form10k.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark One)
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T
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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|
For
the fiscal year ended: JUNE 30, 2008
OR
£
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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|
For
the transition period
from to
Commission
file number: 1-13988
DeVry
Inc.
(Exact
name of registrant as specified in its charter)
DELAWARE
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36-3150143
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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ONE
TOWER LANE, SUITE 1000,
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60181
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OAKBROOK
TERRACE, ILLINOIS
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(Zip
Code)
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(Address
of principal executive offices)
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|
Registrant’s
telephone number; including area code:
(630)
571-7700
Securities
registered pursuant to section 12(b) of the Act:
Title of Each
Class
|
Name of Each Exchange
on Which Registered:
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Common
Stock $0.01 Par Value
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NYSE,
CSE
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Common
Stock Purchase Rights
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NYSE
|
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes T No
£
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes £ No
T
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes T No
£
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer T
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Accelerated
filer
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£
|
|
Non-accelerated
filer £ (Do not
check if a smaller reporting company)
|
Smaller
reporting company
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£
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £ No
T
State the
aggregate market value of the voting and non-voting common equity held by
nonaffiliates as of the last business day of the Registrant’s most recently
completed second fiscal quarter computed by reference to the price at which the
common equity was last sold. Shares of common stock held directly or controlled
by each director and executive officer have been excluded. Determination of
stock ownership by non-affiliates was made solely for the purpose of responding
to this requirement and the Registrant is not bound by this determination for
any other purpose.
December
31, 2007 - $3,227,970,055
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
August
15, 2008 — 71,412,130 shares of Common Stock, $0.01 par value
DOCUMENTS
INCORPORATED BY REFERENCE
Certain
portions of the Registrant’s definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on November 13, 2008, are incorporated into Part III
of this Form 10-K to the extent stated herein.
ANNUAL
REPORT ON FORM 10-K
FISCAL
YEAR ENDED JUNE 30, 2008
TABLE
OF CONTENTS
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Page #
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PART
I
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Item 1
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—
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3
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Item 1A
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—
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31
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Item 1B
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—
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32
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Item 2
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—
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32
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Item 3
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—
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35
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Item 4
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—
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35
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—
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36
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PART
II
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Item 5
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—
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37
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Item 6
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—
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40
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Item 7
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—
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40
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Item 7A
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—
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60
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Item 8
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—
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60
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Item 9
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—
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61
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Item 9A
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—
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61
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Item 9B
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—
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61
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PART
III
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Item 10
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—
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90
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Item 11
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—
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90
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Item 12
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—
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90
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Item 13
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—
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90
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Item 14
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—
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90
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PART
IV
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Item 15
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—
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91
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—
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91
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—
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91
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—
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91
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92
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FORWARD-LOOKING
STATEMENTS
Certain
statements contained in this annual report on Form 10-K, including those that
affect DeVry’s expectations or plans, may constitute forward-looking statements
subject to the Safe Harbor Provision of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements generally can be identified by
phrases such as DeVry Inc. or its management “anticipates,” “believes,”
“estimates,” “expects,” “forecasts,” “foresees,” or other words or phrases of
similar import. Actual results may differ materially from those projected or
implied by these forward-looking statements. Potential risks and uncertainties
that could affect DeVry’s results are described more fully in Item 1A, “Risk
Factors” and in the subsections of “Item 1 — Business” entitled “Competition,”
“Student Recruiting and Admission,” “Accreditation,” “Approval and Licensing,”
“Tuition and Fees,” “Financial Aid and Financing Student Education,” “Student
Loan Defaults,” “Career Services,” “Seasonality,” and
“Employees.” The forward looking statements should be considered in
the context of the risk factors listed above and discussed elsewhere in this
Form 10-K.
ITEM
1. DESCRIPTION OF BUSINESS
OVERVIEW OF DEVRY
INC.
DeVry
Inc. (“DeVry”) is incorporated under the laws of the State of Delaware. DeVry’s
executive offices are located at One Tower Lane, Suite 1000, Oakbrook Terrace,
Illinois, 60181, and the telephone number is (630) 571-7700.
DeVry,
through its wholly-owned subsidiaries, owns and operates DeVry University,
Advanced Academics, Ross University, Chamberlain College of Nursing, and Becker
Professional Review.
DeVry University, founded by
Dr. Herman DeVry in 1931, offers associate, bachelor’s and master’s degree
programs in technology; healthcare technology; business and management. DeVry
University is one of the largest private, degree-granting, regionally
accredited, higher education systems in North America. Undergraduate and
graduate degree programs are offered in the United States, Canada and
online. Graduate degree programs in management are offered through
DeVry University’s Keller Graduate School of Management, which was founded in
1973 by Dennis J. Keller and Ronald L. Taylor.
Advanced Academics, founded in
2000, provides online secondary education to school districts throughout the
United States. DeVry acquired Advanced Academics in October 2007. The
addition of Advanced Academics has further diversified DeVry’s
curricula. Advanced Academics and DeVry University comprise the DeVry
University segment.
Ross University, which was
founded in 1978, is one of the world’s largest providers of medical and
veterinary medical education. Ross University comprises Ross University School
of Medicine, located in the Caribbean country of Dominica, and Ross University
School of Veterinary Medicine, located in St. Kitts. DeVry acquired Ross
University in May 2003.
Chamberlain College of
Nursing, formerly Deaconess College of Nursing, was founded in 1889 and
acquired by DeVry in March 2005. Chamberlain offers several nursing
degree and degree completion programs at its four campuses in the United States
and online. With Ross University, Chamberlain makes up DeVry’s Medical and
Healthcare segment.
Becker Professional Review,
founded in 1957 as the Becker CPA review and acquired by DeVry in 1996, prepares candidates for
the Certified Public Accountant (“CPA”) and Chartered Financial Analyst (“CFA”)
professional certification examinations, and offers continuing professional
education programs and seminars in accounting and finance. These classes are
taught in nearly 300 locations, including sites in 27 foreign countries and
DeVry University teaching sites. Becker comprises DeVry’s
Professional and Training segment.
Student
enrollments in DeVry’s degree granting programs, including DeVry University,
Ross University and Chamberlain College of Nursing, follow.
Percent of Enrollments
by Degree
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Percent of Enrollments
by Program
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Fall
2006
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Fall
2007
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Fall
2006
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Fall
2007
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Doctoral
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6.5 |
% |
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6.8 |
% |
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Technology
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32.5 |
% |
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30.8 |
% |
Master’s
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21.3 |
% |
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21.3 |
% |
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Business
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|
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57.6 |
% |
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57.1 |
% |
Bachelor’s
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61.7 |
% |
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61.4 |
% |
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Medical
and Health
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9.9 |
% |
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12.1 |
% |
Associate
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10.5 |
% |
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10.5 |
% |
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Financial
and descriptive information about DeVry’s operating segments is presented in
Note 15, “Segment Information,” to the Consolidated Financial
Statements. Unless indicated, or the context requires otherwise,
references to years refer to DeVry’s fiscal years then ended.
DEVRY
UNIVERSITY
The
mission of DeVry University is to foster student learning through high-quality,
career-oriented education integrating technology, business and
management. DeVry University delivers practitioner-oriented
undergraduate and graduate programs onsite and online to meet the needs of a
diverse and geographically dispersed student population. Graduate
degree programs in management are offered through DeVry University’s Keller
Graduate School of Management.
Curriculum
DeVry
University offers degree programs in the following areas:
Associate Degree
Programs
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Bachelor’s Degree
Programs
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Master’s Degree
Programs
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Accounting
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Business
Administration with majors/concentrations in:
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Educational
Technology
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Electroneurodiagnostic
Technology
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Accounting
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Electrical
Engineering
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Electronics
& Computer Technology
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Business
Information Systems
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Keller
Graduate School of Management:
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Health
Information Technology
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Finance
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Accounting
and Financial Management
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Network
Systems Administration
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Health
Services Management
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Business
Administration
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Web
Graphic Design
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Hospitality
Management
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Human
Resource Management
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Human
Resource Management
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Information
Systems Management
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Operations
Management
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Network
and Communications Management
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Project
Management
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Project
Management
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Sales
& Marketing
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Public
Administration
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Security
Management
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Small
Business Management & Entrepreneurship
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Technical
Communication
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Biomedical
Engineering Technology
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Computer
Engineering Technology
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Computer
Information Systems with specific tracks in:
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Business/Management
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Computer
Forensics
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Database
Management
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Information
Systems Security
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Systems
Analysis and Integration
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Web
Development and Administration
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Electronics
Engineering Technology
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|
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Game
and Simulation Programming
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Information
Technology
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Network
and Communications Management
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|
|
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|
Technical
Management with specialization in:
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|
|
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Criminal
Justice
|
|
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Health
Information Management
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Business
Administration
|
|
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General
Technical Management
|
|
|
Students
access these programs through a North American system of 91 locations as well as
through DeVry University Online. In addition to these degree
programs, DeVry University offers certificate programs and classes to non-degree
students wishing to take courses for personal or professional
enrichment.
DeVry
University reviews and revises its curricula on a regular basis for relevance to
both students and employers. In addition, new programs and degrees
are regularly evaluated to improve DeVry University’s educational offerings and
respond to competitive changes in job markets.
Some of
the more significant developments from the past several years are summarized
below.
|
—
|
In
2005, a bachelor’s degree in game and simulation programming (GSP) was
introduced, targeted for students who plan to work in the computer and
video game industry or in career fields utilizing simulations such as
crime scene investigation, education, and military
training.
|
|
—
|
In
2006, a criminal justice specialty within the bachelor’s degree technical
management (BSTM) program was introduced. The criminal justice specialty
is designed for students with at least one year of professional experience
in law enforcement, criminal justice, or a closely related field, and for
students who wish to obtain additional credentials for career
advancement.
|
|
—
|
In
2006, an online finance concentration within the bachelor’s degree
business administration program (BSBA) and an online health information
management (HIM) technical specialty within the bachelor’s degree in
technical management (BSTM) were
introduced.
|
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—
|
In
2007, an associate degree program in web graphic design (WGD) was
introduced to prepare students to develop graphic media – web pages,
marketing collateral, advertising, instructional material and
multimedia.
|
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—
|
In
2007, in addition to the graduate program offerings of Keller Graduate
School of Management, DeVry University began offering a masters degree in
educational technology.
|
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—
|
In
2008, DeVry launched the Keller Center for Corporate Learning to provide
education and training solutions to companies to help meet their
organizational needs and the goals of their individual employees with the
programs offered through DeVry University, its Keller Graduate School of
Management and Becker Professional
Review.
|
|
—
|
In
July 2008, DeVry launched an associate degree program in electronics and
computer technology (ECT), two bachelor’s degree programs in electronics
engineering technology (EET) and computer engineering technology (CET) –
all online, as well as a new online-only master’s degree program in
electrical engineering (MSEE).
|
Laboratory
courses throughout each curriculum prepare students for the workplace by
integrating classroom learning with a practical, hands-on experience and applied
learning activities that enhance technical skills. For some courses, laboratory
activities are delivered in a specialized classroom featuring advanced equipment
and software. In addition, some laboratory activities take place in a
lecture-lab classroom, using PCs and various software packages.
DeVry
University also invests in resources for libraries and academic support services
that can assist students in any phase of their educational program. DeVry
University offers undergraduate students an array of social and professional
activities including student organizations closely linked to students’
professional aspirations. Campuses regularly invite technology and business
leaders into the classroom. Faculty members serve as mentors for student
chapters of professional associations and sponsor a wide range of student
co-curricular projects. Students are required to complete a course that teaches
practical strategies and methods for realizing success so they will be prepared
to assume responsibility for their own learning and growth.
Keller
Graduate School of Management emphasizes excellence in teaching, student mastery
of practical management skills, and service to working adults. The
curricula, like the undergraduate curricula, are subject to regular review for
relevance to both students and employers. Keller offers classes in
the evening, on weekends and online, which enables students to complete their
degrees using whatever combination of online and onsite coursework suits their
needs. To broaden the scope and appeal of its master degree programs,
Keller has developed concentrations and graduate
certificates. Most faculty members are practicing professionals
who bring their expertise to the classroom, emphasizing theory and practices
that will best serve students in their work as managers. Critical competencies
in areas such as business communications, electronic commerce, technology,
ethics, quality, and international matters are woven throughout the
curricula.
Keller’s
Master of Accounting and Financial Management program offers students a choice
of three professional certification exam-preparation emphases: Certified Public
Accountant, Certified Fraud Examiner, or Chartered Financial Analyst. The
Certified Public Accountant and Chartered Financial Analyst concentrations were
developed in conjunction with Becker Professional Review. Keller’s
Master of Project Management program abides by the operational and educational
criteria set forth by the Project Management Institute (“PMI”) and is in
candidacy status to earn accreditation through PMI’s global
Accreditation Center. Coursework within Keller’s Master of Human Resource
Management program is in alignment with the HR Curriculum Guidelines and
Templates established by the Society for Human Resource Management. The Master
of Public Administration program offers students a choice of three tracks:
government management, nonprofit management, and health management.
Academic
Calendar
DeVry
University operates on a uniform academic calendar for both the undergraduate
and graduate degree programs across all methods of educational delivery — onsite
and online. The calendar consists of three academic periods of 16 weeks each,
comprising either a 15-week semester or two eight-week sessions. All online
courses, Keller Graduate School programs, and most undergraduate programs are
offered in eight-week sessions.
Online Delivery and
Technology
DeVry
University has offered online graduate programs since September 1998, and online
undergraduate programs since 2001. Our online course offerings have increased
every year, and we expect to continue to add online programs and concentrations
in the future. By offering courses online, we can better serve students whose
schedules or personal circumstances prevent them from attending classes in
person, optimize use of classroom space, and offer students the latest
educational technologies.
The
majority of DeVry University’s online students are adults attracted by the
quality, inherent flexibility and convenience of the program. We also have many
students who “mix and match” onsite and online courses to best meet their
individual needs and schedules.
All of
the Keller master’s degree programs are offered online. DeVry University offers
the following undergraduate degree programs in an online format:
|
—
|
Business
Administration
|
|
—
|
Computer
Engineering Technology
|
|
—
|
Computer
Information Systems
|
|
—
|
Electrical
and Computer Technology
|
|
—
|
Electrical
Engineering Technology
|
|
—
|
Game
and Simulation Programming
|
|
—
|
Health
Information Technology
|
|
—
|
Network
and Communications Management
|
|
—
|
Network
Systems Administration
|
In
addition to our online degree programs, many undergraduate and graduate courses
are taught using an integrated learning system, or “hybrid model,” that
incorporates both onsite and instructor-guided online activities.
Enrollment
Trends
In spring
2008, 44,814 full and part-time students were enrolled in DeVry University’s
undergraduate day, evening, and online programs. There were 16,537 coursetakers
in DeVry University graduate programs, including its Keller Graduate School of
Management, for the term that began in May 2008. The term coursetaker
refers to the number of courses taken by a student. Thus, one student
taking two courses is counted as two coursetakers.
Total
undergraduate enrollment in summer 2008 was 45,907, an increase of 12.6%
compared to 40,774 in the previous summer. There were 16,017 graduate
coursetakers in the July term, an increase of 14.2% from the same term of last
year. Coursetaker enrollment in DeVry University online program offerings in
summer 2008 was 44,503, an increase of 23.6% over the prior year.
The
following table provides historical enrollment data for DeVry University’s
undergraduate operation, including both onsite and online students.
|
|
Undergraduate New Students
|
|
|
|
Enrollment
|
|
|
% Change Over Prior Year
|
|
Fiscal
Year
|
|
Summer
|
|
|
Fall
|
|
|
Spring
|
|
|
Summer
|
|
|
Fall
|
|
|
Spring
|
|
2009
|
|
|
16,595 |
|
|
|
|
|
|
|
|
|
19.3 |
% |
|
|
|
|
|
|
2008
|
|
|
13,906 |
|
|
|
13,204 |
|
|
|
12,410 |
|
|
|
9.7 |
% |
|
|
10.7 |
% |
|
|
12.1 |
% |
2007
|
|
|
12,671 |
|
|
|
11,930 |
|
|
|
11,075 |
|
|
|
12.2 |
% |
|
|
11.9 |
% |
|
|
6.9 |
% |
2006
|
|
|
11,293 |
|
|
|
10,663 |
|
|
|
10,359 |
|
|
|
7.3 |
% |
|
|
6.4 |
% |
|
|
16.4 |
% |
2005
|
|
|
10,522 |
|
|
|
10,018 |
|
|
|
8,902 |
|
|
|
0.9 |
% |
|
|
(5.8 |
)% |
|
|
6.4 |
% |
|
|
Undergraduate
Total Students
|
|
|
|
Enrollment
|
|
|
% Change Over Prior Year
|
|
Fiscal
Year
|
|
Summer
|
|
|
Fall
|
|
|
Spring
|
|
|
Summer
|
|
|
Fall
|
|
|
Spring
|
|
2009
|
|
|
45,907 |
|
|
|
|
|
|
|
|
|
12.6 |
% |
|
|
|
|
|
|
2008
|
|
|
40,774 |
|
|
|
44,594 |
|
|
|
44,814 |
|
|
|
9.8 |
% |
|
|
10.3 |
% |
|
|
10.3 |
% |
2007
|
|
|
37,132 |
|
|
|
40,434 |
|
|
|
40,637 |
|
|
|
2.5 |
% |
|
|
4.9 |
% |
|
|
5.5 |
% |
2006
|
|
|
36,220 |
|
|
|
38,546 |
|
|
|
38,523 |
|
|
|
(4.8 |
)% |
|
|
(2.3 |
)% |
|
|
1.2 |
% |
2005
|
|
|
38,036 |
|
|
|
39,450 |
|
|
|
38,083 |
|
|
|
(5.8 |
)% |
|
|
(8.3 |
)% |
|
|
(6.8 |
)% |
The
following table provides historical coursetaker enrollment for DeVry
University’s graduate operation including its Keller Graduate School of
Management.
|
|
Graduate Coursetakers
|
|
Fiscal
Year
|
|
July
|
|
|
September
|
|
|
November
|
|
|
January
|
|
|
March
|
|
|
May
|
|
2009
|
|
|
16,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
14,023 |
|
|
|
15,857 |
|
|
|
15,657 |
|
|
|
17,377 |
|
|
|
17,005 |
|
|
|
16,537 |
|
2007
|
|
|
12,617 |
|
|
|
14,069 |
|
|
|
13,920 |
|
|
|
15,278 |
|
|
|
14,756 |
|
|
|
14,290 |
|
2006
|
|
|
11,434 |
|
|
|
12,732 |
|
|
|
12,777 |
|
|
|
13,776 |
|
|
|
14,029 |
|
|
|
13,148 |
|
2005
|
|
|
10,276 |
|
|
|
12,129 |
|
|
|
12,368 |
|
|
|
12,597 |
|
|
|
12,496 |
|
|
|
12,113 |
|
|
|
% Change Over Prior Yr
|
|
|
|
July
|
|
|
September
|
|
|
November
|
|
|
January
|
|
|
March
|
|
|
May
|
|
2009
|
|
|
14.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
11.1 |
% |
|
|
12.7 |
% |
|
|
12.5 |
% |
|
|
13.7 |
% |
|
|
15.2 |
% |
|
|
15.7 |
% |
2007
|
|
|
10.3 |
% |
|
|
10.5 |
% |
|
|
8.9 |
% |
|
|
10.9 |
% |
|
|
5.2 |
% |
|
|
8.7 |
% |
2006
|
|
|
11.3 |
% |
|
|
5.0 |
% |
|
|
3.3 |
% |
|
|
9.4 |
% |
|
|
12.3 |
% |
|
|
8.5 |
% |
2005
|
|
|
8.4 |
% |
|
|
9.0 |
% |
|
|
9.7 |
% |
|
|
5.8 |
% |
|
|
5.8 |
% |
|
|
8.7 |
% |
The
following table provides historical enrollment for DeVry University’s
undergraduate and graduate online coursetakers.
|
|
Online Coursetakers*
|
|
|
|
Enrollment
|
|
|
% Change Over Prior Year
|
|
Fiscal
Year
|
|
Summer
|
|
|
Fall
|
|
|
Spring
|
|
|
Summer
|
|
|
Fall
|
|
|
Spring
|
|
2009
|
|
|
44,503 |
|
|
|
|
|
|
|
|
|
23.6 |
% |
|
|
|
|
|
|
2008
|
|
|
36,001 |
|
|
|
41,128 |
|
|
|
43,889 |
|
|
|
26.0 |
% |
|
|
27.1 |
% |
|
|
25.0 |
% |
2007
|
|
|
28,580 |
|
|
|
32,369 |
|
|
|
35,111 |
|
|
|
35.7 |
% |
|
|
32.9 |
% |
|
|
22.5 |
% |
2006
|
|
|
21,068 |
|
|
|
24,357 |
|
|
|
28,912 |
|
|
|
67.3 |
% |
|
|
50.0 |
% |
|
|
46.3 |
% |
2005
|
|
|
12,590 |
|
|
|
16,236 |
|
|
|
19,759 |
|
|
|
92.8 |
% |
|
|
78.9 |
% |
|
|
79.1 |
% |
____________
*
|
Online
coursetakers are included in the new and total undergraduate and graduate
student counts.
|
Population
trends
The total
postsecondary student population can be thought of as two categories of
students: career-launchers, who are mostly traditional college-age students; and
career-enhancers, who are mostly working adults.
According
to the U.S. Department of Education, between 1995 and 2005 enrollment in degree
granting institutions increased by 23%, from 14.3 million to 17.5
million. Enrollment increases may be affected both by population
growth and by rising rates of enrollment. Between 1995 and 2005, the
number of 18- to 24-year olds increased from 25.5 million to 29.3 million, and
the percentage of 18- to 24-year olds enrolled in college rose from 34% to
39%.
The
number of young students has been growing more rapidly than the number of older
students, but this pattern is expected to change. The U.S. Department
of Education estimates that between 1990 and 2005 enrollment of students under
age 25 increased by 33%. Enrollment of persons 25 and older rose by
19% during the same period. From 2005 to 2015, the National Center
for Education Statistics projects a rise of 15% in enrollments of persons under
25, and a rise of 21% in enrollments of persons 25 and older. Many
external forces have combined to inspire older students to attend college today:
the development of the knowledge-based economy; the rapid pace of technological
change in the workplace; the emergence of e-learning tools that make continuing
education more feasible; and growing recognition of the importance of lifelong
learning.
The
National Center for Education Statistics estimates that in 2005 as many as 40%
of all college students were at least 25 years old, up from about 28% in 1970
and 39% in 2000. DeVry believes that more than half of our undergraduate
students are at least 25 years old. More significantly, at DeVry University
online and DeVry University centers, which are designed for the adult student
and have been the fastest growing portion of our operations, we estimate that at
least 80% of the students are age 25 or older. Projections indicate that the
percentage of this age group attending college will remain constant at
approximately 40% until 2014. The Bureau of Labor Statistics projects that
through 2010, job categories requiring at least some postsecondary education
(primarily bachelor’s and associate degrees) will grow nearly twice as fast as
those not requiring such education.
Another
strong motivation for students considering a postsecondary education is the
prospective income premium. According to the U.S. Census Bureau, in 2004, the
average income of U.S. employees with a bachelor’s degree was approximately
$51,550, more than 80% higher than the average for those with only a high school
education. The wage gap is even larger for those with graduate
degrees.
DeVry
University’s student body is increasingly diverse and many come from lower
income families or are first in their family to attend college. Some DeVry
University campuses rank near the top of the list of institutions in the number
of degrees granted to minority students in the fields of computer and
information science, business, and all academic disciplines combined. In
particular, DeVry University was ranked as among the top producers in the
country of minority graduates earning bachelor’s degrees in the fields of
computer and information sciences (CIS), and business, marketing and management
by Diverse Issues in Higher
Education (June 2008).
Demographic
information based on DeVry University’s fall term enrollments
follows.
Total
Population
|
Fall
2005
|
|
Fall
2006
|
|
Fall
2007
|
|
Undergraduate
|
77.9 |
% |
76.9 |
% |
76.6 |
% |
Graduate
|
22.1 |
% |
23.1 |
% |
23.4 |
% |
|
|
|
|
|
|
|
Age
|
Fall
2005
|
|
Fall
2006
|
|
Fall
2007
|
|
24
and Under
|
37.6 |
% |
35.1 |
% |
33.3 |
% |
25-39
|
48.0 |
% |
50.1 |
% |
51.3 |
% |
40
and Over
|
14.4 |
% |
14.7 |
% |
15.3 |
% |
Unknown
|
0.0 |
% |
0.1 |
% |
0.1 |
% |
|
|
|
|
|
|
|
Gender
|
Fall
2005
|
|
Fall
2006
|
|
Fall
2007
|
|
Male
|
59.7 |
% |
58.4 |
% |
56.3 |
% |
Female
|
40.3 |
% |
41.6 |
% |
43.7 |
% |
|
|
|
|
|
|
|
Ethnicity
|
Fall
2005
|
|
Fall
2006
|
|
Fall
2007
|
|
White,
non-Hispanic
|
43.0 |
% |
43.4 |
% |
42.9 |
% |
Black,
non-Hispanic
|
29.5 |
% |
29.1 |
% |
29.1 |
% |
Hispanic
|
14.3 |
% |
13.3 |
% |
13.2 |
% |
Asian/Pacific
Islander
|
7.7 |
% |
6.9 |
% |
6.6 |
% |
American
Indian/Alaska Native
|
0.8 |
% |
0.7 |
% |
0.8 |
% |
Non-resident/Alien
|
1.5 |
% |
2.4 |
% |
1.7 |
% |
Unknown
|
3.2 |
% |
4.2 |
% |
5.7 |
% |
Advanced
Academics
Advanced
Academics is a leading provider of online secondary
education. Founded in 2000 and headquartered in Oklahoma City,
Oklahoma, Advanced Academics partners with school districts to help more
students graduate high school. Through Web-based course instruction
using a proprietary technology platform, Advanced Academics provides a broad
range of programs including virtual high schools, supplemental courses, test
preparation and remediation. This model is flexible, providing a
comprehensive end-to-end solution as well as unbundled, customized programs
based on individual school needs. Advanced Academic’s programs are
taught by certified teachers, and students have access to around-the-clock
support.
Advanced
Academics operates virtual high schools in six states. Since its
inception, Advanced Academics has delivered online learning programs to more
than 40,000 students in more than 200 school districts. DeVry
acquired Advanced Academics on October 31, 2007.
MEDICAL AND
HEALTHCARE
Ross
University
Ross
University operates two schools: Ross University School of Medicine confers the
Doctor of Medicine (M.D.) degree, and Ross University School of Veterinary
Medicine confers the Doctor of Veterinary Medicine (D.V.M.) degree. Together,
the two Ross schools had 4,064 students enrolled in the May 2008 semester. More
than 6,500 graduates have received Ross M.D. degrees since 1978; these
individuals are practicing in all 50 states. More than 2,200 graduates have
received Ross D.V.M. degrees.
Ross
medical students complete a four-semester (approximately 16 months) basic
science and pre-clinical curriculum in modern classrooms and laboratories at a
campus located in Dominica, followed by a one-semester course entitled Advanced
Introduction to Clinical Medicine at the Dominica campus or at the Ross location
in Miami or at an affiliated hospital facility in Saginaw, Michigan. After
students successfully complete Step 1 of the U.S. Medical Licensing
Examinationtm,
which assesses whether medical school students understand and can apply
scientific concepts that are basic to the practice of medicine, they can
complete the remainder of the 10-semester program by participating in clinical
rotations under Ross University direction, and conducted at more than 50
affiliated teaching hospitals in the United States.
During
July 2008, Ross University announced it will open a teaching location in
Freeport, Grand Bahama, in January 2009. The Ross University Freeport
campus will initially accommodate students in the University’s medical school.
The students will initially be housed and taught in temporary space in Grand
Bahama with Ross’s new 60,000-80,000 square foot campus targeted to open in
2010. The Ross Dominica campus will continue to maintain its location as the
medical school’s primary campus. All students in the medical school will begin
their training in Dominica, with a portion of third and forth semester students
transferring to Freeport. The Ross University Freeport campus,
located 52 miles from Fort Lauderdale, will grow to accommodate the future
expansion needs of Ross University’s medical program, as well as potentially
adding other degree programs. The new campus will initially have 18 - 25 faculty
members, and will be equipped for further growth as demand increases. Depending
upon the pace of development, capital expenditures related to opening the branch
campus, including land, buildings and equipment, is expected to be in the range
of $35-$60 million over the next 5 years.
Ross’
educational program is modeled after the educational programs typically offered
at U.S. medical schools. However, Ross’ program consists of three
academic semesters per year — beginning in May, September, and January — which
allows the students to complete their basic science and clinical curriculum in
less time than they would at a U.S. medical school. The program prepares
students for general medical practice and provides the foundation for
postgraduate specialty training primarily in the United States.
Ross
veterinary students complete a seven-semester pre-clinical curriculum in a large
modern facility in St. Kitts. This program is structured to provide a veterinary
education that is modeled after educational programs at U.S. veterinary schools.
After completing their pre-clinical curriculum, Ross veterinary students enter a
clinical clerkship lasting approximately 48 weeks under Ross University
direction at one of 21 affiliated U.S. Colleges of Veterinary
Medicine.
|
|
Ross University New
Students
|
|
|
|
Enrollment
|
|
|
% Change Over Prior Yr
|
|
Fiscal
Year
|
|
September
|
|
|
January
|
|
|
May
|
|
|
September
|
|
|
January
|
|
|
May
|
|
2008
|
|
|
572 |
|
|
|
551 |
|
|
|
481 |
|
|
|
(8.9 |
)% |
|
|
11.1 |
% |
|
|
15.6 |
% |
2007
|
|
|
628 |
|
|
|
496 |
|
|
|
416 |
|
|
|
9.2 |
% |
|
|
28.2 |
% |
|
|
(5.2 |
)% |
2006
|
|
|
575 |
|
|
|
387 |
|
|
|
439 |
|
|
|
40.6 |
% |
|
|
67.5 |
% |
|
|
63.8 |
% |
2005
|
|
|
409 |
|
|
|
231 |
|
|
|
268 |
|
|
|
(12.4 |
)% |
|
|
(36.7 |
)% |
|
|
26.4 |
% |
|
|
Ross University Total
Students
|
|
|
|
Enrollment
|
|
|
% Change Over Prior Year
|
|
Fiscal
Year
|
|
September
|
|
|
January
|
|
|
May
|
|
|
September
|
|
|
January
|
|
|
May
|
|
2008
|
|
|
3,876 |
|
|
|
4,011 |
|
|
|
4,064 |
|
|
|
4.1 |
% |
|
|
7.0 |
% |
|
|
7.9 |
% |
2007
|
|
|
3,724 |
|
|
|
3,747 |
|
|
|
3,767 |
|
|
|
15.4 |
% |
|
|
14.8 |
% |
|
|
9.9 |
% |
2006
|
|
|
3,227 |
|
|
|
3,264 |
|
|
|
3,428 |
|
|
|
(3.8 |
)% |
|
|
4.5 |
% |
|
|
13.2 |
% |
2005
|
|
|
3,353 |
|
|
|
3,122 |
|
|
|
3,029 |
|
|
|
5.6 |
% |
|
|
(3.3 |
)% |
|
|
(8.5 |
)% |
The
average Ross medical student is 27 years old — two years older than the U.S.
medical school average — and the student population is approximately 56% male.
The average Ross veterinary student also is 27 years old — one year older than
the U.S. veterinary school average — and the student population is more than 72%
female. Most Ross students are either citizens or permanent residents of the
United States.
Chamberlain College of
Nursing
DeVry
acquired Chamberlain College of Nursing in March 2005. Founded as Deaconess
College of Nursing more than a century ago, Chamberlain offers programs in
nursing education leading to one of two degrees: a Bachelor of Science in
Nursing (“BSN”), or an Associate of Science in Nursing (“ASN”). Students enroll
at campuses in St. Louis, Missouri; Columbus, Ohio, Phoenix, Arizona; Addison,
Illinois; and online. Chamberlain had approximately 2,200 students
enrolled in the July 2008 semester.
Chamberlain’s
BSN program is a traditional on-campus baccalaureate program. The BSN
program enables students to complete their BSN degree in three years of
full-time study as opposed to typical four year BSN programs where students take
the summer off. Students who already have achieved Registered Nurse
(“RN”) designation through a diploma or associate degree can complete their BSN
online through Chamberlain’s “fast track” RN to BSN completion program in as
little as three semesters. The ASN program is a six-semester year
round program offered onsite or online. In addition, Licensed
Practical Nurses (“LPNs”) receive up to 10 hours of credit for their previous
work and can complete an ASN degree through either the onsite or online
programs. Beginning October 2008, Chamberlain will discontinue the
online delivery of its Associates of Science in Nursing Degree program offered
through its St. Louis, Missouri campus. Approximately 35 students
will be affected by the discontinuation of this program.
Both
degree programs provide nursing skill training and general education.
Pre-licensure students complete clinical training at hospitals or other
healthcare facilities. Chamberlain has developed numerous partnerships with
hospitals for this purpose.
Ninety
percent of Chamberlain students are female. Students in the on-campus BSN
program tend to be younger, yet most enter Chamberlain with previous college
credits. Those in the ASN program tend to be non-traditional adult
students who are changing careers.
According
to the U.S. Bureau of Labor Statistics, RNs constitute the largest healthcare
occupation in the United States with 2.3 million jobs. The U.S.
Department of Health and Human Services projects that the demand for RNs will
grow by 27.3% over the next several years.
Acquisition of U.S.
Education
On July
30, 2008, DeVry announced it would acquire U.S. Education Corporation (“USEC”)
for $290 million in cash. USEC is the parent organization of Apollo
College and Western Career College and is headquartered in Mission Viejo,
California. Apollo College and Western Career College prepare
students for careers in healthcare through certificate and associate degree
programs in such rapidly growing fields as nursing, ultrasound and radiography
technology, surgical technology, veterinary technology, pharmacy technology,
dental hygiene, and medical and dental assisting. Apollo College is
nationally accredited by the Accrediting Council of Independent Colleges and
Schools. Western Career College is regionally accredited by the
Accrediting Commission for Community and Junior Colleges of the Western
Association of Schools and Colleges. The two colleges operate 17
campus locations in the western United States and currently serve more than
8,700 students. Upon completion of the acquisition, USEC will become
part of DeVry’s Medical and Healthcare segment.
PROFESSIONAL AND
TRAINING
Becker
Professional Review is a global leader in professional education and training
serving the accounting and finance professions. Its primary product lines are
review courses preparing students to take the Certified Public Accountant and
Chartered Financial Analyst examinations. Through its CPA and CFA review
courses, Becker served more than 50,000 students in fiscal year
2008. Becker CPA Review is the industry leader in providing CPA exam
review services and has been preparing candidates to pass the exam for over 50
years. For 2007, all ten of the Elijah Watt Sells Award winners,
individuals who achieved the highest cumulative scores on the CPA exam, prepared
with Becker. For 2005 and 2006, 7 of the 10 Elijah Watt Sells Award
winners prepared with Becker.
In 2001,
DeVry acquired Stalla Seminars, now called Stalla Review for the CFA Exams, a
leading provider of CFA review courses and materials. Stalla offers
live, online and self study CFA review programs in the United States and in
major financial centers around the world. Stalla has become a leader
in course-centric, comprehensive CFA exam preparation for 30
years. Through its classes, resources and our expanding partnerships
with firms, local CFA societies, universities, and other global affiliates,
Stalla serves thousands of candidates every year worldwide.
To reach
students who cannot attend class because of location or schedule conflicts,
Becker CPA Review offers complete review courses in more flexible formats,
including CD-ROM or online. Becker’s online products are interactive, and offer
the same instructor-led lessons and materials available in the classroom course.
The online course also provides each student an online instructor who offers
individualized attention and assistance as needed. CD-ROM and online review
course enrollments have grown steadily during the past several years, equaling
approximately 60% of total enrollment.
Based on
published exam pass rate statistics supplied by the American Institute of
Certified Public Accountants, Becker CPA Review students pass at twice the rate
of all CPA exam candidates who did not take a Becker review
course. Becker CPA exam review course students represent nearly
one-half of all students passing the CPA exam. At the request of the CFA
Institute, the professional association that administers the CFA exam, Stalla
and other providers do not disclose pass rate performance.
In 2005,
DeVry acquired Gearty CPE, a provider of continuing professional education
programs and seminars in accounting and finance in the New York/New Jersey
metropolitan area. This acquisition provided an entrée into the CPE marketplace
and complements Becker’s existing exam review business.
Enrollment
trends
Becker CPA Exam
Review
The
Uniform CPA Examination (“CPA exam”) is prepared and administered by the
American Institute of Certified Public Accountants (“AICPA”). The CPA
exam is offered only in a computer-based, on-demand, four-part format for eight
months of the year. In addition to successfully passing the four-part exam, CPA
candidates must also meet educational, work experience, and other requirements
specific to the state or jurisdiction in which they intend to be licensed to
practice. The demand for CPAs remains strong and the number of exam
candidates has increased significantly during the past several
years. Based on the most recent surveys released by the AICPA, hires
reported by CPA firms for summer of 2007 had a compound annual growth rate of
over 22% over the hiring numbers from the last survey covering the 2003-04 base
year. The AICPA has predicted a 9-10% annual growth in CPA exam
candidates through 2010.
Stalla Review for the
CFA® Exams
The CFA
exam review is a graduate-level curriculum and examination program intended to
expand a candidate’s working knowledge and skills relating to the investment
decision-making process. The curriculum is broken into three “levels,” each of
which builds upon another and concludes with an examination. The CFA designation
is often referred to in practice as the “gold standard” for investment
professionals, serving as a standard for measuring practitioner-oriented
competence and integrity in fields including corporate finance, portfolio
management, securities analysis and ethical and professional standards. Stalla’s
approach to CFA exam preparation — The “Stalla System” — combines expert,
comprehensive instruction, an integrated suite of learning tools continuous
guidance and academic support in a program personalized to fit candidates’
unique learning styles and scheduling requirements.
Becker
began offering a CFA review course for the Level 1 examination in 2000. The 2001
acquisition of Stalla Seminars (predecessor of Stalla Review for the CFA® Exam)
enhanced that program and added review courses for the respective Level 2 and
Level 3 examinations. Stalla also offers CFA exam study materials in print, and
its course offerings are also available in more flexible online and self study
formats.
Nearly
119,000 candidates from 165 countries enrolled for the June 2008 CFA exam,
bringing total enrollments for fiscal year 2008 to more than 175,000 — an
increase of 25% over 2007. Of the total enrollments for fiscal year 2008, 32% of
candidates were from the United States, 37% were from Asia-Pacific, 16% were
from Europe and 8% were from Canada. The majority of the remaining candidates
were from Latin America, Africa and the Middle East. The strongest recent
candidate enrollment growth has come from outside of North America —
particularly within the Asia/Pacific area. Stalla has demonstrated positive
enrollment and revenue growth in North American and other markets.
Continuing Professional
Education
Becker
offers customized educational and training programs in the fields of accounting,
finance and project management to help organizations achieve superior
performance through work force development. Since instruction can be conducted
at the organization’s site, Becker provides a unique and cost-effective
continuing education model.
COMPETITION
DeVry
University
The
postsecondary education market is highly fragmented and competitive; no single
institution has a significant market share. According to the National Center for
Education Statistics, there were approximately 6,540 Title IV eligible
postsecondary education institutions in the United States as of the Fall 2006,
including approximately 2,680 private, for-profit (“market-funded”) schools;
approximately 2,010 public, non-profit schools (“publicly-funded” e.g. state
institutions and community colleges); and approximately 1,850 private,
non-profit (“privately-funded”) schools. According to the U.S. Department of
Education, in the fall of 2006 approximately 18.2 million students were
attending degree-granting institutions that participate in the various financial
aid programs under Title IV of the Higher Education Act.
In every
market in which DeVry University operates, there are numerous state
institutions, community colleges, and privately-funded universities. In
particular, there is growing competitive pressure from community colleges,
traditional universities, and technical colleges that offer industry-specific
certification programs, particularly in the computer information
field. In addition, there is growing competition from online
programs (both by market-funded and other traditional institutions) and
site-based market-funded school programs.
Tuition
at independent privately-funded institutions is, on average, higher than the
tuition at DeVry University. Publicly-supported colleges may offer similar
programs at a lower tuition level because of government subsidies,
tax-deductible contributions, and other financial sources not available to
market-funded schools. In fact, many local community colleges offer programs
similar in content to DeVry University’s associate degree programs, but at a
much lower tuition. While community college enrollments have grown significantly
in recent years and these institutions may be viewed as competitors, they also
provide DeVry University an opportunity to serve their graduates: we have a
number of articulation and transfer agreements in place with community colleges
that make it easier for their graduates to continue their education to earn a
bachelor’s degree at DeVry University.
For more
information on DeVry University tuition, please read the section entitled
“Tuition and Fees.”
