ITT Educational Services, Inc.

views updated Jun 27 2018

ITT Educational Services, Inc.

13000 North Meridian Street
Carmel, Indiana 46032
U.S.A.
Telephone: (317) 706-9200
Fax: (317) 706-3040
Web site: http://www.ittesi.com

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

ITT Educational Services, Inc., is a private, postsecondary education provider, with 80 colleges operating in 30 states. The colleges, called ITT Technical Institutes, offer technology-focused, career-oriented programs that lead primarily to associate's and bachelor's degrees. There are five schools available at ITT Technical Institutes, including: Information Technology; Drafting and Design; Electronics Technology; Business; and Criminal Justice. ITT's total enrollment is approximately 40,000, and its students attend classes year-round. ITT Educational remains the largest provider of technical education in the United 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 began as part of Howard W. Sams and Co. Inc., an Indianapolis-based publisher of technical training manuals and textbooks. Sams had been in the publishing business for almost 20 years when it decided to try its hand at running a private trade school. It established its first school—Sams Technical Institute—in Indianapolis in 1963. The institute, which taught electronics, consisted of 28 students. Sams acquired two more schools in 1965 and 1966: Teletronic Technical Institute, of Evansville, Indiana; and Acme Institute of Technology, Inc., in Dayton, Ohio. A fourth school also was opened in Fort Wayne, Indiana, during that time period.

In October 1966, Howard W. Sams and Co. was purchased by ITT Corporation, a large, New York-based conglomerate. Two years later, ITT Corporation incorporated its private school subsidiary as "ITT Educational Services" and established its headquarters in Indianapolis. ITT's first 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 of acquisitions. By the end of the year, the company had acquired seven new schools located in Chicago, St. Louis, Boston, New York City, and Hempstead, New York. This brought the total number of schools in the ITT system to ten. The company began working toward standardizing the materials and lesson plans used in the various schools' courses by establishing curricula committees.

In 1969 ITT Educational entered the foreign market when it acquired Ecole de Gaulle, a Paris-based system of five schools focusing on vocational, 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 its domestic school system at a breakneck pace. Between February and early September of 1969, it acquired ten business and technical schools, scattered through Ohio, Michigan, Washington, Idaho, Illinois, Minnesota, and Washington, D.C. It also opened two new schools in Bethesda and Annapolis, Maryland. Both the new schools operated under the name "ITT Business Institute."

1970s: Leadership Changes

ITT Educational started the new decade with a series of transitions in its leadership. Late in 1969, the company's first president, William Renner, relinquished the position he had assumed only the year before. He was replaced in 1970 by Burton Sheff. But in May of 1972, Sheff 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: Richard McClintock. McClintock, who had been employed by ITT Corporation and its subsidiaries since 1957, had served previously as the company's comptroller and treasurer. Upon taking the helm in 1974, he immediately set about implementing new administrative structures and procedures. Two of his first initiatives were to establish an executive committee for the company and to begin establishing curriculum advisory committees for each region.

The year 1973 marked an important milestone in ITT's growth. That year, the company became a part of the Federal College-based tuition grant and loan programs, which had until then been reserved only for traditional colleges and universities. Acceptance into these programs allowed ITT to offer its students a full range of college loan and grant programs. This meant that attending an ITT school became a viable option 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 had 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 phasing 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, implementing several new expansion initiatives. One of the first was the creation of a new division designed to target individuals who were already employed in the business world, but who wanted to improve existing skills or learn new ones. The new division, named the Business Division, opened its first school in Indianapolis in the spring of 1982. More schools of the same type followed—in Chicago, Los Angeles, Tampa, and Arlington, Texas.

Three years later, ITT created still another division: Employer Services. The Employer Services Division worked directly for businesses, training their employees in word processing. The division's services were offered originally at ITT locations in Indianapolis, Chicago, Houston, and El Segundo, California. Shortly after the division was formed, however, it expanded its services to temporary staffing by merging with a Los Angeles-based provider of interim personnel.

The company also grew via its old, tried-and-true method of adding new schools in new locations. Between 1981 and the end of 1985, more than 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 joining ITT Educational, he had served as the executive vice-president and chief operating officer of Continental Pharma Cryosan Inc., a healthcare company.

