Is bankruptcy inevitable for Carmel-based ITT Educational Services Inc.?
CEO Kevin Modany wouldn’t say Tuesday morning in the wake of the company's announcement that the for-profit education provider—which ran 130 college campuses in 38 states—would cease operations and has eliminated most of its 8,000 workers.
“We don’t have any details to share at this point,” Modany told IBJ on a conference call with other reporters. “We certainly can note we’re dealing with limited resources right now. There is limited to no intake in terms of revenue. We’re using available resources and staff."
The company, which reported nearly $850 million in revenue in 2015, listed assets of $584.9 million and liabilities of $419.8 million as of its June 30 financial statements.
The federal government is holding about $90 million of ITT’s assets in a surety account, Modany said. In addition, the company owes tens of millions of dollars on student loans for which borrowers defaulted and the company serves as guarantor.
Bankruptcy was the fate of Corinthian Colleges, the other high-profile for-profit education company that ceased operations. The company shut down last year amid accusations it deceived students with inflated job placement rates and used inappropriate, strong-arm student-recruitment tactics.
ITT, which has faced sharp criticism that its programs cost too much and are of poor quality, has been shrinking in recent years. The company reported revenue in the latest quarter of $191.5 million, down almost 17 percent from the $230 million the company brought in a year ago.
ITT’s business model relied almost entirely on federal funding. But recent actions by the U.S. Department of Education made it ineligible to accept new students who relied on student loans.
The company’s stock was above $100 per share about seven years ago. On Friday, shares closed at 36 cents each. Shares had not opened for trading Monday as of midday.
Modany said ITT plans to sell off real estate it owns, which includes 29 campus locations and its Carmel headquarters. It leases the rest of its properties.
“We’ll have to liquidate those assets and … figure out a way to distribute it,” Modany said.
The company said only 200 employees remain. About 75 to 100 of those people are in the Indianapolis/Carmel area, Modany said.
Most of those employees will focus on financial and “student-related matters,” including record retention, account reconciliation and helping students assess their options.
ITT does not anticipate any impact to its employees’ retirement benefits. A now-discontinued defined-benefit pension plan that had been paying out assets to former employees is "over-funded" by about $30 million, Modany said, so “there’s no situation where that plan should be negatively impacted by this at all.”