer Servi ces. The Employer Services Division worked directly for businesses, t raining their employees in word processing. The division's services w ere offered originally at ITT locations in Indianapolis, Chicago, Hou ston, and El Segundo, California. Shortly after the division was form ed, however, it expanded its services to temporary staffing by mergin g with a Los Angeles-based provider of interim personnel.

The company also grew via its old, tried-and-true method of adding ne w schools in new locations. Between 1981 and the end of 1985, more th an a dozen new ITT facilities opened in Florida, California, Indiana, Texas, Tennessee, Utah, and Colorado.

In October 1984, ITT's ten-year leader, Richard McClintock, died. The company's executive committee took over day-to-day governance of the operation until a new president could be appointed, and in September 1985, the position was filled by Rene Champagne. Champagne had spent 16 years in various high-level administrative positions with Kendall Company, a subsidiary of Colgate-Palmolive. Immediately prior to joi ning ITT Educational, he had served as the executive vice-president a nd chief operating officer of Continental Pharma Cryosan Inc., a heal thcare company.

The mid-1980s brought changes to ITT's Employer Services Division. In 1985 the division announced that it was closing the training and tem porary staffing operations in Indianapolis, Chicago, Houston, and Los Angeles. Two years later, the Employer Services Division broadened i ts services by offering both temporary and permanent technical staff placement. In 1988, however, the entire division was sold to Olsten C orporation.

In 1986 the company's Resident Division took steps to become more uni fied and standardized. The schools operating under the Resident Divis ion, which were those that offered technical programs such as electro nics and HVAC, were renamed "ITT Technical Institutes." The Resident Division itself also was rechristened to correspond to the schools' n ew name, becoming the ITT Technical Institutes Division.

1990s: Ownership Changes and Rapid Growth

The early 1990s marked a turning point in ITT's evolution. In 1992 th e company unveiled the Vision 2000 plan, a strategy for changing the way it was perceived. Since its formation in the 1960s, ITT institute s had been viewed primarily as "trade schools." Under the Vision 2000 initiative, however, the company planned to make the institutes more like actual colleges by offering more bachelor's degrees. In additio n to this repositioning, Vision 2000 called for aggressive geographic expansion and the addition of new curricula. ITT's new goal was to h ave a network of 80 technical colleges located across the country, se rving more than 45,000 students, by the year 2000.

ITT immediately took steps toward achieving its newly articulated goa ls. By the end of 1993, four new schools had been opened and plans we re under way for three more. The company also had added several new d egree programs to its offerings, including a bachelor of applied scie nce in hospitality management, a bachelor of applied science in indus trial design, and a bachelor's degree in electronics engineering tech nology. By the end of 1994, ITT Educational was operating 54 schools in 25 states. Of the more than 20,000 students it served, approximate ly 70 percent were enrolled in electronics-engineering technology and related programs.

In December 1994, ITT's parent company, ITT Corporation, spun off 17 percent of ITT Educational in a $20 million initial public offeri ng, still retaining majority ownership of 83 percent. The goal of the spinoff, according to ITT Educational President Rene Champagne, was to raise the company's visibility among investors. "The main reason w e decided to do the public stock offering was that we were a moderate sized company in a $23 billion-a-year corporation. We were getti ng lost in the corporate complex," he said in a June 1995 interview w ith the Indianapolis Star. "Most people in the investment comm unity were not aware of who we were." Less than a year after the spin off, ITT Corporation itself announced a sweeping reorganization. Duri ng the restructuring, the giant conglomerate split into three publicl y held companies. ITT Educational was a part of the new public compan y that continued to be called ITT Corporation.

In 1995, ITT took another step toward repositioning its "schools" as "colleges" when it established a Graduate Division at its Indianapoli s ITT Technical Institute. The first degree offered by the Graduate D ivision was a master's in project management. The coursework and clas s schedules in the program were designed to appeal to adults who want ed to complete an advanced degree while working full-time.