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

In 1986 the company's Resident Division took steps to become more unified and standardized. The schools operating under the Resident Division, which were those that offered technical programs such as electronics and HVAC, were renamed "ITT Technical Institutes." The Resident Division itself also was rechristened to correspond to the schools' new 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 the company unveiled the Vision 2000 plan, a strategy for changing the way it was perceived. Since its formation in the 1960s, ITT institutes 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 addition to this repositioning, Vision 2000 called for aggressive geographic expansion and the addition of new curricula. ITT's new goal was to have a network of 80 technical colleges located across the country, serving more than 45,000 students, by the year 2000.

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

Company Perspectives:

The mission of ITT Educational Services, Inc. is to provide a quality postsecondary education and the services that can help a diverse student body to prepare for career opportunities in various fields involving technology. We will strive to establish an environment for students and employees which promotes professional growth, encourages each person to achieve his or her highest potential and fosters ethical responsibility and individual creativity within a framework of equal opportunity.

In December 1994, ITT's parent company, ITT Corporation, spun off 17 percent of ITT Educational in a $20 million initial public offering, 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 we decided to do the public stock offering was that we were a moderate sized company in a $23 billion-a-year corporation. We were getting lost in the corporate complex," he said in a June 1995 interview with the Indianapolis Star. "Most people in the investment community were not aware of who we were." Less than a year after the spinoff, ITT Corporation itself announced a sweeping reorganization. During the restructuring, the giant conglomerate split into three publicly held companies. ITT Educational was a part of the new public company 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 Indianapolis ITT Technical Institute. The first degree offered by the Graduate Division was a master's in project management. The coursework and class schedules in the program were designed to appeal to adults who wanted 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 offing. Starwood made it immediately clear that it had no interest in maintaining an educational subsidiary that did not fit with its core businesses 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 independent, stand-alone company for the first time in its history.

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

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

ITT Educational in the New Millennium

As ITT prepared to enter the new millennium, it was placing increasing emphasis on its information technology (IT) program. The rapidly growing IT industry was in dire need of qualified workers, and demand was expected to increase in the coming years. ITT planned to capitalize on that demand. "We are focused on repositioning our company to meet the demands of the 'new economy' for more graduates in information technology," Champagne said in a January 21, 2000 press release. He added: "The IT program is serving an important catalyst for future growth."

The company planned to continue rapidly rolling out the IT program to the remainder of its schools in 2000. According to a January 21, 2000, press release, an additional 16 schools were expected to begin offering the program during the first quarter of 2000. Additional schools were scheduled to begin offering the program in each of the three remaining quarters of 2000, to complete the rollout by the end of the year. It was expected that with ITT's new focus on information technology and the continued rollout of the CNST program to its schools, enrollment 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 program 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 course 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 2002.

Key Dates:

1963:: Textbook publisher Howard W. Sams opens Sams Technical Institute in Indianapolis, Indiana.
1966:: Sams is purchased by New York-based ITT Corp.
1968:: ITT incorporates its education subsidiary as ITT Educational 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 system.
1994:: Parent company ITT Corporation spins off 17 percent of ITT Educational in a public offering.
1998:: ITT Corp. is purchased by Starwood Hotels and Resorts Worldwide Inc.; ITT introduces its information technology program.
1999:: Starwood sells off all remaining ITT Educational stock in a public offering.
2004:: Federal investigators raid company headquarters and ten ITT campuses.
2005:: The Department of Justice drops its criminal investigation.

The increased demand for IT specialists, a slowing U.S. economy, and higher unemployment rates (displaced workers often went back to school) 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 colleges with $1 billion in revenues by 2010. The company outlined its new strategy in its 2002 and 2003 annual reports, reporting that its initiatives included: increase enrollment; establish new locations; open new learning sites to handle growth at existing sites; offer more bachelor's degree programs at its colleges; develop new degree offerings in various technology fields; research and develop nontechnology degree programs; increase the number on online degree programs; create hybrid programs that utilize both traditional classroom instruction and online classes; seek international growth; and evaluate potential opportunities of nondegree programs of study.

During 2002, the company posted record results. Its earnings per share increased by 34.3 percent over the previous year and both revenues and net income continued to climb. The company was named to the Forbes 200 Best Small Companies list for the third consecutive year in 2002. Enrollment increased by 13.6 percent in 2003 as revenues and 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 2004 despite a very public investigation into the company's records regarding student attendance, grades, and job placement figures. In February 2004, federal investigators working for the U.S. Department of Justice raided company headquarters and ten of its campuses. At that time, the company disclosed that the Securities and Exchange Commission as well as the California Attorney General had been investigating the company since October 2002. In addition, shareholders filed suit against the company, claiming that it falsified its records in order to 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 chief operating officer Omer Waddles stepped down amid the investigation and was replaced by Kevin M. Modany.