Geography and
Consistency
DeVry
University campuses and centers are located in 26 states, with multiple
locations within many of the states, as well as one location in
Canada. As such, we offer a national system of educational offerings
to adults who may be transferred or choose to move from one part of the country
to another. In addition, we offer all our graduate programs and nearly all
undergraduate programs through DeVry University online, making these programs
available to all qualified students without regard to their location or daily
schedule. In most markets where it operates, DeVry University offers
a broader range of elective course options than its competitors.
To ensure
that students can readily transfer from one DeVry University location to another
without disrupting their studies, our graduate and undergraduate curricula
generally are consistent at all locations (with some content variations to meet
local employment market and/or regulatory requirements).
Undergraduate
Programs
DeVry
University’s competitive strengths in the market for undergraduate programs
include:
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Career-oriented
curricula developed with employer input to ensure that graduates learn
marketable skills;
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Faculty
with relevant industry experience;
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Well-developed
undergraduate career service
program;
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National
brand name recognition and market
presence;
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Regional
accreditation;
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Modern
facilities and well-equipped
laboratories;
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Evening,
weekend, and online class
schedules;
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Year-round
academic schedule that permits more flexible attendance and earlier
graduation; and
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Bachelor’s
degree programs that can be completed in three years, giving DeVry
University students the financial advantage of entering the work force one
year earlier than their counterparts at traditional four-year
undergraduate institutions.
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In recent
years, DeVry has increased its competitiveness by enhancing several of the
undergraduate programs, expanding DeVry University online offerings, and adding
DeVry University centers. As a result, we offer more locations, and more
flexible class schedules and learning formats, than most other educational
institutions. Undergraduate classes at DeVry University campuses generally are
offered in morning, afternoon, or evening sessions, which help students maintain
part-time jobs. Undergraduate classes at DeVry University centers generally are
offered in the evening for the convenience of the predominantly working adult
students, but daytime classes are offered at centers in markets where there is
deemed to be sufficient demand.
Graduate
Programs
DeVry
University’s competitive strengths in the market for graduate programs
include:
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A
practitioner approach to education that stresses skills and strategies
that employers value;
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Excellence
in teaching by a faculty of practicing
professionals;
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A
high level of service to the adult student, including flexible schedules
and locations that are convenient to where many students
work;
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Convenience
of more than 80 onsite teaching locations in major metropolitan areas
nationwide; and
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Flexible
schedules with six sessions each year which enable new students to start
their program any time of the year and continuing students to take a
session off, if necessary, to accommodate their
schedules.
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Graduate
programs, both onsite and online, are offered in six, eight-week sessions each
year. Classroom-based courses generally meet once a week, either in the evening
or on Saturday, for the convenience of students with heavy travel or other
demands on their time.
As the
market for adult education programs has expanded in recent years, other schools
have implemented multi-location evening and weekend programs. Enrollments in
DeVry University’s graduate programs continue to increase, demonstrating the
recognition it has earned as an innovator in providing quality practical
education.
Medical and
Healthcare
Ross
University
In the
medical education market, Ross University competes with the 129 U.S.-based
schools of medicine, 25 U.S. colleges of osteopathic medicine, and approximately
25 Caribbean-based medical schools. In the veterinary education market, Ross
competes with AVMA accredited schools, of which 28 are U.S., 4 are Canadian and
7 are international veterinary schools. In addition, Ross competes
with 2 non-AVMA Caribbean veterinary schools.
Ross
University attracts potential students for several reasons. For some, Ross is
their first or only choice of schools because of our commitment to and focus on
teaching. Others applied to U.S.-based medical or veterinary schools but were
not admitted. Some students elected not to apply to U.S. schools because of
self-perceived deficiencies in their academic record or standardized test
scores.
For 2007,
it is estimated that applications to U.S. medical and veterinary medical schools
aggregated over 42,000 and 6,000, respectively. From these applicant
pools, approximately 45% and 47%, respectively, were accepted. An
additional estimated 4,400 students were accepted to U.S. osteopathic medical
schools. Acceptance levels have remained largely unchanged for more than two
decades, but have recently started to increase with the authorization or opening
of several new allopathic and osteopathic schools.
Medical
and veterinary school applicants who were denied admission to U.S. schools
constitute a large segment of prospective students for Ross University. Based
upon the number of Medical College Admission Test (“MCAT”) takers, which
decreased to approximately 67,800 in 2007 (down from approximately 70,900 in
2006), management believes the potential market for medical school students is
much larger than the denied applicant pool alone.
According
to the Association of American Medical Colleges, the demand for medical
education is expected to increase over the next decade by approximately 30%,
spurred by a physician supply/demand imbalance that is projected to grow. The
capacity of U.S. medical schools has not changed materially in more than two
decades. However, some expansion is likely in the U.S. medical
education industry in the future because of the growing supply/demand imbalance
for medical doctors. Management believes the veterinary medical education market
is subject to some of the same forces.
Compared
to its market-funded competitors, Ross University enjoys several competitive
advantages, including a large alumni base and strong reputation, federal
financial aid eligibility for its students, and the historically large network
of diverse geographical opportunities for clinical rotations.
In the
last year for which there is published data (September 2002), more Ross
University School of Medicine graduates obtained first year residency positions
at U.S. teaching hospitals than graduates from any other medical school in the
world, including those schools in the United States. Those residency
appointments have been in virtually every medical specialty and
subspecialty.
Chamberlain College of
Nursing
Nursing
constitutes the largest occupation in healthcare, with more than 2.3 million
nursing jobs in the United States alone. It is estimated that more new nursing
jobs will be created in the United States during the next decade than in any
other healthcare profession. The strong job market for nurses has spurred
applications to nursing schools, but has not yet produced a sufficient increase
in educational capacity. It is estimated by the American Association
of Colleges of Nursing that over 36,000 qualified applicants were turned away
from U.S. baccalaureate degree-granting nursing schools in 2007 because of lack
of capacity.
Nationally,
Chamberlain competes in the nursing education market with more than 800 programs
leading to RN licensure. These include both four-year educational
institutions and two-year community colleges. However, Chamberlain
has an advantage over many of its competitors because it offers an accelerated
three-year BSN program and an ASN program that can be taken either onsite or
online.
Professional and
Training
Becker
competes with other methods of CPA and CFA exam preparation, including
self-study courses sponsored by the CFA Institute and affiliated societies,
courses offered by colleges and universities, and courses offered by other
private training companies. Becker typically charges more for exam preparation
than colleges and private competitors.
With its
50-plus year history and track record of preparing students to pass the CPA
exam, Becker differentiates itself from competitors by providing:
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Extensive
and constantly updated review and practice test
materials;
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Experienced,
well qualified instructors for each of the areas of specialty included in
the exam;
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Courses
available in several formats, including live class, self study CD, and
online sessions, to meet candidate needs for flexibility and control;
and
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Practice
simulations and software functionality, similar to those used in the
actual exam.
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Becker’s
CD-ROM and online courses offer a wider range of study alternatives than other
course providers. Becker students have a high success rate on the exam; some of
Becker students enroll after taking other review courses or studying
independently without success.
Stalla
differentiates itself from competitors by employing an expert-led, comprehensive
approach to preparation focused on helping candidates master and apply CFA
curriculum topics and pass their exams. Other advantages over competing programs
include:
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A
curriculum produced by more than 50 CFA Charterholders and subject matter
experts;
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An
instructional team that includes Charterholders, practitioners and subject
matter experts, all of whom are skilled
teachers;
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Materials
that are continually updated to reflect the most recent CFA curriculum,
with a rigorous quality assurance process in
place;
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Courses
that are available in several formats, including live class, self study
CD, and online sessions, to meet candidate needs for flexibility and
control; and
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Access
for all Stalla System candidates to a team of CFA Charterholder, upon whom
they can rely for ongoing and unlimited support and expert
guidance.
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CPA and
CFA exam candidates can take advantage of the Becker review course content and
methodology in conjunction with their DeVry University MBA or Master of
Accounting and Financial Management programs in several states, earning full
academic credit. These credits also may be used to fulfill the 150-hour
educational requirement that most states have made a prerequisite to sitting for
the CPA exam. Extending the marketing and administrative benefits of joint
operation, Becker offers classes at DeVry University locations.
The
Stalla CFA review course is taught live in a classroom setting in selected large
financial markets around the world and in an online format and self-study CD
format to reach potential exam takers not able to attend the classroom course.
In the CFA exam preparation market, much like the CPA exam preparation market,
Stalla competes with courses offered by local CFA Society chapters, other
training companies, and student self-study.
STUDENT RECRUITING AND
ADMISSION
DeVry
University
Direct
Recruiting
DeVry
University employs approximately 1,200 admissions advisors, not including
managers and other administrative staff who support the recruiting process,
throughout the United States and Canada. Admissions advisors are salaried,
full-time DeVry employees. There are admissions advisors at each DeVry
University location who work with potential applicants.
Undergraduate
students applying to DeVry University to take courses online are recruited
primarily by admissions advisors, either at a DeVry University location if the
applicant lives or works in the area, or by a central staff of admissions
advisors who are dedicated to serving online applicants. Some applicants to
online programs, who are in areas remote from a DeVry University location,
including active military personnel on military bases, are recruited by a
central staff of admissions advisors.
All
graduate school students are recruited by admissions advisors.
Certain
states and Canadian provinces require advisors and student recruiters to be
licensed or authorized by a particular regulatory agency. Regulations governing
student participation in U.S. federal financial assistance programs prohibit
schools from paying commissions, bonuses, or incentives to student recruiters
based directly or indirectly on the number of students they enroll. DeVry
believes that its compensation practices were designed to be in compliance with
current regulations.
In May
2008, the U.S. Department of Justice, Civil Division, working with the U.S.
Attorney for the Northern District of Illinois, requested that DeVry voluntarily
furnish documents and other information regarding its policies and practices
with respect to recruiter compensation and performance
evaluation. The stated purpose of the request was to examine whether
DeVry may have submitted or caused the submission of false claims or false
statements to the U.S. Department of Education in violation of the False Claims
Act. DeVry made a timely production of documents and continues to
offer its full cooperation to the government in carrying out its
inquiry. DeVry believes that its compensation practices were designed
to be in compliance with current regulations.
Many of
our applicants are older working adults who want to attend class in the evening
or on weekends, recently unemployed adults seeking to improve their job skills,
and students transferring to a DeVry University undergraduate program from
nearby community colleges. DeVry University has entered into articulation
agreements with community colleges to facilitate the enrollment of their
students seeking to transfer course credits to DeVry University. A growing
number of new students enrolling in our undergraduate programs have some prior
college experience. In addition, military veterans with military-specific
technical training are attracted to DeVry University’s practical career-oriented
education and extensive geographic reach.
Admissions
advisors visited more than 7,000 high schools, community colleges, military
bases, and other locations in North America last year, making presentations on
career choices — particularly in business and technology-related fields — and on
the importance of a college education. Participating students complete career
surveys, which provide a large and important source of recruiting inquiries.
Admissions advisors also receive student inquiries generated by DeVry
University’s web-site, the Internet, direct mail, television, radio and print
advertising. Follow-up interview sessions with prospective students generally
take place at a DeVry University location or in the student’s home with his or
her parents.
DeVry
University also recruits students through its Corporate Education Program
(“CEP”). The program is designed to meet the education needs of
corporate clients and their employees with DeVry University program
offerings. A national network of corporate account managers directs
its student recruiting efforts primarily at Fortune 1000 companies leveraging
relationships with these clients through DeVry University’s career services
organization.
Marketing and
Outreach
To
enhance the productivity of our admissions advisors, DeVry University increased
its emphasis on local marketing and outreach, recognizing that potential
applicants in different market areas can be better recruited by targeted means
and messages.
DeVry
University currently advertises on various Internet sites, television and radio,
in magazines and newspapers, and utilizes telemarketing and direct mail to reach
prospective students. During fiscal 2008, we increased efficiency in inquiry
generating marketing efforts, focusing on nationally efficient advertising
vehicles, including Internet, television and direct mail. We
continuously update our marketing programs in order to better communicate the
quality of our degree programs and the value of a DeVry University
education. In January 2008, DeVry University launched a
career-focused brand campaign, entitled “We Major in Careers,” that is grounded
in DeVry University’s graduate employment rate that spans more than 30
years. The campaign is a culmination of more than a year’s worth of
in-depth consumer, marketplace and brand research. The creative
content is based upon “real students / real stories” who provide a testimonial
on a DeVry University education and graduate employment success. “We
Major in Careers” is an integrated campaign that includes Internet, broadcast
and print advertising, as well as direct mail and local marketing
efforts.
DeVry
University markets to high school students in several unique
ways. For example, since July 2004, we have worked with the Chicago
Public School system to create the DeVry Advantage Academy. This program allows
high school students with an aptitude for mathematics and technology to complete
their junior and senior year of high school coursework at DeVry University’s
Chicago campus while also taking college-level courses taught by DeVry
University faculty. Upon completion, Advantage Academy students will have the
opportunity to graduate with both a high school diploma and an associate degree
in Network Systems Administration. All tuition, textbooks, and educational
materials are paid for by the Chicago Board of Education and DeVry University.
This program began with an initial enrollment of 128 students in 2004. From this
first class, which graduated in June 2006, approximately 90% earned their high
school diploma, and approximately 81% earned their associate degree. In June
2008, a class of 121 students graduated and a class of approximately 100
students will begin in September 2008. DeVry University replicated
this model program in conjunction with the Columbus, Ohio School District in
July 2006. In June 2008, the Columbus Advantage Academy graduated its
first class of 22 students, all of whom are continuing their education,
enrolling at colleges and universities across the United States this fall to
pursue bachelor’s degrees. In July 2008, a class of 24 students will
begin. Efforts are underway to launch similar Advantage Academy
programs in other metropolitan areas.
Other
outreach and recruitment initiatives include weekend SAT preparatory classes for
high school seniors, Career Reality workshops to teach students and educators
about trends in business and industry, free summer classes for high school
students seeking a head start on business and technology college credits, and
fellowships for high school and community college faculty and
administrators. Another example is HerWorld®, an
innovative program designed to encourage and reinforce interest in business and
technology careers among high school girls.
Admissions
Standards
To be
admitted to a DeVry University undergraduate program in the United States, an
applicant must be either a high school graduate, have a General Education
Development (“GED”) certificate, or hold a degree from a DeVry
University-approved postsecondary institution. Applicants for admission must be
at least 17 years old and complete an interview with an admissions advisor. In
Canada, an applicant must meet either the same criteria as in the United States,
or meet alternative “mature student” criteria.
All
applicants must meet prescribed admission qualifications and attain minimum
placement examination scores, which vary depending on the program. Students can
elect to take the Computerized Placement Tests, which were designed in
collaboration with The College Board and Educational Testing Service, to assess
applicants’ achievement levels and developmental needs during the admission
process. ACT or SAT examination scores deemed appropriate for the desired
program, or acceptable grades in qualifying college-level work completed at an
approved postsecondary institution, also can be used to meet undergraduate
admission requirements.
After
prospective students complete an application, our admissions advisors contact
them through phone calls, mailings, and invitations to site-based workshops or
other events to improve the rate at which such applicants begin their program of
study.
To be
admitted to a graduate program, applicants must hold a bachelor’s degree from a
U.S. institution that is accredited by or is in candidacy status with a regional
accrediting agency recognized by the U.S. Department of Education. International
applicants must hold a degree recognized to be equivalent to a U.S.
baccalaureate degree. Applicants whose undergraduate cumulative grade point
average is 2.70 or higher are eligible for admission. Applicants with a
cumulative grade point average below 2.70 must achieve acceptable scores on the
Graduate Management Admission Test (“GMAT”), the Graduate Record Examination
(“GRE”) or the Keller-administered alternative admissions test. Admissions
decisions are based on evaluation of a candidate’s academic credentials,
entrance test scores, and a personal interview.
Medical and
Healthcare
Ross
University
The Ross
University School of Medicine and School of Veterinary Medicine focus their
marketing efforts on attracting highly qualified, primarily U.S. and Canadian
applicants, with the motivation and requisite academic ability to complete their
educational programs and to pass the United States Medical Licensing Exam and
the North American Veterinary Licensure Examination,
respectively. Ross’ marketing effort includes direct e-mail
marketing, visits to undergraduate campuses to meet students and their
pre-med/pre-vet advisors, targeted direct mail campaigns, information seminars
in 40 major markets throughout the United States, Canada, and Puerto Rico,
alumni referrals, a national undergraduate poster campaign, radio advertisements
in select markets, print ads in major magazines, newspapers, as well as college
newspapers.
Ross
employs regional admissions representatives in ten cities throughout the U.S.
who seek out and pursue student interest in our two programs. Senior
Associate Directors of Admissions and Associate Directors of Admission recruit,
interview, admit, and enroll all new students to each of our three entering
cohorts. Admission requirements include a minimum of 90 earned
undergraduate credit hours, though a bachelor’s degree is strongly
preferred. The successful applicant must have all prerequisite
sciences (with labs), mathematics, and English courses as dictated by the
admissions committee of both the medical and veterinary schools
respectively. All candidates for admission must interview with an
associate director at one of our sites in New Jersey, Miami, Providence,
Charlotte, Dallas, Los Angeles, Anaheim, Orlando, Denver, Chicago or Ontario,
Canada. All admission decisions are made by the admissions committees
of the medical and veterinary schools.
Chamberlain College of
Nursing
Chamberlain
utilizes varied marketing approaches to generate interest from potential
students. Chamberlain recruiters visit Arizona, Illinois, Missouri and Ohio high
schools, employ targeted direct mail and Internet campaigns, cultivate alumni
referrals, and participate in information seminars and career fairs. Chamberlain
holds open house events to attract local prospective students, and advertises in
healthcare career publications, in newspapers, and on television and radio.
Chamberlain’s extensive informational web-site generates nearly one-third of all
potential applicant inquiries.
Chamberlain
employs regional admissions representatives who arrange for student interviews
and campus tours. Admission requirements include a high school diploma or GED;
minimum cumulative grade point average requirements vary depending upon the
program. Applicants must pass the Chamberlain standard pre-admission exam or
obtain a prescribed minimum score on the ACT exam, depending upon the program in
which the applicant is interested. Admissions decisions are made by an
admissions committee.
Professional and
Training
Becker
markets its courses directly to potential students and to selected employers,
primarily the large national and regional accounting and financial services
firms. Alumni referrals, direct mail, print advertising, electronic mail, and a
network of on-campus recruiters at colleges and universities across the country
also generate new students for Becker’s CPA and CFA review courses. The Becker
web-site is another source of information for interested
applicants.
Becker
delivers its CPA review courses on about 70 college campuses, recruiting
students attending that institution. Becker also is the preferred provider of
CPA review for several of the country’s largest CPA firms.
The CFA
exam review course is now offered in an expanded number of classroom locations
and online. Dozens of CFA societies, including those in Toronto, Washington
D.C., Chicago, Singapore, and Hong Kong, have adopted Stalla as their preferred
provider of CFA preparation programs. Also, several prominent investment firms
and universities are on the Stalla client roster, further expanding the reach
and prominence of the Stalla brand.
ACCREDITATION
Educational
institutions and their individual programs can earn “accreditation” by achieving
a level of quality that entitles them to the confidence of the educational
community and the public they serve. Accredited institutions are subject to
periodic review by accrediting bodies to ensure continued high performance and
institutional and program improvement and integrity, and to confirm that
accreditation requirements continue to be satisfied.
DeVry
University
Regional
accreditation in the United States is a voluntary process designed to promote
educational quality and improvement, and is an important strength for DeVry
University. Management believes regional accreditation offers DeVry University a
significant advantage over most other market-funded colleges. DeVry University
has been accredited by the Higher Learning Commission of the North Central
Association of Colleges and Schools (“HLC”), which is one of the six regional
collegiate accrediting agencies in the U.S. College and university
administrators depend on the accredited status of an institution when evaluating
transfers of credit and applications to their schools; employers rely on the
accredited status of an institution when evaluating a candidate’s credentials;
and parents and high school counselors look to accreditation for assurance that
an institution meets quality educational standards. Moreover, accreditation is
necessary for students to qualify for federal financial assistance, and most
scholarship commissions restrict their awards to students attending accredited
institutions.
Keller
Graduate School of Management was first awarded its accreditation in 1977, and
DeVry Institutes was first awarded North Central Association (now HLC)
accreditation in 1981. Each school was separately accredited until February
2002, when the North Central Association approved the merger of DeVry Institutes
and Keller Graduate School into a single institution with the name DeVry
University. After a comprehensive evaluation visit in August 2002, the HLC
approved a 10-year re-accreditation for DeVry University. HLC further affirmed
that DeVry University can offer, without restriction, any of its programs
onsite, online, or through any combination of the two.
In
addition to regional accreditation, the baccalaureate electronics engineering
technology programs at most of DeVry University’s U.S. locations are accredited
by the Technology Accreditation Commission of ABET (“TAC of ABET”), an
accreditation board for applied science, computing, engineering, and technical
educations. Baccalaureate computer engineering technology programs at several
DeVry University U.S. locations are also accredited by ABET. The associate level
electronics engineering technology program in North Brunswick, New Jersey is
also TAC of ABET accredited.
DeVry
University campuses will apply for TAC of ABET accreditation for the biomedical
engineering technology program, and additional campuses will apply for
accreditation of the computer engineering technology program, when their first
classes graduate from these programs. Similarly, newer DeVry University campus
locations will apply for TAC of ABET accreditation for their eligible programs
when their first classes graduate.
The
associate degree health information technology programs offered online and at
DeVry University locations in Atlanta, Chicago, Columbus, Dallas, Ft.
Washington, Houston, and Southern California are accredited by the Commission on
Accreditation for Health Informatics and Information Management Education.
Additional DeVry campuses are in the process of applying for this accreditation
for their programs.
The
province of Alberta granted accreditation to DeVry Calgary to confer Bachelor of
Technology degrees in 2001 and accreditation to confer Bachelor of Science
degrees in 2006. DeVry Calgary is the first and only market-funded institution
in Canada to be provincially accredited to grant bachelor’s degrees. Through an
arrangement with the Alberta Department of Advanced Education, the State of
Arizona, and the NCA, the computer engineering technology and network and
communications management curricula offered at DeVry Calgary fall under the
accreditation of DeVry University (Arizona) as an off-site instructional
location. The computer engineering technology and electronics engineering
technology programs are accredited by the Canadian Technology Accreditation
Board (CTAB).
Advanced
Academics
Advanced
Academics is accredited by the North Central Association of Colleges and Schools
and the Commission of International and Trans-Regional
Accreditation.
Medical and
Healthcare
Ross
University
The
Commonwealth of Dominica authorizes Ross University School of Medicine to confer
the Doctor of Medicine degree. The medical school has been recognized and
accredited as a University and School of Medicine by the Dominican Medical Board
(“DMB”). The National Committee on Foreign Medical Education of the U.S.
Department of Education has affirmed that the DMB has established and enforces
standards of educational accreditation that are comparable to those promulgated
by the U.S. Liaison Committee on Medical Education. In addition, the states of
New York, New Jersey, California, and Florida — the only four states to require
separate approval for medical schools — have approved or found the Ross Medical
program of study to be acceptable.
The
Veterinary School has been recognized and accredited as a University and School
of Veterinary Medicine by the government of the Federation of St. Christopher
and Nevis (“St. Kitts”) and is chartered to confer the Doctor of Veterinary
Medicine degree. The Veterinary School is American Veterinary Medical
Association (“AVMA”) listed and has affiliations with 22 AVMA-accredited U.S.
colleges of veterinary medicine so that Ross students can complete their final
three semesters of study in the United States. Only students who graduate from
an AVMA-listed school are eligible for U.S. licensure.
The
Veterinary School has undergone a consultative visit from the AVMA Council on
Education as a precursor to the University applying to the AVMA for
accreditation as an international school. The University has received
a site visit report covering the consultative visit from the AVMA Council on
Education and is implementing the AVMA’s recommendations.
Chamberlain College of
Nursing
Chamberlain
College of Nursing is HLC accredited. Both the ASN and BSN programs are approved
by the respective State Boards of Nursing of Arizona, Illinois, Missouri and
Ohio and accredited by the National League for Nursing Accrediting Commission.
The BSN program is also accredited by the Commission on Collegiate Nursing
Education.
APPROVAL AND
LICENSING
DeVry
needs authorizations from many state or Canadian provincial licensing agencies
or ministries to recruit students, operate schools, conduct exam preparation
courses, and grant degrees. Generally, the addition of any new program of study
or new operating location also requires approval by the appropriate licensing
and regulatory agencies. In the United States, each DeVry University and
Chamberlain College of Nursing location is approved to grant associate,
bachelor’s and/or master’s degrees by the respective state in which it is
located.
Many
states and Canadian provinces require market-funded postsecondary education
institutions to post surety bonds for licensure. In the United States, DeVry has
posted approximately $19 million of surety bonds with regulatory authorities on
behalf of DeVry University, Chamberlain College of Nursing and Becker
Professional Review. We have posted CDN $0.3 million of surety bonds with
regulatory agencies in Canada.
Certain
states have set standards of financial responsibility that differ from those
prescribed by federal regulation. DeVry believes it is in material compliance
with state and Canadian provincial regulations. If DeVry were unable to meet the
tests of financial responsibility for a specific state, and could not otherwise
demonstrate financial responsibility, we could be required to cease operations
in that state. To date, DeVry has successfully demonstrated its financial
responsibility where required.
TUITION AND
FEES
DeVry
University
Effective
with the summer 2008 term, DeVry University’s U.S. undergraduate tuition ranges
from $515 to $560 per credit hour for students enrolling in 1 to 11 credit
hours. Tuition ranges from $310 to $330 per credit hour for each
credit hour in excess of 11 credit hours. These tuition rates vary by
location and/or program and represent an expected weighted average increase of
approximately 4.3% as compared to the summer 2007 term.
Based
upon current tuition rates, a full-time student enrolling in the five-term
undergraduate network systems administration program will pay total tuition
ranging from $32,095 to $33,650. A full-time student enrolled in the eight-term
undergraduate business administration program will pay total tuition ranging
from $56,530 to $59,270, including the application fee and tuition
deposit.
Undergraduate
tuition rates at DeVry University are below the average tuition at four-year
independent institutions, but generally are higher than the average at four-year
publicly supported institutions. For the academic year 2007-2008, the average
annual tuition and fees at four-year private schools was reported by the College
Board to be $23,712, an increase of 6.3% from last year. The average annual
tuition and fees at four-year publicly supported institutions increased 6.6%
from last year to $6,185, and two-year publicly supported institutions
reportedly increased their tuition by 4.2% to $2,361 per year. While these
increases were significantly lower than the double-digit increases in the recent
past, they continue to increase faster than the rate of inflation.
Effective
with the July 2008 term, Keller Graduate School of Management program tuition
per classroom course (four quarter credit hours) ranges from $1,845 to $2,100,
depending on location. This represents an expected weighted average increase of
3.1%. The price for a graduate course taken online is $2,100, compared to $2,050
previously.
If a
student leaves school before completing a term, federal, state, and Canadian
provincial regulations and accreditation criteria permit schools to retain a set
percentage of the total tuition received. This amount varies with, but generally
equals or exceeds, the percentage of the term the student completes. Excess
amounts are refunded to the student or the appropriate financial aid funding
source.
In
addition to the tuition amounts described above, undergraduate students at DeVry
University incur technology charges each semester that vary depending upon their
location and enrollment status. Some DeVry University programs,
including the computer information systems and electronics and computer
technology programs, require students to purchase a laptop computer at some
locations. Students also must purchase their own textbooks, electronic course
materials and supplies.
Medical and
Healthcare
Ross
University
Effective
September 2008, tuition and fees for the beginning basic sciences portion of the
programs at the medical and veterinary schools are $13,650 per semester. This
tuition rate represents an increase from September 2007 tuition rates of
approximately 5.4%. Tuition and fees for the final clinical portion of the
programs are $15,000 per semester for the medical school, and $17,150 per
semester for the veterinary school. These amounts do not include the cost of
books, supplies, transportation or living expenses.
DeVry
believes that Ross University’s tuition is at the middle of the range among
private medical and veterinary schools, but approximately equal to or higher
than tuition in publicly supported medical and veterinary schools. Tuition rates
at most medical and veterinary schools, including Ross University, have
increased every year, and management believes rates will continue to
increase.
Chamberlain College of
Nursing
Tuition
for the 2008-2009 academic year is $546 per credit hour. Students enrolled on a
full-time basis (between 12 and 17 credit hours) are charged a flat tuition
amount of $6,552 per semester. This represents an increase from 2007-2008
academic year tuition rates of approximately 5%. These amounts do not
include the cost of books, supplies, transportation, living expenses, or other
fees.
DeVry
believes that Chamberlain’s tuition is in the middle of the range among private
nursing schools, but equal to or higher than tuition in publicly supported
schools. Tuition rates at most nursing schools have increased every year, and
management believes they will continue to increase.
Professional and
Training
The price
of the complete classroom Becker CPA review course is $2,825. The complete CPA
review course on CD-ROM and the complete online review course are the same
price. Exam candidates may elect to enroll for individual sections of the exam
review course at a price of $910 per section. Becker offers discounts from these
tuition rates under various enrollment promotions at college campuses and for
students employed by participating accounting firms.
The
current list price for the CFA exam course ranges from $1,190 to $1,490, and
Stalla offers various promotional program discounts.
FINANCIAL AID AND FINANCING
STUDENT EDUCATION
Students
attending DeVry University, Ross University and Chamberlain College of Nursing
finance their education through a variety of sources, including
government-sponsored financial aid, private and university-provided
scholarships, employer-provided tuition assistance, veteran’s benefits, private
loans and cash payments. Students attending the Becker CPA or Stalla
CFA review courses are not eligible for federal or state financial aid, but many
receive partial or full tuition reimbursement from their employers.
The
following table summarizes DeVry’s cash receipts from tuition payments by fund
source as a percentage of total revenue for the fiscal year ended June 30,
2007. Final data for fiscal year 2008 is not yet
complete.
Title
IV Program Funding:
|
|
|
|
Grants
and Loans
|
|
|
64 |
% |
Federal
Work Study
|
|
|
1 |
% |
Total
Title IV Program Funding
|
|
|
65 |
% |
State
Grants
|
|
|
3 |
% |
Private
Loans
|
|
|
6 |
% |
Student
accounts, cash payments, private scholarships, employer provided tuition
assistance and other
|
|
|
26 |
% |
Total
|
|
|
100 |
% |
DeVry
University assists its undergraduate students in locating part-time employment
to supplement their incomes and help finance their education. Data from the
National Center for Education Statistics indicates that almost half of all
full-time college students between the ages of 18 and 24 are employed, but we
believe the employment rate among DeVry University full-time undergraduate
students is higher.
All
financial aid and assistance programs are subject to political and governmental
budgetary considerations. In the United States, the Higher Education Act (“HEA”)
guides the federal government’s support of postsecondary
education. The HEA was reauthorized by the United States Congress on
July 30, 2008, and was signed into law by the President on August 14,
2008.
Information about Particular
Government Financial Aid Programs
DeVry
University, Chamberlain College of Nursing and Ross University students
participate in many U.S. and Canadian financial aid programs. Each of these
programs is briefly described below.
United States federal
financial aid programs
Students
in the United States rely on three types of U.S. Department of Education
financial aid programs under Title IV of the Higher Education Act.
1. Grants. Students
in DeVry University’s undergraduate degree granting programs may participate in
the Pell, Federal Supplemental Education Opportunity Grant, National Science and
Mathematics Access to Retain Talent Grant and the Academic Competitiveness
Grant. Students in Chamberlain College of Nursing’s undergraduate
degree programs may participate in the Pell, Federal Supplemental Education
Opportunity and Academic Competitiveness grant programs.
|
—
|
Federal Pell
grants. These funds, available to all eligible
undergraduate students who demonstrate financial need, do not have to be
repaid. For the 2008-2009 school year, eligible students can receive Pell
grants ranging from $400 to $4,731.
|
|
—
|
Federal Supplemental
Educational Opportunity Grant (“FSEOG”). This is a
supplement to the Pell grant, and is only available to the neediest
undergraduate students. Federal rules restrict the amount of FSEOG funds
that may go to a single institution. The maximum individual FSEOG award is
$4,000 per academic year, and educational institutions are required to
supplement that amount with a 25% matching contribution. Institutional
matching contributions may be satisfied, in whole or in part, by state
grants, scholarship funds (discussed below) or by externally provided
scholarship grants.
|
|
—
|
National Science and
Mathematics Access to Retain Talent Grant (“SMART”). New
in 2006-2007, this grant was authorized by Congress to stimulate
enrollment in certain critical and strategic subject areas, including
science, mathematics, certain engineering programs and foreign
languages. Most of DeVry’s undergraduate programs qualify as an
eligible program of study. The awards are restricted to
Pell-eligible juniors and seniors who achieve and maintain a 3.0
cumulative grade point average. The awards are $4,000 per
academic year.
|
|
—
|
Academic Competitiveness Grant
(“ACG”). New in 2006-2007, this grant was authorized by
Congress to stimulate enrollment in rigorous secondary courses of
study. The awards are restricted to Pell-eligible students in
their first or second year of post-secondary degree-seeking studies who
have completed a rigorous secondary course of study. Rigorous
courses of study are defined by State Education
Authorities. Award amounts are $750 for students in their first
year of study and $1,300 for students in their second year of
study. Students in their second year of study must have
attained a 3.0 cumulative grade point
average.
|
2. Loans. DeVry
University, Chamberlain College of Nursing and Ross University students
participate in the Stafford and PLUS programs within the Federal Family
Education Loan Program (“FFELP”). DeVry University undergraduate
students may participate in the Federal Perkins Direct Student Loan
Program.
|
—
|
Subsidized Stafford
loan: awarded on the basis of student financial need, it
is a low-interest loan with interest charges and principal repayment
delayed until six months after a student no longer attends school on at
least a half-time basis. Loan limits per academic year range from $3,500
for students in their first academic year to $5,500 for students in their
third or higher academic year, increasing to $8,500 per academic year for
graduate students.
|
|
—
|
Unsubsidized Stafford
loan: awarded to students who do not meet the needs test
or as an additional supplement to the subsidized Stafford loan for
independent students. These loans incur interest from the time funds are
disbursed, but actual interest payments may be deferred until the
principal payments begin. Unsubsidized loan limits per academic year range
from $6,000 for students in their first academic year to $7,000 in later
years, increasing to $12,000 per academic year for graduate and
professional program students. Total Stafford Loan limit is
$20,500 per academic year, with a $138,500 Stafford Loan aggregate
borrowing limit that includes Stafford Loan amounts borrowed as an
undergraduate. Of the $20,500 in academic year borrowings, no more than
$8,500 may be in subsidized loans.
|
|
—
|
PLUS
loan: enables a graduate student or parents of a
dependant undergraduate student to borrow additional funds to meet the
cost of the student’s education. These loans are not based on financial
need, nor are they subsidized. Interest begins to accrue, and repayment
obligations begin, immediately after the loan is fully
disbursed. Graduate students and parents may also borrow funds
through the Federal Graduate PLUS program up to the cost of attendance
which includes allowances for tuition, fees and living
expenses.
|
|
—
|
Federal Perkins
loan: is a low-interest loan available only to those
students who demonstrate exceptional financial need. Perkins loans are
available up to a maximum of $4,000 per award year. Ongoing funding for
this program is provided from collections on loans issued in previous
years. When students repay principal and interest on these loans, that
money goes to the pool of funds available for future loans to students at
the same institution.
|
3. Federal
work-study. This program offers work opportunities, both on or
off campus, on a part-time basis to undergraduate students who demonstrate
financial need. Work-study wages are paid partly from federal funds and partly
from qualified employer funds.
A U.S.
Department of Education regulation known as the “90/10 Rule” affects only
proprietary postsecondary institutions, such as DeVry University, Ross
University and Chamberlain. Under this regulation, an institution that derives
more than 90% of its revenues from federal financial assistance programs in any
year may not participate in these programs for the following
year. The following table details the percent of revenue from federal
financial assistance programs for each of DeVry’s Title IV eligible
institutions. Final data for fiscal 2008 is not yet complete.
|
|
Fiscal
Year
|
|
|
|
2007
|
|
|
2006
|
|
DeVry
University:
|
|
|
|
|
|
|
Undergraduate
|
|
|
70 |
% |
|
|
75 |
% |
Graduate
|
|
|
65 |
% |
|
|
60 |
% |
Ross
University
|
|
|
80 |
% |
|
|
63 |
% |
Chamberlain
College of Nursing
|
|
|
70 |
% |
|
|
35 |
% |
Ross
University’s percent of revenue from federal financial assistance programs
increased from 63% in fiscal year 2006 to 80% in fiscal year 2007 primarily due
to introduction of the Graduate Plus loan program during
2007. Chamberlain College of Nursing’s percent of revenue from
federal financial assistance programs increased from 35% in fiscal year 2006 to
70% in fiscal year 2007 due to growing student enrollments and enhanced
financial aid packaging.
State financial aid
programs
Several
states, including Arizona, California, Colorado, Florida, Georgia, Illinois,
Kentucky, Minnesota, New Jersey, New York, Ohio, Pennsylvania, Rhode Island and
Vermont offer state grant and loan assistance to eligible undergraduate
students.
Private Loan
Programs
Some
DeVry University, Chamberlain College of Nursing and Ross University students
rely on private (nonfederal) loan programs for financial
assistance. These programs are used to finance the gap between a
student’s educational and living costs and their financial aid
awards. The amount of the typical loan varies significantly according
to the student’s enrollment and financial aid awards. The average
borrowing for DeVry University students participating in these programs is less
than $9,000 per year. DeVry estimates that approximately one-half of
the borrowings under private loan programs are used by students to pay for
non-educational expenses, such as room and board.
Prior to
2006, Ross University students relied heavily on private loan programs to meet
the gap between tuition and Stafford loan eligibility as well as to meet living
costs. Legislation introduced in February 2006 expanded the parent
loan program (PLUS) eligibility to graduate students. This
lower-cost, non-credit based program is now used in place of private loan
programs for most U.S. citizens and permanent residents.
Some Ross
students also borrow under private loan programs to pay the portion of their
tuition that exceeds federal loan limits, as well as to meet living expenses
while they are in school. Ross University also offers a limited number of full
tuition scholarships to eligible students.
Most
private loans are approved using the student or co-borrower’s credit
history. The cost of these loans varies, but in almost all cases will
be more costly than the federal programs. The application process is
separate from the traditional financial aid process. Student finance
personnel at DeVry’s degree granting institutions coordinate these processes to
assure that all students receive assistance from the federal and state programs
first. A small percentage of these loans were issued from opportunity
or school-backed pools. Opportunity pools were made available to
students with little or no credit history or some adverse credit history, who
otherwise would not qualify for a private loan. School-backed
programs typically contain an up-front cost-sharing component or a recourse
provision for defaulted loans. Less than 3% of the total private
loans to DeVry University’s students were made under a school-backed program
and, while it participates in certain cost sharing programs, DeVry University
has no current agreement with a recourse provision or opportunity
pools.
DeVry
maintains a recommended lender list as a service to students, and selects the
lenders through open and competitive requests for proposals. The recommended
list helps students sort through an array of loan offers they may receive from
scores of lenders. DeVry develops the list of recommended lenders based on their
ability to provide services including the following:
|
—
|
Competitive
rates and terms for students;
|
|
—
|
Access
to and reliable delivery of both federal and private funds;
and
|
|
—
|
High-quality
customer service to borrowers.
|
DeVry
absorbs any costs related to employees who sit on lender advisory boards, attend
any lender-sponsored training, or receive any lender-sponsored
services. DeVry does not accept any referral or marketing fees from
lenders.
Tax-favored
programs
The
United States has a number of tax-favored programs aimed at promoting savings
for future college expenses. These include state-sponsored “529” college savings
plans, state-sponsored prepaid tuition plans, education savings accounts
(formerly known as education IRAs), custodial accounts for minors, Hope and
Lifetime Learning credits, and tax deductions for interest on student
loans.
Canadian government
financial aid programs
Undergraduate
students who are Canadian citizens or permanent residents of Canada (other than
students from Quebec) are eligible for loans under the Canada Student Loan Plan,
which is financed by the Canadian government but administered at the provincial
level. Canadian undergraduate students attending the DeVry University Calgary
campus may also be eligible for provincial student loans. Eligibility
and amount of funding vary by province. The loans are interest-free
while the student is in school, and repayment begins six months after the
student leaves school. Qualified students also may benefit from Canada Study
Grants (designed for students whose financial needs and special circumstances
cannot otherwise be met), tax-free withdrawals from retirement savings plans,
tax-free education savings plans, loan repayment extensions, and interest relief
on loans.