Early 1998 brought yet another shift at the corporate level for ITT. In February, its parent company, ITT Corporation, was acquired by New York-based Starwood Hotels and Resorts Worldwide Inc. From the time of the acquisition, ITT Educational knew that change was in the offin g. Starwood made it immediately clear that it had no interest in main taining an educational subsidiary that did not fit with its core busi nesses of hotels and gaming. In June, Starwood sold 13 million shares of ITT Educational stock, reducing its ownership in the company from 83 to 35 percent. Then in an early 1999 public offering, the company sold the remainder of its ITT Educational stock, making ITT an indep endent, stand-alone company for the first time in its history.

Despite the ownership upheavals of the 1990s, ITT had continued to st eadily add new colleges and new programs to its system. By spring of 1999, the company had 67 ITT Technical Institutes operating nationwid e. It was also in the middle of rolling out an important new informat ion technology program: Computer Network Systems Technology (CNST). I TT first introduced CNST at three locations in 1998, with plans to ad d it to 13 more schools in 1999. The program--which focused on areas such as computer network systems, programming, and Web development--w as so well received, however, that the company decided to introduce i t at 27 locations, rather than the 13 originally planned.

ITT Educational finished up 1999 with record revenues of $316.4 m illion, an 8.6 percent increase over 1998. Student enrollment was up by approximately 3.2 percent over the previous year. Enrollment incre ases were particularly noticeable in the schools offering the company 's new CNST program; schools offering that program increased their to tal student enrollment as of December 31, 1999 by 7.8 percent over De cember 31, 1998.

ITT Educational in the New Millennium

As ITT prepared to enter the new millennium, it was placing increasin g emphasis on its information technology (IT) program. The rapidly gr owing IT industry was in dire need of qualified workers, and demand w as expected to increase in the coming years. ITT planned to capitaliz e on that demand. "We are focused on repositioning our company to mee t the demands of the 'new economy' for more graduates in information technology," Champagne said in a January 21, 2000 press release. He a dded: "The IT program is serving an important catalyst for future gro wth."

The company planned to continue rapidly rolling out the IT program to the remainder of its schools in 2000. According to a January 21, 200 0, press release, an additional 16 schools were expected to begin off ering the program during the first quarter of 2000. Additional school s were scheduled to begin offering the program in each of the three r emaining quarters of 2000, to complete the rollout by the end of the year. It was expected that with ITT's new focus on information techno logy and the continued rollout of the CNST program to its schools, en rollment and revenues would increase in the coming years.

Indeed, revenue jumped to $347.5 million in 2000, an increase of nearly 10 percent over the previous year. The company's new IT progra m rollout was a success; more than 13,000 students had enrolled since its inception. The company also partnered with Cisco Systems Inc. to create the Cisco Networking Academy, a short-term 24-week training c ourse designed to teach students how to build computer networks. ITT Educational began to offer online programs in 2001 that would result in a bachelor's degree in Technical Project Management for Electronic Commerce. A second program in Cyber Security was launched in June 20 02.

The increased demand for IT specialists, a slowing U.S. economy, and higher unemployment rates (displaced workers often went back to schoo l) left ITT Educational well positioned for additional growth during this time period. In 2002, the company announced a new ten-point plan designed to ensure the company met its goal of operating 100 college s with $1 billion in revenues by 2010. The company outlined its n ew strategy in its 2002 and 2003 annual reports, reporting that its i nitiatives included: increase enrollment; establish new locations; op en new learning sites to handle growth at existing sites; offer more bachelor's degree programs at its colleges; develop new degree offeri ngs in various technology fields; research and develop nontechnology degree programs; increase the number on online degree programs; creat e hybrid programs that utilize both traditional classroom instruction and online classes; seek international growth; and evaluate potentia l opportunities of nondegree programs of study.

During 2002, the company posted record results. Its earnings per shar e increased by 34.3 percent over the previous year and both revenues and net income continued to climb. The company was named to the Fo rbes 200 Best Small Companies list for the third consecutive year in 2002. Enrollment increased by 13.6 percent in 2003 as revenues an d net income continued climbing to record levels.