ITT Educational breathed a sigh of relief in June 2005 when the criminal investigation led by the Department of Justice was dropped after it found no wrongdoing by the company or its executive team. While the government continued its investigation into certain campuses and employees, 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 heavily on internal investigations and legal fees. Nevertheless, company management continued to forge ahead with its growth strategy. With enrollment 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.

ITT Educational Services, Inc.

views updated May 21 2018

ITT Educational Services, Inc.

5975 Castle Creek Parkway North Drive
Indianapolis, Indiana 46250
U.S.A.
Telephone: (317) 594-9499
Fax: (317) 594-4284
Web site: http://www.itttech.edu; http://www.ittesi.com

Public Company
Incorporated: 1968
Employees: 3,120
Sales: $316.4 million (1999)
Stock Exchanges: New York
Ticker Symbol: ESI
NAIC: 61121 Junior Colleges

ITT Educational Services, Inc. is a private, postsecondary education provider, with 67 colleges operating in 28 states. The colleges, called ITT Technical Institutes, offer technology-focused, career-oriented programs that lead primarily to associate’s and bachelor’s degrees. ITT’s total enrollment is approximately 25,000, and its students attend classes year-round.

1960s: Building the Business

The business that was eventually to become ITT Educational Services began as part of Howard W. Sams and Co. Inc., an Indianapolis-based publisher of technical training manuals and textbooks. Sams had been in the publishing business for almost 20 years when it decided to try its hand at running a private trade school. It established its first school—Sams Technical Institute—in Indianapolis in 1963. The institute, which taught electronics, consisted of 28 students. Sams acquired two more schools in 1965 and 1966: Teletronic Technical Institute, of Evansville, Indiana; and Acme Institute of Technology, Inc., in Dayton, Ohio. A fourth school was also opened in Fort Wayne, Indiana, during that time period.

In October of 1966, Howard W. Sams and Co. was purchased by ITT Corporation, a large, New York-based conglomerate. Two years later, ITT Corporation incorporated its private school subsidiary as “ITT Educational Services” and established its headquarters in Indianapolis. ITT’s first president was William D. Renner, who had previously been the vice-president of training for Howard W. Sams.

1970s: Leadership Changes

ITT Educational started the new decade with a series of transitions in its leadership. Late in 1969, the company’s first president, William Renner, relinquished the position he had assumed only the year before. He was replaced in 1970 by Burton Sheff. But in May of 1972, Sheff 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: Richard McClintock. McClintock, who had been employed by ITT Corporation and its subsidiaries since 1957, had served previously as the company’s comptroller and treasurer. Upon taking the helm in 1974, he immediately set about implementing new administrative structures and procedures. Two of his first initiatives were to establish an executive committee for the company and to begin establishing curriculum advisory committees for each region.

The year 1973 marked an important milestone in ITT’s growth. That year, the company became a part of the Federal College-based tuition grant and loan programs, which had until then been reserved only for traditional colleges and universities. Acceptance into these programs allowed ITT to offer its students a full range of college loan and grant programs. This meant that attending an ITT school became a viable option for a new pool of students—those who needed federal financial aid to pay for schooling.

1980s: Adding New Divisions

In 1981, however, the company began a period of controlled growth, implementing several new expansion initiatives. One of the first was the creation of a new division designed to target individuals who were already employed in the business world, but who wanted to improve existing or learn new skills. The new division, named the Business Division, opened its first school in Indianapolis in the spring of 1982. More schools of the same type followed—in Chicago, Los Angeles, Tampa, and Arlington, Texas.

Three years later, ITT created still another division: Employer Services. The Employer Services Division worked directly for businesses, training their employees in word processing. The division’s services were offered originally at ITT locations in Indianapolis, Chicago, Houston, and El Segundo, California. Shortly after the division was formed, however, it expanded its services to temporary staffing by merging with a Los Angeles-based provider of interim personnel.

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 of 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 joining ITT Educational, he had served as the executive vice-president and chief operating officer of Continental Pharma Cryosan Inc., a health care company.