DeVry-Provided Financial
Assistance
DeVry
University’s EDUCARD® Plan is available to its U.S.-based undergraduate
students; a similar option is available at the Calgary, Canada campus. The
EDUCARD® Plan is a proprietary loan program designed to assist students who are
unable to completely cover educational costs by other means. EDUCARD®
proprietary loans may be used only for tuition, books, and fees, and are
available only after all other student financial assistance has been applied
toward those purposes. Repayment plans for EDUCARD® Plan balances are developed
to address the financial circumstances of the particular
student. Under the deferred payment plan, certain students can
arrange to defer all payments on all charges for twelve weeks when the full
amount is due. Interest charges accrue each month on the unpaid
balance. Under the revolving loan plan, amounts owed by current students are
subject to a monthly interest charge of one percent of the average outstanding
balance. After a student leaves school, the student typically will
have a monthly installment repayment plan with all balances due within 12 to 24
months. During July 2008, DeVry University expanded its EDUCARD® Plan
to allow students to extend the installment repayment plan up to 60 months after
leaving school.
The
remaining gross receivable balance under DeVry University’s EDUCARD® Plan for
current and former U.S. undergraduate students at June 30, 2008, was
approximately $44.8 million, compared to approximately $46.2 million last year.
The lower undergraduate receivable balance was primarily the result of an
improvement in the timeliness of receivable collections as compared to the prior
year period.
DeVry
University undergraduate students also are eligible for numerous scholarships.
Scholarship programs generally are designed to attract recent high school
graduates and students enrolled at community colleges, with awards that range
from $1,000 per term up to the amount of full tuition. DeVry University has also
provided funds in the form of institutional grants to help those students most
in need of financial assistance.
Keller
graduate students may choose from several deferred tuition payment plans.
Students eligible for tuition reimbursement plans may have their tuition billed
directly to their employers or payment deferred until after the end of the
session. Educational expenses paid by an employer on behalf of an
employee generally are excludable from the employee’s income if provided under a
qualified educational assistance plan. At present, the maximum annual exclusion
is $5,250.
Professional and
Training
Students
attending the Becker CPA or Stalla CFA review courses are not eligible for
federal or state financial aid, but many receive partial or full tuition
reimbursement from their employers. Private loans are also available
to students to help meet the program costs.
Compliance with Legislative
and Regulatory Requirements
Extensive
and complex regulations in the United States and Canada govern all the
government grant, loan, and work study programs in which DeVry University, Ross
University and Chamberlain College of Nursing and their respective students
participate. DeVry must comply with many rules and standards, including maximum
student loan default rates, limits on the proportion of its revenue that can be
derived from federal aid programs, prohibitions on certain types of incentive
payments to student recruiters and financial aid officers, standards of
financial responsibility, and administrative capability
requirements. Like any other educational institution, DeVry’s
administration of these programs is periodically reviewed by various regulatory
agencies and is subject to audit or investigation by other governmental
authorities. Any violation could be the basis for penalties or other
disciplinary action, including initiation of a suspension, limitation or
termination proceeding. Previous Department of Education and state
regulatory agency program reviews have not resulted in significant findings or
adjustments against DeVry.
The
financial responsibility test for continued participation by an institution’s
students in federal financial assistance programs is based upon a composite
score of three ratios: an equity ratio that measures the institution’s capital
resources; a primary reserve ratio that measures an institution’s ability to
fund its operations from current resources; and a net income ratio that measures
an institution’s ability to operate profitably. A minimum score of 1.5 is
necessary to meet the Department of Education’s financial
standards.
For the
past several years, DeVry’s composite score has exceeded the required minimum of
1.5. Management believes it will continue to demonstrate the required level of
financial stability. If DeVry were unable to meet requisite financial
responsibility standards or otherwise demonstrate, within the regulations, its
ability to continue to provide educational services, then DeVry could be
required to post a letter of credit to enable its students to continue to
participate in federal financial assistance programs.
Institutions
that participate in U.S. federal financial aid programs must disclose
information upon request about undergraduate student “completion rates” to
current and prospective students. The federal Student-Right-To-Know Act defines
the cohort of students on which the institution must report as “first-time,
full-time, degree-seeking” students who enter the fall term. Completion rates
calculated in accordance with the statute for each of DeVry University’s U.S.
undergraduate campuses generally fall within the range of completion rates at
selected four-year urban public colleges in the areas in which its campuses are
located. However, its overall completion rate actually is higher than reported
in these statistics: many DeVry University students have previously attended
other colleges (and completion rates for undergraduate students entering with
previous college experience generally are higher than for first-time students),
but these students are not included in the completion rate statistics that are
defined by the Student-Right-To-Know Act. In an effort to improve our completion
rates as defined by the statute, DeVry University has changed undergraduate
admission requirements and added student support services. For the 2001 freshman
student cohorts (the latest period for which final completion statistics are
available), the graduation rate for DeVry University U.S. undergraduates was
31.1% as compared to the 2000 rate of 34.1%.
Specialized
staff at DeVry’s Oakbrook Terrace, Illinois headquarters reviews, interprets,
and establishes procedures for compliance with regulations governing financial
assistance programs and processes financial aid applications. Because financial
assistance programs are required to be administered in accordance with the
standard of care and diligence of a fiduciary, any regulatory violation could be
the basis for disciplinary action, including the initiation of a suspension,
limitation, or termination proceeding.
In the
United States, DeVry University, Chamberlain College of Nursing and Ross
University have completed and submitted all required audits of compliance with
federal financial assistance programs for fiscal 2007. DeVry’s independent
public accountants are currently conducting the required audits of the one-year
period ended June 30, 2008. In conjunction with previously filed financial aid
audit reports, DeVry University has been required to post letters of credit. As
of August 2008, there were approximately $2.8 million in letters of credit
outstanding relating to participation in federal financial aid assistance
programs. These letters of credit expire in less than one year. No amount has
ever been drawn under these letters of credit issued on behalf of
DeVry.
As a part
of its effort to monitor the administration of student financial assistance
programs, the U.S. Department of Education and state grant agencies may conduct
site visits and program reviews at any educational institution at any time.
Reviews at several DeVry campuses have not resulted in any adverse material
findings or adjustments. If a proceeding were initiated and caused the
Department of Education to substantially curtail DeVry’s participation in
government grant or loan programs, DeVry’s enrollments, revenues and accounts
receivable could be all adversely affected.
In May
2008, the U.S. Department of Justice, Civil Division, working with the U.S.
Attorney for the Northern District of Illinois, requested that DeVry voluntarily
furnish documents and other information regarding its policies and practices
with respect to recruiter compensation and performance
evaluation. The stated purpose of the request was to examine whether
DeVry may have submitted or caused the submission of false claims or false
statements to the U.S. Department of Education in violation of the False Claims
Act. DeVry made a timely production of documents and continues to
offer its full cooperation to the government in carrying out its
inquiry. DeVry believes that its compensation practices were designed
to be in compliance with current regulations.
In
addition to the requirements that educational institutions must meet, student
recipients of financial aid must maintain satisfactory academic progress toward
completion of their program of study and an appropriate grade point
average.
STUDENT LOAN
DEFAULTS
The U.S.
Department of Education has instituted strict regulations that penalize
institutions whose students have high default rates on federal student loans.
For a variety of reasons, high default rates are most often found in proprietary
institutions and community colleges — all of which tend to have a higher
percentage of low income students enrolled than do four-year publicly supported
and independent colleges and universities.
Educational
institutions are penalized to varying degrees under the Federal Family Education
Loan Program or the William D. Ford Federal Direct Student Loan Program,
depending on the default rate for the “cohort” defined in the statute. An
institution with a cohort default rate that exceeds 20% for the year is required
to develop a plan to reduce defaults, but the institution’s operations and its
students’ ability to utilize student loans are not restricted. An institution
with a cohort default rate of 25% or more for three consecutive years is
ineligible to participate in these loan programs and cannot offer student loans
administered by the U.S. Department of Education for the fiscal year in which
the ineligibility determination is made and for the next two fiscal years.
Students attending an institution whose cohort default rate has exceeded 25% for
three consecutive years also are ineligible for Pell grants. Any institution
with a cohort default rate of 40% or more in any year is subject to immediate
limitation, suspension, or termination proceedings from all federal aid
programs. DeVry carefully monitors students’ loan default rate, and
has never had a cohort default rate of 25% or more for three consecutive years,
or of 40% or more in any one year. We are not subject to any restriction or
termination under any student loan program.
According
to the U.S. Department of Education, the cohort default rate for all colleges
and universities eligible for federal financial aid decreased from 5.1% in
fiscal year 2004 to 4.6% for fiscal year 2005 (the latest period for which data
is available).
Default
rates for DeVry University, Chamberlain College of Nursing and Ross University
students follow. The latest period for which data is available is
2005.
|
|
Cohort Default Rate
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
DeVry
University - Federal Family Education Loan Program
|
|
|
6.1 |
% |
|
|
6.5 |
% |
|
|
5.7 |
% |
DeVry
University – Federal Perkins Loan Program
|
|
|
6.9 |
% |
|
|
8.5 |
% |
|
|
11.7 |
% |
DeVry
University – Graduate Programs
|
|
|
1.7 |
% |
|
|
2.3 |
% |
|
|
2.0 |
% |
Ross
University – Medical School
|
|
|
0.0 |
% |
|
|
0.2 |
% |
|
|
0.1 |
% |
Ross
University – Veterinary School
|
|
|
0.1 |
% |
|
|
0.4 |
% |
|
|
0.0 |
% |
Chamberlain
College of Nursing
|
|
|
0.5 |
% |
|
|
0.7 |
% |
|
|
0.0 |
% |
Under the
Federal Perkins loan program, the institution is responsible for collecting
outstanding loans. Any institution with a Perkins loan cohort default rate
exceeding 15% must establish a default reduction plan. DeVry has
worked to reduce the default rate by implementing student counseling and
additional collection efforts and retaining outside loan service
agencies.
CAREER
SERVICES
DeVry
University believes that the employment of its graduates is essential to its
ability to attract and retain students. Career services professionals located at
DeVry University undergraduate campuses work with students to choose careers,
craft resumes, and prepare for job interviews. The staff also maintains contact
with local and national employers to proactively identify job opportunities and
arrange interviews. In many cases, company hiring representatives conduct
interviews at DeVry University campuses.
DeVry
University attempts to gather accurate data to determine how many of its
undergraduates, both at the associate and bachelor’s degree levels, are employed
in positions related to their program of study within six months following
graduation. To a large extent, the reliability of such data depends on the
quality of information that graduates self-report.
In the
ten-year period ending October 2007, our U.S. campuses graduated more than
67,000 students who were eligible for career services assistance (this excludes
graduates who continued their education, students from foreign countries not
legally eligible to work in the United States, and other categories of students
who were not available for employment). More than 57,000 graduates during this
ten-year period actively pursued employment or were already employed; 90% of
those held positions related to their program of study within six months of
graduation.
For the
three undergraduate classes that ended in calendar year 2007, there were 6,692
graduates from DeVry University’s U.S. undergraduate degree and diploma programs
eligible for career service assistance, excluding the one-year
post-baccalaureate information technology program (this excludes students
continuing their education, students from foreign countries legally ineligible
to work in the United States, and others ineligible for employment). From that
pool of graduates, 6,012 actively pursued employment or were already employed.
Within six months of graduation, 5,578, or 92.8% of those graduates were
employed in positions related to their program of study. This compares to 91.9%
who were employed in positions related to their program of study for the three
classes that ended in calendar year 2006, and 88.1% who were employed in
positions related to their program of study for the three classes that ended in
calendar year 2005.
DeVry
University believes that a significant number of graduating students currently
employed in positions not directly related to their program of study have chosen
to not actively seek other employment opportunities. For the three graduating
classes in calendar year 2007, there were 469 graduates who were employed but
not in positions related to their program of study. Of these individuals, 74%
did not conduct an active employment search through DeVry University’s career
services offices.
DeVry
University’s 2007 graduates (undergraduate programs) achieved reported annual
compensation ranging from $30,236 to $48,465 with an average salary of $43,365.
Individual compensation levels vary depending upon the graduate’s previous
employment experience, program of study, and geographic area of
employment.
DeVry
University’s Calgary campus graduated more than 2,700 students during the past
decade who were eligible for career services assistance. For the ten-year period
ended October 2007, more than 84% of those graduates who actively pursued
employment or who were already employed when they graduated held positions
related to their program of study within six months of graduation. For the three
classes that ended in calendar year 2007, more than 80% of the Calgary graduates
who actively pursued employment secured jobs or were already employed in
positions related to their program of study within six months of graduation.
This includes students who received diplomas, those who received bachelor’s
degrees through the DeVry University Phoenix degree completion program in
Calgary or bachelor’s degrees awarded under the authority of the Government of
Alberta, and those students who completed their degree requirements at a DeVry
University U.S. campus, but does not include graduates of the one-year
information technology program.
DeVry
University believes that no single employer has hired more than 5% of our
graduates in recent years. Major employers of DeVry undergraduates include
Abbott Laboratories, Accenture, Boeing, Discover, Federal Express, GE
Healthcare, Hewlett-Packard, IBM, Intel, Motorola, Northrop Grumman,
Schlumberger, Siemens, and UPS.
Management
considers its career services commitment an important element of its service to
students. Over the past several years, DeVry University developed and
implemented a student national job database, which allows students to log into
one site to view, apply for, and learn more about job leads appropriate to their
experience and education level. For the upcoming year, this database
will be further expanded for employer use. In addition, management
developed a preferred employer program. This program provides an
avenue for businesses to easily partner with DeVry in areas such as career
services, curriculum development, and continued employee education.
SEASONALITY
Our
quarterly revenue and net income fluctuate primarily as a result of the pattern
of student enrollments. Generally, the schools’ highest enrollment
and revenues typically occur in the fall, which corresponds to the second and
third quarters of DeVry’s fiscal year. Enrollment is slightly lower in the
spring, and the lowest enrollment generally occurs during the summer months.
Becker’s seasonal pattern is somewhat less pronounced as the CPA exam is offered
eight times during the year. DeVry’s operating costs do not fluctuate
as significantly on a quarterly basis.
Results
of operations reflect both this seasonal enrollment pattern and the pattern of
student recruiting activity costs that precede the start of every term.
Revenues, operating income, and net income by quarter for each of the past two
fiscal years are included in Note 17 to the Consolidated Financial Statements,
“Quarterly Financial Data.”
EMPLOYEES
As of
June 30, 2008, DeVry had the following number of employees:
|
|
Faculty
and Staff
|
|
|
|
|
|
|
|
|
|
Full-time
|
|
|
Part-time
|
|
|
Part-time
Student Employees
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DeVry
University
|
|
|
4,761 |
|
|
|
87 |
|
|
|
517 |
|
|
|
5,365 |
|
Advanced
Academics, Inc.
|
|
|
88 |
|
|
|
9 |
|
|
|
-- |
|
|
|
97 |
|
Ross
University
|
|
|
668 |
|
|
|
23 |
|
|
|
-- |
|
|
|
691 |
|
Chamberlain
College of Nursing
|
|
|
102 |
|
|
|
3 |
|
|
|
-- |
|
|
|
105 |
|
Becker
Professional Review
|
|
|
158 |
|
|
|
20 |
|
|
|
-- |
|
|
|
178 |
|
Home
office staff
|
|
|
307 |
|
|
|
12 |
|
|
|
-- |
|
|
|
319 |
|
Total
|
|
|
6,084 |
|
|
|
154 |
|
|
|
517 |
|
|
|
6,755 |
|
DeVry
also utilizes independent contractors who teach as adjunct faculty and
instructors. These independent contractors are not included in the
above table. DeVry believes that its relationship with its employees
is satisfactory. The only employees represented by a union are
approximately 200 administrative and support employees of Ross University’s
medical school campus in Dominica. These employees are covered by a collective
bargaining agreement with a local union.
DeVry
University
Each
DeVry University campus is managed by a president or campus dean and has a staff
of academic deans, faculty and academic support staff, career service and
student service personnel, and other professionals. Each campus also has an
admissions director, who reports to a central organization responsible for new
student recruiting. Each DeVry University center is managed by a center dean and
has admissions representatives and appropriate academic and administrative
support staff. Group vice presidents of operations oversee the campuses and
centers in geographically defined areas.
Each
DeVry University campus president hires academic deans and faculty members in
accordance with internal criteria, accrediting standards, and applicable state
law. More than 85% of our full-time undergraduate faculty members hold advanced
academic degrees, and most faculty members teaching in technical areas have
related industry experience. DeVry University offers sabbatical and other leave
programs to allow faculty to engage in developmental projects or consulting
opportunities so they can maintain and enhance their currency and teaching
skills.
In
addition to its regular faculty, DeVry University engages adjunct and visiting
faculty — especially in the evening programs and at DeVry University Online —
who teach on a part-time basis while continuing to work in their technical field
or specialty.
Graduate
program faculty members are primarily practicing business professionals who are
engaged to teach on a course-by-course basis. We offer a multi-session course to
train and develop new faculty throughout Keller’s national system. To support
its practitioner faculty, DeVry University employs a core of academically and
professionally qualified staff that includes curriculum managers and program
directors. Over the past several years, graduate school courses have
been taught selectively by full-time faculty to respond to student demand in
areas of rapidly growing enrollment and to meet licensing approval requirements
in certain states. Less than 10% of our graduate instructors, excluding
non-faculty employees who teach courses on an occasional basis, are employed on
a full-time basis.
DeVry
University faculty members have teaching schedules that may include both day and
evening classes. Some faculty may teach both graduate and undergraduate courses,
depending upon their qualifications and the demand at specific locations or for
specific courses.
Faculty
members are evaluated periodically based on student comments and observations by
an academic dean. DeVry University does not offer tenure.
Advanced
Academics
Nearly
all of Advanced Academics’ employees work at its home office located in Oklahoma
City, Oklahoma. The staff includes state certified high school
teachers, high school counselors, student service, curriculum development,
information technology, student recruiting, finance and administrative
personnel.
Medical and
Healthcare
Ross
University
The Ross
University School of Medicine and School of Veterinary Medicine are managed by
deans with appropriate department chairs and course directors to oversee the
educational operations. In addition, each campus has student services staff to
assist with financial aid, housing, and other student-related matters. The
campuses are supported by Dominica Management, Inc., a central administrative
staff, located in North Brunswick, New Jersey, and Miami, Florida.
Each
medical school faculty member has a Ph.D. or an M.D. degree or both. The
full-time faculty is supplemented by visiting or part-time instructors who are
engaged to lecture on very specialized or emerging subjects. Each
veterinary faculty member has either a Ph.D. or D.V.M. degree or
both. Ross University faculty members are not tenured.
Chamberlain College of
Nursing
Chamberlain
College of Nursing campuses are managed by campus deans. The dean is
supported by a national director of nursing programs and program coordinators
who are responsible for standardized delivery of curricula on each campus.
Student services staff is available to assist campus and online students with
admissions, financial aid, housing, and other aspects of student life.
Administration of the Chamberlain online program offerings is supported, in
part, by staff at DeVry Online. The campuses and online program
offerings are supported by a central administrative/management staff located in
Addison, Illinois.
In
general, Chamberlain College of Nursing faculty members have a Master of Science
in Nursing, and several have a Ph.D. Those faculty without a master’s degree are
enrolled in a graduate program in nursing. General education courses in the St.
Louis nursing program are taught by faculty at a nearby university. General
education courses on the Columbus, Addison and Phoenix campuses are taught by
DeVry University faculty. Chamberlain faculty members are not
tenured.
Professional and
Training
Becker
Professional Review is managed by a staff based primarily in Oakbrook Terrace
that supports its operations. Certain regional operations, as well as some other
functions such as curriculum development, are managed and located throughout the
United States and Canada. Becker’s faculty consists primarily of practicing
professionals and university professors who teach the review courses on a
part-time, course-by-course basis.
Home Office
Staff
Staff at
DeVry’s Oakbrook Terrace, Illinois, home office supports the employees for all
of DeVry’s educational programs and locations by providing a broad range of
services. Among the centrally-provided support services are curriculum
development, academic management, licensing and accreditation, marketing and
recruiting management, computer services, financial aid processing, regulatory
compliance, internal audit, legal, tax, payroll, and finance and
accounting.
TRADEMARKS AND SERVICE
MARKS
DeVry
owns and uses numerous trademarks and service marks, such as “DeVry,” “DeVry
University,” “Keller Graduate School of Management,” “Advanced Academics,”
“Becker CPA Review,” “Ross University,” “Chamberlain,” “EDUCARD®,” and variants
thereof. All trademarks, service marks, and copyright registrations associated
with its businesses are registered in the name of a subsidiary of DeVry Inc..
Copyright registrations expire over various periods of time. DeVry vigorously
defends against infringements of its trademarks, service marks, and
copyrights.
ADDITIONAL
INFORMATION
DeVry’s
Web site is at http://www.devryinc.com.
Through
its Web site, DeVry offers (free of charge) the Annual Report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) as soon as
reasonably practicable after it electronically files such material with, or
furnishes such material to, the SEC. The Web site also includes copies of the
following:
DeVry
Corporate Governance Principles
Policy
for Communication with Directors
Policy
for Communicating Allegations Related to Accounting Complaints
Director
Nominating Process
Code of
Business Conduct and Ethics
Academic
Committee Charter
Audit
Committee Charter
Compensation
Committee Charter
Finance
Committee Charter
Governance
Committee Charter
Information
contained on the Web site is not incorporated by reference into this
report.
Copies of
the DeVry’s filings with the SEC and the above-listed policies and charters also
may be obtained by written request to the Director of Investor Relations at
DeVry’s executive offices. In addition, DeVry’s filings with the SEC
can be read or copied at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, D.C. 20549. Information on the operation of the Public
Reference Room can be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains a Web site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC; the Web site address is at
http://www.sec.gov.
DeVry’s
business operations are subject to numerous risks and uncertainties that could
materially and adversely affect DeVry’s business, results of operations and
financial condition. Some of these are described below. Because of their very
nature, management cannot predict all the possible risks and uncertainties that
may arise. Risks and uncertainties that may affect DeVry’s business include, but
are not limited to:
Risks
Related to DeVry’s Highly Regulated Industry
DeVry is subject to risks
relating to regulatory matters. If DeVry fails to comply with the
extensive regulatory requirements for its business, DeVry could face fines and
penalties, including loss of access to federal and state student loans for our
students.
DeVry
University, Ross University, or Chamberlain College of Nursing may be unable or
otherwise fail to comply with state and federal regulatory requirements relating
to financial aid program administration, causing their students to lose
financial aid eligibility or causing one or more of DeVry’s schools to lose
authorization to operate.
DeVry
could lose or suffer limitations in accreditations and licensing approvals that
could affect its ability to recruit students, operate schools in some locations,
and grant degrees.
Unforeseen
changes to laws or regulations governing DeVry’s operations may adversely affect
current operations or future growth opportunities.
DeVry is subject to risks
relating to financial aid and student finance. A substantial decrease
in student financing options, or a significant increase in financing costs for
DeVry students, could have a material adverse affect on DeVry’s student
enrollment and financial results.
DeVry’s
students are highly dependent on government-funded financial aid programs. If
there are changes to financial aid program regulations that restrict student
eligibility or reduce funding levels, DeVry’s enrollment and/or collection of
student billings may suffer, causing revenues to decline. Conversely, increases
in state funding levels to taxpayer-supported educational institutions could
generate further price competition that adversely affects DeVry’s ability to
recruit and retain students.
Changes
in tax laws or reduced corporate earnings both could affect corporate
educational benefit plans. If employers reduce tuition reimbursement amounts,
working students may be less likely to enroll in a DeVry program, causing
enrollment and revenues to decline.
Risks
Related to DeVry’s Business
DeVry is subject to risks
relating to enrollment of students. If DeVry is not able to continue
to successfully recruit and retain its students, it will not be able to sustain
its recent revenue growth rate.
DeVry’s
undergraduate and graduate educational programs are concentrated in selected
areas of technology, healthcare and business. If applicant career interests
shift away from these fields, and we do not anticipate or adequately respond to
that trend, future enrollment and revenue may decline.
If
employment opportunities for DeVry graduates in fields related to their
educational programs decline, future enrollment and revenue may decline as
potential applicants choose to enroll at other educational institutions offering
different courses of study.
DeVry may
experience increased competition from other educational institutions in
recruiting new students and retaining students already enrolled, causing
enrollment and revenues to decline.
DeVry is subject to risks
relating to operating matters, which could have a material adverse affect on
DeVry’s financial results.
If other
educational institutions reduce their price of tuition, a DeVry education could
become less attractive to prospective students. In addition, DeVry may be
unable, for competitive reasons, to maintain and increase tuition rates in the
future, adversely affecting future revenues and earnings.
DeVry may
be unable to hire and retain key employees with appropriate educational
qualifications and experience, causing DeVry to incur higher wage expense and/or
provide less student support and customer service which could adversely affect
enrollment, revenues and expense.
The
performance and reliability of DeVry’s computer networks and system
applications, especially its online educational platforms and student
operational and financial aid packaging applications, are critical to DeVry’s
reputation and ability to attract and retain students. System errors
and/or failures could adversely impact DeVry’s delivery of educational content
to its online students. In addition, system errors could result in
delays and/or errors in processing student financial aid and related
disbursements.
Unauthorized
access to DeVry’s computer networks — either administrative networks or those
supporting educational programs — could interrupt operations and may result in
loss or misuse of student and other critical data, causing disruption to
operations, compromising confidential information and causing attendant risks,
including reputation therefrom and increasing expense.
DeVry may
experience business interruptions resulting from natural disasters, inclement
weather, transit disruptions, or other events in one or more of the geographic
areas in which it operates, particularly in the West Coast and Gulf States of
the U.S. and in the Caribbean. These events could cause DeVry to close schools —
temporarily or permanently — and could affect student recruiting opportunities
in those locations, causing enrollment and revenues to decline.
Some of
these risks and uncertainties are described more fully in this annual report on
Form 10-K, especially in the subsections of “Item 1 — Business” entitled
“Competition,” “Student Recruiting and Admission,” “Accreditation,” Approval and
Licensing,” “Tuition and Fees,” “Financial Aid and Financing Student Education,”
“Student Loan Defaults,” “Career Services,” “Seasonality,” and
“Employees.”
ITEM 1B —
UNRESOLVED STAFF COMMENTS
There are
no unresolved SEC staff comments.
DEVRY
UNIVERSITY
DeVry
University campuses are large and modern buildings located in suburban
communities or urban neighborhoods. They are easily accessible to major
thoroughfares, have available parking areas, and many are served by public
transportation. Each campus includes teaching facilities, admissions and
administrative offices. Teaching facilities include classrooms, laboratories,
libraries, bookstores and student lounges. Laboratories include computers and
various telecommunications, electronic and biomedical equipment necessary to
provide an appropriate environment for students’ development of the required
technical skills for their programs of study. Computer laboratories include both
stand-alone and networked PC-compatible workstations that support all curricular
areas with numerous software packages offering a variety of business,
engineering and scientific applications. Connections to the Internet are
included through the computer laboratories as a part of the program
curriculum.
DeVry
University is executing an ongoing real estate optimization strategy, which
involves evaluating its current facilities and locations in order to ensure the
optimal mix of large campuses, small campuses and DeVry University centers to
meet the demand in each market that it serves. This process also
improves capacity utilization and enhances economic value. These
plans may include actions such as reconfiguring campuses; renegotiating lease
terms; sub-leasing excess space; co-locating other educational offerings and
administrative functions at campuses; and relocating to smaller locations within
the same geographic area to improve cost effective use of space and increase
market penetration. Future actions under this program could result in
accounting gains and/or losses depending upon real estate market conditions,
whether the facility is owned or leased and other market factors.
DeVry
made progress in executing its real estate optimization strategy during fiscal
year 2008. Such accomplishments include:
|
—
|
In
September 2007, DeVry sold its facility located in Seattle,
Washington. In the same transaction, DeVry sold its facility
located in Phoenix, Arizona. In connection with the transaction, DeVry
entered into agreements to lease back approximately 60% of the total space
of both facilities.
|
|
—
|
In
September 2007, DeVry exercised the option under its lease agreement to
purchase its facility in Alpharetta, Georgia. Immediately
following the acquisition, DeVry sold the facility to a different party
and executed a leaseback on the entire
facility.
|
|
—
|
In
February 2008, DeVry sold its Houston campus. In the same
transaction, DeVry is leasing back approximately 60 percent of the
original space.
|
|
—
|
Chamberlain
College of Nursing began offering nursing programs at its new campuses in
Addison, Illinois, and Phoenix in March 2008. These new
locations are co-located with DeVry University
campuses.
|
|
—
|
In
June 2008, Ross University’s administrative staff, Dominica Management
Inc., co-located its New Jersey offices with the DeVry University campus
in North Brunswick, New Jersey.
|
No campus
that is owned by DeVry is subject to a mortgage or other
indebtedness. The following table sets forth certain information
regarding the 23 large campus properties at which DeVry University undergraduate
programs were conducted at June 30, 2008:
|
June 2008
|
|
|
|
Area
|
|
|
|
(Approximate
|
|
|
|
Square Feet)
|
|
Ownership
|
Phoenix,
Arizona
|
69,000
|
|
Leased
|
Westminster
(Denver), Colorado
|
72,000
|
|
Leased
|
Pomona
(Los Angeles), California
|
100,500
|
|
Owned
|
Long
Beach (Los Angeles), California
|
98,000
|
|
Leased
|
Sherman
Oaks, (Los Angeles), California
|
35,000
|
|
Leased
|
Fremont
(San Francisco), California
|
99,000
|
|
Owned
|
Orlando,
Florida
|
72,000
|
|
Leased
|
Miramar,
Florida
|
94,000
|
|
Leased
|
Alpharetta
(Atlanta), Georgia
|
65,000
|
|
Leased
|
Decatur
(Atlanta), Georgia
|
108,000
|
|
Owned
|
Chicago,
Illinois
|
156,000
|
|
Owned
|
Addison
(Chicago), Illinois
|
113,000
|
|
Owned
|
Tinley
Park (Chicago), Illinois
|
70,000
|
|
Owned
|
Kansas
City, Missouri
|
75,000
|
|
Owned
|
North
Brunswick, New Jersey
|
99,000
|
|
Owned
|
Long
Island City, New York
|
155,000
|
|
Leased
|
Columbus,
Ohio
|
114,000
|
|
Owned
|
Fort
Washington (Philadelphia), Pennsylvania
|
104,000
|
|
Leased
|
North
Irving (Dallas), Texas
|
57,000
|
|
Leased
|
Houston,
Texas
|
58,000
|
|
Leased
|
Arlington
(Washington, D.C.) Virginia
|
86,000
|
|
Leased
|
Federal
Way (Seattle), Washington
|
54,000
|
|
Leased
|
Calgary,
Alberta, Canada
|
70,000
|
|
Leased
|
In
addition to the undergraduate programs that are taught at these campuses, Keller
Graduate School of Management degree programs and Becker CPA Review programs are
also available at some sites.
In July
2008, there were 68 DeVry University centers throughout the United States in
operation. Undergraduate degree programs are offered at 64 of these centers.
DeVry plans to open four to six new DeVry University center locations in fiscal
2009.
DeVry
University centers are established in convenient metropolitan locations in
modern buildings. These teaching centers, which mostly range in size from
approximately 3,000 to 25,000 square feet, include classrooms, computer labs
with Internet access, reference materials, admissions and administrative
offices. Teaching centers have an information center designed to enhance
students’ success and support coursework requiring data and information beyond
that provided in course texts and packets. The information centers include
personal computers; all software required in courses; Internet access; alternate
texts; popular business periodicals; videos of selected courses; and access to
numerous electronic data-bases.
Examples
of smaller DeVry University centers include those in Palmdale, California (3,050
square feet); Waukesha, Wisconsin (7,400 square feet); and Kansas City, Missouri
(5,200 square feet). Larger DeVry University centers include Chicago, Illinois
(16,050 square feet); Colorado Springs, Colorado (17,500 square feet); Las
Vegas, Nevada (18,500 square feet); and Sacramento, California (24,400 square
feet).
MEDICAL AND
HEALTHCARE
Ross
University
The
medical school’s basic science instructional facilities are located on an
approximately 33 acre campus in the Caribbean country of Dominica, of which
approximately 22 acres are occupied under lease.
In
addition to classrooms and auditoriums, educational facilities include a gross
anatomy lab, a multi-purpose lab, library and learning resource centers,
offices, bookstore, cafeteria and recreational space. Classrooms and
laboratories are furnished with state of the art audio-visual
equipment.
During
July 2008, Ross University announced it will open a teaching location in
Freeport, Grand Bahama, in January 2009. The Ross University Freeport
campus will initially accommodate students in the University’s medical school.
The students will be housed and taught in temporary space in Grand Bahama with
Ross’s new 60,000-80,000 square foot campus targeted to open in
2010. Depending upon the pace of development, capital expenditures
related to opening the branch campus, including land, buildings and equipment,
are expected to be in the range of $35-$60 million over the next 5
years.
The
veterinary school’s pre-clinical instructional facilities are located on a 50
acre site in St. Kitts. Ross University owns 27 acres and 23 acres of pasture
land are leased from the government. Educational facilities include an
anatomy/clinical building, pathology building, classroom buildings,
administration building, bookstore, cafeteria and a library/learning resource
center. The library/learning resource center is believed to be the largest
electronic learning lab in veterinary medical education. Animal care facilities
include kennels, an aviary and livestock barns. Two 150 to 180 seat
classrooms are currently under construction and are expected to be in service in
January 2010.
During
June 2008, Dominica Management, Inc., Ross University’s administrative services
provider relocated its administrative offices from a leased facility in Edison,
New Jersey to co-locate with a DeVry University facility in North Brunswick, New
Jersey.
Chamberlain College of
Nursing
Chamberlain
leases approximately 55,000 square feet of space in a hospital facility located
in St. Louis, Missouri. The Chamberlain facilities include classrooms, dormitory
space and administrative offices. In addition, Chamberlain College of
Nursing has co-located three campuses with DeVry University’s campuses in
Columbus, Ohio; Addison, Illinois; and Phoenix, Arizona.
PROFESSIONAL AND
TRAINING
Becker
Professional Review is headquartered at DeVry’s administrative office in
Oakbrook Terrace, Illinois. In addition to this main administrative center,
Becker leases approximately 8,300 square feet of space in Southern California
for staff devoted to curriculum and other development efforts. Becker also
leases approximately 3,500 square feet of space in Melville, New York for its
eastern regional sales and administrative staff.
CPA and
CFA review classes are conducted in leased facilities, fewer than ten of which
are leased on a full-time basis. The remaining classes are conducted in
facilities which are leased on an as-needed basis, allowing classes to be added,
expanded, relocated or closed as current enrollments require. Becker classes are
also offered at several DeVry University locations.
HOME
OFFICE
DeVry’s
administrative offices are located in approximately 129,000 square feet of
leased space in an office tower in Oakbrook Terrace, Illinois, a suburb of
Chicago. In addition, it leases more than 50,000 square feet in an adjacent
building for a data center, additional office space and storage.
In fiscal
2005, DeVry purchased a 108,000 square foot building in Naperville, Illinois, a
nearby suburban location, to house its expanding online
operations. In June 2008, DeVry purchased a 110,000 square foot
building in Wood Dale, Illinois, a Chicago suburb, for expansion of its growing
online operations.
DeVry’s
leased facilities are occupied under leases whose remaining terms range from one
to 14 years. A majority of these leases contain provisions giving DeVry the
right to renew its lease for additional periods at various rental rates, though
generally at rates higher than are currently being paid.
DeVry is
subject to occasional lawsuits, administrative proceedings, regulatory reviews
and investigations associated with financial assistance programs and other
claims arising in the normal conduct of its business. The following is a
description of pending litigation that may be considered other than ordinary and
routine litigation that is incidental to the business.
On
December 23, 2005, Saro Daghlian, a former DeVry University student in
California, commenced a putative class action against DeVry University and DeVry
Inc. (collectively “DeVry”) in Los Angeles Superior Court, asserting various
claims predicated upon DeVry’s alleged failure to comply with disclosure
requirements under the California Education Code relating to the transferability
of academic units. In addition to the alleged omission,
Daghlian also claimed that DeVry made untrue or misleading statements to
prospective students, in violation of the California Unfair Competition Law
("UCL") and the California False Advertising Law,
("FAL"). DeVry removed the action to the U.S. District Court
for the Central District of California. In two Orders dated October
9, 2007, and December 31, 2007, the District Court entered judgment
dismissing all of plaintiffs ’ class and individual claims and
awarded DeVry its cost of suit. Plaintiffs have filed a Notice
signifying their intent to appeal the dismissal to the U.S. Court of Appeals for
the Ninth Circuit. DeVry intends to vigorously defend itself with
respect to this claim.
In May
2008, the U.S. Department of Justice, Civil Division, working with the U.S.
Attorney for the Northern District of Illinois, requested that DeVry voluntarily
furnish documents and other information regarding its policies and practices
with respect to recruiter compensation and performance
evaluation. The stated purpose of the request was made to examine
whether DeVry may have submitted or caused the submission of false claims or
false statements to the U.S. Department of Education in violation of the False
Claims Act. DeVry made a timely production of documents and continues
to offer its full cooperation to the government in carrying out its
inquiry. DeVry believes that its compensation practices were designed
to be in compliance with current regulations.
The
ultimate outcome of pending litigation and other proceedings, reviews,
investigations and contingencies is difficult to estimate. At this time, DeVry
does not expect that the outcome of any such matter, including the litigation
described above, will have a material effect on its cash flows, results of
operations or financial position.
ITEM 4 –
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There
were no matters submitted to a vote of DeVry’s security holders during the
fourth quarter of the fiscal year.
The name,
age and current position of each executive officer of DeVry are:
Name, Age and
Office
|
|
Business
Experience
|
|
|
|
Daniel
M. Hamburger
President
and Chief Executive Officer, DeVry Inc.
|
44
|
Mr.
Hamburger joined DeVry in November 2002 as Executive Vice President with
responsibility for DeVry’s online programs and Becker Professional Review
division. In July 2004, Mr. Hamburger was appointed President and Chief
Operating Officer of DeVry. Mr. Hamburger was appointed Chief
Executive Officer in November 2006. Prior to joining DeVry, Mr.
Hamburger was Chairman and Chief Executive Officer of Indeliq, a developer
of simulation-based training software, which merged with Accenture
Learning in 2002. Prior to that, Mr. Hamburger was President of
the Internet Commerce division of W.W. Grainger.
|
|
|
|
David
Pauldine
Executive
Vice President, DeVry Inc. and President, DeVry University,
Inc.
|
51
|
Mr.
Pauldine joined DeVry in October 2005. In July 2006, he became President
of DeVry University, Inc. Prior to joining DeVry, Mr. Pauldine was
Executive Vice President at EDMC and President of The Art Institutes, a
market-funded educational management company, from July 2001 to October
2005.
|
|
|
|
Thomas
C. Shepherd
Executive
Vice President, DeVry Inc. and President, Ross University
|
58
|
Dr.
Shepherd joined DeVry in October 2004 as President of Ross University.
Prior to joining DeVry, Dr. Shepherd was President of Bastyr University, a
Washington based university with offerings in healthcare education. He
also co-founded Royale Healthcare, a hospital management company, and has
served in senior management roles for several hospitals and healthcare
facilities.
|
|
|
|
Richard
M. Gunst
Senior
Vice President, Chief Financial Officer and Treasurer, DeVry
Inc.
|
52
|
Mr.
Gunst joined DeVry in July 2006 as Senior Vice President, Chief Financial
Officer and Treasurer. Prior to joining DeVry, Mr. Gunst served as Senior
Vice President and Chief Financial Officer of Sagus International, a
manufacturer of school furniture, from 2005 to 2006. Mr. Gunst
served as Senior Vice President and Senior Financial Officer of ConAgra
Refrigerated Foods Group, from 2003 to 2004. He was also Chief Financial
Officer of Quaker Foods and Beverages, from 2001 to
2003.
|
|
|
|
Sharon
Thomas Parrott
Senior
Vice President, Government and Regulatory Affairs and Chief Compliance
Officer, DeVry Inc.
|
58
|
Ms.
Thomas Parrott joined DeVry in 1982 after several years as an officer in
the U.S. Department of Education’s Office of Student Financial Assistance.
She served DeVry in several student finance positions and later assumed
responsibility for corporate communications and government and public
relations. In her current position, she is responsible for implementing
and maintaining DeVry’s corporate and government compliance program. She
is also responsible for managing relations with key external audiences,
including government officials, education policymakers and
legislators.
|
|
|
|
Gregory
S. Davis
Vice
President, General Counsel and Corporate Secretary, DeVry
Inc.
|
46
|
Mr.
Davis joined DeVry in July 2007 as Vice President, General Counsel and
Corporate Secretary. Prior to joining DeVry, Mr. Davis was Vice
President, General Counsel and Secretary of LaPetite Academy, Inc., from
2003 to 2007, which operated nearly 650 schools offering education and
care to children ages 6 months to 12 years. Prior to that, Mr.
Davis was a partner at Andersen Worldwide from 1991 to 2001, with merger
and acquisition and legal related responsibilities.
|
|
|
|
Donna
N. Jennings
Vice
President, Human Resources, DeVry Inc.
|
46
|
Ms.