Sure enough, ITT Educational's new ten-point strategy appeared to be paying off. Revenue, net income, and enrollment increased again in 20 04 despite a very public investigation into the company's records reg arding student attendance, grades, and job placement figures. In Febr uary 2004, federal investigators working for the U.S. Department of J ustice raided company headquarters and ten of its campuses. At that t ime, the company disclosed that the Securities and Exchange Commissio n as well as the California Attorney General had been investigating t he company since October 2002. In addition, shareholders filed suit a gainst the company, claiming that it falsified its records in order t o receive student financial aid from the federal government--aid that made up nearly two-thirds of the company's revenue--and that company officials had financially benefited from ITT Educational's inflated stock price by selling shares between 2002 and 2004. President and ch ief operating officer Omer Waddles stepped down amid the investigatio n and was replaced by Kevin M. Modany.

ITT Educational breathed a sigh of relief in June 2005 when the crimi nal investigation led by the Department of Justice was dropped after it found no wrongdoing by the company or its executive team. While th e government continued its investigation into certain campuses and em ployees, ITT Educational cooperated with the investigation, releasing more than one million documents to investigators.

Overall, the charges proved costly to the company. After the raid in February 2004, ITT Educational lost $1.3 billion in market value as its share price fell hard. The firm also was forced to spend heavi ly on internal investigations and legal fees. Nevertheless, company m anagement continued to forge ahead with its growth strategy. With enr ollment and revenues on the rise, ITT Educational appeared to be well positioned for success in the years to come despite its legal woes.

Principal Competitors: Apollo Group Inc.; Corinthian Colleges Inc.; DeVry Inc.

Chronology

  • Key Dates:
  • 1963: Textbook publisher Howard W. Sams opens Sams Technical I nstitute in Indianapolis, Indiana.
  • 1966: Sams is purchased by New York-based ITT Corp.
  • 1968: ITT incorporates its education subsidiary as ITT Educati onal Services.
  • 1981: ITT creates its new Business Division.
  • 1984: Employer Services Division is created.
  • 1992: ITT initiates Vision 2000, a growth strategy plan aimed at offering more degree programs and adding more colleges to the syst em.
  • 1994: Parent company ITT Corporation spins off 17 percent of I TT Educational in a public offering.
  • 1998: ITT Corp. is purchased by Starwood Hotels and Resorts Wo rldwide Inc.; ITT introduces its information technology program.
  • 1999: Starwood sells off all remaining ITT Educational stock i n a public offering.
  • 2004: Federal investigators raid company headquarters and ten ITT campuses.
  • 2005: The Department of Justice drops its criminal investigati on.

Additional Details

  • Public Company
  • Incorporated: 1968
  • Employees: 6,200
  • Sales: $617.8 million (2004)
  • Stock Exchanges: New York
  • Ticker Symbol: ESI
  • NAIC: 611210 Junior Colleges

Further Reference

  • Andrews, Greg, "Fast-Growing School Biz Plans IPO, Faster Gro wth," Indianapolis Business Journal, December 5, 1994, p. 3.
  • ------, "ITT Paid for Feds' Aggression," Indianapolis Business Journal, July 4, 2005, p. A1.
  • ------, "ITT Spin-Off at Top of Class," Indianapolis Business Journal, November 25, 1996, p. 1A.
  • ------, "Raids at ITT Dim Outlook for Star Performer," Indiana polis Business Journal, December 27, 2004, p. 32.
  • Francis, Mary, "Tech Institute Places Itself on the Cutting Edge, " Indianapolis Star, March 2, 1999, p. D1.
  • "ITT's President Quits As Feds Probe Records," Grand Rapids Pr ess, July 13, 2004.
  • Lieber, Tammy, "ITT Looks to Future Despite New Ownership, Lawsui ts," Indianapolis Business Journal, November 16, 1998, p. 9.
  • McKimmie, Kathy, "School Biz," Indiana Business Magazine, February 1, 2002.
  • Pulley, John L., "Justice Department Ends Inquiry into ITT Educat ional Services," Chronicle of Higher Education, July 8, 2005, p. A23.
  • Smith, Bruce, "ITT Educational Services Is Ahead of the Pack," Indianapolis Star, June 14, 1995, p. F01.
  • Taylor, Jeffrey, "The New America: ITT Educational Services Inc., " Investor's Business Daily, April 7, 1995, p. A6.
  • Wall, J.K., "ITT Keeps Focus Amidst Probe," Indianapolis Star, May 9, 2005.

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