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

In 1986 the company’s Resident Division took steps to become more unified and standardized. The schools operating under the Resident Division—which were those that offered such technical programs as electronics and HVAC—were renamed “ITT Technical Institutes.” The Resident Division itself also was rechristened to correspond to the schools’ new 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 the company unveiled the Vision 2000 plan, a strategy for changing the way it was perceived. Since its formation in the 1960s, ITT institutes 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 addition to this repositioning, Vision 2000 called for aggressive geographic expansion and the addition of new curricula. ITT’s new goal was to have a network of 80 technical colleges located across the country, serving more than 45,000 students, by the year 2000.

ITT immediately took steps toward achieving its newly articulated goals. By the end of 1993, four new schools had been opened and plans were under way for three more. The company also had added several new degree programs to its offerings, including a bachelor of applied science in hospitality management, a bachelor of applied science in industrial design, and a bachelor’s degree in electronics engineering technology. By the end of 1994, ITT Educational was operating 54 schools in 25 states. Of the more than 20,000 students it served, approximately 70 percent were enrolled in electronics-engineering technology and related programs.

Company Perspectives:

Our mission is to provide a quality post secondary education and the services that can help a diverse student body begin to prepare for career opportunities in various fields involving technology. We will strive to establish an environment for students and employees which promotes professional growth, encourages each person to achieve his or her highest potential and fosters ethical responsibility and individual creativity within a framework of equal opportunity.

In December 1994, ITT’s parent company, ITT Corporation, spun off 17 percent of ITT Educational in a $20 million initial public offering, still retaining majority ownership of 83 percent. The goal of the spin-off, according to ITT Educational President Rene Champagne, was to raise the company’s visibility among investors. “The main reason we decided to do the public stock offering was that we were a moderate sized company in a $23 billion-a-year corporation. We were getting lost in the corporate complex,” he said in a June 1995 interview with the Indianapolis Star. “Most people in the investment community were not aware of who we were.” Less than a year after the spin-off, ITT Corporation itself announced a sweeping reorganization. During the restructuring, the giant conglomerate split into three publicly held companies. ITT Educational was a part of the new public company 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 Indianapolis ITT Technical Institute. The first degree offered by the Graduate Division was a master’s in project management. The coursework and class schedules in the program were designed to appeal to adults who wanted to complete an advanced degree while working full-time.

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

ITT Educational finished up 1999 with record revenues of $316.4 million, an 8.6 percent increase over 1998. Student enrollment was up by approximately 3.2 percent over the previous year. Enrollment increases were particularly noticeable in the schools offering the company’s new CNST program; schools offering that program increased their total student enrollment as of December 31, 1999 by 7.8 percent over December 31, 1998.

What’s Ahead for ITT Educational

As ITT moved into the future, it was placing increasing emphasis on its information technology program. The rapidly growing IT industry was in dire need of qualified workers, and demand was expected to increase in the coming years. ITT planned to capitalize on that demand. “We are focused on repositioning our company to meet the demands of the ‘new economy’ for more graduates in information technology,” Champagne said in a January 21, 2000 press release, adding “The IT program is serving an important catalyst for future growth.”

The company planned to continue rapidly rolling out the IT program to the remainder of its schools in 2000. According to a January 21, 2000 press release, an additional 16 schools were expected to begin offering it during the first quarter of 2000. Additional schools were scheduled to begin offering the program in each of the three remaining quarters of 2000 to complete the roll-out by the end of the year. It was expected that with ITT’s new focus on information technology and the continued roll-out of the CNST program to its schools, enrollment and revenues would increase in the coming years.

Principal Competitors

DeVry Inc; Computer Learning Centers, Inc.; Corinthian Colleges, Inc.; Apollo Group, Inc.; Learning Tree International, Inc.; Micro Electronics, Inc.; Quest Education Corporation; Strayer Education, Inc.; Whitman Education Group, Inc.

Key Dates:

1963:: Textbook publisher Howard W. Sams opens Sams Technical Institute in Indianapolis, Indiana.
1966:: Sams is purchased by New York-based ITT Corp.
1968:: ITT incorporates its education subsidiary as ITT Educational 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 system.
1994:: Parent company ITT Corp. spins off 17 percent of ITT Educational in a public offering.
1998:: ITT Corp. is purchased by Starwood Hotels and Resorts Worldwide Inc.; ITT introduces its information technology program.
1999:: Starwood sells off all remaining ITT Educational stock in a public offering.