Jennings joined DeVry in October 2006 as Vice President of Human
Resources. Prior to joining DeVry, Ms. Jennings was Vice President, Human
Resources and Communications, of Velsicol Chemical Corporation, a global
chemical products manufacturer, from 1994 to
2006.
|
Eric
Dirst
Vice
President, Chief Information Officer, DeVry
Inc.
|
41
|
Mr.
Dirst joined DeVry in May 2008 as Vice President and Chief Information
Officer. Prior to joining the Company, Mr. Dirst was the Chief Information
Officer and Chief Technical Officer at SIRVA, a relocation and moving
service provider, from 2000 to 2008.
|
|
|
|
Steven
Riehs
Vice
President and General Manager, Online Operations, DeVry
Inc.
|
48
|
Mr.
Riehs joined DeVry in 2004 as Vice President and General Manager of all
online operations, including enrollment growth, program development and
student services. Prior to joining DeVry, Mr. Riehs was Chief Executive
Officer of BrainX, Inc., an education software company; Vice President in
the medical division of Kaplan Educational Centers and Vice President and
Chief Operating Officer of Compass Medical Education
Network.
|
|
|
|
Thomas
J. Vucinic
Vice
President, DeVry Inc. and President, Becker Professional
Review
|
61
|
Mr.
Vucinic has been the President of Becker Professional Review since July
2006 and General Manager since 1997. Prior to that, Mr. Vucinic was
DeVry’s director of financial planning and analysis.
|
|
|
|
John
P. Roselli
Vice
President, Business Development and Planning, DeVry Inc.
|
44
|
Mr.
Roselli joined DeVry in May 2003 as its Director of Business Development
and General Manager of Corporate Continuing Education. In 2006,
Mr. Roselli was appointed Vice President, Business Development and
Planning.
|
|
|
|
Patrick
J. Unzicker
Controller,
DeVry Inc.
|
37
|
Mr.
Unzicker joined DeVry in March 2006 as its Controller. Prior to joining
DeVry, Mr. Unzicker was Vice President — Controller at Whitehall
Jewellers, Inc., a mall-based retail jeweler, from July 2003 to March
2006. Mr. Unzicker previously served as Vice President of
Finance at Galileo International, computer based travel reservation
system, from May 2000 to August
2002.
|
PART II
ITEM 5 –
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
(a)
Market
Information
DeVry’s
common stock is listed on the New York Stock Exchange and the Chicago Stock
Exchange under the symbol “DV.” The stock transfer agent and
registrar is Computershare Investor Services, L.L.C.
The
following table sets forth the high and low sales price and dividends paid per
share of common stock by quarter for the past two years.
|
|
Fiscal 2008
|
|
|
Fiscal 2007
|
|
|
|
Dividends Paid
|
|
|
High
|
|
|
Low
|
|
|
Dividends Paid
|
|
|
High
|
|
|
Low
|
|
First
Quarter
|
|
$ |
0.05 |
|
|
$ |
38.42 |
|
|
$ |
31.70 |
|
|
$ |
- |
|
|
$ |
23.61 |
|
|
$ |
19.75 |
|
Second
Quarter
|
|
|
- |
|
|
|
59.97 |
|
|
|
36.79 |
|
|
|
- |
|
|
|
28.75 |
|
|
|
21.11 |
|
Third
Quarter
|
|
|
0.06 |
|
|
|
61.25 |
|
|
|
39.25 |
|
|
|
0.05 |
|
|
|
29.90 |
|
|
|
26.46 |
|
Fourth
Quarter
|
|
|
- |
|
|
|
61.57 |
|
|
|
41.85 |
|
|
|
- |
|
|
|
36.09 |
|
|
|
27.44 |
|
(b)
Approximate Number of
Security Holders
There
were 535 holders of record of DeVry’s common stock as of August 1, 2008. The
number of holders of record does not include beneficial owners of its securities
whose shares are held by various brokerage firms, other financial institutions,
DeVry’s 401(k) and profit sharing plan and its employee stock purchase plan.
DeVry believes that there are more than 10,000 beneficial holders of its common
stock including employees who own stock through the exercise of stock options,
who own stock through participation in the employee stock purchase plan or who
own stock through their investment election in DeVry’s 401(k) and profit sharing
plan.
(c)
Dividends
DeVry is
a holding company and, as such, is dependent on the earnings of its subsidiaries
for funds to pay cash dividends. Cash flow from DeVry’s subsidiaries may be
restricted by law and is subject to some restrictions by covenants in the
subsidiaries’ debt agreements, including maintaining consolidated net worth,
fixed charge coverage and leverage at or above specified levels. DeVry generated
sufficient cash flow in fiscal 2008 to fund its current operations, reinvest in
capital equipment as appropriate, reduce outstanding debt and remain in full
compliance with the covenants in its debt agreements. In May 2008, the Board of
Directors declared a dividend of $0.06 per share of common stock, paid in July
2008. DeVry's Board of Directors stated its intent to declare
dividends on a semi-annual basis, resulting in an annual dividend rate of $0.12
per share. There is no guarantee that dividends will be declared in
the future, and payment of dividends will be at the discretion of the Board of
Directors and will be dependent on projections of future earnings, cash flow,
financial requirements of DeVry and other factors as the board of directors
deems relevant.
Issuer Purchases of Equity
Securities
Period
|
|
Total
Number of Shares
Purchased
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number of Shares Purchased as part of Publicly Announced Plans or Programs1
|
|
|
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs1
|
|
April
2008
|
|
|
87,826 |
|
|
$ |
48.49 |
|
|
|
87,826 |
|
|
$ |
-- |
|
May
2008
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
50,000,000 |
|
June
2008
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
50,000,000 |
|
Total
|
|
|
87,826 |
|
|
$ |
48.49 |
|
|
|
87,826 |
|
|
$ |
50,000,000 |
|
1On
November 15, 2006, the Board of Directors approved a stock repurchase program,
pursuant to which up to $35 million of DeVry common stock may be repurchased
within the next two years. This program was announced in DeVry’s
report on Form 8-K, which was filed on November 15, 2006. In April
2008, DeVry completed this repurchase plan. On May 13, 2008, the
Board of Directors authorized a share repurchase program to buyback up to $50
million of DeVry common stock through December 31, 2010. As of June
30, 2008, DeVry has not repurchased any shares under this program.
Other Purchases of Equity
Securities
Period
|
|
Total
Number of Shares Purchased2
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number of Shares Purchased as part of Publicly Announced Plans or Programs
|
|
|
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|
|
April
2008
|
|
|
580 |
|
|
$ |
57.97 |
|
|
|
N/A |
|
|
|
N/A |
|
May
2008
|
|
|
502 |
|
|
$ |
54.04 |
|
|
|
N/A |
|
|
|
N/A |
|
June
2008
|
|
|
-- |
|
|
$ |
-- |
|
|
|
N/A |
|
|
|
N/A |
|
Total
|
|
|
1,082 |
|
|
$ |
56.15 |
|
|
|
N/A |
|
|
|
N/A |
|
2Represents
shares delivered back to the issuer under a swap agreement resulting from
employees’ exercise of incentive stock options pursuant to the terms of DeVry’s
stock incentive plans.
Performance
Graph
The
following graph and chart compare the total cumulative return (assuming dividend
reinvestment) on the Company’s Common Stock during the period from June 30, 2003
through June 30, 2008 with the cumulative return on the NYSE Stock Market Index
(U.S. Companies), and two industry group indices.
COMPARISON
OF CUMULATIVE TOTAL RETURN SINCE JUNE 30, 2003
AMONG
DEVRY INC., NYSE MARKET INDEX,AND INDUSTRY GROUP INDICES
|
|
June 30
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
DeVry
Inc.
|
|
|
100.0 |
|
|
|
117.7 |
|
|
|
85.5 |
|
|
|
94.3 |
|
|
|
146.1 |
|
|
|
230.5 |
|
NYSE
Market Index - U.S. Companies
|
|
|
100.0 |
|
|
|
120.0 |
|
|
|
127.8 |
|
|
|
145.9 |
|
|
|
174.9 |
|
|
|
153.4 |
|
Industry
Group Index-New (1)
|
|
|
100.0 |
|
|
|
135.5 |
|
|
|
117.4 |
|
|
|
93.2 |
|
|
|
116.1 |
|
|
|
90.5 |
|
Industry
Group Index-Old (1)
|
|
|
100.0 |
|
|
|
143.7 |
|
|
|
129.3 |
|
|
|
109.2 |
|
|
|
134.3 |
|
|
|
106.4 |
|
Data for
this graph was prepared by Zacks Investment Research.
Assumes
$100 was invested on June 30, 2003 in DeVry Inc. Common Stock, the NYSE Stock
Market Index (U.S. Companies), the Industry Group-New (1) and the Industry
Group-Old (1), and that all dividends were reinvested.
(1) The
Industry Group-New consists of the following companies selected on the basis of
similarity in nature of their business: Apollo Group, Inc., Capella Education
Co., Career Education Corp., Corinthian Colleges, Inc., ITT Educational
Services, Inc., Lincoln Educational Services, Strayer Education, Inc., and
Universal Technical Institute. DeVry believes that, including itself,
these companies represent the majority of the market value of publicly traded
companies whose primary business is education. Among the changes to the index
were the addition of one company that newly trades as a public company and the
deletion of several companies that no longer trade as separate public
companies.
The
Industry Group-Old Consists of the following companies selected on the basis of
similarity in nature of their business: Apollo Group, Inc., Apollo Group,
Inc.-University of Phoenix, Career Education Corp., Concorde Career Colleges,
Corinthian Colleges, Inc., Education Management Corp., ITT Educational Services,
Inc., Laureate Education Inc., Lincoln Educational Services, Strayer Education,
Inc., and Universal Technical Institute.
ITEM 6 –
SELECTED FINANCIAL DATA
Selected
financial data for DeVry for the last five years are included in the exhibit,
“Five-Year Summary — Operating, Financial and Other Data”, on page 91 of this
report.
ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The
following discussion of DeVry’s results of operations and financial condition
should be read in conjunction with the consolidated financial statements and the
notes thereto appearing elsewhere in this report.
OVERVIEW
DeVry
posted record revenues and net income for fiscal year 2008 based on increasing
enrollments and continued execution of its five-year strategic
plan. Fiscal year 2008 earnings per share of $1.73, a significant
increase compared to $1.07 per share a year-ago, was driven by improved
operating performance. Operational and financial highlights for
fiscal year 2008 include:
|
—
|
All
three of DeVry’s business segments achieved double digit revenue and
operating profit growth, due to continued strength in new student
recruiting and demand for DeVry’s high quality educational programs and
offerings, while at the same time making investments to drive future
growth.
|
|
—
|
The
Summer 2008 term marked DeVry University’s eleventh consecutive period of
positive undergraduate new student growth and the eighth consecutive
period of positive total student enrollment
growth.
|
|
—
|
Becker
Professional Review delivered record revenues of $81.1 million and
operating profit of $33.8 million driven by continued demand for its high
quality CPA and CFA exam preparation class and materials. All
ten of the most recent Elijah Watt Sells Award winners, individuals who
achieved the highest cumulative scores on the CPA exam, prepared with
Becker.
|
|
—
|
Ross
University produced record revenues and operating
profits. During the June 2008 graduation ceremony, Ross
University conferred a record number of Doctor of Medicine and Doctor of
Veterinary Medicine degrees.
|
|
—
|
Chamberlain
College of Nursing began offering nursing programs at its new campuses in
Addison, Illinois, and Phoenix in March 2008. These new
locations are co-located with DeVry University
campuses.
|
|
—
|
In
connection with its real estate optimization strategy, DeVry executed sale
leaseback transactions at four of its facilities resulting in an upfront
loss of $2.3 million net of tax, or $0.03 per share. Management
expects these actions will result in a $1.1 million improvement in
operating income on an annual
basis.
|
|
—
|
On
October 31, 2007, DeVry acquired Advanced Academics Inc., a leading
provider of online secondary education, for $27.5 million in
cash. This acquisition marks DeVry’s entry into secondary
education and is expected to accelerate growth in DeVry’s online
operations.
|
|
—
|
DeVry
repurchased 552,926 shares of its common stock at a total cost of
approximately $24.5 million during fiscal year 2008 completing the $35
million stock repurchase program in April 2008. In May 2008,
DeVry’s Board of Directors approved a $50 million stock repurchase program
to be completed by December 2010.
|
|
—
|
DeVry’s
financial position continued to strengthen as it ended fiscal year 2008
with no debt outstanding and $277 million of cash and marketable
securities.
|
The
following table illustrates the effects of the loss/(gain) on the sale of
facilities and separation plan severance on DeVry’s earnings. The
non-GAAP disclosure of net income and earnings per share, excluding these items,
is not preferable to GAAP net income but is shown as a supplement to such
disclosure for comparability to the prior periods. The following
table reconciles these items to the relevant GAAP information (in thousands,
except per share data). Adjusted earnings per share may not add
because of rounding.
|
|
Fiscal
Year
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Net
Income
|
|
$ |
125,532 |
|
|
$ |
76,188 |
|
|
$ |
43,053 |
|
Earnings
per Share (diluted)
|
|
$ |
1.73 |
|
|
$ |
1.07 |
|
|
$ |
0.61 |
|
Loss
(Gain) on Sale of Assets (net of tax)
|
|
$ |
2,279 |
|
|
$ |
(12,672 |
) |
|
$ |
273 |
|
Effect
on Earnings per Share (diluted)
|
|
$ |
0.03 |
|
|
$ |
(0.18 |
) |
|
|
-- |
|
Separation
Plan Severance (net of tax)
|
|
|
-- |
|
|
$ |
3,807 |
|
|
|
-- |
|
Effect
on Earnings per Share (diluted)
|
|
|
-- |
|
|
$ |
0.05 |
|
|
|
-- |
|
Net
Income Excluding the Loss (Gain) on Sale of Assets and Separation
Plan Severance (net of tax)
|
|
$ |
127,811 |
|
|
$ |
67,323 |
|
|
$ |
42,780 |
|
Adjusted
Earnings per Share (diluted)
|
|
$ |
1.77 |
|
|
$ |
0.94 |
|
|
$ |
0.61 |
|
RESULTS OF
OPERATIONS
The
following table presents information with respect to the relative size to
revenue of each item in the Consolidated Statements of Income for the current
and prior fiscal years. Percents may not add because of
rounding.
|
|
Fiscal Year
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost
of Educational Services
|
|
|
46.1 |
% |
|
|
52.1 |
% |
|
|
54.0 |
% |
Separation
Plan Severance
|
|
|
-- |
|
|
|
0.7 |
% |
|
|
-- |
|
Loss
(Gain) on Sale of Assets
|
|
|
0.3 |
% |
|
|
(2.2 |
%) |
|
|
(0.1 |
%) |
Student
Services & Administrative Expense
|
|
|
38.7 |
% |
|
|
38.5 |
% |
|
|
38.5 |
% |
Total
Operating Expenses
|
|
|
85.1 |
% |
|
|
89.0 |
% |
|
|
92.4 |
% |
Operating
Income
|
|
|
14.9 |
% |
|
|
11.0 |
% |
|
|
7.6 |
% |
Interest
Income
|
|
|
1.0 |
% |
|
|
0.8 |
% |
|
|
0.5 |
% |
Interest
Expense
|
|
|
(0.1 |
%) |
|
|
(0.5 |
%) |
|
|
(1.2 |
%) |
Net
Interest Income (Expense)
|
|
|
0.9 |
% |
|
|
0.3 |
% |
|
|
(0.8 |
%) |
Income
Before Income Taxes
|
|
|
15.8 |
% |
|
|
11.2 |
% |
|
|
6.8 |
% |
Income
Tax Provision
|
|
|
4.3 |
% |
|
|
3.1 |
% |
|
|
1.7 |
% |
Net
Income
|
|
|
11.5 |
% |
|
|
8.2 |
% |
|
|
5.1 |
% |
FISCAL YEAR ENDED JUNE 30,
2008 VS. FISCAL YEAR ENDED JUNE 30, 2007
REVENUES
Total
consolidated revenues for fiscal 2008 of $1,091.8 million increased $158.4
million, or 17.0%, as compared to last year. Revenues are reported net of
tuition refunds applicable to students who withdraw from the academic term for
which they are enrolled during the period specified by the refund policy.
Revenues increased at all three of DeVry’s business segments as a result of
continued growth in total student enrollments, improved student retention and
tuition price increases as compared to the year ago period. In addition,
revenues increased because of higher sales of Becker CPA review
materials.
DeVry
University
During
fiscal year 2008, DeVry University segment revenues increased by 15.5% to $840.9
million as compared to fiscal year 2007. While DeVry University accounted for
the majority of the revenue increase in this segment, revenues at Advanced
Academics Inc., which was acquired on October 31, 2007, also contributed to
segment revenue growth. DeVry University tuition revenues are the
largest component of total revenues in the DeVry University segment. The two
principal factors that influence revenues are enrollment and tuition rates. Key
trends in these two components are set forth below.
Total undergraduate enrollment by
term:
|
—
|
Increased
by 9.8% from summer 2006 (37,132 students) to summer 2007 (40,774
students);
|
|
—
|
Increased
by 10.3% from fall 2006 (40,434 students) to fall 2007 (44,594
students);
|
|
—
|
Increased
by 10.3% from spring 2007 (40,637 students) to spring 2008 (44,814
students); and
|
|
—
|
Increased
by 12.6% from summer 2007 (40,774 students) to summer 2008 (45,907
students). This was DeVry University’s eighth consecutive
period of positive total undergraduate student enrollment
growth.
|
New undergraduate enrollment by
term:
|
—
|
Increased
by 9.7% from summer 2006 (12,671 students) to summer 2007 (13,906
students);
|
|
—
|
Increased
by 10.7% from fall 2006 (11,930 students) to fall 2007 (13,204
students);
|
|
—
|
Increased
by 12.1% from spring 2007 (11,075 students) to spring 2008 (12,410
students); and
|
|
—
|
Increased
by 19.3% from summer 2007 (13,906 students) to summer 2008 (16,595
students). The summer 2008 term was the eleventh consecutive
term in which new undergraduate student enrollments increased from the
year-ago level.
|
Graduate coursetaker enrollment,
including the Keller Graduate School of Management:
The term
“coursetaker” refers to the number of courses taken by a
student. Thus, one student taking two courses is counted as two
coursetakers.
|
—
|
Increased
by 11.1% from the July 2006 session (12,617 coursetakers) to the July 2007
session (14,023 coursetakers);
|
|
—
|
Increased
by 12.7% from the September 2006 session (14,069 coursetakers) to the
September 2007 session (15,857
coursetakers);
|
|
—
|
Increased
by 12.5% from the November 2006 session (13,920 coursetakers) to the
November 2007 session (15,657
coursetakers);
|
|
—
|
Increased
by 13.7% from the January 2007 session (15,278 coursetakers) to the
January 2008 session (17,377
coursetakers);
|
|
—
|
Increased
by 15.2% from the March 2007 session (14,756 coursetakers) to the March
2008 session (17,005 coursetakers);
|
|
—
|
Increased
by 15.7% from the May 2007 session (14,290 coursetakers) to the May 2008
session (16,537 coursetakers); and
|
|
—
|
Increased
by 14.2% from the July 2007 session (14,023 coursetakers) to the July 2008
session (16,017 coursetakers).
|
Tuition rates:
|
—
|
Undergraduate
program tuition increased by approximately 4.5% in July 2007;
and
|
|
—
|
Graduate
school program tuition increased by approximately 0% to 5%, depending on
location, for the July 2007 session, with a weighted average increase of
2.7%.
|
Management
believes the increased undergraduate student enrollments were most significantly
impacted by improved marketing and recruiting efforts, continued strong demand
for DeVry University’s online programs and a heightened focus on the retention
of existing students. Management believes efforts at Keller to
enhance brand awareness through improved messaging have produced positive
graduate enrollment results. Also contributing to higher total
revenues in the DeVry University segment was an increase in Other Educational
Revenues from sales of educational materials.
Partly
offsetting the increases in revenue from improved enrollments and higher tuition
rates were an increase in DeVry University scholarships and a growing proportion
of working adult undergraduate students who typically enroll for less than a
full-time academic load. These students primarily are enrolled in online
programs and in programs offered at DeVry University centers. These part-time
students pay a lesser total average tuition amount each term than do full-time
students at the undergraduate campus locations. Therefore, the higher revenue
per student resulting from tuition increases has been partially offset by a
greater proportion of part-time students. In addition, interest
charges (included in Other Educational Revenue) on undergraduate student
accounts receivable decreased during fiscal year 2008, as compared to the prior
year periods. These receivables are generally subject to a monthly
interest charge of one percent under DeVry University’s EDUCARD® proprietary
loan program for financing students’ education. Lower interest
charges are primarily the result of an improvement in the timeliness of
receivable collections as compared to the prior year periods.
Medical and
Healthcare
The
Medical and Healthcare segment posted record revenues of $169.8 million in
fiscal year 2008, representing an increase of $32.6 million, or 23.8% as
compared to the prior year. While Ross University accounted for the
majority of the revenue increase in this segment, increasing enrollments at
Chamberlain College of Nursing also contributed to segment revenue
growth. The two principal factors that influence revenues are
enrollment and tuition rates. Key trends in these two components are set forth
below.
Ross University total enrollment by
term:
|
—
|
Increased
by 9.9% from May 2006 (3,428 students) to May 2007 (3,767
students);
|
|
—
|
Increased
by 4.1% from September 2006 (3,724 students) to September 2007 (3,876
students);
|
|
—
|
Increased
by 7.0% from January 2007 (3,747 students) to January 2008 (4,011
students); and
|
|
—
|
Increased
by 7.9% from May 2007 (3,767 students) to May 2008 (4,064
students).
|
Ross University new student
enrollment by term:
|
—
|
Decreased
by 5.2% from May 2006 (439 students) to May 2007 (416
students);
|
|
—
|
Decreased
by 8.9% from September 2006 (628 students) to September 2007 (572
students);
|
|
—
|
Increased
by 11.1% from January 2007 (496 students) to January 2008 (551 students);
and
|
|
—
|
Increased
by 15.6% from May 2007 (416 students) to May 2008 (481
students).
|
Chamberlain
College of Nursing total enrollment by term:
|
—
|
Increased
by 83.3% from July 2006 (594 students) to July 2007 (1,089 students);
and
|
|
—
|
Increased
by 99.0% from July 2007 (1,089 students) to July 2008 (2,167
students).
|
Tuition rates:
|
—
|
Tuition
and fees for the Ross University core sciences programs increased by
approximately 5.4% for the September 2006 term and approximately 6.8%
effective with the September 2007
term;
|
|
—
|
Tuition
and fees for the Ross University final clinical portion of the programs
increased by approximately 5.0% for the September 2006 term and
approximately 7.5% effective with the September 2007 term;
and
|
|
—
|
Tuition
for Chamberlain increased approximately 5% for the 2007-2008 academic year
(effective July 2007).
|
Continued
demand for medical doctors and veterinarians positively influenced career
decisions of new students towards these respective fields of
study. Management believes the increasing enrollments at Ross
University for the past several terms resulted from enhancements made to its
marketing and recruiting functions, as well as steps taken to meet increasing
student demand such as adding faculty, classrooms, and a new student center and
gymnasium.
The
increase in student enrollments at Chamberlain was attributable to its growing
RN to BSN online completion program and the opening of its Columbus campus in
March 2007. Also, during March 2008, Chamberlain began offering
nursing programs at its campuses in Addison, Illinois, and
Phoenix. These locations are co-located with existing respective
DeVry University campuses.
Professional and
Training
Professional
and Training segment revenues reached a record high of $81.1 million for fiscal
year 2008, increasing by $13.2 million, or 19.4% from the prior year. The
primary reasons for the increase were higher sales of CPA review courses on
CD-ROM and increased enrollment in Becker Professional Review’s CPA review
courses. Management believes these increases are being driven largely
by Becker’s success in capturing the continuing strong demand for CPAs from
accounting and consulting firms. Also contributing to the growth in
revenues was a price increase of approximately 5%, effective July
2007.
Other Educational
Revenues
Other
Educational Revenues increased by 24.0% to $87.8 million during fiscal year 2008
as compared to the prior year. As discussed above, the primary drivers for the
increase in Other Educational Revenue were increased sales of Becker CPA Review
course materials on CD-ROM and strong sales of educational materials at DeVry
University, partially offset by a decrease in interest charged on undergraduate
student receivables due to improved collections and management of student
accounts.
COSTS AND
EXPENSES
Cost of Educational
Services
The
largest component of Cost of Educational Services is the cost of employees who
support educational operations. This expense category also includes the costs of
facilities, supplies, bookstore and other educational materials, student
education-related support activities, and the provision for uncollectible
student accounts.
DeVry’s
Cost of Educational Services increased 3.4% to $503.1 million during fiscal year
2008 as compared to the year-ago period. Cost increases were incurred
in support of the higher number of DeVry University Centers, expanding online
program enrollments and from Advanced Academics, which was acquired on October
31, 2007. In addition, cost increases were incurred at Ross University to both
support increasing student enrollments and capacity expansion to drive future
growth. Also, Cost of Educational Services increased due to the
operation of two additional Chamberlain locations which began offering programs
in March 2008. Partially offsetting these cost increases were savings
realized from the voluntary and involuntary work force reductions taken at DeVry
University during the fourth quarter of fiscal year 2007 along with facility
cost reductions from DeVry University’s ongoing real estate optimization
program.
As a
percent of revenue, Cost of Educational Services decreased to 46.1% in fiscal
year 2008 from 51.1% during the prior year period. The decrease was
the combined result of increased operating leverage with existing facilities and
staff and revenue gains, which more than offset incremental investments within
all three business segments. Management anticipates improvements in
operating leverage to continue during fiscal year 2009, albeit not at the same
level achieved during fiscal year 2008 as expenses are expected to increase
based on additional hiring and project spending to support future quality
enhancements and revenue growth.
Separation Plan
Severance
During
the third quarter of fiscal year 2007, DeVry offered a voluntary separation plan
(VSP) to eligible DeVry University campus-based employees, and during the fourth
quarter of fiscal year 2007, DeVry University announced plans for an involuntary
reduction in force (RIF). In connection with these actions, DeVry
University reduced its workforce by approximately 220 employees, and recorded a
total pre-tax charge of approximately $6.3 million in fiscal year 2007. The
charge consisted of severance pay and extended medical and dental benefits
coverage. The charge was separately classified in the Consolidated Statements of
Income as a component of Total Costs and Expenses and was related to the DeVry
University reportable segment.
Loss (Gain) on Sale of
Assets
In
February, 2008, DeVry University completed the sale of its 98,000 square foot
Houston facility for approximately $14.5 million of gross proceeds. DeVry is
leasing back approximately 60 percent of the original space. An accounting gain
from the sale of the facility of $2.2 million is being recognized ratably over
the 12-year lease period.
In
September 2007, DeVry sold its facility located in Seattle, Washington, for
approximately $12.4 million. In connection with the sale, DeVry
recorded a pre-tax loss of $5.4 million during the first quarter of fiscal year
2008. In the same transaction, DeVry sold its facility located in
Phoenix, Arizona, for approximately $16.0 million which resulted in a pre-tax
gain of approximately $7.7 million. In connection with the transaction, DeVry
entered into agreements to lease back approximately 60% of the total space of
both facilities. The leaseback required the deferral of a portion of
the gain on the sale of the Phoenix facility of approximately $6.6 million. This
gain is being recognized as a reduction to rent expense over the ten year life
of the lease agreement. The remaining pre-tax gain of $1.1 million was recorded
during the first quarter of fiscal year 2008.
In
September 2007, DeVry exercised the option to purchase its leased facility in
Alpharetta, Georgia, for $11.2 million. Immediately following the
acquisition, DeVry sold the facility to a different party for $11.2 million and
executed a leaseback on the entire facility. In connection with this
transaction, DeVry accelerated to the first quarter of fiscal year 2008, the
recognition of approximately $0.6 million of remaining deferred lease credits
associated with the original lease.
The
recorded net loss on the sale of the facilities and the recognition of the
deferred lease credits was separately classified in the Consolidated Statements
of Income as a component of Total Operating Costs and Expenses and was related
to the DeVry University reportable segment.
In
September 2006, DeVry sold its facility located in West Hills, California, for
$36.0 million. In connection with the sale, DeVry recorded a pre-tax gain of
$19.9 million during the first quarter of fiscal year 2007. DeVry
relocated its West Hills campus operations to a leased facility in nearby
Sherman Oaks, California. This gain was separately classified in the
Consolidated Statements of Income as a component of Total Operating Costs and
Expenses and was also related to the DeVry University reportable
segment.
These
transactions were executed as a part of DeVry’s ongoing real estate optimization
strategy, which involves evaluating DeVry’s current facilities and locations in
order to ensure the optimal mix of large campuses, small campuses and DeVry
University centers to meet the demand of each market that it
serves. This process also improves capacity utilization and enhances
economic value. This strategy may include actions such as
reconfiguring large campuses; renegotiating lease terms; sub-leasing excess
space and relocating to smaller locations within the same geographic area to
increase market penetration. DeVry will also consider co-locating
other educational offerings such as Chamberlain College of Nursing at DeVry
University campuses. Future actions under this program could result
in accounting gains and/or losses depending upon real estate market conditions,
including whether the facility is owned or leased and other market
factors.
Student Services and
Administrative Expense
This
expense category includes student recruiting and advertising costs, general and
administrative costs, expenses associated with curriculum development, and the
amortization expense of finite-lived intangible assets related to acquisitions
of businesses.
Student
Services and Administrative Expense grew by 17.7% to $422.6 million during
fiscal year 2008 as compared to the year-ago period. The increase in
expenses represented additional investments in advertising and recruiting to
drive and support future growth in new student enrollments. Increased
new student enrollments, as described above, at all three of DeVry’s business
segments are believed to be, in part, attributable to the higher level and
effectiveness of this spending. In addition, cost increases were
incurred for improved information technology and student
services. Also, expenses were higher as compared to the year-ago
periods as a result of the acquisition of Advanced Academics, which was
purchased on October 31, 2007.
Partially
offsetting these increases was lower amortization of finite-lived intangible
assets in connection with acquisitions of businesses, primarily related to Ross
University, net of increased amortization of finite-lived intangible assets
resulting from the acquisition of Advanced Academics on October 31,
2007. For fiscal year 2008, amortization expense for finite-lived
intangible assets was $4.9 million compared to $6.8 million in the year-ago
period. Amortization expense is included entirely in the Student
Services and Administrative Expense category.
OPERATING
INCOME
DeVry
University
DeVry
University segment operating income increased 117% to $83.4 million during
fiscal year 2008, as compared to the prior year period. Revenue
increased and gross margin improved significantly during fiscal year 2008, which
was partially offset by the loss from sale leaseback transactions. In
September 2007, DeVry executed sale leaseback transactions for its facilities in
Seattle, Washington; Phoenix, Arizona; and Alpharetta, Georgia. In connection
with these transactions, DeVry recorded a pre-tax loss of $3.7 million during
the fiscal year 2008. During fiscal year 2007, DeVry recorded pre-tax
gains of $20.8 million associated with facility sales and recorded a pre-tax
charge of $6.3 million in connection with separation plans. The loss
in fiscal year 2008 and gain and charge in fiscal year 2007 were included in
operating income of the DeVry University reportable
segment. Excluding the impact of the asset sales in both the current
and prior year and the voluntary separation plan charge in the prior year
period, on a non-GAAP basis DeVry University fiscal year 2008 operating income
of $87.2 million increased $63.3 million from $23.9 million in the year-ago
period.
Medical and
Healthcare
Medical
and Healthcare segment operating income increased 11.2% to $52.2 million during
fiscal year 2008 as compared to the prior year. Increases in student
enrollments and tuition produced higher revenues and operating income in fiscal
year 2008 as compared to the prior year even as faculty, staff and facilities
were being added in connection with the operation of two additional Chamberlain
campuses which began offering programs in March 2008. The increase
was partially offset by an increase in the allocation of corporate expenses to
this business unit, including information technology, human resources and legal,
based upon current usage of such services.
Professional and
Training
Professional
and Training segment operating income rose 31.4% to $33.8 million during fiscal
year 2008 as compared to the year-ago period. The increase in
operating income is the result of higher revenue and improved operating leverage
as discussed earlier.
INTEREST
Interest
income increased 40.7%, to $10.5 million during fiscal year 2008 as compared to
the prior year. The increase was attributable to higher levels of
invested cash balances and marketable securities with higher interest rates as
compared to the prior year. The increase in invested cash balances
and marketable securities was attributable to improved operating cash flow and
proceeds received from the sale of assets, as discussed earlier.
Interest
expense decreased 89.1% to $0.5 million during fiscal year 2008 as compared to
the year-ago period. The decrease in interest expense was
attributable to lower average borrowings and lower amortization of deferred
financing costs. During July and October 2006, DeVry repaid the
remaining Senior Notes totaling $115 million. During January 2007,
DeVry amended its revolving credit agreement, which among other things, reduced
the spread on applicable interest and fee rates.
INCOME
TAXES
Taxes on
income were 27.1% of pretax income for fiscal year 2008, compared to 27.4% for
the prior year. The lower effective income tax rate in fiscal year
2008 was attributable to the gain on the sale of the West Hills facility and
excess adjacent land to the Tinley Park campus, which occurred in fiscal year
2007, and carried a tax rate of 39.1%, partially offset by an increase in the
proportion of income generated by U.S. operations to the offshore operations of
Ross University during fiscal year 2008 as compared to the prior year
period.
Earnings
of Ross University’s international operations are not subject to U.S. federal or
state taxes and also are exempt from income taxes in the jurisdictions in which
the schools operate. The medical and veterinary schools have
agreements with the governments that exempt them from local income taxation
through the years 2043 and 2023, respectively. DeVry intends to
indefinitely reinvest Ross University earnings and cash flow to improve and
expand facilities and operations at the medical and veterinary schools, and
pursue other business opportunities outside the United States. Accordingly,
DeVry has not recorded a current provision for the payment of U.S. income taxes
on these earnings.
FISCAL YEAR ENDED JUNE 30,
2007 VS. FISCAL YEAR ENDED JUNE 30, 2006
REVENUES
Total
consolidated revenues for fiscal 2007 of $933.5 million increased $94.0 million,
or 11.2%, as compared to fiscal year 2006. Revenues were reported net of tuition
refunds applicable to students who withdraw from the academic term for which
they were enrolled during the period specified by the refund
policy. During fiscal year 2007, revenues increased at all three of
DeVry’s business segments as a result of continued growth in student enrollments
and tuition price increases as compared to fiscal year 2006. In addition,
revenues increased because of higher sales of Becker Professional Review
materials and the expanding sale of educational materials at DeVry
University.
DeVry
University
During
fiscal year 2007, DeVry University revenues increased by 7.8% to $728.4 million
as compared to fiscal year 2006. Tuition revenues are the largest component of
total revenues in the DeVry University Segment. The two principal factors that
influence revenues are enrollment and tuition rates. Key trends in these two
components are set forth below.
Total undergraduate enrollment by
term:
|
—
|
Increased
by 2.5% from summer 2005 (36,220 students) to summer 2006 (37,132
students);
|
|
—
|
Increased
by 4.9% from fall 2005 (38,546 students) to fall 2006 (40,434
students);
|
|
—
|
Increased
by 5.5% from spring 2006 (38,523 students) to spring 2007 (40,637
students); and
|
|
—
|
Increased
by 9.8% from summer 2006 (37,132 students) to summer 2007 (40,774
students). This was DeVry University’s fifth consecutive period
of positive total undergraduate student enrollment
growth.
|
New undergraduate enrollment by
term:
|
—
|
Increased
by 12.2% from summer 2005 (11,293 students) to summer 2006 (12,671
students);
|
|
—
|
Increased
by 11.9% from fall 2005 (10,663 students) to fall 2006 (11,930
students);
|
|
—
|
Increased
by 6.9% from spring 2006 (10,359 students) to spring 2007 (11,075
students); and
|
|
—
|
Increased
by 9.7% from summer 2006 (12,671 students) to summer 2007 (13,906
students). The summer 2007 term was the eighth consecutive term in which
new undergraduate student enrollments increased from the year-ago
level.
|
Graduate coursetaker
enrollment:
The term
“coursetaker” refers to the number of courses taken by a
student. Thus, one student taking two courses is counted as two
coursetakers.
|
—
|
Increased
by 10.3% from the July 2005 session (11,434 coursetakers) to the July 2006
session (12,617 coursetakers);
|
|
—
|
Increased
by 10.5% from the September 2005 session (12,732 coursetakers) to the
September 2006 session (14,069
coursetakers);
|
|
—
|
Increased
by 8.9% from the November 2005 session (12,777 coursetakers) to the
November 2006 session (13,920
coursetakers);
|
|
—
|
Increased
by 10.9% from the January 2006 session (13,776 coursetakers) to the
January 2007 session (15,278
coursetakers);
|
|
—
|
Increased
by 5.2% from the March 2006 session (14,029 coursetakers) to the March
2007 session (14,756 coursetakers);
|
|
—
|
Increased
by 8.7% from the May 2006 session (13,148 coursetakers) to the May 2007
session (14,290 coursetakers); and
|
|
—
|
Increased
by 11.1% from the July 2006 session (12,617 coursetakers) to the July 2007
session (14,023 coursetakers).
|
Tuition rates:
|
—
|
Undergraduate
program tuition increased by approximately 4.5% in July 2006 and by
approximately 4.5% in July 2007;
and
|
|
—
|
Graduate
school program tuition increased by approximately 4.5% for the July 2006
session following a 5.0% increase for the September 2005
session.
|
The
increasing undergraduate new student enrollments were attributable to greater
investments in marketing and recruiting, continued demand for DeVry’s high
quality educational programs and its position within the working adult
market. Management believes that efforts at Keller to sharpen brand
presentation and program messaging have produced positive enrollment results
and will continue to focus on further improvements in the
future. Also contributing to higher total revenues in the DeVry
University segment was an increase in Other Educational Revenues partly from
sales of educational materials.
Partly
offsetting the increases in revenue from improved enrollments and higher tuition
rates were an increase in DeVry University scholarships and a growing proportion
of working adult undergraduate students who typically enroll for less than a
full-time academic load. These students are primarily enrolled in online
programs and at programs offered at DeVry University centers. These part-time
students pay a lesser total average tuition amount each term than do full-time
students at the undergraduate campus locations. Therefore, the higher revenue
per student resulting from tuition increases has been partially offset by a
greater proportion of part-time students. In addition, interest
charges (included in Other Educational Revenue) on undergraduate student
accounts receivable decreased in fiscal year 2007, as compared to the prior year
periods. These receivables are generally subject to a monthly
interest charge of one percent under DeVry University’s EDUCARD® proprietary
loan program for financing students’ education. Lower interest
charges were primarily a result of a decrease in the average accounts receivable
balance on enrolled, undergraduate student accounts. The timeliness
of receivable collections improved as compared to fiscal year 2006.
Medical and
Healthcare
The
Medical and Healthcare segment posted revenues of $137.2 million in fiscal year
2007, which represented an increase of $26.8 million, or 24.2% as compared to
fiscal year 2006. While Ross University accounted for the majority of
the revenue increase in this segment, increasing enrollments at Chamberlain
College of Nursing also contributed to segment revenue growth. The
two principal factors that influence revenues are enrollment and tuition rates.
Key trends in these two components are set forth below.
Ross University total enrollment by
term:
|
—
|
Increased
by 13.2% from May 2005 (3,029 students) to May 2006 (3,428
students);
|
|
—
|
Increased
by 15.4% from September 2005 (3,227 students) to September 2006 (3,724
students);
|
|
—
|
Increased
by 14.8% from January 2006 (3,264 students) to January 2007 (3,747
students); and
|
|
—
|
Increased
by 9.9% from May 2006 (3,428 students) to May 2007 (3,767
students).
|
Ross University new student
enrollment by term:
|
—
|
Increased
by 63.8% from May 2005 (268 students) to May 2006 (439
students);
|
|
—
|
Increased
by 9.2% from September 2005 (575 students) to September 2006 (628
students);
|
|
—
|
Increased
by 28.2% from January 2006 (387 students) to January 2007 (496 students);
and
|
|
—
|
Decreased
by 5.2% from May 2006 (439 students) to May 2007 (416 students) as a
result of a lower number of transfer students in May 2007 as compared to
the prior year term.
|
Chamberlain
College of Nursing total enrollment by term:
|
—
|
Increased
by 83.3% from July 2006 (594 students) to July 2007 (1,089
students).
|
Tuition rates:
|
—
|
Tuition
and fees for the Ross University beginning basic sciences programs
increased by approximately 5.4% for the September 2006 term and
approximately 6.8% effective with the September 2007
term;
|
|
—
|
Tuition
and fees for the Ross University final clinical portion of the programs
increased by approximately 5.0% for the September 2006 term and
approximately 7.2% effective with the September 2007 term;
and
|
|
—
|
Tuition
for Chamberlain College of Nursing increased approximately 5% for the
2006-2007 academic year (effective July 2006) and approximately 5% for the
2007-2008 academic year (effective July
2007).
|
Management
believed that the increasing enrollments at Ross University for the past several
terms resulted from enhancements made to its marketing and recruiting
functions. In addition, continued demand for medical doctors and
veterinarians positively influenced career decisions of new students towards
these respective fields of study. To prepare for increasing student
demand, Ross University added faculty, classrooms, laboratories and student
housing.
During
March 2007, Chamberlain College of Nursing began offering associate and
bachelor’s degrees in nursing programs at its new campus in Columbus,
Ohio. This new location is co-located with DeVry University’s campus
in Columbus.
Professional and
Training
Professional
and Training segment recorded revenues of $67.9 million for fiscal year 2007,
which increased by $14.3 million, or 26.8% from fiscal year 2006. The primary
reason for the increased revenue during fiscal year 2007 was increased
enrollment in Becker Professional Review’s CPA review courses and from increased
sales of CPA and CFA review courses on CD-ROM. Management believed that these
increases were being driven by an increase in market share and the continued
demand for accounting and finance professionals. Also contributing to
the growth in revenues was a price increase of approximately 5%.
Other Educational
Revenues
Other
Educational Revenues increased by 22.7% to $70.8 million during fiscal year 2007
as compared to fiscal year 2006. As discussed above, the primary drivers for the
increase in Other Educational Revenues were strong sales of Becker Professional
Review course materials on CD-ROM and educational materials at DeVry
University.
COSTS AND
EXPENSES
Cost of Educational
Services
The
largest component of Cost of Educational Services is the cost of employees who
support educational operations. This expense category also includes the costs of
facilities, supplies, bookstore and other educational materials, student
education-related support activities, and the provision for uncollectible
student accounts.
Cost of
Educational Services increased 7.4% to $486.7 million during fiscal year 2007 as
compared to fiscal year 2006. Cost increases were incurred in support
of expanding online program enrollments and five additional DeVry University
centers. In addition, cost increases were incurred at Ross University
to support increasing student enrollments. Also contributing to
the higher cost of educational services was an increase in salary expense due to
annual merit increases. In addition, provision for doubtful accounts
increased primarily as a result of revenue growth. Partially
offsetting these increases was a decrease in depreciation expense in fiscal year
2007 because of lower capital spending during each of the past several
years.
As a
percent of revenue, Cost of Educational Services decreased to 52.1% in fiscal
year 2007 from 54.0% during the prior year period. The decrease was a
result of increased operating leverage with existing facilities and staff and
revenue gains, which more than offset incremental investments at all three
business segments.
Separation Plan
Severance
During
the third quarter of fiscal 2007, DeVry offered a voluntary separation plan
(VSP) to eligible DeVry University campus-based employees. The
decision to take this action resulted from a thorough analysis which revealed
that a reduction in the number of employees at DeVry University campuses was
warranted to address the subsidiary’s cost structure. The VSP was
offered at 22 DeVry University campuses with 285 employees being eligible to
participate. Seventy employees accepted this separation
plan. Separation of employment was effective no later than June
30, 2007. DeVry recorded a pre-tax charge of approximately $3.7
million in the third and fourth quarters of fiscal 2007 in relation to these
employees. The charge consisted of severance pay and extended medical
and dental benefits coverage.
In April
2007, DeVry announced plans for an involuntary reduction in force (RIF) that
further reduced its workforce by approximately 150 positions at its DeVry
University campus-based operations. This resulted in an additional
pre-tax charge in the fourth quarter of fiscal 2007 of approximately $2.6
million that represented severance pay and benefits in relation to these
employees.
Cash
payments for the VSP began in the first quarter of fiscal year 2008 and will
extend until the period of benefit coverage has expired. Cash
payments for the RIF were $1.1 million in the fourth quarter of fiscal 2007.
These payments will extend until the period of benefit coverage has expired. Of
the total amount accrued for the 2007 VSP and RIF, approximately $5.1 million
remained to be paid as of June 30, 2007.
Gain on Sale of
Assets
During
fiscal year 2007, DeVry sold its facility located in West Hills, California for
$36.0 million. DeVry relocated its West Hills campus operations to a
leased facility in nearby Sherman Oaks, California. In March 2007,
DeVry sold unused land adjacent to its campus in Tinley Park, Illinois for $1.9
million. In connection with these sales, DeVry recorded a pre-tax
gain of approximately $20.8 million ($12.7 million, net of tax, or $0.18 per
share) during fiscal year 2007. These gains were separately
classified in the Consolidated Statements of Income as a component of Total
Costs and Expenses and were related to the DeVry University
segment.
These
transactions were executed as a part of DeVry’s ongoing real estate optimization
strategy, which involves evaluating DeVry’s current facilities and locations in
order to ensure the optimal mix of large campuses, small campuses and DeVry
University centers to meet the demand of each market that it
serves. This process also improves capacity utilization and enhances
economic value. These plans may include actions such as reconfiguring
large campuses; renegotiating lease terms; sub-leasing excess space and
relocating to smaller locations within the same geographic area to increase
market penetration. DeVry will also consider co-locating other
educational offerings such as Chamberlain College of Nursing at DeVry University
campuses. Future actions under this program could result in
accounting gains and/or losses depending upon real estate market conditions,
whether the facility is owned or leased and other market factors.
Student Services and
Administrative Expense
This
expense category includes student recruiting and advertising costs, general and
administrative costs, expenses associated with curriculum development, and the
amortization expense of finite-lived intangible assets related to acquisitions
of businesses.
Student
Services and Administrative Expense grew by 11.1% to $359.0 million during
fiscal year 2007 as compared to fiscal year 2006. The increase in
expenses represented additional investments in recruiting, advertising and
systems to drive and support future growth in new student
enrollments. High school presenters and advisors were added in
connection with DeVry University’s strategy to increase enrollment of recent
high school graduates. Also, admissions advisors were added during
fiscal year 2007 to support the growing online program enrollments and at new
DeVry University centers. Increased new student enrollments, as
described above, at DeVry University, Becker Professional Review and Ross
University are believed to be, in part, attributable to the higher level and
effectiveness of this spending. In addition, expense attributed to
stock-based awards included in Student Services and Administrative Expense
increased during fiscal year 2007 as more new stock options were granted during
this period.
Partially
offsetting these increases in student recruiting expense was lower amortization
of finite-lived intangible assets in connection with acquisitions of businesses,
primarily related to Ross University. Amortization expense is included entirely
in the Student Services and Administrative Expense category. For fiscal 2007,
amortization expense for finite-lived intangible assets was $6.8 million
compared to $9.9 million in fiscal year 2006.
OPERATING
INCOME
DeVry
University
DeVry
University generated operating income of $38.4 million in fiscal 2007 as
compared to $18.4 million in fiscal 2006. Revenue increases and
gross margin improvements were partially offset by increased spending on
recruiting, advertising and systems infrastructure to drive future enrollment
gains and enhance student services. Also contributing to the
increase in operating income for fiscal year 2007 were the gains on the sale of
assets of $20.8 million, which were partially offset by the severance plan
charges of $6.3 million, as previously discussed.
Medical and
Healthcare
Operating
income of $47.0 million for the Medical and Healthcare segment increased by
approximately $8.9 million, or 23.4%, from fiscal 2006. At Ross University,
increases in student enrollments and tuition produced higher revenues and
operating income for the current year as compared to the prior year periods even
as faculty, staff and facilities were being added to accommodate future
enrollment growth. Operating income at Chamberlain College of Nursing
increased because of higher revenues from growing enrollments but was partially
offset by costs associated with opening its new campus in Columbus,
Ohio.
Professional and
Training
Professional
and Training operating income rose 42.6% to $25.8 million during fiscal year
2007 as compared to fiscal year 2006. The increase in operating income was the
result of higher revenues and improved operating leverage as discussed
above. The increase was partially offset by a higher allocation of
corporate expenses to this business segment, including information technology,
human resources and legal, based upon the current usage of such
services.
INTEREST
Fiscal
year 2007 interest income of $7.4 million was a significant increase over fiscal
year 2006. The increase was attributable to higher levels of
short-term investments with higher short-term interest rates as compared to the
prior year.
Interest
expense decreased $5.4 million to $4.8 million in fiscal year 2007 as compared
to fiscal year 2006. The decrease in interest expense was
attributable to lower average borrowings. The decrease was partially
offset by the write-off of unamortized deferred financing costs related to the
pre-payment of the Senior Notes and the change in the members of the bank group
related to the Third Amendment to DeVry’s revolving credit
agreement. During July and October 2006, DeVry repaid the remaining
Senior Notes totaling $115 million. In connection with the debt
prepayments, DeVry charged to expense approximately $0.8 million of unamortized
deferred financing costs in fiscal year 2007. During January 2007,
DeVry amended its revolving credit agreement to, among other things, reduce the
spread on applicable interest and fee rates; extend the remaining term from two
to five years; revise and loosen certain financial covenants; and provide
increased flexibility for acquisitions, dividends and/or share repurchase
programs. DeVry deferred approximately $0.2 million in financing
costs incurred in relation to this refinancing and charged to expense
approximately $0.1 million of previously deferred financing costs.
INCOME
TAXES
The
effective tax rate was 27.4% for fiscal year 2007, compared to 25.1% for the
fiscal year 2006. The higher effective income tax rate in fiscal year
2007 was primarily due to gains on the sale of the West Hills facility and
excess land adjacent to the Tinley Park campus, which carried a tax rate of
39.1% and changes to prior and current year income tax estimates for Ross
University’s domestic operations. These increases in the effective
tax rate were partially offset by an increase in the relative proportion of
earnings from Ross University’s international operations to U.S. sourced
income.
Earnings
of Ross University’s international operations are not subject to U.S. federal or
state taxes and also are exempt from income taxes in the jurisdictions in which
the schools operate. The medical and veterinary schools have
agreements with the governments that exempt them from local taxation through the
years 2043 and 2023, respectively. DeVry intends to indefinitely
reinvest Ross University’s international earnings and cash flow to improve and
expand operations at the medical and veterinary schools, and pursue other
business opportunities outside the United States. Accordingly, DeVry has not
recorded a current provision for the payment of U.S. income taxes on these
earnings.
CRITICAL ACCOUNTING
POLICIES
Note 2,
Summary of Significant Accounting Policies, in the Notes to Consolidated
Financial Statements for the fiscal year ended June 30, 2008, describes in more
detail the method of application of significant accounting policies and should
be read in conjunction with the discussion below.
Revenue
Recognition
DeVry
University tuition and technology fees, Ross University tuition for the basic
science semesters, and Chamberlain College of Nursing tuition all are billed at
the start of each academic term. The revenue is recognized ratably on a
straight-line basis over that academic term. Revenue from Ross University
clinical terms is recognized based upon the student’s weekly schedule of actual
attendance. Refunds of tuition and other charges are reported as a reduction of
revenues. Textbook, electronic course materials and other educational supply
sales, and commissions received on sales by bookstores (which are operated by an
outside party), are recognized when the sale occurs.
Tuition
revenue from Becker Professional Review is recognized ratably on a straight-line
basis over the course term. Becker Professional Review self-study CD ROM and
textbook and other educational product revenues are recognized when the sale
occurs. Revenue from training services, which are generally short-term in
duration, is recognized when the training service is provided.
Tuition
revenue from Advanced Academics Inc. is recognized ratably on a straight-line
basis over the course term.
Expense
Recognition
Advertising
costs are charged to expense in the period in which materials are purchased or
services are rendered. Similarly, start-up expenses related to new operating
locations and new curriculum development costs are charged directly to expense
as incurred.
Allowance for Uncollectible
Accounts
The
allowance for uncollectible accounts is determined by analyzing the current
level of accounts receivable and loss rates on collections of accounts
receivable. In addition, management considers projections of future receivable
levels and collection loss rates. We perform this analysis periodically
throughout the year. Provisions required to maintain the allowance at
appropriate levels are charged to expense in each period as
required.
Internally Developed
Software
Selected
costs associated with developing DeVry’s information technology systems have
been capitalized in accordance with the rules on accounting for costs of
computer software developed for internal use in accordance with SOP
98-1.
Stock-Based
Compensation
Effective
with the start of fiscal 2006, stock-based compensation is recorded as
compensation expense in accordance with SFAS 123(R). Accordingly, expenses
relating to stock-based awards have been included in the various expense
categories, as appropriate.
If
factors change and different assumptions are employed in the application of SFAS
123(R) in future periods, the stock-based compensation expense that DeVry
records may differ significantly from what was recorded in the prior
period.
Impairment of Goodwill and
Other Intangible Assets
In
accordance with Statement of Financial Accounting Standards No. 142, “Goodwill
and Other Intangible Assets” (“SFAS 142”), management annually compares the fair
value of DeVry’s reporting units to their carrying value to identify potential
impairment of goodwill. Similarly, management compares the fair value to the
carrying value of indefinite-lived intangible assets arising from business
combinations. This assessment is performed annually, or more frequently if
circumstances require. The valuation is based upon several factors, including
estimates of future revenues and earnings and a discounted cash flow analysis
for several future years, and includes other assumptions, such as future income
tax and interest discount rates. Such estimates require significant judgment,
and over future periods, actual results may differ from these estimates.
Although management believes its estimates are appropriate, if earnings and/or
cash flow are less than our projections indicate, or other assumptions
underlying the analysis change significantly, DeVry could incur impairment
charges in future periods.
At June
30, 2008, intangible assets from business combinations totaled $62.8 million,
and goodwill totaled $308.0 million. Together these assets equal approximately
37% of total assets, and any impairment could significantly affect future
results of operations.
Impairment of Long-Lived
Assets
DeVry
evaluates the carrying amount of its major long-lived assets whenever changes in
circumstances or events indicate that the value of such assets may not be fully
recoverable in accordance with Statement of Financial Accounting Standards No.
144, “Accounting for Impairment or Disposal of Long-Lived Assets.”
Income Tax
Liabilities
DeVry
recognizes income tax expense based upon income earned. However, some expenses,
such as depreciation, may be recorded in one period for financial statement
reporting but in the tax return for another period. These timing differences
create deferred tax assets and liabilities that are recorded on the balance
sheet to reflect the subsequent realization or payment of these amounts,
respectively. DeVry’s deferred tax items are regularly analyzed and valuation
reserves are established as required when the realization of a deferred tax
asset is in doubt.
Estimates and
Assumptions
DeVry’s
financial statements include estimates and assumptions about the reported
amounts of assets, liabilities, revenues, and expenses whose exact amounts will
not be known until future periods. Management and DeVry’s independent registered
public accountants have discussed with the Audit Committee of the Board of
Directors the critical accounting policies discussed above and the significant
estimates included in the financial statements in this report. Although
management believes its assumptions and estimates are reasonable, actual amounts
may differ from the estimates included in the financial statements and could
produce materially different results in the future.
DeVry’s
financial statements reflect the following significant estimates and
assumptions:
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the
method of revenue recognition across the academic
periods;
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the
estimates and judgments used to record the provision for uncollectible
accounts receivable. DeVry believes that it has appropriately
considered known or expected outcomes of its students’ ability to pay
their outstanding amounts due to DeVry. DeVry’s greatest
accounts receivable risk is with its DeVry University undergraduate
students. If an additional allowance of 1% of DeVry University
undergraduate gross receivables was necessary, an additional provision of
approximately $0.5 million would be
required.
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the
useful lives of equipment and facilities whose value is a significant
portion of DeVry’s total assets;
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the
value and useful lives of acquired finite-lived intangible
assets;
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the
value of indefinite-lived intangible
assets;
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the
pattern of the amortization of finite-lived intangible assets over their
economic life;
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losses
to be realized in the future on the collection of presently owed student
receivable balances;
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the
value of deferred tax assets and evaluation of uncertainties under FASB
Interpretation No. 48;
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certain
marketable securities are valued using observable and unobservable inputs,
such as internally-developed pricing
models;
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costs
associated with any settlement of claims and lawsuits in which DeVry is a
defendant;
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health
care reimbursement claims for medical services rendered but for which
claims have not yet been processed or paid;
and
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the
value of stock-based compensation awards and related compensation
expense.
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The
methodology management used to derive each of the above estimates for fiscal
2008 is consistent with the manner in which such estimates were made in prior
years, although management regularly analyzes the parameters used in setting the
value of these estimates and may change those parameters as conditions warrant.
Actual results could differ from those estimates.
CONTINGENCIES
DeVry is
subject to occasional lawsuits, administrative proceedings, regulatory reviews
and investigations associated with financial assistance programs and other
claims arising in the normal conduct of its business. The following is a
description of pending litigation that may be considered other than ordinary and
routine litigation that is incidental to the business.
On
December 23, 2005, Saro Daghlian, a former DeVry University student in
California, commenced a putative class action against DeVry University and DeVry
Inc. (collectively “DeVry”) in Los Angeles Superior Court, asserting various
claims predicated upon DeVry’s alleged failure to comply with disclosure
requirements under the California Education Code relating to the transferability
of academic units. In addition to the alleged omission,
Daghlian also claimed that DeVry made untrue or misleading statements to
prospective students, in violation of the California Unfair Competition Law
("UCL") and the California False Advertising Law,
("FAL"). DeVry removed the action to the U.S. District Court
for the Central District of California. In two Orders dated October
9, 2007, and December 31, 2007, the District Court entered judgment
dismissing all of plaintiffs ’ class and individual claims and
awarded DeVry its cost of suit. Plaintiffs have filed a Notice
signifying their intent to appeal the dismissal to the U.S. Court of Appeals for
the Ninth Circuit. DeVry intends to vigorously defend itself with
respect to this claim.
In May
2008, the U.S. Department of Justice, Civil Division, working with the U.S.
Attorney for the Northern District of Illinois, requested that DeVry voluntarily
furnish documents and other information regarding its policies and practices
with respect to recruiter compensation and performance
evaluation. The stated purpose of this request was to examine whether
DeVry may have submitted or caused the submission of false claims or false
statements to the U.S. Department of Education in violation of the False Claims
Act. DeVry made a timely production of documents and continues to
offer its full cooperation to the government in carrying out its
inquiry. DeVry believes that its compensation practices were designed
to be in compliance with current regulations.
The
ultimate outcome of pending litigation and other proceedings, reviews,
investigations and contingencies is difficult to estimate. At this time, DeVry
does not expect that the outcome of any such matter, including the litigation
described above, will have a material effect on its cash flows, results of
operations or financial position.
LIQUIDITY AND CAPITAL
RESOURCES
Student
Payments
DeVry’s
primary source of liquidity is the cash received from payments for student
tuition, books, educational supplies and fees. These payments include funds
originating as financial aid from various federal, state and provincial loan and
grant programs; student and family educational loans (“private loans”); employer
educational reimbursements; and student and family financial
resources. During fiscal year 2008, some lenders announced that they
were exiting certain private loan programs for some schools. DeVry
expects that these actions will not have a material impact on its students’
ability to access funds for their educational needs and thus its
enrollments.
The
pattern of cash receipts during the year is somewhat seasonal. DeVry’s accounts
receivable peak immediately after bills are issued each semester. At DeVry
University, the principal undergraduate semesters begin in July, November and
March, but it also offers shorter eight-week session courses that begin six
times per year. These shorter sessions have the effect of somewhat
smoothing the cash flow peaks throughout the year as they represent a new
revenue billing and collection cycle within the longer semester
cycle.
Collections
of student receivables generally peak during the first half of each academic
period, reaching seventy to eighty percent of collections for that entire
period. These early collections have historically exceeded operating expenses
for the semester so they have provided sufficient cash flow for operations at
the end of the semester when collections are lower.
Historically,
accounts receivable reach their lowest level at the end of each semester,
dropping to their lowest point during the year at the end of June. This is when
the DeVry University undergraduate spring semester, the Keller Graduate School
May term, and the student financial aid year all come to an end and
substantially all financial aid for the previous 12 months has been disbursed.
Ross University experiences a similar operating pattern, but its semesters begin
in May, September and January, thus smoothing the cyclical pattern of cash flows
from DeVry University. With the on-demand CPA exam format, the Becker
Professional Review has a somewhat smoother enrollment and cash flow pattern
throughout the year.
At June
30, 2008, total accounts receivable, net of related reserves, were $55.2
million, compared to $43.1 million at June 30, 2007. The increase is due to the
impact on receivables from revenue growth across all three business segments as
compared to the year-ago period, a change in timing of federal funds receivable
and accounts receivable associated with the acquisition of Advanced Academics on
October 31, 2007. These increases were partially offset by continued
improvements in the timeliness of collections of receivables across all three of
DeVry’s business segments.
To reduce
the level of interim student financing under the DeVry University undergraduate
EDUCARD® program,
many students participate in supplementary loan programs funded by private
lenders. The supplementary loans are aimed at students whose federal and state
funded financial aid is not sufficient to cover all their costs of education.
DeVry has entered into a limited default risk sharing arrangement for some of
these loans. At June 30, 2008, DeVry had reserved for and recognized as expense
the amount of DeVry’s share of the default risk.
Financial
Aid
DeVry is
highly dependent upon the timely receipt of federal financial aid funds. In
fiscal year 2007, approximately 70% of DeVry University undergraduate students’
tuition, book and fee revenues have been financed by federal financial
assistance programs. Keller Graduate School tuition revenues from student
participation in federal loan programs were approximately 65% of revenues. Ross
University tuition revenues from student participation in federal loan programs
were approximately 80% of revenues at both the medical and veterinary
schools. Chamberlain tuition revenues from student participation in
federal financial aid programs were approximately 70% of
revenues. Data for fiscal year 2008 is not yet
available.
All
financial aid and assistance programs are subject to political and governmental
budgetary considerations. In the United States, the Higher Education Act (“HEA”)
guides the federal government’s support of postsecondary
education. The HEA was reauthorized by the United States Congress in
July 2008, and was signed into law by the President on August 14,
2008.
In
addition, government-funded financial assistance programs are governed by
extensive and complex regulations in both the United States and Canada. Like any
other educational institution, DeVry’s administration of these programs is
periodically reviewed by various regulatory agencies and is subject to audit or
investigation by other governmental authorities. Any violation could
be the basis for penalties or other disciplinary action, including initiation of
a suspension, limitation or termination proceeding. Previous Department of
Education and state regulatory agency program reviews have not resulted in
material findings or adjustments against DeVry.
Under the
terms of DeVry’s participation in financial aid programs, certain cash received
from state governments and the U.S. Department of Education is maintained in
restricted bank accounts. DeVry receives these funds either after the financial
aid authorization and disbursement process for the benefit of the student is
completed, or just prior to that authorization. Once the authorization and
disbursement process for a particular student is completed, the funds may be
transferred to unrestricted accounts and become available for DeVry to use in
current operations. This process generally occurs during the academic term for
which such funds were authorized. At June 30, 2008, cash in the amount of $4.1
million was held in restricted bank accounts, compared to $14.5 million at June
30, 2007. The decrease in the restricted cash balance is due to
timing in the disbursement of such funds.
As
described in more detail in “Item 1. Description of Business,” institutions must
meet a financial responsibility test if their students participate in federal
financial assistance programs. The Department of Education relies on a test that
considers equity, primary reserve, and net income ratios, with a minimum
required score of 1.5. Management has calculated DeVry’s composite score at June
30, 2008, and determined that it exceeds 1.5. Management believes DeVry can
continue to demonstrate the required level of financial stability.
Cash from
Operations
Cash
generated from operations in fiscal year 2008 was $198.6 million, compared to
$125.2 million in the year ago period. Cash flow from operations
increased because of higher net income. Cash flow was also
driven by an increase in advance tuition payments of $4.8 million; $4.2 million
greater source of cash from restricted funds; and a $12.2 million greater source
of cash compared to the prior year for changes in levels of prepaid expenses,
accounts payable and accrued expenses. These increases were partially
offset by an increase in accounts receivable of $12.2 million and lower non-cash
charges from depreciation and amortization of $4.1 million.
Accounts
receivable increased due to a change in timing of federal funds receivable and
accounts receivable associated with the acquisition of Advanced Academics on
October 31, 2007. Variations in the levels of accrued expenses from
period to period are caused, in part, by the timing of the year-end relative to
DeVry’s payroll and bill payment cycles.
Investing
Activities
Capital
expenditures in fiscal year 2008 were $62.8 million compared to $38.6 million in
the year ago period. The increase in capital expenditures during
fiscal year 2008 was partially driven by DeVry’s exercise of its option to
purchase its leased facility in Alpharetta, Georgia, for $11.2
million. Immediately following the acquisition, DeVry sold the
facility to a different party for $11.2 million and executed a leaseback on the
entire facility. The increase in capital expenditures was also driven
by the purchase of an office building in the Chicago suburbs to support the
continued growth of DeVry’s online operations; spending to support DeVry’s real
estate optimization strategy; costs of opening additional DeVry University
centers; and spending on information systems. Also, capital
expenditures increased because of facility expansion at both the Ross University
medical and veterinary schools and investments for the continued co-location and
expansion of the Chamberlain College of Nursing.
During
fiscal year 2008, DeVry executed sale leaseback transactions which resulted in
the receipt of total sales proceeds of $52.6 million. Included in the
total sales proceeds was the receipt of $11.2 million from the sale leaseback of
the Alpharetta facility, which DeVry purchased for $11.2 million immediately
prior to the leaseback.
During
fiscal year 2008, cash outflows relating to the purchase of businesses was $27.6
million, net of cash acquired. On October 31, 2007, DeVry acquired
Advanced Academics Inc., a leading online provider of secondary education, for
$27.5 million in cash.
During
fiscal year 2008, DeVry purchased $247.0 million of municipal auction rate
securities and investments in mutual funds all of which are classified as
available-for-sale securities. During fiscal year 2008, DeVry sold
$184.9 million of such securities. As of June 30, 2008, DeVry held
auction-rate debt securities in the aggregate principal amount of $59.5 million.
The auction-rate securities are triple-A rated, long-term debt obligations with
contractual maturities ranging from 18 to 33 years. They are secured
by student loans, which are guaranteed by U.S. and state governmental agencies.
Liquidity for these securities has in the past been provided by an auction
process that has allowed DeVry and other investors in these instruments to
obtain immediate liquidity by selling the securities at their face amounts.
Current disruptions in credit markets, however, have adversely affected the
auction market for these types of securities. Recent auctions for these
securities have not produced sufficient bidders to allow for successful
auctions. As a result, DeVry has been unable to liquidate its auction-rate
securities and there can be no assurance that DeVry will be able to access the
principal value of these securities prior to their maturity. The
liquidity issues associated with DeVry’s portfolio of auction-rate securities
has resulted in an estimated $2.3 million temporary impairment of these
securities and has resulted in a reclassification of these investments from
current assets to long-term assets.
For each
unsuccessful auction, the interest rates on these securities are reset to a
maximum rate defined by the terms of each security, which in turn is reset on a
periodic basis at levels which are generally higher than defined short-term
interest rate benchmarks. To date DeVry has collected all interest
payable on all of its auction-rate securities when due and expects to continue
to do so in the future. This is the first time DeVry has experienced
liquidity issues with its portfolio of auction-rate
securities. Recent auction failures relating to this type of security
are symptomatic of current conditions in the broader debt markets and are not
unique to DeVry. DeVry intends to hold its portfolio of auction-rate
securities until successful auctions resume, a buyer is found outside of the
auction process, the issuers establish a different form of financing to replace
these securities, or final payments come due according to contractual maturities
ranging from 18 to 33 years.
While the
recent auction failures will limit DeVry’s ability to liquidate these
investments for some period of time, DeVry believes that based on its current
cash, cash equivalents and marketable securities balances of $220 million
(exclusive of auction-rate securities) and its current borrowing capacity under
its $175 million revolving credit facility (DeVry has the option to expand the
revolving credit facility to $275 million), the current lack of liquidity in the
auction-rate market will not have a material impact on its ability to fund its
operations, nor will it interfere with external growth plans. Also
DeVry has the option to borrow up to 80% of the fair market value of its auction
rate securities portfolio through its broker, UBS. Should DeVry need
to liquidate such securities and auctions of these securities continue to fail,
future impairment of the carrying value of these securities could cause DeVry to
recognize a material charge to net income in future periods.
On August
8, 2008, UBS announced that it had reached a settlement, in principle, with the
New York Attorney General, the Massachusetts Securities Division, the Securities
and Exchange Commission and other state regulatory agencies represented by North
American Securities Administrators Association to restore liquidity to all
remaining clients' holdings of auction rate securities. Under this
agreement in principle, UBS has committed to provide liquidity solutions to
institutional investors, including DeVry, and will agree from June 2010 to
purchase all or any of the remaining auction rate securities, at par, from its
institutional clients.
For
fiscal 2009, management expects capital expenditures to increase to support
future growth through acquisition and expansion of existing operations including
further facility expansion plans at the Ross University medical and veterinary
schools and Chamberlain College of Nursing, additional DeVry University centers
and spending to support its real estate optimization strategy. In
addition, spending on information systems is likely to increase in fiscal year
2009.
During
July 2008, Ross University announced it will open a teaching location in
Freeport, Grand Bahama, in January 2009. The students will be housed
and taught in temporary space in Grand Bahama with Ross’ new 60,000 – 80,000
square foot campus targeted to open in 2010. The new campus will
initially have 18 – 25 faculty members, and will be equipped for further growth
as demand increases. Depending on the pace of development, capital
expenditures related to opening the branch campus, including land, buildings and
equipment, is expected to be in the range of $35 - $60 million over the next
five years.
Also
during July 2008, DeVry announced it will acquire U.S. Education Corporation
(“USEC”) for $290 million in cash. USEC is the parent organization of
Apollo College and Western Career College and is based in Mission Viejo,
California. Apollo College and Western Career College prepare
students for careers in healthcare through certificate and associate degree
programs in nursing, ultrasound and radiography technology, surgical technology,
veterinary technology, pharmacy technology, dental hygiene, and medical and
dental assisting. The two colleges operate 17 campus locations in the
western United States and currently serve more than 8,700
students. Under the terms of the agreement, which has been approved
by the boards of directors of both companies, DeVry will pay the purchase price
of $290 million in cash in exchange for all outstanding shares of USEC, subject
to customary purchase price adjustments. DeVry intends to finance the
acquisition through a combination of cash and debt, utilizing its existing
credit facility and potentially borrowing against its holdings of auction rate
securities. The transaction is subject to regulatory approvals and customary
closing conditions. The transaction is not conditioned on financing and is
expected to close during the first quarter of fiscal year 2009.
Cash from Financing
Activities
During
fiscal year 2008, DeVry repurchased, on the open market, 552,926 shares of its
common stock at a total cost of approximately $24.5
million. All of the shares repurchased were related to the
share repurchase program announced on November 15, 2006. In April
2008, DeVry completed this repurchase plan. Cash dividends paid
during fiscal year 2008 were $7.8 million.
DeVry’s
Board of Directors declared a dividend on May 13, 2008 of $0.06 per share to
common stockholders of record as of June 19, 2008. The dividend was
paid on July 10, 2008.
On May
13, 2008, the Board of Directors authorized a share repurchase program to
buyback up to $50 million of DeVry common stock through December 31,
2010. As of June 30, 2008, DeVry has not repurchased any shares under
this program. The timing and amount of any future repurchases will be
determined by company management based on its evaluation of market conditions
and other factors. These repurchases may be made through the open market,
including block purchases, or in privately negotiated transactions, or
otherwise. The buyback will be funded through available cash balances and/or
borrowings under its revolving credit agreement and may be suspended or
discontinued at any time.
Revolving Credit
Agreement
In
January 2007, DeVry amended its revolving credit agreement to, among other
things, reduce the spread on applicable interest and fee rates; extend the
remaining term from two to five years; revise and loosen certain financial
covenants; and provide increased flexibility for acquisitions, dividends and/or
share repurchase programs. All borrowings and letters of credit issued under the
revolving credit agreement are through DeVry and Global Education International
(“GEI”), an international subsidiary.
The
following table summarizes the terms of the revolving credit agreement, as
amended in January 2007, and its status as of June 30, 2008:
Revolving
Credit Agreement, as amended in January 2007
|
|
DeVry
Inc.
|
|
GEI
|
Borrowing
limit
|
|
$175
million, with option to increase to $275 million, less any outstanding GEI
borrowings under the revolving credit agreement
|
|
$50
million sub limit
|
Interest
rate
|
|
At
DeVry’s discretion, either the prime rate or a LIBOR rate plus 0.50% —
1.25%, depending upon the achievement of certain financial
ratios.
|
|
At
DeVry’s discretion, either the prime rate or a LIBOR rate plus 0.50% —
1.25%, depending upon the achievement of certain financial
ratios.
|
Maturity
|
|
January
11, 2012
|
|
January
11, 2012
|
Outstanding
borrowings at June 30, 2008
|
|
$0
|
|
$0
|
Interest
rate at June 30, 2008
|
|
N/A
|
|
N/A
|
Outstanding
letters of credit at June 30, 2008
|
|
$4,328,670
|
|
$0
|
No amount
has ever been drawn under the letter of credit issued on behalf of
DeVry.
DeVry and
GEI are not required to repay any borrowings under the revolving credit
agreement until its maturity dates, but we can make prepayments without penalty
at any time.
Other Contractual
Arrangements
DeVry’s
long-term contractual obligations consist of its revolving line of credit
(discussed above), operating leases on facilities and equipment, and agreements
for various services. At June 30, 2008, there were no outstanding borrowings nor
any required payments under DeVry’s revolving credit agreement prior to its
maturity.
DeVry is
not a party to any off-balance sheet financing or contingent payment
arrangements, nor are there any unconsolidated subsidiaries. DeVry has not
extended any loans to any officer, director or other affiliated person. DeVry
has not entered into any synthetic leases, and there are no residual purchase or
value commitments related to any facility lease. DeVry has not entered into any
derivative, swap, futures contract, put, call, hedge or non-exchange traded
contracts during fiscal years 2007 and 2008.
As of the
end of the fiscal year, DeVry had posted more than $19.0 million of surety bonds
to various governmental jurisdictions on behalf of DeVry University, Chamberlain
College of Nursing and Becker Professional Review in the United States, and
approximately CDN $0.3 million in Canada. The surety bonds are related primarily
to student recruiting and educational operations. If DeVry were to fail to meet
its obligations in these jurisdictions, it could be responsible for payment up
to the amount of the related bond. To date, no surety bond has ever been paid
because DeVry failed to meet its obligations.
A summary
of DeVry’s contractual obligations at June 30, 2008, is presented
below:
|
|
|
|
|
Due In
|
|
|
|
Total
|
|
|
Less
Than 1 Year
|
|
|
1-3 Years
|
|
|
4-5 Years
|
|
|
After
5 Years
|
|
|
|
(Dollars
in thousands)
|
|
Operating
Leases
|
|
$ |
307,800 |
|
|
$ |
48,200 |
|
|
$ |
117,700 |
|
|
$ |
60,700 |
|
|
$ |
81,200 |
|
Employment
Agreements
|
|
|
7,277 |
|
|
|
992 |
|
|
|
3,017 |
|
|
|
661 |
|
|
|
2,607 |
|
Total
Cash Obligations
|
|
$ |
315,077 |
|
|
$ |
49,192 |
|
|
$ |
120,717 |
|
|
$ |
61,361 |
|
|
$ |
83,807 |
|
DeVry’s
consolidated cash balances of $217.2 million at June 30, 2008, include
approximately $129.6 million of cash attributable to the Ross University
offshore operations. It is DeVry’s intention to indefinitely reinvest this cash
and subsequent earnings and cash flow to improve and expand operations of Ross
University and pursue future business opportunities outside the United
States. Therefore, cash held by Ross University will not be available
for domestic general corporate purposes.
Management
believes that current balances of unrestricted cash, cash generated from
operations and the revolving loan facility, will be sufficient to fund both
DeVry’s current operations and growth plans, future dividend payments and share
repurchases for the foreseeable future unless future significant investment
opportunities should arise.
RECENT ACCOUNTING
PRONOUNCEMENTS
SFAS 157
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements,” (“SFAS 157”). SFAS 157 defines and
establishes a framework for measuring fair value. In addition, SFAS
157 expands disclosures about fair value measurements. For DeVry,
SFAS 157 is effective beginning in fiscal year 2009. DeVry does not
expect that the adoption of SFAS 157 will have a material impact on its
consolidated financial statements.
SFAS 159
In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, “The Fair Value Option for Financial Assets and Liabilities, Including an
Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial instruments and certain other
assets and liabilities at fair value, with changes in fair value recorded in
earnings. Under SFAS 159, the decision to measure items at fair value
is made at specified election dates on an instrument-by-instrument basis and is
irrevocable. For DeVry, SFAS 159 is effective beginning in fiscal
year 2009. DeVry does not expect that the adoption of SFAS 159 will
have a material impact on its consolidated financial statements.
SFAS
141R
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141R, “Business Combinations” (“SFAS 141R”). SFAS 141R retains the
fundamental requirements of Statement of Financial Accounting Standards No. 141
(“SFAS 141”) that the acquisition method of accounting be used for all business
combinations. SFAS 141R also retains the guidance in SFAS 141 for identifying
and recognizing intangible assets separately from goodwill. The new
accounting requirements of SFAS 141R will change how business acquisitions are
accounted for and will impact financial statements both on the acquisition date
and in subsequent periods. For DeVry, SFAS 141R is effective
beginning in fiscal year 2010 and will impact the accounting for any
acquisitions DeVry may complete beginning in that fiscal year.
SFAS 160
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, “Noncontrolling Interests in Consolidated Financial Statements an Amendment
of ARB number 51” (“SFAS 160”). SFAS 160 establishes accounting and
reporting standards to improve the relevance, comparability and transparency of
the financial information provided in a company’s financial statements as it
relates to minority interests in the equity of a subsidiary. These
minority interests will be recharacterized as noncontrolling interests and
classified as a component of equity. For DeVry, SFAS 160 is effective
beginning in fiscal year 2010. DeVry does not expect that the
adoption of SFAS 160 will have a material impact on its consolidated financial
statements as all current subsidiaries are wholly owned.
SFAS 161
In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161,
“Disclosures about Derivative Instruments and Hedging Activities, an Amendment
to FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced
disclosures about an entity’s derivative and hedging activities and thereby
improves the transparency of financial reporting. For DeVry, SFAS 161
is effective beginning in the third quarter of fiscal year 2009. The
adoption of SFAS 161 is not expected to have a material impact on DeVry’s
consolidated financial statements as DeVry does not currently maintain
derivative instruments or engage in hedging activities.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
DeVry is
not dependent upon the price levels, nor affected by fluctuations in pricing, of
any particular commodity or group of commodities. However, more than 50% of
DeVry’s costs are in the form of employee wages and benefits. Changes in
employment market conditions or escalations in employee benefit costs could
cause DeVry to experience cost increases at levels beyond what it has
historically experienced.
The
financial position and results of operations of Ross University’s Caribbean
operations are measured using the U.S. dollar as the functional currency.
Substantially all Ross University financial transactions are denominated in the
U.S. dollar.
The
financial position and results of operations of DeVry’s Canadian educational
programs are measured using the Canadian dollar as the functional currency. The
Canadian operations have not entered into any material long-term contracts to
purchase or sell goods and services, other than the lease agreement on a
teaching facility. DeVry does not have any foreign exchange contracts or
derivative financial instruments designed to mitigate changes in the value of
the Canadian dollar. Because Canada-based assets constitute less than 2.5% of
DeVry’s overall assets, and its Canadian liabilities constitute a similarly
small percentage of overall liabilities, changes in the value of Canada’s
currency at rates experienced during the past several years are unlikely to have
a material effect on DeVry’s results of operations or financial position. Based
upon the current value of the net assets in the Canadian operations, a change of
$0.01 in the value of the Canadian dollar relative to the U.S. dollar would
result in a translation adjustment of less than $100,000.
DeVry’s
customers are principally individual students enrolled in its various
educational programs. Accordingly, concentration of accounts receivable credit
risk is small relative to total revenues or accounts receivable.
DeVry’s
cash is held in accounts at various large, financially secure depository
institutions. Although the amount on deposit at a given institution typically
will exceed amounts subject to guarantee, DeVry has not experienced any deposit
losses to date, nor does management expect to incur such losses in the
future.
The
interest rate on DeVry’s debt is based upon Eurodollar interest rates for
periods typically ranging from one to three months. Based upon borrowings of
$50.0 million, a 1.0% increase in short-term interest rates would result in
approximately $0.5 million of additional annual interest expense. At June 30,
2008, DeVry had no outstanding borrowings. However, future investment
opportunities and cash flow generated from operations may affect the level of
outstanding borrowings and the effect of a change in interest
rates.
ITEM 8 —
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
following financial statements and supplemental schedules of DeVry and its
subsidiaries are included below on pages 62 through 89 of this
report:
|
10K
Report Page
|
Consolidated
Balance Sheets at June 30, 2008 and 2007
|
62
|
Consolidated
Statements of Income for the years ended June 30, 2008, 2007 and
2006
|
63
|
Consolidated
Statements of Cash Flows for the years ended June 30, 2008, 2007 and
2006
|
64
|
Consolidated
Statements of Shareholders’ Equity and Comprehensive Income for the years
ended June 30, 2008, 2007 and 2006
|
65
|
Notes
to Consolidated Financial Statements
|
66
|
Schedule
II1. —
Valuation and Qualifying Accounts
|
88
|
Report
of Independent Registered Public Accounting Firm
|
89
|
1Schedules
other than the one listed above are omitted for the reason that they are not
required or are not applicable, or the required information is shown on the
financial statements or notes thereto.
ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
Principal Executive, CEO,
and Principal Financial Officer, CFO, Certificates
The
required compliance certificates signed by DeVry’s CEO and CFO are included as
Exhibits 31 and 32 of this Annual Report on Form 10-K.
Disclosure Controls and
Procedures
Disclosure
controls and procedures are designed to help ensure that all the information
required to be disclosed in DeVry’s reports filed under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified by the applicable rules and forms.
DeVry has
a Senior Vice President and Chief Compliance Officer to oversee all of its
regulatory affairs, internal controls and compliance efforts, including those
related to disclosure controls and procedures and those relating to internal
control over financial reporting. In addition, DeVry has a Corporate Compliance
Officer, reporting to this Senior Vice President to further enhance DeVry’s
efforts in these important areas. DeVry has also engaged Deloitte & Touche
LLP to work in conjunction with its own internal audit resources to conduct the
testing and review that leads to management’s assessment of internal
controls.
Evaluations
required by Rule 13a — 15 of the Securities Exchange Act of 1934 of the
effectiveness of DeVry’s disclosure controls and procedures as of the end of the
period covered by this Report have been carried out under the supervision and
with the participation of its management, including its Chief Executive Officer
and its Chief Financial Officer. Based upon these evaluations, the Chief
Executive Officer and Chief Financial Officer have concluded that DeVry’s
disclosure controls and procedures were effective as required, and have attested
to this in Exhibit 31 of this Report.
Management’s Report on
Internal Control Over Financial Reporting
The
management of DeVry is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined by Rule 13a — 15(f) of the
Securities Exchange Act. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
As of
June 30, 2008, DeVry’s management has assessed the effectiveness of its internal
control over financial reporting, using the criteria embodied by the Committee
of Sponsoring Organizations of the Treadway Commission’s 1992 report Internal Control — Integrated
Framework. Based upon this assessment, DeVry concluded that as of June
30, 2008, its internal control over financial reporting was effective based upon
these criteria.
The
effectiveness of DeVry’s internal control over financial reporting as of June
30, 2008 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which appears
herein.
Changes in Internal Control
Over Financial Reporting
There
were no changes in internal control over financial reporting identified in
connection with the evaluation referred to above that occurred during the fourth
quarter of fiscal year 2008 that materially affected, or are reasonably likely
to materially affect, DeVry’s internal control over financial
reporting.
None.
DEVRY
INC.
CONSOLIDATED
BALANCE SHEETS
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
ASSETS:
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$ |
217,199 |
|
|
$ |
129,155 |
|
Marketable
Securities
|
|
|
2,308 |
|
|
|
— |
|
Restricted
Cash
|
|
|
4,113 |
|
|
|
14,483 |
|
Accounts
Receivable, Net
|
|
|
55,214 |
|
|
|
43,084 |
|
Deferred
Income Taxes, Net
|
|
|
14,975 |
|
|
|
13,915 |
|
Prepaid
Expenses and Other
|
|
|
31,779 |
|
|
|
18,348 |
|
Total
Current Assets
|
|
|
325,588 |
|
|
|
218,985 |
|
Land,
Buildings and Equipment:
|
|
|
|
|
|
|
|
|
Land
|
|
|
50,726 |
|
|
|
60,570 |
|
Buildings
|
|
|
216,048 |
|
|
|
218,836 |
|
Equipment
|
|
|
282,273 |
|
|
|
260,847 |
|
Construction
In Progress
|
|
|
4,874 |
|
|
|
15,816 |
|
|
|
|
553,921 |
|
|
|
556,069 |
|
Accumulated
Depreciation and Amortization
|
|
|
(314,606 |
) |
|
|
(296,742 |
) |
Land,
Buildings and Equipment, Net
|
|
|
239,315 |
|
|
|
259,327 |
|
Other
Assets:
|
|
|
|
|
|
|
|
|
Intangible
Assets, Net
|
|
|
62,847 |
|
|
|
56,920 |
|
Goodwill
|
|
|
308,024 |
|
|
|
291,113 |
|
Perkins
Program Fund, Net
|
|
|
13,450 |
|
|
|
13,450 |
|
Marketable
Securities
|
|
|
57,171 |
|
|
|
— |
|
Other
Assets
|
|
|
11,961 |
|
|
|
4,318 |
|
Total
Other Assets
|
|
|
453,453 |
|
|
|
365,801 |
|
TOTAL
ASSETS
|
|
$ |
1,018,356 |
|
|
$ |
844,113 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$ |
70,368 |
|
|
$ |
34,295 |
|
Accrued
Salaries, Wages and Benefits
|
|
|
51,300 |
|
|
|
47,093 |
|
Accrued
Expenses
|
|
|
31,175 |
|
|
|
32,737 |
|
Advance
Tuition Payments
|
|
|
16,972 |
|
|
|
14,402 |
|
Deferred
Tuition Revenue
|
|
|
40,877 |
|
|
|
37,348 |
|
Total
Current Liabilities
|
|
|
210,692 |
|
|
|
165,875 |
|
Other
Liabilities:
|
|
|
|
|
|
|
|
|
Deferred
Income Taxes, Net
|
|
|
22,163 |
|
|
|
18,343 |
|
Accrued
Postemployment Agreements
|
|
|
3,893 |
|
|
|
4,901 |
|
Deferred
Rent and Other
|
|
|
25,619 |
|
|
|
13,028 |
|
Total
Other Liabilities
|
|
|
51,675 |
|
|
|
36,272 |
|
TOTAL
LIABILITIES
|
|
|
262,367 |
|
|
|
202,147 |
|
COMMITMENTS AND
CONTINGENCIES (Note
13)
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY:
|
|
|
|
|
|
|
|
|
Common
Stock, $0.01 Par Value, 200,000,000 Shares Authorized; 71,377,000 and
71,131,000 Shares Outstanding at June 30, 2008 and 2007,
Respectively
|
|
|
724 |
|
|
|
716 |
|
Additional
Paid-in Capital
|
|
|
168,405 |
|
|
|
143,580 |
|
Retained
Earnings
|
|
|
627,064 |
|
|
|
510,979 |
|
Accumulated
Other Comprehensive Loss
|
|
|
(2,963 |
) |
|
|
(918 |
) |
Treasury
Stock, at Cost (989,579 and 436,786 Shares,
Respectively)
|
|
|
(37,241 |
) |
|
|
(12,391 |
) |
TOTAL
SHAREHOLDERS’ EQUITY
|
|
|
755,989 |
|
|
|
641,966 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
|
|
$ |
1,018,356 |
|
|
$ |
844,113 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
DEVRY
INC.
CONSOLIDATED
STATEMENTS OF INCOME
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands except for per
share amounts)
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
Tuition
|
|
$ |
1,004,029 |
|
|
$ |
862,660 |
|
|
$ |
781,813 |
|
Other
Educational
|
|
|
87,804 |
|
|
|
70,813 |
|
|
|
57,700 |
|
Total
Revenues
|
|
|
1,091,833 |
|
|
|
933,473 |
|
|
|
839,513 |
|
OPERATING
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Educational Services
|
|
|
503,133 |
|
|
|
486,721 |
|
|
|
453,066 |
|
Separation
Plan Severance
|
|
|
— |
|
|
|
6,252 |
|
|
|
— |
|
Loss
(Gain) on Sales of Assets
|
|
|
3,743 |
|
|
|
(20,812 |
) |
|
|
(451 |
) |
Student
Services and Administrative Expense
|
|
|
422,622 |
|
|
|
359,025 |
|
|
|
323,010 |
|
Total
Operating Costs and Expenses
|
|
|
929,498 |
|
|
|
831,186 |
|
|
|
775,625 |
|
Operating
Income
|
|
|
162,335 |
|
|
|
102,287 |
|
|
|
63,888 |
|
INTEREST:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
10,463 |
|
|
|
7,437 |
|
|
|
3,785 |
|
Interest
Expense
|
|
|
(522 |
) |
|
|
(4,784 |
) |
|
|
(10,190 |
) |
Net
Interest Income (Expense)
|
|
|
9,941 |
|
|
|
2,653 |
|
|
|
(6,405 |
) |
Income
Before Income Taxes
|
|
|
172,276 |
|
|
|
104,940 |
|
|
|
57,483 |
|
Income
Tax Provision
|
|
|
46,744 |
|
|
|
28,752 |
|
|
|
14,430 |
|
NET
INCOME
|
|
$ |
125,532 |
|
|
$ |
76,188 |
|
|
$ |
43,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.76 |
|
|
$ |
1.07 |
|
|
$ |
0.61 |
|
Diluted
|
|
$ |
1.73 |
|
|
$ |
1.07 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Dividend Declared per Common Share
|
|
$ |
0.12 |
|
|
$ |
0.10 |
|
|
$ |
— |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
DEVRY
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars
in thousands)
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$ |
125,532 |
|
|
$ |
76,188 |
|
|
$ |
43,053 |
|
Adjustments
to Reconcile Net Income to Net Cash Provided by Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-Based
Compensation Charge
|
|
|
5,724 |
|
|
|
5,428 |
|
|
|
4,339 |
|
Depreciation
|
|
|
34,808 |
|
|
|
35,979 |
|
|
|
37,616 |
|
Amortization
|
|
|
5,066 |
|
|
|
8,028 |
|
|
|
10,492 |
|
Provision
for Refunds and Uncollectible Accounts
|
|
|
51,881 |
|
|
|
51,240 |
|
|
|
47,271 |
|
Deferred
Income Taxes
|
|
|
3,110 |
|
|
|
4,592 |
|
|
|
(475 |
) |
Loss
(Gain) on Disposals of Land, Buildings and Equipment
|
|
|
3,882 |
|
|
|
(20,452 |
) |
|
|
(260 |
) |
Changes
in Assets and Liabilities, Net of Effects from Acquisitions of
Businesses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Cash
|
|
|
10,374 |
|
|
|
6,153 |
|
|
|
(6,755 |
) |
Accounts
Receivable
|
|
|
(59,952 |
) |
|
|
(47,739 |
) |
|
|
(55,123 |
) |
Prepaid
Expenses And Other
|
|
|
(21,867 |
) |
|
|
(5,225 |
) |
|
|
(5,410 |
) |
Accounts
Payable
|
|
|
35,997 |
|
|
|
(5,384 |
) |
|
|
9,172 |
|
Accrued
Salaries, Wages, Benefits and Expenses
|
|
|
533 |
|
|
|
13,002 |
|
|
|
(4,055 |
) |
Advance
Tuition Payments
|
|
|
2,546 |
|
|
|
(2,213 |
) |
|
|
1,888 |
|
Deferred
Tuition Revenue
|
|
|
1,012 |
|
|
|
5,579 |
|
|
|
9,069 |
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES
|
|
|
198,646 |
|
|
|
125,176 |
|
|
|
90,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
|
(62,806 |
) |
|
|
(38,558 |
) |
|
|
(25,265 |
) |
Net
Proceeds from Sales of Land and Building
|
|
|
52,571 |
|
|
|
36,642 |
|
|
|
1,798 |
|
Payments
for Purchases of Businesses, Net of Cash Acquired
|
|
|
(27,603 |
) |
|
|
— |
|
|
|
(2,530 |
) |
Marketable
Securities Purchased
|
|
|
(247,013 |
) |
|
|
— |
|
|
|
— |
|
Marketable
Securities-Maturities and Sales
|
|
|
184,854 |
|
|
|
— |
|
|
|
— |
|
NET CASH USED IN
INVESTING ACTIVITIES
|
|
|
(99,997 |
) |
|
|
(1,916 |
) |
|
|
(25,997 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from Exercise of Stock Options
|
|
|
17,703 |
|
|
|
12,946 |
|
|
|
3,598 |
|
Reissuance
of Treasury Stock
|
|
|
1,021 |
|
|
|
927 |
|
|
|
336 |
|
Repurchase
of Common Stock for Treasury
|
|
|
(24,465 |
) |
|
|
(10,534 |
) |
|
|
— |
|
Cash
Dividends Paid
|
|
|
(7,840 |
) |
|
|
(3,545 |
) |
|
|
— |
|
Excess
Tax Benefit from Stock-Based Payments
|
|
|
4,201 |
|
|
|
972 |
|
|
|
532 |
|
Borrowings
from Revolving Credit Facility
|
|
|
25,000 |
|
|
|
40,000 |
|
|
|
— |
|
Repayments
Under Revolving Credit Facility
|
|
|
(26,895 |
) |
|
|
(50,000 |
) |
|
|
(90,000 |
) |
Repayments
Under Senior Notes
|
|
|
— |
|
|
|
(115,000 |
) |
|
|
(10,000 |
) |
NET CASH USED IN
FINANCING ACTIVITIES
|
|
|
(11,275 |
) |
|
|
(124,234 |
) |
|
|
(95,534 |
) |
Effects
of Exchange Rate Differences
|
|
|
670 |
|
|
|
(454 |
) |
|
|
(531 |
) |
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
|
|
|
88,044 |
|
|
|
(1,428 |
) |
|
|
(31,240 |
) |
Cash and Cash Equivalents at
Beginning of
Year
|
|
|
129,155 |
|
|
|
130,583 |
|
|
|
161,823 |
|
Cash and Cash Equivalents at
End of Year
|
|
$ |
217,199 |
|
|
$ |
129,155 |
|
|
$ |
130,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Paid During the Year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
369 |
|
|
$ |
4,752 |
|
|
$ |
9,214 |
|
Income
Taxes, Net
|
|
|
58,387 |
|
|
|
18,100 |
|
|
|
24,013 |
|
Non-cash
Financing Activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration
of Cash Dividends to be Paid
|
|
|
4,283 |
|
|
|
3,557 |
|
|
|
— |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
DEVRY
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
For
the Years Ended June 30, 2008, 2007 and 2006
|
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Amount
$.01
|
|
|
Additional
Paid-In
|
|
|
Retained
|
|
|
Other
Comprehensive
|
|
|
Treasury
|
|
|
|
|
|
|
Par Value
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Total
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
Balance
at June 30, 2005
|
|
$ |
706 |
|
|
$ |
115,847 |
|
|
$ |
398,840 |
|
|
$ |
266 |
|
|
$ |
(2,276 |
) |
|
$ |
513,383 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income in 2006
|
|
|
|
|
|
|
|
|
|
|
43,053 |
|
|
|
|
|
|
|
|
|
|
|
43,053 |
|
Change
in fair value of interest rate hedge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
12 |
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(702 |
) |
|
|
|
|
|
|
(702 |
) |
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,363 |
|
Stock-based
Compensation
|
|
|
|
|
|
|
4,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,339 |
|
Proceeds
from exercise of stock options
|
|
|
2 |
|
|
|
3,745 |
|
|
|
|
|
|
|
|
|
|
|
(149 |
) |
|
|
3,598 |
|
Proceeds
from stock issued under Employee Stock Purchase Plan
|
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
305 |
|
|
|
336 |
|
Tax
benefit from exercise of stock options
|
|
|
|
|
|
|
588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588 |
|
Balance
at June 30, 2006
|
|
|
708 |
|
|
|
124,550 |
|
|
|
441,893 |
|
|
|
(424 |
) |
|
|
(2,120 |
) |
|
|
564,607 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income in 2007
|
|
|
|
|
|
|
|
|
|
|
76,188 |
|
|
|
|
|
|
|
|
|
|
|
76,188 |
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(494 |
) |
|
|
|
|
|
|
(494 |
) |
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,694 |
|
Stock-based
Compensation
|
|
|
|
|
|
|
5,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,428 |
|
Cash
Dividends of $0.10 per common share
|
|
|
|
|
|
|
|
|
|
|
(7,102 |
) |
|
|
|
|
|
|
|
|
|
|
(7,102 |
) |
Proceeds
from exercise of stock options
|
|
|
8 |
|
|
|
13,504 |
|
|
|
|
|
|
|
|
|
|
|
(566 |
) |
|
|
12,946 |
|
Proceeds
from stock issued under Employee Stock Purchase Plan
|
|
|
|
|
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
829 |
|
|
|
927 |
|
Repurchase
of Common Shares for Treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,534 |
) |
|
|
(10,534 |
) |
Balance
at June 30, 2007
|
|
|
716 |
|
|
|
143,580 |
|
|
|
510,979 |
|
|
|
(918 |
) |
|
|
(12,391 |
) |
|
|
641,966 |
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income in 2008
|
|
|
|
|
|
|
|
|
|
|
125,532 |
|
|
|
|
|
|
|
|
|
|
|
125,532 |
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(388 |
) |
|
|
|
|
|
|
(388 |
) |
Unrealized
Investment Gains (Losses), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,657 |
) |
|
|
|
|
|
|
(1,657 |
) |
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,487 |
|
Stock-based
Compensation
|
|
|
|
|
|
|
5,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,724 |
|
Cash
Dividends of $0.12 per common share
|
|
|
|
|
|
|
|
|
|
|
(8,566 |
) |
|
|
|
|
|
|
|
|
|
|
(8,566 |
) |
Proceeds
from exercise of stock options
|
|
|
8 |
|
|
|
18,787 |
|
|
|
|
|
|
|
|
|
|
|
(1,092 |
) |
|
|
17,703 |
|
Proceeds
from stock issued under Employee Stock Purchase Plan
|
|
|
|
|
|
|
314 |
|
|
|
|
|
|
|
|
|
|
|
707 |
|
|
|
1,021 |
|
Cumulative
effect of FIN 48
|
|
|
|
|
|
|
|
|
|
|
(881 |
) |
|
|
|
|
|
|
|
|
|
|
(881 |
) |
Repurchase
of Common Shares for Treasury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,465 |
) |
|
|
(24,465 |
) |
Balance
at June 30, 2008
|
|
$ |
724 |
|
|
$ |
168,405 |
|
|
$ |
627,064 |
|
|
$ |
(2,963 |
) |
|
$ |
(37,241 |
) |
|
$ |
755,989 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
DEVRY
INC.
Notes
to Consolidated Financial Statements
NOTE
1: NATURE OF OPERATIONS
DeVry
Inc. (“DeVry”), through its wholly owned subsidiaries, including DeVry
University, Dominica Management, Inc. (“DMI”), Becker CPA Review Corp. (d/b/a
Becker Professional Review) and Ross University School of Nursing & Health
Sciences operates an international system of degree-granting, career-oriented
higher education schools and a leading international training firm.
DeVry
University is one of the largest regionally accredited higher education systems
in North America, offering both undergraduate and graduate programs. DeVry
University’s undergraduate operations award associate and bachelor’s degrees in
technology, healthcare technology and business. Keller Graduate School of
Management of DeVry University awards master’s degrees in business
administration, accounting and financial management, information systems
management, human resource management, project management, public administration
and telecommunications management. At June 30, 2008, DeVry University programs
were offered at 23 large campus locations and 68 smaller teaching centers, all
in the United States, except for one campus location in Canada and through DeVry
University Online. Several additional DeVry University locations are planned to
open in fiscal 2009.
DeVry
University operates Advanced Academics Inc (“AAI”). AAI supplements
traditional high school classroom programs through online- based course
instruction using highly qualified teachers and a proprietary technology
platform specifically designed for secondary education. AAI also operates
virtual high schools in 6 states.
Ross
University comprises the Ross University School of Medicine and the Ross
University School of Veterinary Medicine (collectively referred to as “Ross
University”), with campuses in the Caribbean countries of Dominica and St.
Kitts, respectively. Ross University students complete their basic science
curriculum in modern, fully equipped campuses in the Caribbean and complete
their clinical education in U.S. teaching hospitals and veterinary schools under
affiliation with Ross University.
Chamberlain
College of Nursing (“Chamberlain”), formerly Deaconess College of Nursing,
through its locations in St. Louis, Missouri, Columbus, Ohio, Addison, Illinois
and Phoenix, Arizona, Chamberlain offers associate and bachelor’s degree
programs in nursing. In addition, Chamberlain offers a bachelor’s degree
completion program designed for registered nurses who have previously completed
an associate degree or nursing diploma program. Non-clinical coursework is
offered both on campus and online.
Becker
Professional Review (“Becker”) prepares candidates for the Certified Public
Accountant (“CPA”) and Chartered Financial Analyst (“CFA”) professional
certification examinations, and offers continuing professional education
programs and seminars in accounting and finance. These classes are taught in
more than 250 locations, including sites in 30 foreign countries and some DeVry
University teaching sites.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of
Consolidation
The
consolidated financial statements include the accounts of DeVry and its wholly
owned subsidiaries. All intercompany balances and transactions have been
eliminated in consolidation. Unless indicated, or the context requires
otherwise, references to years refer to DeVry’s fiscal years.
Cash and Cash
Equivalents
Cash and
cash equivalents can include time deposits, high-grade commercial paper, money
market funds and bankers acceptances with original maturities of three months or
less. Short-term investment objectives are to minimize risk and maintain
liquidity. These investments are stated at cost, which approximates
market, because of their short duration or liquid nature. DeVry places its cash
and temporary cash investments with high credit quality institutions. Cash and
cash equivalent balances are generally in excess of the FDIC insurance limit.
DeVry has not experienced any losses on its cash and cash
equivalents.
Management
periodically evaluates the creditworthiness of the security issuers and
financial institutions with which it invests and maintains deposit
accounts.
Financial Aid and Restricted
Cash
Financial
aid and assistance programs, in which most DeVry University, Ross University and
Chamberlain students participate, are subject to political and governmental
budgetary considerations. There is no assurance that such funding will be
maintained at current levels. Extensive and complex regulations in the United
States and Canada govern all of the government financial assistance programs in
which students participate. Administration of these programs is periodically
reviewed by various regulatory agencies. Any regulatory violation could be the
basis for disciplinary action, including the initiation of a suspension,
limitation or termination proceeding.
A
significant portion of revenue is received from students who participate in
government financial aid and assistance programs. Restricted cash represents
amounts received from the federal and state governments under various student
aid grant and loan programs. These funds are either received subsequent to the
completion of the authorization and disbursement process for the benefit of the
student or just prior to that authorization. Restricted funds are held in
separate bank accounts. Once the authorization and disbursement process to the
student has been completed, the funds are transferred to unrestricted accounts,
and these funds then become available for use in DeVry’s current operations.
This authorization and disbursement process that precedes the transfer of funds
generally occurs within the period of the academic term for which such funds
were authorized, with no term being more than 16 weeks in length.
In fiscal
year 2008, as part of continuing operations in Pennsylvania, DeVry was required
to maintain a “minimum protective endowment” of at least
$500,000. These funds are required as long as DeVry operates campuses
in the state. DeVry accounts for these funds as restricted
cash.
Marketable
Securities
Marketable
securities consist of auction-rate certificates and investments in mutual funds
all of which are classified as available-for-sale securities. The
following is a summary of our short-term and long-term available-for-sale
marketable securities at June 30, 2008 (dollars in thousands):
|
|
Gross Unrealized
|
|
|
|
Cost
|
|
|
(Loss)
|
|
|
Gain
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond
Mutual Fund
|
|
$ |
746 |
|
|
$ |
- |
|
|
$ |
12 |
|
|
$ |
758 |
|
Stock Mutual Funds
|
|
|
1,939 |
|
|
|
(389 |
) |
|
|
- |
|
|
|
1,550 |
|
Total Short-term
Investments
|
|
$ |
2,685 |
|
|
$ |
(389 |
) |
|
$ |
12 |
|
|
$ |
2,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction Rate Certificates
|
|
$ |
59,475 |
|
|
$ |
(2,304 |
) |
|
$ |
- |
|
|
$ |
57,171 |
|
Total Long-term Investments
|
|
$ |
59,475 |
|
|
$ |
(2,304 |
) |
|
$ |
- |
|
|
$ |
57,171 |
|
Investments
are classified as short-term if they are readily convertible to cash or have
other characteristics of short-term investments such as highly liquid markets or
maturities within one year. At June 30, 2008, contractual maturities of our
long-term investments ranged from 18 to 33 years.
At June
30, 2008, all of the Bond and Stock mutual fund investments are held in a rabbi
trust for the purpose of paying benefits under DeVry’s non-qualified deferred
compensation plan.
All
mutual fund investments are recorded at fair market value based upon quoted
market prices. Due to changing market conditions that have reduced liquidity for
Auction Rate Securities, as detailed below, these investments are valued using
observable and unobservable inputs, such as internally-developed pricing models.
Unrealized gains or temporary unrealized losses, net of income tax effects, are
reported as a component of accumulated other comprehensive loss in the
consolidated balance sheets. Realized gains and losses are computed
on the basis of specific identification and are included in interest income in
the consolidated income statements. DeVry has recorded realized gains of $80,000
for fiscal 2008. No realized losses have been recorded to
date.
As of
June 30, 2008, all unrealized losses in the above table have been in a
continuous unrealized loss position for less than one year. When
evaluating its investments for possible impairment, DeVry reviews factors such
as length of time and extent to which fair value has been less than cost basis,
the financial condition of the investee, and DeVry’s ability and intent to hold
the investment for a period of time that may be sufficient for anticipated
recovery in fair value. The decline in value of the above investments
is considered temporary in nature and, accordingly, DeVry does not consider
these investments to be permanently impaired as of June 30, 2008.
As shown
in the table above, as of June 30, 2008, DeVry held auction-rate debt securities
in the aggregate principal amount of $59.5 million. The auction-rate securities
are triple-A rated, long-term debt obligations with contractual maturities
ranging from 18 to 33 years. They are secured by student loans, which
are guaranteed by U.S. and state governmental agencies. Liquidity for these
securities has in the past been provided by an auction process that has allowed
DeVry and other investors in these instruments to obtain immediate liquidity by
selling the securities at their face amounts. Current disruptions in credit
markets, however, have adversely affected the auction market for these types of
securities. Recent auctions for these securities have not produced sufficient
bidders to allow for successful auctions. As a result, DeVry has been unable to
liquidate its auction-rate securities and there can be no assurance that DeVry
will be able to access the principal value of these securities prior to their
maturity. The liquidity issues associated with DeVry’s portfolio of
auction-rate securities has resulted in an estimated $2.3 million temporary
impairment of these securities and has resulted in a reclassification of these
investments from current assets to long-term assets.
For each
unsuccessful auction, the interest rates on these securities are reset to a
maximum rate defined by the terms of each security, which in turn is reset on a
periodic basis at levels which are generally higher than defined short-term
interest rate benchmarks. To date DeVry has collected all interest
payable on all of its auction-rate securities when due and expects to continue
to do so in the future. This is the first time DeVry has experienced
liquidity issues with its portfolio of auction-rate
securities. Recent auction failures relating to this type of security
are symptomatic of current conditions in the broader debt markets and are not
unique to DeVry. DeVry intends to hold its portfolio of auction-rate
securities until successful auctions resume, a buyer is found outside of the
auction process, the issuers establish a different form of financing to replace
these securities, or final payments come due according to contractual maturities
ranging from 18 to 33 years.
While the
recent auction failures will limit DeVry’s ability to liquidate these
investments for some period of time, DeVry believes that based on its current
cash, cash equivalents and marketable securities balances of $220 million
(exclusive of auction-rate securities) and its current borrowing capacity under
its $175 million revolving credit facility (DeVry has the option to expand the
revolving credit facility to $275 million), the current lack of liquidity in the
auction-rate market will not have a material impact on its ability to fund its
operations, nor will it interfere with external growth plans. Also
DeVry has the option to borrow up to 80% of the fair market value of its auction
rate securities portfolio through its broker, UBS. Should DeVry need
to liquidate such securities and auctions of these securities continue to fail,
future impairment of the carrying value of these securities could cause DeVry to
recognize a material charge to net income in future periods.
On August
8, 2008, UBS announced that it had reached a settlement, in principle, with the
New York Attorney General, the Massachusetts Securities Division, the Securities
and Exchange Commission and other state regulatory agencies represented by North
American Securities Administrators Association to restore liquidity to all
remaining clients' holdings of auction rate securities. Under this
agreement in principle, UBS has committed to provide liquidity solutions to
institutional investors, including DeVry, and will agree from June 2010 to
purchase all or any of the remaining auction rate securities, at par, from its
institutional clients.
Revenue
Recognition
DeVry
University tuition and technology fee revenues are recognized ratably on a
straight-line basis over the applicable academic term. Ross University basic
science curriculum revenues are recognized ratably on a straight-line basis over
the academic term. The clinical portion of the Ross University education program
is conducted under the supervision of the U.S. teaching hospitals and veterinary
schools. Ross University is responsible for the billing and collection of
tuition from its students during the period of clinical education. Revenues are
recognized on a weekly basis based on actual education program attendance during
the period of the clinical program. Fees paid to the hospitals and veterinary
schools for supervision of Ross University students are charged to expense on
the same basis. Chamberlain tuition and fee revenues are recognized ratably on a
straight-line basis over the applicable academic term. AAI tuition and fee
revenues are recognized ratably on a straight-line basis over the applicable
contract term. The provision for refunds, which is reported as a reduction to
Tuition Revenues in the Consolidated Statements of Income, and the provision for
uncollectible accounts, which is included in the Cost of Educational Services in
the Consolidated Statements of Income, also are recognized in the same
straight-line fashion as revenue to most appropriately match these costs with
the tuition revenue in that term.
Estimates
of DeVry’s expected refunds are determined at the onset of each academic term,
based upon actual experience in previous terms, and monitored and adjusted as
necessary within the term. If a student leaves school prior to completing a
term, federal, state and/or Canadian provincial regulations and accreditation
criteria permit DeVry to retain only a set percentage of the total tuition
received from such student, which varies with, but generally equals or exceeds,
the percentage of the term completed by such student. Payment amounts received
by DeVry in excess of such set percentages of tuition are refunded to the
student or the appropriate funding source. All refunds are charged against
revenue during the applicable academic term. Reserves for uncollectible accounts
are analyzed periodically in light of current collection and loss experience.
Related reserves with respect to uncollectible accounts and refunds totaled
$35,880,000 and $35,889,000 at June 30, 2008 and June 30, 2007,
respectively.
Textbook
and electronic course materials sales and other educational product sales,
including training services and the Becker CD-ROM product, are included in Other
Educational Revenues in the Consolidated Statements of Income. Textbook,
electronic course materials and other educational product revenues are
recognized when the sale occurs, generally at the start of each academic term.
Revenues from training services, which are generally short-term in duration, are
recognized when the training service is provided. Also included in Other
Educational Revenues are receivable interest billings from various
student-deferred tuition payment plans. Interest charges are generally billed
monthly and are recognized when billed. In addition, fees from international
licensees of the Becker programs are included in Other Educational Revenues and
recognized into income when confirmation of course delivery is
received.
DeVry
defers DeVry University enrollment fee revenue. This deferred revenue is
recognized in subsequent periods as student services are provided. Additionally,
DeVry has elected to defer certain direct costs of activities associated with
these fees, limited to the extent of the revenue deferral. These costs are
subsequently amortized over the periods in which student services are provided.
Similar enrollment fee revenue deferrals are recorded at Ross University and
Becker. Since changes to the deferrals involve the recording of equivalent
amounts of revenues and costs, net income is not affected.
Land, Buildings and
Equipment
Land,
buildings and equipment are recorded at acquisition cost. Cost also includes
additions and those improvements that enhance performance, increase the capacity
or lengthen the useful lives of the assets. Repairs and maintenance costs are
expensed as incurred. Upon sale or retirement of an asset, the accounts are
relieved of the cost and the related accumulated depreciation, with any
resulting profit or loss included in income in the period incurred. Assets under
construction are reflected in Construction in Progress until they are placed
into service for their intended use. Interest is capitalized as a component of
cost on major projects during the construction period.
Leasehold
improvements are amortized using the straight-line method over the term of the
lease or the estimated useful life of the asset, whichever is shorter. Leased
property meeting certain criteria is capitalized, and the present value of the
related lease payments is recorded as a liability. Amortization of capitalized
leased assets is computed on the straight-line method over the term of the lease
or the life of the related asset, whichever is shorter.
Depreciation
is computed using the straight-line method over estimated service lives. These
lives range from five to 31 years for buildings and leasehold improvements, and
from three to eight years for computers, furniture and equipment.
Business Combinations,
Intangible Assets and Goodwill
Intangible
assets relate mainly to acquired business operations (see “Note 6-Business
Combinations”). These assets consist of the fair value of certain identifiable
assets acquired. Goodwill represents the excess of the purchase price over the
fair value of assets acquired less liabilities assumed.
Statement
of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (“SFAS 142”) provides that goodwill and indefinite-lived intangibles
arising from a business combination are not amortized and charged to expense
over time. Instead, goodwill and indefinite-lived intangibles must be reviewed
annually for impairment, or more frequently if circumstances arise indicating
potential impairment. This impairment review was most recently completed at the
end of fiscal 2008. For goodwill, if the carrying amount of the reporting unit
containing the goodwill exceeds the fair value of that reporting unit, an
impairment loss is recognized to the extent the “implied fair value” of the
reporting unit goodwill is less than the carrying amount of the
goodwill.
For
indefinite-lived intangible assets, if the carrying amount exceeds the fair
value, an impairment loss is recognized in an amount equal to that excess. See
“Note 7-Intangible Assets” for results of DeVry’s required impairment analysis
of its intangible assets and goodwill.
Intangible
assets with finite lives are amortized over their expected economic lives,
generally two to 15 years. Amortization of all intangible assets and certain
goodwill is being deducted for tax reporting purposes over statutory
lives.
DeVry
expenses all curriculum development, new school opening and student recruiting
costs as incurred.
Perkins Program
Fund
DeVry
University is required, under federal aid program regulations, to make
contributions to the Perkins Student Loan Fund, most recently at a rate equal to
33% of new contributions by the federal government. No new federal contributions
were received in fiscal 2008. DeVry carries its investment in such contributions
at original values, net of allowances for expected losses on loan collections,
of $2,562,000 at June 30, 2008 and 2007. The allowance for future loan losses is
based upon an analysis of actual loan losses experienced since the inception of
the program. As previous borrowers repay their Perkins loans, their payments are
used to fund new loans, thus creating a revolving loan fund. The
federal contributions to this revolving loan program do not belong to DeVry and
are not recorded on its financial statements. Under current law, upon
termination of the program by the federal government or withdrawal from future
program participation by DeVry University, subsequent student loan repayments
would be divided between the federal government and DeVry University to satisfy
their respective cumulative contributions to the fund.
Internal Software
Development Costs
DeVry
capitalizes certain internal software development costs that are amortized using
the straight-line method over the estimated lives of the software, not to exceed
five years. Capitalized costs include external direct costs of materials and
services consumed in developing or obtaining internal-use software, and
payroll-related costs for employees directly associated with the internal
software development project. Capitalization of such costs ceases at the point
at which the project is substantially complete and ready for its intended
purpose. Capitalized software development costs for projects not yet complete
are included as equipment in the Land, Buildings and Equipment section of the
Consolidated Balance Sheets There were no costs capitalized during fiscal 2008,
2007 and 2006. The capitalized software development costs for completed
projects, which are also included in the Land, Building and Equipment section of
the Consolidated Balance Sheets, were $2.0 million and $5.5 million at June 30,
2008 and 2007, respectively.
Fair Value of Financial
Instruments
The
carrying amounts reported in the Consolidated Balance Sheets for cash and cash
equivalents, restricted cash, accounts receivable, accounts payable, accrued
expenses, and advanced and deferred tuition payments approximate fair value
because of the immediate or short-term maturity of these financial instruments.
All of DeVry’s current maturities and long-term debt (see “Note 11-Long-Term
Debt”) bear interest at a floating rate reset to current rates on a periodic
basis not currently exceeding six months. Therefore, the carrying amount of
DeVry’s long-term debt, if any, approximates fair value.
Foreign Currency
Translation
The
financial position and results of operations of Ross University’s Caribbean
operations are measured using the U.S. dollar as the functional currency. As
such, there is no translation gain or loss associated with these operations. The
financial position and results of operations of DeVry’s Canadian operations are
measured using the local currency as the functional currency. Assets and
liabilities of the Canadian operations are translated to U.S. dollars using
exchange rates in effect at the balance sheet dates. Income and expense items
are translated at monthly average rates of exchange. The resultant translation
adjustments are included in the component of Shareholders’ Equity designated as
Accumulated Other Comprehensive Income (Loss). Transaction gains or losses
during the years ended June 30, 2008, 2007 and 2006 were not
material.
Income
Taxes
Income
taxes are provided by applying statutory rates to income recognized for
financial statement purposes. Deferred income taxes are provided for temporary
differences between the financial reporting and income tax basis of assets and
liabilities. Effects of statutory rate changes are recognized for financial
reporting purposes in the year in which enacted by law. The Ross University
operating subsidiaries in Dominica and St. Kitts have agreements with their
respective governments that exempt them from local income taxation through the
years 2043 and 2023, respectively. Also, DeVry intends to indefinitely reinvest
existing cash balances, subsequent earnings and cash flow in Ross University or
other business opportunities outside the United States. Accordingly, no
provision for current income taxes is being recorded for income attributable to
these taxing jurisdictions.
Guarantees
Under its
bylaws, DeVry has agreed to indemnify its officers and directors for certain
events or occurrences while the officers or directors are performing at DeVry’s
request in such capacity. The indemnification agreement period is for an
officer’s or director’s lifetime. The maximum potential amount of future
payments DeVry could be required to make under these indemnification agreements
is unlimited; however, DeVry has a director and officer liability insurance
policy that limits its exposure and enables it to recover a portion of any
future amounts paid. Management believes the estimated fair value of
these indemnification agreements is minimal. DeVry has no liabilities
recorded for these agreements of June 30, 2008 and 2007.
Derivative Instruments and
Hedging Activities
DeVry has
used derivative financial instruments to manage its exposure to movements in
interest rates. DeVry has not used any such financial instruments since the
first quarter of fiscal 2006. The use of these financial instruments
modifies the exposure of these risks with the intent to reduce the risk to
DeVry. DeVry does not use financial instruments for trading purposes, nor does
it use leveraged financial instruments. Credit risk related to derivative
financial instruments is considered minimal and is managed by requiring periodic
settlements and high credit standards for its counterparties
All
derivative contracts are reported at fair value, with changes in fair value
reported in earnings or deferred, depending on the nature and effectiveness of
the offset or hedging relationship. Any ineffectiveness in a hedging
relationship is recognized immediately into earnings.
Earnings per Common
Share
Basic
earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is computed by dividing net income by the weighted average number of
shares assuming dilution. Dilutive shares are computed using the Treasury Stock
Method and reflect the additional shares that would be outstanding if dilutive
stock options were exercised during the period. Excluded from the June 30, 2008,
2007 and 2006 computations of diluted earnings per share were options to
purchase 495,000, 915,000 and 1,750,000 shares of common stock, respectively.
These outstanding options were excluded because the option exercise prices were
greater than the average market price of the common shares; thus, their effect
would be anti-dilutive.
The
following is a reconciliation of basic shares to diluted shares.
|
|
Years Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(in
thousands)
|
|
Basic
shares
|
|
|
71,277 |
|
|
|
70,909 |
|
|
|
70,595 |
|
Effect of Dilutive Stock
Options
|
|
|
1,129 |
|
|
|
491 |
|
|
|
285 |
|
Diluted Shares
|
|
|
72,406 |
|
|
|
71,400 |
|
|
|
70,880 |
|
Treasury
Stock
During
the third quarter of fiscal 2007, the Company initiated a stock repurchase
program (see “Note 4 – Dividends and Stock Repurchase Program”). Shares that are
repurchased by the Company are recorded as Treasury Stock at cost and result in
a reduction of Shareholders’ Equity.
From time
to time, shares of its common stock are delivered back to DeVry under a swap
arrangement resulting from employees’ exercise of incentive stock options
pursuant to the terms of the DeVry Stock Incentive Plans (see “Note 3 –
Stock-Based Compensation”). These shares are recorded as Treasury Stock at cost
and result in a reduction of Shareholders’ Equity.
Treasury
shares are reissued on a monthly basis at market value, to the DeVry Employee
Stock Purchase Plan in exchange for employee payroll deductions. In
the second quarter of fiscal year 2008, 3,455 treasury shares were resold at a
10% discount to market value to two employees of Advanced Academics Inc. upon
the acquisition of that business (see “Note 6 – Business
Combination). When treasury shares are reissued, DeVry uses an
average cost method to reduce the Treasury Stock balance. Gains on
the difference between the average cost and the reissuance price are credited to
Additional Paid-in Capital. Losses on the difference are charged to Additional
Paid-in Capital to the extent that previous net gains from reissuance are
included therein; otherwise such losses are charged to Retained
Earnings.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
Accumulated Other
Comprehensive Loss
Accumulated
Other Comprehensive Loss is composed of the change in cumulative translation
adjustment, unrealized gains and losses on available-for-sale marketable
securities, net of the effects of income taxes, and the differences between
changes in the fair values of the cash flow hedging instruments described above
in “Derivative Instruments and Hedging Activities,” and the amount of these
instruments being amortized to earnings. The following are the amounts recorded
in Accumulated Other Comprehensive Loss for the years ended June 30, 2008, 2007
and 2006 (dollars in thousands).
|
|
Year Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Balance
at Beginning of Period
|
|
$ |
(918 |
) |
|
$ |
(424 |
) |
|
$ |
266 |
|
Net
Unrealized Investment Gains (Losses)
|
|
|
(1,657 |
) |
|
|
- |
|
|
|
- |
|
Translation
Adjustments
|
|
|
(388 |
) |
|
|
(494 |
) |
|
|
(702 |
) |
Change
in fair value of interest rate hedge
|
|
|
- |
|
|
|
- |
|
|
|
12 |
|
Balance
at End of Period
|
|
$ |
(2,963 |
) |
|
$ |
(918 |
) |
|
$ |
(424 |
) |
The
Accumulated Other Comprehensive Loss balance at June 30, 2008, consists of
$1,306,000 of cumulative translation losses and $1,657,000 of unrealized losses
on available-for-sale marketable securities, net of tax of $1,036,000. At June
30, 2007, this balance was composed entirely of cumulative translation losses of
$918,000.
Advertising
Expense
Advertising
costs are recognized as expense in the period in which materials are purchased
or services are performed. Advertising expense, which is included in
student services and administrative expense in the Consolidated Statements of
Income, was $135.1 million, $112.6 million, and $107.1 million for the fiscal
years ended June 30, 2008, 2007 and 2006, respectively.
Recent Accounting
Pronouncements
SFAS 157
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements,” (“SFAS 157”). SFAS 157 defines and
establishes a framework for measuring fair value. In addition, SFAS
157 expands disclosures about fair value measurements. For DeVry,
SFAS 157 is effective beginning in fiscal year 2009. DeVry does not
expect that the adoption of SFAS 157 will have a material impact on its
consolidated financial statements.
SFAS 159
In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, “The Fair Value Option for Financial Assets and Liabilities, Including an
Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial instruments and certain other
assets and liabilities at fair value, with changes in fair value recorded in
earnings. Under SFAS 159, the decision to measure items at fair value
is made at specified election dates on an instrument-by-instrument basis and is
irrevocable. For DeVry, SFAS 159 is effective beginning in fiscal
year 2009. DeVry does not expect that the adoption of SFAS 159 will
have a material impact on its consolidated financial statements.
SFAS
141R
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141R, “Business Combinations” (“SFAS 141R”). SFAS 141R retains the
fundamental requirements of Statement of Financial Accounting Standards No. 141
(“SFAS 141”) that the acquisition method of accounting be used for all business
combinations. SFAS 141R also retains the guidance in SFAS 141 for identifying
and recognizing intangible assets separately from goodwill. The new
accounting requirements of SFAS 141R will change how business acquisitions are
accounted for and will impact financial statements both on the acquisition date
and in subsequent periods. For DeVry, SFAS 141R is effective
beginning in fiscal year 2010 and will impact the accounting for any
acquisitions DeVry may complete beginning in that fiscal year.
SFAS 160
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160, “Noncontrolling Interests in Consolidated Financial Statements an Amendment
of ARB number 51” (“SFAS 160”). SFAS 160 establishes accounting and
reporting standards to improve the relevance, comparability and transparency of
the financial information provided in a company’s financial statements as it
relates to minority interests in the equity of a subsidiary. These
minority interests will be recharacterized as noncontrolling interests and
classified as a component of equity. For DeVry, SFAS 160 is effective
beginning in fiscal year 2010. DeVry does not expect that the
adoption of SFAS 160 will have a material impact on its consolidated financial
statements as all current subsidiaries are wholly owned.
SFAS 161
In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161,
“Disclosures about Derivative Instruments and Hedging Activities, an Amendment
to FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced
disclosures about an entity’s derivative and hedging activities and thereby
improves the transparency of financial reporting. For DeVry, SFAS 161
is effective beginning in the third quarter of fiscal year 2009. The
adoption of SFAS 161 is not expected to have a material impact on DeVry’s
consolidated financial statements as DeVry does not currently maintain
derivative instruments or engage in hedging activities.
NOTE
3: STOCK-BASED COMPENSATION
DeVry
maintains five stock-based award plans: the 1991 Stock Incentive Plan, the 1994
Stock Incentive Plan, the 1999 Stock Incentive Plan, the 2003 Stock Incentive
Plan and the 2005 Incentive Plan. Under these plans, directors, key executives
and managerial employees are eligible to receive incentive stock or nonqualified
options to purchase shares of DeVry’s common stock. The 2005 Incentive Plan also
permits the award of stock appreciation rights, restricted stock, performance
stock and other stock and cash based compensation. The 1999 and 2003 Stock
Incentive Plans are administered by a Plan Committee of the Board of Directors
subject to approval by the Compensation Committee of the Board of
Directors. The 2005 Incentive Plan is administered by the
Compensation Committee of the Board of Directors. Options are granted
for terms of up to 10 years and can vest immediately or over periods of up to
five years. The requisite service period is equal to the vesting period. The
option price under the plans is the fair market value of the shares on the date
of the grant.
DeVry
accounts for options granted to retirement eligible employees that fully vest
upon an employees’ retirement under the non-substantive vesting period approach
to these options. Under this approach, the entire compensation cost is
recognized at the grant date for options issued to retirement eligible
employees.
At June
30, 2008, 5,895,744 authorized but unissued shares of common stock were reserved
for issuance under DeVry’s stock incentive plans.
Effective
July 1, 2005, DeVry adopted the provisions of SFAS 123(R) which establishes
accounting for stock-based awards exchanged for employee services. Accordingly,
stock-based compensation cost is measured at grant date, based on the fair value
of the award, and is recognized as expense over the employee requisite service
period.
The
following is a summary of options activity for the fiscal year ended June 30,
2008:
|
|
Options
Outstanding
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Remaining Contractual Life
|
|
|
Aggregate
Intrinsic Value ($000)
|
|
Outstanding
at July 1, 2007
|
|
|
3,316,210 |
|
|
$ |
23.61 |
|
|
|
|
|
|
|
Options
Granted
|
|
|
645,500 |
|
|
$ |
36.67 |
|
|
|
|
|
|
|
Options
Exercised
|
|
|
(798,830 |
) |
|
$ |
23.82 |
|
|
|
|
|
|
|
Options
Canceled
|
|
|
(123,084 |
) |
|
$ |
27.84 |
|
|
|
|
|
|
|
Outstanding
at June 30, 2008
|
|
|
3,039,796 |
|
|
$ |
26.19 |
|
|
|
6.51 |
|
|
$ |
83,527 |
|
Exercisable
at June 30, 2008
|
|
|
1,633,026 |
|
|
$ |
24.07 |
|
|
|
5.03 |
|
|
$ |
48,263 |
|
The total
intrinsic value of options exercised for the years ended June 30, 2008, 2007 and
2006 was $21,122,000, $8,266,000 and $2,626,000, respectively.
The fair
value of DeVry’s stock-based awards was estimated using a binomial model. This
model uses historical cancellation and exercise experience of DeVry to determine
the option value. It also takes into account the illiquid nature of employee
options during the vesting period.
The
weighted average estimated grant date fair values, as defined by SFAS 123(R),
for options granted at market price under DeVry’s stock option plans during
fiscal years 2008, 2007 and 2006 were $16.41, $10.58 and $10.12, per share,
respectively. The fair values of DeVry’s stock option awards were estimated
assuming the following weighted average assumptions:
|
|
Fiscal Year
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Expected
Life (in Years)
|
|
|
6.60 |
|
|
|
6.67 |
|
|
|
5.42 |
|
Expected
Volatility
|
|
|
39.33 |
% |
|
|
41.51 |
% |
|
|
41.35 |
% |
Risk-free
Interest Rate
|
|
|
4.34 |
% |
|
|
4.57 |
% |
|
|
3.82 |
% |
Dividend
Yield
|
|
|
0.32 |
% |
|
|
0.46 |
% |
|
|
— |
|
Pre-vesting
Forfeiture Rate
|
|
|
5.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
The
expected life of the options granted is based on the weighted average exercise
life with age and salary adjustment factors from historical exercise behavior.
The expected life of options granted in fiscal year 2006 was based on a
projected exercise pattern that accounts for the shorter vesting provisions of
the majority of the options granted during that period.
DeVry’s
expected volatility is computed by combining and weighting the implied market
volatility, its most recent volatility over the expected life of the option
grant, and DeVry’s long-term historical volatility.
The
pre-vesting forfeiture rate is based on DeVry’s historical stock option
forfeiture experience. The pre-vesting for forfeiture assumption
increased to 5.0% during fiscal year 2008 from 4.0% used in previous periods due
to an increase in employee turnover.
If
factors change and different assumptions are employed in the application of SFAS
123(R) in future periods, the stock-based compensation expense that DeVry
records may differ significantly from what was recorded in the previous
period.
The
following table shows total stock-based compensation expense included in the
Consolidated Statement of Earnings:
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars
in thousands)
|
|
Cost
of Educational Services
|
|
$ |
1,832 |
|
|
$ |
1,737 |
|
|
$ |
1,388 |
|
Student
Services and Administrative Expense
|
|
|
3,892 |
|
|
|
3,691 |
|
|
|
2,951 |
|
Income
Tax Benefit
|
|
|
(962 |
) |
|
|
(1,090 |
) |
|
|
(731 |
) |
Net
Stock-Based Compensation Expense
|
|
$ |
4,762 |
|
|
$ |
4,338 |
|
|
$ |
3,608 |
|
As of
June 30, 2008, $12.4 million of total pre-tax unrecognized compensation costs
related to non-vested awards is expected to be recognized over a weighted
average period of 3.5 years. The total fair value of options vested during the
years ended June 30, 2008, 2007 and 2006 was approximately $4,900,000,
$5,000,000 and $5,100,000, respectively.
There
were no capitalized stock-based compensation costs at June 30, 2008 and
2007.
DeVry has
an established practice of issuing new shares of common stock to satisfy share
option exercises. However, DeVry also may issue treasury shares to
satisfy option exercises under certain of its plans.
NOTE
4: DIVIDENDS AND STOCK REPURCHASE PROGRAM
During
fiscal years 2007 and 2008, DeVry’s Board of Directors declared the following
cash dividends:
Declaration
Date
|
|
Record
Date
|
|
Payment
Date
|
|
Dividend
Per Share
|
|
Total
Dividend Amount (In
Thousands)
|
|
Nov.
15, 2006
|
|
Dec.
20, 2006
|
|
Jan.
15, 2007
|
|
$ |
0.05 |
|
$ |
3,545 |
|
May
8, 2007
|
|
June
18, 2007
|
|
July
12, 2007
|
|
$ |
0.05 |
|
$ |
3,557 |
|
Nov.
7, 2007
|
|
Dec.
14, 2007
|
|
Jan.
4, 2008
|
|
$ |
0.06 |
|
$ |
4,283 |
|
May
13, 2008
|
|
June
19, 2008
|
|
July
10, 2008
|
|
$ |
0.06 |
|
$ |
4,283 |
|
The
dividend paid on July 10, 2008 of $4.3 million was recorded as a reduction to
retained earnings as of June 30, 2008. Future dividends will be at
the discretion of the Board of Directors.
On
November 15, 2006, DeVry announced that its Board of Directors had established a
stock repurchase plan. The stock repurchase plan allowed DeVry repurchase back
up to $35 million of its common stock through December 31, 2008. As of April,
2008, DeVry completed this repurchase plan having repurchased, on the open
market, 908,399 shares of its common stock at a total cost of $35 million. These
buybacks were funded through available cash balances.
On May
13, 2008, the Company announced its Board of Directors authorized a new share
repurchase program, which allows the company to repurchase up to $50 million of
its common stock through December 31, 2010. The timing and amount of any
repurchase will be determined by management based on its evaluation of market
conditions and other factors. These repurchases may be made through the open
market, including block purchases, or in privately negotiated transactions, or
otherwise. The buyback will be funded through available cash balances and/or
borrowings, and may be suspended or discontinued at any time. No
repurchases had been made under this plan as of June 30, 2008.
Shares of
stock repurchased under the programs are held as treasury shares. These
repurchased shares have reduced the weighted average number of shares of common
stock outstanding for basic and diluted earnings per share
calculations
NOTE
5: BUSINESS COMBINATIONS
Gearty
CPE
In July
2005, DeVry acquired Gearty CPE for $2.0 million in cash. Gearty CPE, which
operates in the New York/New Jersey metro area, is a provider of continuing
professional education (CPE) programs and seminars in accounting and finance
predominantly serving chief financial officers and controllers of Fortune 500
companies. There is no pro forma presentation of prior year operating
results related to this acquisition due to the insignificant effect on
consolidated operations.
Advanced Academics,
Inc.
On
October 31, 2007, DeVry Inc. acquired the operations of Advanced Academics, Inc.
(“AAI”) for $27.6 million in cash, including costs of acquisition. Funding was
provided from DeVry’s existing operating cash balances. The results of AAI’s
operations have been included in the consolidated financial statements of DeVry
since the date of acquisition.
AAI is a
leading provider of online secondary education. Founded in 2000 and
headquartered in Oklahoma City, Oklahoma, AAI partners with school districts to
help more students graduate high school. AAI supplements traditional
classroom programs through Web-based course instruction using highly qualified
teachers and a proprietary technology platform specifically designed for
secondary education. AAI also operates virtual high schools in 6
states. Since its inception, AAI has delivered online learning
programs to more than 20,000 students in more than 200 school
districts. The addition of AAI has further diversified DeVry’s
curricula.
The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition (dollars in
thousands).
|
|
At October 31, 2007
|
|
|
|
|
|
Current
Assets
|
|
$ |
4,556 |
|
Property
and Equipment
|
|
|
210 |
|
Other
Long-term Assets
|
|
|
3,796 |
|
Intangible
Assets
|
|
|
10,853 |
|
Goodwill
|
|
|
16,911 |
|
Total
Assets Acquired
|
|
|
36,326 |
|
Liabilities
Assumed
|
|
|
8,691 |
|
Net
Assets Acquired
|
|
$ |
27,635 |
|
Of the
$10.9 million of acquired intangible assets, $1.3 million was assigned to the
value of the AAI trade name which has been determined to not be subject to
amortization. The remaining acquired intangible assets have all been
determined to be subject to amortization and their values and estimated useful
lives are as follows (dollars in thousands):
|
|
As of October 31,
2007
|
|
|
Value
Assigned
|
|
Estimated
Useful Life
|
|
|
|
|
|
Customer
Contracts-Direct to Student
|
|
$ |
4,100 |
|
6
yrs 8 mths
|
Customer
Contracts-Direct to District
|
|
|
2,900 |
|
4
yrs 8 mths
|
Curriculum/Software
|
|
|
2,500 |
|
5
yrs
|
Other
|
|
|
53 |
|
1
yr
|
DeVry
determined this allocation based upon a number of factors. The $16.9 million of
goodwill was all assigned to the DeVry University operating
segment.
There is
no pro forma presentation of prior year operating results related to this
acquisition due to the insignificant effect on consolidated
operations.
NOTE
6: INTANGIBLE ASSETS
Intangible
assets consist of the following (dollars in thousands):
|
|
As of June 30, 2008
|
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
Amortized
Intangible Assets:
|
|
|
|
|
|
|
Student
Relationships
|
|
$ |
47,770 |
|
|
$ |
(47,770 |
) |
Customer
Contracts
|
|
|
7,000 |
|
|
|
(897 |
) |
License
and Non-compete Agreements
|
|
|
2,684 |
|
|
|
(2,670 |
) |
Class
Materials
|
|
|
2,900 |
|
|
|
(1,500 |
) |
Curriculum/Software
|
|
|
2,500 |
|
|
|
(333 |
) |
Trade
Names
|
|
|
110 |
|
|
|
(110 |
) |
Other
|
|
|
639 |
|
|
|
(633 |
) |
Total
|
|
$ |
63,603 |
|
|
$ |
(53,913 |
) |
Unamortized
Intangible Assets:
|
|
|
|
|
|
|
|
|
Trade
Names
|
|
$ |
22,272 |
|
|
|
|
|
Trademark
|
|
|
1,645 |
|
|
|
|
|
Ross
Title IV Eligibility and Accreditations
|
|
|
14,100 |
|
|
|
|
|
Intellectual
Property
|
|
|
13,940 |
|
|
|
|
|
Chamberlain
Title IV Eligibility and Accreditations
|
|
|
1,200 |
|
|
|
|
|
Total
|
|
$ |
53,157 |
|
|
|
|
|
|
|
As of June 30, 2007
|
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
Amortized
Intangible Assets:
|
|
|
|
|
|
|
Student
Relationships
|
|
$ |
47,770 |
|
|
$ |
(44,341 |
) |
License
and Non-compete Agreements
|
|
|
2,650 |
|
|
|
(2,623 |
) |
Class
Materials
|
|
|
2,900 |
|
|
|
(1,300 |
) |
Trade
Names
|
|
|
110 |
|
|
|
(103 |
) |
Other
|
|
|
620 |
|
|
|
(620 |
) |
Total
|
|
$ |
54,050 |
|
|
$ |
(48,987 |
) |
Unamortized
Intangible Assets:
|
|
|
|
|
|
|
|
|
Trade
Names
|
|
$ |
20,972 |
|
|
|
|
|
Trademark
|
|
|
1,645 |
|
|
|
|
|
Ross
Title IV Eligibility and Accreditations
|
|
|
14,100 |
|
|
|
|
|
Intellectual
Property
|
|
|
13,940 |
|
|
|
|
|
Chamberlain
Title IV Eligibility and Accreditations
|
|
|
1,200 |
|
|
|
|
|
Total
|
|
$ |
51,857 |
|
|
|
|
|
Amortization
expense for amortized intangible assets was $4,926,000 and $6,842,000 for the
years ended June 30, 2008 and 2007, respectively. Estimated amortization expense
for amortized intangible assets for the next five fiscal years ending June 30 is
as follows (dollars in thousands):
Fiscal
Year
|
|
|
|
2009
|
|
$ |
2,154 |
|
2010
|
|
|
2,204 |
|
2011
|
|
|
2,006 |
|
2012
|
|
|
1,698 |
|
2013
|
|
|
778 |
|
The
weighted-average amortization period for amortized intangible assets is three
and five years for Chamberlain and Ross University Student Relationships,
respectively; approximately six years for AAI customer contracts; six years for
License and Non-compete Agreements; 14 years for Class Materials; five years for
Curriculum/Software; four years for Trade Names and six years for Other. These
intangible assets, except for the Ross University Student Relationships and the
AAI Customer Contracts, are being amortized on a straight-line basis. The amount
being amortized for the Ross University Student Relationships is based on the
estimated progression of the students through the respective medical and
veterinary programs, giving consideration to the revenue and cash flow
associated with both existing students and new applicants. This results in the
basis being amortized at an annual rate for each of the five years of estimated
economic life as follows:
Year
1
|
|
|
27.4 |
% |
Year
2
|
|
|
29.0 |
% |
Year
3
|
|
|
21.0 |
% |
Year
4
|
|
|
14.5 |
% |
Year
5
|
|
|
8.1 |
% |
The
amount being amortized for the AAI Customer Contracts is based on the estimated
renewal probability of the contracts, giving consideration to the revenue and
discounted cash flow associated with both types of customer relationships. This
results in the basis being amortized at an annual rate for each of the years of
estimated economic life as follows:
Fiscal
Year
|
|
Direct
to Student
|
|
|
Direct
to District
|
|
2008
|
|
|
12 |
% |
|
|
14 |
% |
2009
|
|
|
18 |
% |
|
|
24 |
% |
2010
|
|
|
19 |
% |
|
|
25 |
% |
2011
|
|
|
17 |
% |
|
|
21 |
% |
2012
|
|
|
14 |
% |
|
|
16 |
% |
2013
|
|
|
11 |
% |
|
|
- |
|
2014
|
|
|
9 |
% |
|
|
- |
|
Indefinite-lived
intangible assets related to Trademarks, Trade Names, Title IV Eligibility,
Accreditations and Intellectual Property are not amortized, as there are no
legal, regulatory, contractual, economic or other factors that limit the useful
life of these intangible assets to the reporting entity. As of the end of fiscal
years 2008 and 2007, there was no impairment loss associated with these
indefinite-lived intangible assets, as estimated fair value exceeds the carrying
amount.
DeVry
determined that as of the end of fiscal years 2008 and 2007, there was no
impairment in the value of DeVry’s goodwill for any reporting units. This
determination was made after considering a number of factors including a
valuation analysis prepared by management. The carrying amount of goodwill
related to the DeVry University reportable segment at June 30, 2008 was $39.1
million which was an increase of $16.9 million from June 30, 2007. This increase
results from the allocation of the AAI purchase price as described in Note
5-Business Combination. The carrying amount of goodwill related to
the Professional and Training reportable segment was unchanged at $24.7 million
at June 30, 2008 and June 30, 2007. The carrying amount of goodwill related to
the Medical and Healthcare segment was unchanged at $244.2 million at June 30,
2008 and June 30, 2007.
NOTE
7: SALE OF FACILITIES
In
February 2008, DeVry sold its facility located in Houston, Texas, for
approximately $14.5 million in gross proceeds which resulted in a pre-tax gain
of approximately $2.2 million. In connection with the transaction,
DeVry entered into an agreement to lease back approximately 60% of the original
space in the facility. The leaseback required the deferral of the
gain on the sale. The gain is being recognized ratably as a reduction
to rent expense over the twelve year term of the lease agreement.
In
September 2007, DeVry sold its facility located in Seattle, Washington, for
approximately $12.4 million. In connection with the sale, DeVry
recorded a pre-tax loss of $5.4 million during the first quarter of fiscal year
2008. In the same transaction, DeVry sold its facility located in
Phoenix, Arizona, for approximately $16.0 million which resulted in a pre-tax
gain of approximately $7.7 million. In connection with the transaction, DeVry
entered into agreements to lease back approximately 60% of the total space of
both facilities. The leaseback required the deferral of a portion of
the gain on the sale of the Phoenix facility of approximately $6.6 million. This
gain will be recognized as a reduction to rent expense over the ten year life of
the lease agreement. The remaining pre-tax gain of $1.1 million was recorded
during the first quarter of fiscal year 2008.
In
September 2007, DeVry exercised the option to purchase its leased facility in
Alpharetta, Georgia, for $11.2 million. Immediately following the
acquisition, DeVry sold the facility to a different party for $11.2 million and
executed a leaseback on the entire facility. In connection with this
transaction, DeVry accelerated to the first quarter of fiscal year 2008, the
recognition of approximately $0.6 million of remaining deferred lease credits
associated with the original lease.
The
recorded net loss on the sale of the facilities and the recognition of the
deferred lease credits are separately classified in the Consolidated Statements
of Income as a component of Total Operating Costs and Expenses and are related
to the DeVry University reportable segment.
In March
2007, DeVry sold unused land located adjacent to its DeVry University campus in
Tinley Park, Illinois for approximately $1.9 million. In connection with the
sale, DeVry recorded a pre-tax gain of approximately $0.9 million during the
third quarter of fiscal year 2007. In September 2006, DeVry sold its
facility located in West Hills, California for $36.0 million. In connection with
the sale, DeVry recorded a pre-tax gain of $19.9 million during the first
quarter of fiscal year 2007. DeVry relocated its West Hills campus
operations to a leased facility in nearby Sherman Oaks,
California. These gains are separately classified in the Consolidated
Statements of Income as a component of Total Operating Costs and Expenses and
are related to the DeVry University reportable segment.
In
November 2005, a DeVry owned building in the Denver, Colorado area was sold for
$1.8 million. As a result of this sale, DeVry realized a pre-tax gain of $0.5
million. This gain is separately classified in the Consolidated Statements of
Income as a component of Total Operating Costs and Expenses and related to the
DeVry University reportable segment. This building was acquired in 1999 with the
acquisition of Denver Technical College. This facility was no longer essential
to its operations, having been largely replaced by a new and larger DeVry
University campus serving the Denver market.
NOTE
8: REDUCTION IN WORKFORCE CHARGES
During
the third quarter of fiscal 2007, DeVry offered a voluntary separation plan
(VSP) to eligible DeVry University campus-based employees. The
decision to take this action resulted from a thorough analysis which revealed
that a reduction in the number of employees at DeVry University campuses was
warranted to address the subsidiary’s cost structure. The VSP was
offered at 22 DeVry University campuses with 285 employees being eligible to
participate. Seventy employees accepted this separation
plan. Separation of employment was effective no later than June
30, 2007. DeVry recorded a pre-tax charge of approximately $3.7
million in the third and fourth quarters of fiscal 2007 in relation to these
employees. This charge consists of severance pay and extended medical
and dental benefits coverage.
In April
2007, DeVry announced plans for an involuntary reduction in force (RIF) that
further reduced its workforce by approximately 150 positions at its DeVry
University campus-based operations. This resulted in an additional
pre-tax charge in the fourth quarter of fiscal 2007 of approximately $2.6
million that represented severance pay and benefits in relation to these
employees.
The VSP
and RIF charges are separately classified in the Consolidated Statements of
Income as a component of Total Operating Costs and Expenses and are related to
the DeVry University reportable segment.
Cash
payments for the VSP and RIF were approximately $4.6 million and $1.1 million,
in the years ended June 30, 2008 and 2007, respectively. These payments will
extend until the period of benefit coverage has expired. Of the total amount
accrued for the fiscal year 2007 VSP and RIF, approximately $0.5 million
remained to be paid as of June 30, 2008.
NOTE
9: INCOME TAXES
The
components of income before income taxes are as follows (dollars in
thousands).
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
U.S.
|
|
$ |
123,101 |
|
|
$ |
66,734 |
|
|
$ |
33,154 |
|
Foreign
|
|
|
49,175 |
|
|
|
38,206 |
|
|
|
24,329 |
|
Total
|
|
$ |
172,276 |
|
|
$ |
104,940 |
|
|
$ |
57,483 |
|
The
income tax provisions (benefits) related to the above results are as follows
(dollars in thousands):
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Current
Tax Provision:
|
|
|
|
|
|
|
|
|
|
U.S.
Federal
|
|
$ |
36,624 |
|
|
$ |
23,718 |
|
|
$ |
11,818 |
|
State
and Local
|
|
|
3,009 |
|
|
|
1,247 |
|
|
|
3,033 |
|
Foreign
|
|
|
(1,330 |
) |
|
|
(1,122 |
) |
|
|
(310 |
) |
Total
Current
|
|
|
38,303 |
|
|
|
23,843 |
|
|
|
14,541 |
|
Deferred
Tax Provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Federal
|
|
|
6,296 |
|
|
|
2,980 |
|
|
|
(87 |
) |
State
and Local
|
|
|
2,145 |
|
|
|
1,929 |
|
|
|
(24 |
) |
Foreign
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
Deferred
|
|
|
8,441 |
|
|
|
4,909 |
|
|
|
(111 |
) |
Income
Tax Provision
|
|
$ |
46,744 |
|
|
$ |
28,752 |
|
|
$ |
14,430 |
|
The
income tax provisions differ from those computed using the statutory U.S.
federal rate as a result of the following items (dollars in
thousands):
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Income
Tax at Statutory Rates
|
|
$ |
60,297 |
|
|
|
35.0 |
% |
|
$ |
36,729 |
|
|
|
35.0 |
% |
|
$ |
20,119 |
|
|
|
35.0 |
% |
Lower
Rates on Foreign Operations
|
|
|
(17,211 |
) |
|
|
(10.0 |
)% |
|
|
(13,372 |
) |
|
|
(12.7 |
)% |
|
|
(8,420 |
) |
|
|
(14.7 |
)% |
State
Income Taxes
|
|
|
5,480 |
|
|
|
3.2 |
% |
|
|
3,136 |
|
|
|
3.0 |
% |
|
|
1,816 |
|
|
|
3.2 |
% |
Stock
Options
|
|
|
(537 |
) |
|
|
(0.3 |
)% |
|
|
(189 |
) |
|
|
(0.2 |
)% |
|
|
628 |
|
|
|
1.1 |
% |
Tax
Credits and Other
|
|
|
(1,285 |
) |
|
|
(0.8 |
)% |
|
|
2,448 |
|
|
|
2.3 |
% |
|
|
287 |
|
|
|
0.5 |
% |
Income
Tax Provision
|
|
$ |
46,744 |
|
|
|
27.1 |
% |
|
$ |
28,752 |
|
|
|
27.4 |
% |
|
$ |
14,430 |
|
|
|
25.1 |
% |
Deferred
income tax assets (liabilities) result primarily from temporary differences in
the recognition of various expenses for tax and financial statement purposes,
and from the recognition of the tax benefits of net operating loss
carryforwards. These assets and liabilities are composed of the
following (dollars in thousands):
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Loss
Carryforwards, net
|
|
$ |
16,163 |
|
|
$ |
10,869 |
|
|
$ |
10,469 |
|
Employee
Benefits
|
|
|
6,164 |
|
|
|
7,195 |
|
|
|
7,841 |
|
Stock-Based
Payments
|
|
|
206 |
|
|
|
5,315 |
|
|
|
5,650 |
|
Receivable
Reserves and Other, net
|
|
|
20,528 |
|
|
|
12,267 |
|
|
|
13,000 |
|
Depreciation
|
|
|
1,144 |
|
|
|
2,416 |
|
|
|
1,626 |
|
Less:
Valuation Allowance
|
|
|
(13,616 |
) |
|
|
(10,308 |
) |
|
|
(7,100 |
) |
Gross
Deferred Tax Assets
|
|
|
30,589 |
|
|
|
27,754 |
|
|
|
31,486 |
|
Amortization
of Intangible Assets
|
|
|
(37,777 |
) |
|
|
(32,182 |
) |
|
|
(30,350 |
) |
Gross
Deferred Tax Liabilities
|
|
|
(37,777 |
) |
|
|
(32,182 |
) |
|
|
(30,350 |
) |
Net
Deferred Taxes
|
|
$ |
(7,188 |
) |
|
$ |
(4,428 |
) |
|
$ |
1,136 |
|
DeVry has
net operating loss carryforwards in various tax jurisdictions expiring at
various times through the years ending June 30, 2028.
As of
June 30, 2008, valuation allowances have been established for approximately
$13.6 million as compared to $10.3 million as of June 30, 2007. The
increase in valuation allowances in fiscal year 2008 was primarily related to
the historical federal net operating losses that were acquired as a result of
the acquisition of Advanced Academics. The valuation allowances are composed of
$6.5 million related to our Canadian subsidiary and $4.3 million for certain
state net operating loss carryforwards that may expire before their benefits are
utilized and $2.8 million related to the historical federal net operating losses
acquired as a result of the Advanced Academics acquisition. The
Canadian valuation allowances are composed of net operating losses of $2.5
million, depreciation of $3.5 million and $0.5 million of other deferred tax
benefits.
Based on
DeVry’s expectations for future taxable income, management believes that it is
more likely than not that operating income in respective jurisdictions will be
sufficient to recognize fully all deferred tax assets, except as explained
above.
DeVry has
not recorded a tax provision for the undistributed international earnings of the
Medical and Veterinary Schools. It is DeVry’s intention to
indefinitely reinvest accumulated cash balances, future cash flows and
post-acquisition undistributed earnings and profits to improve the facilities
and operations of the Schools and pursue future opportunities outside of the
United States. In accordance with this plan, cash held by Ross
University will not be available for general company purposes and under current
laws will not be subject to U.S. taxation. Included in DeVry’s
consolidated cash balances were approximately $129.6 million and $72.4 million
attributable to Ross University’s international operations as of June 30, 2008
and 2007, respectively. As of June 30, 2008 and 2007, cumulative
undistributed earnings were approximately $146.4 million and $94.3 million,
respectively.
The
effective tax rate was 27.1% for fiscal year 2008, compared to 27.4% for the
prior year. The higher effective income tax rate in fiscal year 2007
was primarily due to gains on the sale of the West Hills facility and excess
land adjacent to the Tinley Park campus, which carried a tax rate of
39.1%. In fiscal year 2008, there is no corresponding gain, and the
net loss on the fiscal year 2008 first quarter facility sales which carries a
tax rate of 39.1% provided a benefit which decreased the fiscal 2008 effective
tax rate. This decrease was partially offset by an increase in the
proportion of income generated by U.S. operations to the offshore operations of
Ross University as compared to the prior year.
Effective
July 1, 2007, DeVry adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48). FIN 48 prescribes a more-likely-than-not threshold for
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. This interpretation also provides guidance
on derecognition of income tax assets and liabilities, classification of current
and deferred income tax assets and liabilities, accounting for interest and
penalties associated with tax positions, accounting for income taxes in interim
periods and income tax disclosures. The cumulative effects of applying this
interpretation have been recorded as a decrease of $0.9 million to retained
earnings, an increase of $0.5 million to net deferred income tax assets, a
decrease of $4.2 million to net deferred income tax liabilities, an increase of
$0.7 million to other accrued current taxes and an increase of $4.8 million to
other accrued non-current taxes as of July 1, 2007. In conjunction
with adoption of FIN 48, we classify uncertain tax positions as non-current tax
liabilities unless expected to be paid in one year.
As of the
adoption of FIN 48, the total amount of gross unrecognized tax benefits for
uncertain tax positions, including positions impacting only the timing of tax
benefits, was $6.0 million. The amount of unrecognized tax benefits
that, if recognized, would impact the effective tax rate was $1.4
million. As of June 30, 2008, our gross unrecognized tax benefits,
including positions impacting only the timing of benefits, was $2.6 million. The
total amount of unrecognized tax benefits that, if recognized, would impact the
effective tax rate is $1.9 million. We expect that our unrecognized tax benefits
will decrease by an insignificant amount during the next twelve
months. DeVry classifies interest and penalties on tax uncertainties
as a component of the provision for income taxes. The total amount of
interest and penalties accrued as of adoption was $0.5 million and at June 20,
2008 was $0.8 million.
The
change in our unrecognized tax benefits for the year ended June 30, 2008 was
(dollars in millions):
July
1, 2007
|
|
$ |
6.0 |
|
|
|
|
|
|
|
|
Increases
from positions taken during prior periods
|
|
|
0.7 |
|
|
|
|
|
|
|
|
Decreases
from positions taken during prior periods
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
Increases
from positions taken during the current period
|
|
|
0.2 |
|
|
|
|
|
|
|
|
Decreases
related to settlements with taxing authorities
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
Decreases
related to change in tax accounting method
|
|
|
(4.0 |
) |
|
|
|
|
|
|
|
Decreases
resulting from the lapse in the statute of limitations
|
|
|
(0.1 |
) |
|
|
|
|
|
|
June
30, 2008
|
|
$ |
2.6 |
|
The
Internal Revenue Service is currently examining DeVry’s 2006 and 2007 U.S.
Federal Income Tax Returns. DeVry generally remains subject to
examination for all tax years beginning on or after July 1, 2004.
NOTE
10: LONG-TERM DEBT
All of
DeVry’s borrowings and letters of credit under its $175 million revolving credit
facility are through DeVry Inc. and Global Education International, Inc.
(“GEI”), an international subsidiary. As of June 30, 2008 and 2007,
DeVry had no outstanding borrowings under this facility. The
revolving credit facility became effective on May 16, 2003, and was amended as
of September 30, 2005 and again on January 11, 2007. DeVry Inc. aggregate
commitments including borrowings and letters of credit under this agreement in
total cannot exceed $175,000,000, and GEI aggregate commitments cannot exceed
$50,000,000. At the request of DeVry, the maximum borrowings and letters of
credit can be increased to $275,000,000 in total with GEI aggregate commitments
cannot exceed $50,000,000. There are no required payments under this revolving
credit agreement and all borrowings and letters of credit mature on January 11,
2012. As a result of the agreement extending beyond one year, all borrowings are
classified as long-term with the exception of amounts expected to be repaid in
the 12 months subsequent to the balance sheet date. DeVry Inc. letters of credit
outstanding under this agreement were $4,329,000 and $1,491,000 as of June 30,
2008 and 2007, respectively. As of June 30, 2008, any outstanding borrowings
under this agreement would bear interest, payable quarterly or upon expiration
of the interest rate period, at the prime rate or a Eurodollar rate plus 0.50%,
at the option of DeVry. Outstanding letters of credit under the revolving credit
agreement are charged an annual fee equal to 0.50% of the undrawn face amount of
the letter of credit, payable quarterly. The agreement also requires payment of
a commitment fee equal to 0.1% of the undrawn portion of the credit facility.
The interest rate, letter of credit fees and commitment fees are adjustable
quarterly, based upon DeVry’s achievement of certain financial
ratios.
The
revolving credit agreement contains certain covenants that, among other things,
require maintenance of certain financial ratios, as defined in the agreements.
These financial ratios include a consolidated fixed charge coverage ratio, a
consolidated leverage ratio and a composite Equity, Primary Reserve and Net
Income, Department of Education, financial responsibility ratio (“DOE Ratio”).
Failure to maintain any of these ratios or violation of other covenants
contained in the agreement will constitute an event of default and could result
in termination of the agreements and, required payment of all outstanding
borrowings. DeVry was in compliance with all debt covenants as of June 30,
2008.
The stock
of certain of the subsidiaries of DeVry is pledged as collateral for the
borrowings under the revolving credit facility.
In
connection with entering into various borrowing agreements and amendments to
those agreements, DeVry incurred financing costs that were deferred. The
unamortized balance of the original and amendment related financing costs
associated with the revolving credit facility are being amortized over the
extended 5-year term of the loan. All other deferred financing fees were
amortized or written-off to expense upon the payment and prepayment of the
related debt. Amortization and write-offs of deferred financing
costs, which are included in interest expense were $140,000, $1,186,000 and
$555,000 for the years ended June 30, 2008, 2007 and 2006,
respectively.
NOTE
11: EMPLOYEE BENEFIT PLANS
Profit Sharing Retirement
Plan
All
employees, except those of DMI and Ross University, who meet certain eligibility
requirements can participate in DeVry’s 401(k) Profit Sharing Retirement Plan.
DeVry contributes to the plan an amount up to 2.0% of the total eligible
compensation of employees who make contributions under the plan. Employees of
DMI and Ross University participate in two separate plans and receive matching
contributions of up to 5% of total eligible compensation. Matching contributions
under the plans were approximately $4,754,000, $4,554,000 and $4,009,000 in
fiscal 2008, 2007 and 2006, respectively. In addition, DeVry’s Board of
Directors may also make discretionary contributions for the benefit of all
eligible employees, except those of DMI and Ross University. Provisions for
discretionary contributions under the plan were approximately $5,925,000,
$4,983,000 and $3,644,000 in fiscal 2008, 2007 and 2006,
respectively.
Employee Stock Purchase
Plan
Under
provisions of DeVry’s Employee Stock Purchase Plan, any eligible employee may
authorize DeVry to withhold up to $25,000 of annual earnings to purchase common
stock of DeVry at 95% of the prevailing market price on the purchase date. The
purchase date is defined as the last business day of each month. DeVry
subsidizes the remaining 5% and pays all brokerage commissions and
administrative fees associated with the plan. These expenses were insignificant
for the years ended June 30, 2008, 2007 and 2006. Total shares issued to the
Plan were 18,361 and 36,242 in fiscal 2008 and 2007, respectively. This Plan is
intended to qualify as an “employee stock purchase plan” within the meaning of
Section 423 of the Internal Revenue Code. At the current time, DeVry is
re-issuing treasury shares to satisfy employee share purchases under this
plan
Postemployment
Benefits
DeVry
previously entered into employment agreements with its current Chair of the
Board of Directors and a former Chief Executive Officer. These
agreements provided for certain benefits that required accrual over the service
period which ended June 30, 2005. For the fiscal years ended June 30, 2008, 2007
and 2006, DeVry recognized expense of approximately $35,000, $300,000 and
$48,000, respectively, representing the present value of the obligation related
to these agreements, discounted using a 6.77% rate as of June 30, 2008, and
using the sinking fund accrual method.
NOTE
12: SHAREHOLDER RIGHTS PLAN
On
November 24, 2004, DeVry adopted a shareholder rights plan. In connection with
this plan, DeVry’s Board of Directors declared a dividend of one Common Stock
Purchase Right (“Right” or “Rights”) for each outstanding share of DeVry Inc.
Common Stock. The dividend was distributed on December 6, 2004 to shareholders
of record on that date. Each shareholder is automatically entitled to the Rights
and no physical distribution of new certificates was made.
Each
Right, as represented by DeVry’s Common Stock certificates, currently entitles
the holder to buy one one-thousandth of a share of DeVry’s Common Stock at an
exercise price of $75 subject to adjustment, e.g. for stock splits or stock
dividends. However, following the acquisition of 15% or more of DeVry Inc.
Common Stock by a person or group, the holders of the Rights (other than the
acquiring person or group) will be entitled to purchase shares of DeVry Inc.
Common Stock at half of the then current fair market value. Further, in the
event of a subsequent merger or other acquisition of DeVry, the holder of the
Rights (other than the acquiring person or group) will be entitled to buy shares
of common stock of the acquiring entity at one-half of the market price of these
shares.
The
Rights are redeemable for $.001 per Right, subject to adjustment, before the
acquisition by a person or group of 15% or more of DeVry’s Common Stock. The
Rights will expire on December 6, 2014.
NOTE
13: COMMITMENTS AND CONTINGENCIES
DeVry,
DeVry University, Becker, Ross University and Chamberlain lease certain
equipment and facilities under non-cancelable operating leases, some of which
contain renewal options, escalation clauses and requirements to pay taxes,
insurance and maintenance costs.
Future
minimum rental commitments for all non-cancelable operating leases having a
remaining term in excess of one year at June 30, 2008, are as follows (dollars
in thousands):
Year Ended June
30,
|
|
Amount
|
|
2009
|
|
$ |
48,200 |
|
2010
|
|
|
43,700 |
|
2011
|
|
|
38,000 |
|
2012
|
|
|
36,000 |
|
2013
|
|
|
32,600 |
|
Thereafter
|
|
|
109,300 |
|
DeVry
recognizes rent expense on a straight line basis over the term of the lease,
although the lease may include escalation clauses that provide for lower rent
payments at the start of the lease term and higher lease payments at the end of
the lease term.
Rent
expenses for the years ended June 30, 2008, 2007and 2006, were $50,724,000,
$50,531,000 and $47,033,000, respectively.
DeVry is
subject to occasional lawsuits, administrative proceedings, regulatory reviews
and investigations associated with financial assistance programs and other
claims arising in the normal conduct of its business. The following is a
description of pending litigation that may be considered other than ordinary and
routine litigation that is incidental to the business.
On
December 23, 2005, Saro Daghlian, a former DeVry University student in
California, commenced a putative class action against DeVry University and DeVry
Inc. (collectively “DeVry”) in Los Angeles Superior Court, asserting various
claims predicated upon DeVry’s alleged failure to comply with disclosure
requirements under the California Education Code relating to the transferability
of academic units. In addition to the alleged omission,
Daghlian also claimed that DeVry made untrue or misleading statements to
prospective students, in violation of the California Unfair Competition Law
("UCL") and the California False Advertising Law,
("FAL"). DeVry removed the action to the U.S. District Court
for the Central District of California. In two Orders dated October
9, 2007, and December 31, 2007, the District Court entered judgment
dismissing all of plaintiffs ’ class and individual claims and
awarded DeVry its cost of suit. Plaintiffs have filed a Notice
signifying their intent to appeal the dismissal to the U.S. Court of Appeals for
the Ninth Circuit. DeVry intends to vigorously defend itself with
respect to this claim.
In May
2008, the U.S. Department of Justice, Civil Division, working with the U.S.
Attorney for the Northern District of Illinois, requested that DeVry voluntarily
furnish documents and other information regarding its policies and practices
with respect to recruiter compensation and performance
evaluation. The stated purpose of the request was to examine whether
DeVry may have submitted or caused the submission of false claims or false
statements to the U.S. Department of Education in violation of the False Claims
Act. DeVry made a timely production of documents and continues to
offer its full cooperation to the government in carrying out its
inquiry. DeVry believes that its compensation practices were designed
to be in compliance with current regulations.
The
ultimate outcome of pending litigation and other proceedings, reviews,
investigations and contingencies is difficult to estimate. At this time, DeVry
does not expect that the outcome of any such matter, including the litigation
described above, will have a material effect on its cash flows, results of
operations or financial position.
NOTE
14: SEGMENT INFORMATION
DeVry’s
principal business is providing secondary and post-secondary education. The
services of our operations are described in more detail in “Note 1- Nature of
Operations.” DeVry presents three reportable segments: the DeVry University
undergraduate and graduate and the Advanced Academics operations (DeVry
University); the professional exam review and training operations which includes
Becker CPA Review and Stalla Review for the CFA Exams (Professional and
Training); and the Ross University medical and veterinary school and Chamberlain
College of Nursing operations (Medical and Healthcare).
These
segments are consistent with the method by which management evaluates
performance and allocates resources. Such decisions are based, in part, on each
segment’s operating income, which is defined as income before interest income
and expense, amortization and income taxes. Intersegment sales are accounted for
at amounts comparable to sales to nonaffiliated customers and are eliminated in
consolidation. The accounting policies of the segments are the same as those
described in “Note 2 — Summary of Significant Accounting Policies.”
The
consistent measure of segment profit excludes interest income and expense,
amortization and certain corporate-related depreciation and expenses. As such,
these items are reconciling items in arriving at income before income taxes. The
consistent measure of segment assets excludes deferred income tax assets and
certain depreciable corporate assets. Additions to long-lived assets have been
measured in this same manner. Reconciling items are included as corporate
assets.
Following
is a tabulation of business segment information based on the current
segmentation for each of the years ended June 30, 2008, 2007 and 2006. Corporate
information is included where it is needed to reconcile segment data to the
consolidated financial statements.
|
|
For the Year Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars
in thousands)
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
DeVry
University
|
|
$ |
840,940 |
|
|
$ |
728,401 |
|
|
$ |
675,537 |
|
Medical
and Healthcare
|
|
|
169,814 |
|
|
|
137,177 |
|
|
|
110,412 |
|
Professional
and Training
|
|
|
81,079 |
|
|
|
67,895 |
|
|
|
53,564 |
|
Total
Consolidated Revenues
|
|
$ |
1,091,833 |
|
|
$ |
933,473 |
|
|
$ |
839,513 |
|
Operating
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
DeVry
University
|
|
$ |
83,425 |
|
|
$ |
38,446 |
|
|
$ |
18,413 |
|
Medical
and Healthcare
|
|
|
52,243 |
|
|
|
46,980 |
|
|
|
38,082 |
|
Professional
and Training
|
|
|
33,844 |
|
|
|
25,753 |
|
|
|
18,060 |
|
Reconciling
Items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
Expense
|
|
|
(4,926 |
) |
|
|
(6,842 |
) |
|
|
(9,937 |
) |
Depreciation
and Other
|
|
|
(2,251 |
) |
|
|
(2,050 |
) |
|
|
(730 |
) |
Total
Consolidated Operating Income
|
|
$ |
162,335 |
|
|
$ |
102,287 |
|
|
$ |
63,888 |
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
|
|
|
10,463 |
|
|
|
7,437 |
|
|
|
3,785 |
|
Interest
Expense
|
|
|
(522 |
) |
|
|
(4,784 |
) |
|
|
(10,190 |
) |
Net
Interest Income (Expense)
|
|
|
9,941 |
|
|
|
2,653 |
|
|
|
(6,405 |
) |
Total
Consolidated Income before Income Taxes
|
|
$ |
172,276 |
|
|
$ |
104,940 |
|
|
$ |
57,483 |
|
Segment
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
DeVry
University
|
|
$ |
442,350 |
|
|
$ |
330,970 |
|
|
$ |
375,170 |
|
Medical
and Healthcare
|
|
|
465,950 |
|
|
|
398,586 |
|
|
|
395,913 |
|
Professional
and Training
|
|
|
82,382 |
|
|
|
92,963 |
|
|
|
79,032 |
|
Corporate
|
|
|
27,674 |
|
|
|
21,594 |
|
|
|
22,367 |
|
Total
Consolidated Assets
|
|
$ |
1,018,356 |
|
|
$ |
844,113 |
|
|
$ |
872,482 |
|
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars
in thousands)
|
|
Additions
to Long-lived Assets:
|
|
|
|
|
|
|
|
|
|
DeVry
University
|
|
$ |
81,236 |
|
|
$ |
26,280 |
|
|
$ |
15,743 |
|
Medical
and Healthcare
|
|
|
9,349 |
|
|
|
12,025 |
|
|
|
8,959 |
|
Professional
and Training
|
|
|
195 |
|
|
|
253 |
|
|
|
2,563 |
|
Total
Consolidated Additions to Long-lived Assets
|
|
$ |
90,780 |
|
|
$ |
38,558 |
|
|
$ |
27,265 |
|
Reconciliation
to Consolidated Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
$ |
62,806 |
|
|
$ |
38,558 |
|
|
$ |
25,265 |
|
Increase
in Capital Assets from Acquisitions
|
|
|
210 |
|
|
|
— |
|
|
|
— |
|
Increase
in Intangible Assets and Goodwill
|
|
|
27,764 |
|
|
|
— |
|
|
|
2,000 |
|
Total
Increase in Consolidated Long-lived Assets
|
|
$ |
90,780 |
|
|
$ |
38,558 |
|
|
$ |
27,265 |
|
Depreciation
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
DeVry
University
|
|
$ |
27,967 |
|
|
$ |
29,799 |
|
|
$ |
32,149 |
|
Medical
and Healthcare
|
|
|
5,662 |
|
|
|
4,739 |
|
|
|
4,028 |
|
Professional
and Training
|
|
|
414 |
|
|
|
453 |
|
|
|
451 |
|
Corporate
|
|
|
765 |
|
|
|
988 |
|
|
|
988 |
|
Total
Consolidated Depreciation
|
|
$ |
34,808 |
|
|
$ |
35,979 |
|
|
$ |
37,616 |
|
Intangible
Asset Amortization Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
DeVry
University
|
|
$ |
1,267 |
|
|
$ |
— |
|
|
$ |
— |
|
Medical
and Healthcare
|
|
|
3,428 |
|
|
|
6,589 |
|
|
|
9,671 |
|
Professional
and Training
|
|
|
231 |
|
|
|
253 |
|
|
|
266 |
|
Total
Consolidated Amortization
|
|
$ |
4,926 |
|
|
$ |
6,842 |
|
|
$ |
9,937 |
|
In
February 2008, DeVry sold its facility located in Houston, Texas, for
approximately $14.5 million in gross proceeds which resulted in a pre-tax gain
of approximately $2.2 million. In connection with the transaction,
DeVry entered into an agreement to lease back approximately 60% of the original
space in the facility. The gain is being recognized ratably as a
reduction to rent expense over the twelve year term of the lease agreement in
the DeVry University reportable segment. In September 2007, DeVry
executed a sale leaseback transaction for its facilities in Seattle, Washington,
and Phoenix, Arizona. In connection with these transactions, DeVry recorded a
pre-tax loss of $4.3 million during the first quarter of fiscal year 2008. This
loss is included in operating income of the DeVry University reportable
segment.
In
September 2007, DeVry exercised the option to purchase its leased facility in
Alpharetta, Georgia. Immediately following the acquisition, DeVry
sold the facility to a different party and executed a leaseback on the entire
facility. In connection with this transaction, DeVry accelerated to
the first quarter of fiscal year 2008, the recognition of approximately $0.6
million of remaining deferred lease credits associated with the original lease.
This income is included in operating income of the DeVry University reportable
segment.
In March
2007, DeVry sold unused land located adjacent to its DeVry University campus in
Tinley Park, Illinois for approximately $1.9 million. In connection with the
sale, DeVry recorded a pre-tax gain of approximately $0.9 million during the
third quarter of fiscal year 2007. In September 2006, DeVry sold its
facility located in West Hills, California. In connection with the
sale, DeVry recorded a pre-tax gain of $19.9 million during the first quarter of
fiscal year 2007. These gains are included in operating income of the DeVry
University reportable segment.
DeVry
conducts its educational operations in the United States, Canada, the Caribbean
countries of Dominica and St. Kitts/Nevis, Europe, the Middle East and the
Pacific Rim. Other international revenues, which are derived principally from
Canada, were less than 5% of total revenues for the years ended June 30, 2008,
2007 and 2006. Revenues and long-lived assets by geographic area are as
follows:
|
|
For the Year Ended
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(Dollars
in thousands)
|
|
Revenues
from Unaffiliated Customers:
|
|
|
|
|
|
|
|
|
|
Domestic
Operations
|
|
$ |
937,902 |
|
|
$ |
798,371 |
|
|
$ |
724,975 |
|
International
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominica
and St. Kitts/Nevis
|
|
|
142,762 |
|
|
|
123,544 |
|
|
|
103,184 |
|
Other
|
|
|
11,169 |
|
|
|
11,558 |
|
|
|
11,354 |
|
Total
International
|
|
|
153,931 |
|
|
|
135,102 |
|
|
|
114,538 |
|
Consolidated
|
|
$ |
1,091,833 |
|
|
$ |
933,473 |
|
|
$ |
839,513 |
|
Long-lived
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
Operations
|
|
$ |
380,560 |
|
|
$ |
315,758 |
|
|
$ |
337,514 |
|
International
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominica
and St. Kitts/Nevis
|
|
|
311,833 |
|
|
|
309,046 |
|
|
|
306,628 |
|
Other
|
|
|
375 |
|
|
|
324 |
|
|
|
267 |
|
Total
International
|
|
|
312,208 |
|
|
|
309,370 |
|
|
|
306,895 |
|
Consolidated
|
|
$ |
692,768 |
|
|
$ |
625,128 |
|
|
$ |
644,409 |
|
No one
customer accounted for more than 10% of DeVry’s consolidated
revenues.
NOTE
15: RELATED PARTIES
Until
November 2005, one of the DeVry’s directors was also an investor in, and a
director of, a consulting firm engaged by DeVry to assist with system
development projects, including the new student information system. There were
no fees paid to this consulting firm in fiscal years 2008, 2007 and
2006.
NOTE
16: SUBSEQUENT EVENTS
On July
30, 2008, DeVry Inc. (the “Company”) entered into an agreement with William
Blair Capital Partners VII QP, L.P., ClearLight Partners, LLC, and the
stockholders and optionholders of U.S. Education Corporation (“USEC”) to acquire
USEC. USEC is the privately held holding company for Apollo College
and Western Career College. Apollo College and Western Career
College, based in Mission Viejo, California, prepare students for careers in
health care through certificate and associate degree programs in such fields as
nursing, biotechnology, medical and dental assisting, dental hygiene,
respiratory therapy, pharmacy tech, lab tech, physical therapy tech and vet
tech.
The
purchase price is $290 million in cash, payable at closing and is subject to
adjustment for working capital and other items. The Company intends
to finance the transaction through a combination of cash and debt, with the
Company utilizing its existing credit facility and potentially borrowing against
its holdings of auction rate securities. The transaction is
structured as a purchase of approximately 99% of the common stock and all of the
preferred stock of USEC and a “short-form” merger under the Delaware General
Corporation Law to acquire the remaining shares of USEC that are held by a
minority stockholder. The agreement contains customary
representations, warranties, covenants and conditions, as well as
indemnification provisions subject to specified limitations and an
indemnification provision in favor of the Company, which is not subject to any
limitations, relating to claims made by the minority stockholder as a result of
the consummation of the transaction. The transaction is subject to
regulatory approvals, including the expiration or termination of the applicable
waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976,
various state and federal educational accreditations, and other customary
closing conditions and is expected to close in the first quarter of fiscal year
2009. The agreement is subject to termination if the transaction is
not completed by October 31, 2008.
NOTE
17: QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized
unaudited quarterly data for the years ended June 30, 2008 and 2007, are as
follows.
|
|
Quarter
|
|
|
Total
|
|
2008
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Year
|
|
|
|
(Dollars
in thousands, except for per share amounts)
|
|
Revenues
|
|
$ |
250,318 |
|
|
$ |
273,737 |
|
|
$ |
290,973 |
|
|
$ |
276,805 |
|
|
$ |
1,091,833 |
|
Operating
Profit
|
|
|
33,902 |
|
|
|
46,933 |
|
|
|
50,551 |
|
|
|
30,949 |
|
|
|
162,335 |
|
Net
Income
|
|
|
26,835 |
|
|
|
35,813 |
|
|
|
38,318 |
|
|
|
24,566 |
|
|
|
125,532 |
|
Earnings
per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.38 |
|
|
|
0.50 |
|
|
|
0.54 |
|
|
|
0.34 |
|
|
|
1.76 |
|
Diluted
|
|
|
0.37 |
|
|
|
0.49 |
|
|
|
0.53 |
|
|
|
0.34 |
|
|
|
1.73 |
|
Cash
Dividend Declared per Common Share
|
|
|
— |
|
|
|
0.06 |
|
|
|
— |
|
|
|
0.06 |
|
|
|
0.12 |
|
|
|
Quarter
|
|
|
Total
|
|
2007
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Year
|
|
Revenues
|
|
$ |
219,215 |
|
|
$ |
235,604 |
|
|
$ |
245,825 |
|
|
$ |
232,829 |
|
|
$ |
933,473 |
|
Operating
Profit
|
|
|
32,968 |
|
|
|
21,786 |
|
|
|
29,587 |
|
|
|
17,946 |
|
|
|
102,287 |
|
Net
Income
|
|
|
20,920 |
|
|
|
16,397 |
|
|
|
22,924 |
|
|
|
15,947 |
|
|
|
76,188 |
|
Earnings
per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.30 |
|
|
|
0.23 |
|
|
|
0.32 |
|
|
|
0.22 |
|
|
|
1.07 |
|
Diluted
|
|
|
0.29 |
|
|
|
0.23 |
|
|
|
0.32 |
|
|
|
0.22 |
|
|
|
1.07 |
|
Cash
Dividend Declared per Common Share
|
|
|
— |
|
|
|
0.05 |
|
|
|
— |
|
|
|
0.05 |
|
|
|
0.10 |
|
In
September 2007, DeVry executed a sale leaseback transaction for its facilities
in Seattle, Washington, and Phoenix, Arizona. In connection with these
transactions, DeVry recorded a pre-tax loss of $4.3 million during the first
quarter of fiscal year 2008. Also in September 2007, DeVry exercised
the option to purchase its leased facility in Alpharetta,
Georgia. Immediately following the acquisition, DeVry sold the
facility to a different party and executed a leaseback on the entire
facility. In connection with this transaction, DeVry accelerated to
the first quarter of fiscal year 2008, the recognition of approximately $0.6
million of remaining deferred lease credits associated with the original
lease.
In
September 2006, DeVry sold its facility located in West Hills,
California. In connection with the sale, DeVry recorded a pre-tax
gain of $19.9 million during the first quarter of fiscal year
2007. In March 2007, DeVry sold unused land adjacent to its campus in
Tinley Park, Illinois. In connection with the sale, DeVry recorded a
pre-tax gain of approximately $0.9 million during the third quarter of fiscal
year 2007. Also in the third and fourth quarters of fiscal 2007,
DeVry recorded pre-tax charges totaling $1.2 million and $5.1 million,
respectively, for separation plan severance expense.
DEVRY
INC.
SCHEDULE
II
VALUATION
AND QUALIFYING ACCOUNTS AND RESERVES
For
the Years Ended June 30, 2008, 2007 and 2006
Description of
Allowances and Reserves
|
|
Balance
at Beginning of
Period
|
|
|
Charged
to Costs and Expenses
|
|
|
Charged
to Other Accounts (a)
|
|
|
Deductions
(b)
|
|
|
Balance
at End of Period
|
|
|
|
(Dollars
in thousands)
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted
from accounts receivable for refunds
|
|
$ |
937 |
|
|
$ |
26,067 |
|
|
$ |
1 |
|
|
$ |
26,257 |
|
|
$ |
748 |
|
Deducted
from accounts receivable for uncollectible accounts
|
|
|
34,952 |
|
|
|
24,769 |
|
|
|
16 |
|
|
|
24,605 |
|
|
|
35,132 |
|
Deducted
from notes receivable for uncollectible notes
|
|
|
4,519 |
|
|
|
1,121 |
|
|
|
22 |
|
|
|
292 |
|
|
|
5,370 |
|
Deducted
from contributions to Perkins loan program for uncollectible
loans
|
|
|
2,562 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,562 |
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted
from accounts receivable for refunds
|
|
$ |
1,306 |
|
|
$ |
24,904 |
|
|
$ |
1 |
|
|
$ |
25,274 |
|
|
$ |
937 |
|
Deducted
from accounts receivable for uncollectible accounts
|
|
|
35,276 |
|
|
|
25,041 |
|
|
|
16 |
|
|
|
25,381 |
|
|
|
34,952 |
|
Deducted
from notes receivable for uncollectible notes
|
|
|
3,158 |
|
|
|
1,338 |
|
|
|
23 |
|
|
|
— |
|
|
|
4,519 |
|
Deducted
from contributions to Perkins loan program for uncollectible
loans
|
|
|
2,562 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,562 |
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted
from accounts receivable for refunds
|
|
$ |
348 |
|
|
$ |
23,407 |
|
|
$ |
2 |
|
|
$ |
22,451 |
|
|
$ |
1,306 |
|
Deducted
from accounts receivable for uncollectible accounts
|
|
|
28,740 |
|
|
|
23,774 |
|
|
|
36 |
|
|
|
17,274 |
|
|
|
35,276 |
|
Deducted
from notes receivable for uncollectible notes
|
|
|
2,969 |
|
|
|
147 |
|
|
|
42 |
|
|
|
— |
|
|
|
3,158 |
|
Deducted
from contributions to Perkins loan program for uncollectible
loans
|
|
|
2,722 |
|
|
|
(160 |
) |
|
|
— |
|
|
|
— |
|
|
|
2,562 |
|
____________
(a)
|
Effect
of foreign currency translation charged to Accumulated Other Comprehensive
Income.
|
(b)
|
Write-offs
of uncollectible amounts.
|
Report
of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of DeVry Inc.:
In our
opinion, the consolidated financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of DeVry Inc.
and its subsidiaries at June 30, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2008 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. Also in our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of June 30, 2008, based on criteria
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The
Company's management is responsible for these financial statements and financial
statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in Management's Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on these financial statements, on the financial statement
schedule, and on the Company's internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of
internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
As
discussed in Notes 3 and 9 to the financial statements, the Company changed the
manner in which it accounts for stock-based compensation in 2006 and for
uncertain tax positions in 2008.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/
PRICEWATERHOUSECOOPERS LLP
Chicago,
Illinois
August
27, 2008
PART III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
The
information called for by Item 10 relating to Directors and Nominees for
election to the Board of Directors is incorporated by reference to DeVry’s
definitive Proxy Statement to be filed in connection with the solicitation of
proxies for the Annual Meeting of Stockholders to be held November 13, 2008 (the
“Proxy Statement”). The information called for by Item 10 with respect to
Executive Officers is set forth at the end of Part I of this Annual Report on
Form 10-K.
The
information called for by Item 10 with respect to Regulation S-K, Item 405
disclosure of delinquent Form 3, 4 or 5 filers is incorporated by reference to
the Proxy Statement.
In
accordance with the information called for by Item 10 relating to Regulation
S-K, Item 406 disclosures about DeVry’s Code of Business Conduct and Ethics,
DeVry has a Code of Conduct and Ethics which applies to its directors, officers
(including the Chief Executive Officer, the Chief Financial Officer and the
Controller), and all other employees. The full text of the Code is
available on DeVry’s website. DeVry intends to satisfy the
requirements of the Securities and Exchange Commission regarding amendments to,
or waivers from, the Code by posting such information on its
website. To-date, there have been no waivers from the
Code.
The
information called for by Item 10 relating to Regulation S-K, Item 407(c)(3)
disclosure of procedures by which security holders may recommend nominees to
DeVry’s board of directors is incorporated by reference to the Proxy
Statement. The information called for by Item 10 relating to
Regulation S-K, Item 407(d)(4) and (d)(5) disclosure of the DeVry’s audit
committee financial experts and identification of the DeVry’s audit committee is
incorporated by reference to the Proxy Statement.
The
annual Chief Executive Officer certification to the New York Stock Exchange
(“NYSE”) following the Annual Meeting of Stockholders in November 2007 was
submitted pursuant to the NYSE Listed Company Manual (Section 303A) stating that
the CEO was unaware of any violation by DeVry of the NYSE’s corporate governance
listing standards as of the date of the certification.
The
information called for by Item 11 is incorporated by reference to the Proxy
Statement (as defined in Item 10).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The
information called for by Item 12 is incorporated by reference to the Proxy
Statement (as defined in Item 10).
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The
information called for by Item 13 is incorporated by reference to the Proxy
Statement (as defined in Item 10).
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
information called for by Item 14 is incorporated by reference to the Proxy
Statement (as defined in Item 10).
PART IV
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
(a) The following documents are filed
as part of this report:
The
required financial statements of DeVry and its subsidiaries are included in Part
II, Item 8, on pages 62 through 89 of this Annual Report on Form
10-K.
The
required supplemental schedule of DeVry and its subsidiaries is included in Part
II, Item 8 on page 88 of this Annual Report on Form 10-K.
A
complete listing of exhibits is included on pages 93 through 94 of this Annual
Report on Form 10-K.
FIVE-YEAR
SUMMARY — OPERATING, FINANCIAL AND OTHER DATA
Year Ended June
30,
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Dollars
in thousands except for per share amounts)
|
|
OPERATING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
1,091,833 |
|
|
$ |
933,473 |
|
|
$ |
839,513 |
|
|
$ |
780,662 |
|
|
$ |
784,719 |
|
Depreciation
|
|
|
34,808 |
|
|
|
35,979 |
|
|
|
37,616 |
|
|
|
42,353 |
|
|
|
40,836 |
|
Amortization
of Intangible Assets and Other
|
|
|
5,066 |
|
|
|
8,028 |
|
|
|
10,492 |
|
|
|
15,213 |
|
|
|
14,748 |
|
Interest
Income
|
|
|
10,463 |
|
|
|
7,437 |
|
|
|
3,785 |
|
|
|
642 |
|
|
|
166 |
|
Interest
Expense
|
|
|
522 |
|
|
|
4,784 |
|
|
|
10,190 |
|
|
|
9,047 |
|
|
|
7,834 |
|
Income
Before Cumulative Effect of Change in Accounting
|
|
|
125,532 |
|
|
|
76,188 |
|
|
|
43,053 |
|
|
|
16,201 |
|
|
|
52,357 |
|
Net
Income
|
|
|
125,532 |
|
|
|
76,188 |
|
|
|
43,053 |
|
|
|
18,011 |
|
|
|
52,357 |
|
Diluted
Earnings per Common Share (EPS) — Income Before Cumulative Effect of
Change in Accounting
|
|
|
1.73 |
|
|
|
1.07 |
|
|
|
0.61 |
|
|
|
0.24 |
|
|
|
0.74 |
|
Diluted
Earnings per Common Share (EPS) — Net Income
|
|
|
1.73 |
|
|
|
1.07 |
|
|
|
0.61 |
|
|
|
0.26 |
|
|
|
0.74 |
|
Shares
Used in Calculating Diluted EPS (in Thousands)
|
|
|
72,406 |
|
|
|
71,400 |
|
|
|
70,880 |
|
|
|
70,591 |
|
|
|
70,757 |
|
Cash
Dividends Declared Per Common Share
|
|
|
0.12 |
|
|
|
0.10 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
FINANCIAL
POSITION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
|
217,199 |
|
|
|
129,155 |
|
|
|
130,583 |
|
|
|
161,823 |
|
|
|
146,227 |
|
Total
Assets
|
|
|
1,018,356 |
|
|
|
844,113 |
|
|
|
872,482 |
|
|
|
910,035 |
|
|
|
884,132 |
|
Total
Funded Debt
|
|
|
-- |
|
|
|
-- |
|
|
|
125,000 |
|
|
|
225,000 |
|
|
|
250,000 |
|
Total
Shareholders’ Equity
|
|
|
755,989 |
|
|
|
641,966 |
|
|
|
564,607 |
|
|
|
513,383 |
|
|
|
481,899 |
|
OTHER
SELECTED DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Provided by Operating Activities
|
|
|
198,646 |
|
|
|
125,176 |
|
|
|
90,822 |
|
|
|
86,977 |
|
|
|
133,956 |
|
Capital
Expenditures
|
|
|
62,806 |
|
|
|
38,558 |
|
|
|
25,265 |
|
|
|
42,909 |
|
|
|
42,808 |
|
Shares
Outstanding at Year-end (in Thousands)
|
|
|
71,377 |
|
|
|
71,131 |
|
|
|
70,757 |
|
|
|
70,475 |
|
|
|
70,331 |
|
Closing
Price of Common Stock at Year-end
|
|
|
53.62 |
|
|
|
34.02 |
|
|
|
21.97 |
|
|
|
19.90 |
|
|
|
27.42 |
|
Price
Earnings Ratio on Common Stock(1)
|
|
|
31 |
|
|
|
32 |
|
|
|
36 |
|
|
|
77 |
|
|
|
37 |
|
____________
(1)
|
Computed
on trailing four quarters of earnings per common
share.
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
DeVry
Inc.
|
|
|
|
Date:
August 27, 2008
|
|
|
|
By
|
/s/ Daniel M.
Hamburger
|
|
|
Daniel
M. Hamburger
|
|
|
Chief
Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature
|
Title
|
Date
|
|
|
|
/s/ Dennis J.
Keller
|
Board
Chair and Director
|
August
27, 2008
|
Dennis
J. Keller
|
|
|
|
|
|
/s/ Daniel M.
Hamburger
|
Chief
Executive Officer and Director
|
August
27, 2008
|
Daniel
M. Hamburger
|
|
|
|
|
|
/s/ Richard M.
Gunst
|
Senior
Vice President, Chief Financial
|
August
27, 2008
|
Richard
M. Gunst
|
Officer,
and Principal Accounting Officer
|
|
|
|
|
/s/ Ronald L.
Taylor
|
Director
|
August
27, 2008
|
Ronald
L. Taylor
|
|
|
|
|
|
/s/ Charles A.
Bowsher
|
Director
|
August
27, 2008
|
Charles
A. Bowsher
|
|
|
|
|
|
/s/ David S.
Brown
|
Director
|
August
27, 2008
|
David
S. Brown
|
|
|
|
|
|
/s/ Connie R.
Curran
|
Director
|
August
27, 2008
|
Connie
R. Curran
|
|
|
|
|
|
/s/ William T.
Keevan
|
Director
|
August
27, 2008
|
William
T. Keevan
|
|
|
|
|
|
/s/ Frederick A.
Krehbiel
|
Director
|
August
27, 2008
|
Frederick
A. Krehbiel
|
|
|
|
|
|
/s/ Lyle Logan
|
Director
|
August
27, 2008
|
Lyle
Logan
|
|
|
|
|
|
/s/ Robert C.
McCormack
|
Director
|
August
27, 2008
|
Robert
C. McCormack
|
|
|
|
|
|
/s/ Julie A.
McGee
|
Director
|
August
27, 2008
|
Julie
A. McGee
|
|
|
|
|
|
/s/ Fernando
Ruiz
|
Director
|
August
27, 2008
|
Fernando
Ruiz
|
|
|
|
|
|
/s/ Harold T.
Shapiro
|
Director
|
August
27, 2008
|
Harold
T. Shapiro
|
|
|
INDEX TO
EXHIBITS
Exhibit
Number
|
|
Exhibit
|
|
Sequentially
Numbered Page
|
|
Incorporated by Reference
to:
|
2(a)
|
|
Stock
Purchase Agreement and amendments regarding purchase of Dominica
Management, Inc. dated as of March 19, 2003
|
|
|
|
Exhibit
2 to the Company’s Form 8-K filed May 23, 2003 (File No.
1-13988)
|
|
|
|
|
|
|
|
2(b)
|
|
Stock
Purchase Agreement regarding purchase of U.S. Education Corporation, dated
as of July 30, 2008
|
|
|
|
Exhibit
2.1 to the Company’s Form 8-K filed August 1, 2008 (File No.
1-13988)
|
|
|
|
|
|
|
|
3(a)
|
|
Restated
Certificate of Incorporation of the Registrant
|
|
|
|
Exhibit
4.1 to the Company’s Form S-8, 333-130604 dated December 22,
2005
|
|
|
|
|
|
|
|
3(b)
|
|
Amended
and Restated By-Laws of the Registrant
|
|
|
|
Exhibit
3.1 to the Company’s Form 8-K dated June 29, 2008
|
|
|
|
|
|
|
|
4(a)
|
|
Credit
Agreement, dated as of May 16, 2003, between DeVry Inc. and Global
Education International, Inc. as borrowers, and certain financial
institutions and Bank of America, N.A. as lenders
|
|
|
|
Exhibits
4.1, 4.2 and 4.3 to the Company’s Form 8-K filed June 2, 2003 (File No.
1-13988)
|
|
|
|
|
|
|
|
4(b)
|
|
Note
Purchase Agreement, dated as of May 16, 2003, between DeVry Inc. and
Global Education International, Inc. as borrowers, and certain financial
institutions as lenders
|
|
|
|
Exhibits
4.4 and 4.5 to the Company’s Form 8-K filed on June 2, 2003 (File No.
1-13988)
|
|
|
|
|
|
|
|
4(c)
|
|
Waiver
to Credit Agreement dated as of June 9, 2004, between DeVry Inc. and
Global Education International, Inc. as borrowers and certain financial
institutions and Bank of America, N.A. as lenders
|
|
|
|
Exhibit
4(c) to the Company’s Form 10-K for the year ended June 30,
2004
|
|
|
|
|
|
|
|
4(d)
|
|
First
Amendment, dated as of June 29, 2004 to Credit Agreement between DeVry
Inc. and Global Education International, Inc. as borrowers and certain
financial institutions and Bank of America, N.A. as
lenders
|
|
|
|
Exhibit
4(d) to the Company’s Form 10-K for the year ended June 30,
2004
|
|
|
|
|
|
|
|
4(e)
|
|
Second
Amendment, dated as of September 30, 2005 to Credit Agreement between
DeVry Inc. and Global Education International, Inc. as borrowers and
certain financial institutions and Bank of America, N.A. as
lenders
|
|
|
|
Exhibit
4 to the Company’s Form 10-Q dated November 9, 2005
|
|
|
|
|
|
|
|
4(f)
|
|
Third
Amendment, dated as of January 11, 2007 to Credit Agreement between DeVry
Inc. and Global Education International, Inc. as borrowers and certain
financial institutions and Bank of America, N.A. as
lenders
|
|
|
|
Exhibit
4.1 to the Company’s 8-K dated January 11, 2007
|
|
|
|
|
|
|
|
10(a)
|
|
Registrant’s
Amended and Restated Stock Incentive Plan
|
|
|
|
Exhibit
10.1 to the Company’s Form S-3, File No. 333-22457 dated
February 27, 1997
|
|
|
|
|
|
|
|
10(b)
|
|
Registrant’s
1991 Stock Incentive Plan
|
|
|
|
Exhibit
10.3 to the Company’s Form S-3, File No. 333-22457 dated February 27,
1997
|
|
|
|
|
|
|
|
10(c)
|
|
Registrant’s
1994 Stock Incentive Plan
|
|
|
|
Exhibit
10.2 to the Company’s Form S-3, File No. 333-22457 dated February 27,
1997
|
|
|
|
|
|
|
|
10(d)
|
|
Registrant’s
1999 Stock Incentive Plan
|
|
|
|
Exhibit
10(d) to the Company’s Form 10-K for the year ended June 30, 2000 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(e)
|
|
Amended
and Restated DeVry Inc. 1999 Stock Incentive Plan
|
|
|
|
Exhibit
10(e) to the Company’s Form 10-K for the year ended June 30, 2002 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(f)
|
|
Registrant’s
2003 Stock Incentive Plan
|
|
|
|
Exhibit
A to the Company’s definitive Proxy Statement for the Annual Meeting of
Shareholders on November 18, 2003
|
|
|
|
|
|
|
|
10(g)
|
|
Registrant’s
2005 Incentive Plan
|
|
|
|
Appendix
B to the definitive Proxy Statement in connection with the Annual Meeting
of Stockholders on November 9, 2005
|
|
|
|
|
|
|
|
10(h)
|
|
Registrant’s
Amended 2005 Incentive Plan
|
|
|
|
Exhibit
to the Company’s Form 10-K for the year ended June 30,
2006
|
Exhibit
Number
|
|
Exhibit
|
|
Sequentially
Numbered Page
|
|
Incorporated
by Reference to:
|
10(i)
|
|
DeVry
Inc. Amended and Restated Profit Sharing Retirement Plan dated effective
as of July 1, 1992
|
|
|
|
Exhibit
10(d) to the Company’s Form 10-K for the year ended June 30, 1996 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(j)
|
|
First
Amendment to DeVry Inc. Amended and Restated Profit Sharing Retirement
Plan
|
|
|
|
Exhibit
10(e) to the Company’s Form 10-K for the year ended June 30, 1996 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(k)
|
|
Amendment
to DeVry Inc. Amended and Restated Profit Sharing Retirement
Plan
|
|
|
|
Exhibit
10(f) to the Company’s Form 10-K for the year ended June 30, 1997 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(l)
|
|
Amendment
to DeVry Inc. Amended and Restated Profit Sharing Retirement
Plan
|
|
|
|
Exhibit
10(g) to the Company’s Form 10-K for the year ended June 30, 1997 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(m)
|
|
Amendment
to DeVry Inc. Amended and Restated Profit Sharing Retirement
Plan
|
|
|
|
Exhibit
10(h) to the Company’s Form 10-K for the year ended June 30, 1997 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(n)
|
|
Employee
Stock Purchase Plan
|
|
|
|
Exhibit
10(f) to the Company’s Form S-3, File No. 33-58636 dated February 22,
1993
|
|
|
|
|
|
|
|
10(o)
|
|
First
Amendment to Employee Stock Purchase Plan
|
|
|
|
Exhibit
10(h) to the Company’s Form 10-K for the year ended June 30, 1994 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(p)
|
|
Amended
and Restated Employee Stock Purchase Plan
|
|
|
|
Appendix
A to the definitive Proxy Statement in connection with the Annual Meeting
of Stockholders on November 9, 2005
|
|
|
|
|
|
|
|
10(q)
|
|
Deferred
Compensation Plan
|
|
|
|
Exhibit
10(k) to the Company’s Form 10-K for the year ended June 30, 1999 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(r)
|
|
Form
of Indemnification Agreement between the Registrant and its
Directors
|
|
|
|
Exhibit
10(n) to the Company’s Form 10-K for the year ended June 30, 2003 (File
No. 1-13988)
|
|
|
|
|
|
|
|
10(s)
|
|
Letter
Agreement between the Registrant and
Dennis
J. Keller dated November 2, 2004
|
|
|
|
Exhibit
10.2 to the Company’s Form 8-K dated August 9, 2005
|
|
|
|
|
|
|
|
10(t)
|
|
Letter
Agreement between the Registrant and
Dennis
J. Keller dated August 9, 2005
|
|
|
|
Exhibit
10.3 to the Company’s Form 8-K dated August 9, 2005
|
|
|
|
|
|
|
|
10(u)
|
|
Employment
Agreements between the Registrant and each of Dennis J. Keller and Ronald
L. Taylor
|
|
|
|
Exhibit
10(a) to the Company’s Form 10-Q for the quarter ended December 31, 2002
(File No. 1-13988)
|
|
|
|
|
|
|
|
10(v)
|
|
Senior
Advisor Agreements between the Registrant and each of Dennis J. Keller and
Ronald L. Taylor
|
|
|
|
Exhibit
10(b) to the Company’s Form 10-Q for the quarter ended December 31, 2002
(File No. 1-13988)
|
|
|
|
|
|
|
|
10(w)
|
|
Letter
Agreement between the Registrant and Ronald L. Taylor, CEO, dated August
15, 2006
|
|
|
|
Exhibit
10.1 to the Company’s Form 8-K dated August 16, 2006
|
|
|
|
|
|
|
|
10(x)
|
|
Employment
Agreement between the Registrant and Daniel M. Hamburger
|
|
|
|
Exhibit
10.1 to the Company’s Form 8-K dated November 21, 2006
|
|
|
|
|
|
|
|
10(y)
|
|
Letter
Agreement between the Registrant and Richard M. Gunst dated July 24,
2006
|
|
|
|
Exhibit
10(y) to the Company’s Form 10-Q for the quarter ended September 30,
2006
|
|
|
|
|
|
|
|
|
|
Subsidiaries
of the Registrant
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
Consent
of PricewaterhouseCoopers LLP, independent registered public accounting
firm
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
Rule
13a-14(a)/15d-14(a) Certifications
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
Section
1350 Certifications
|
|
99
|
|
|
|
|
|
|
|
|
|
99(a)
|
|
Policy
on Pre-Approval of Audit and Permissible Non-Audit
Services
|
|
|
|
Exhibit
99(a) to the Company’s Form 10-K for the quarter ended June 30,
2004
|
|
|
|
|
|
|
|
99(b)
|
|
Director
Nominating Policy
|
|
|
|
Exhibit
99(b) to the Company’s Form 10-K for the year ended June 30,
2004
|
|
|
|
|
|
|
|
99(c)
|
|
Policy
for Shareholder Communication with Directors
|
|
|
|
Exhibit
99(c) to the Company’s Form 10-K for the year ended June 30,
2004
|
|
|
|
|
|
|
|
99(d)
|
|
Amendment
to Policy for Shareholder Communication with Directors
|
|
|
|
Item
8.01 in the Company’s Form 8-K dated March 30,
2006
|
94