e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: June 30, 2010
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-13988
DeVry Inc.
(Exact name of registrant as specified in its charter)
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DELAWARE
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36-3150143 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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3005 HIGHLAND PARKWAY |
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DOWNERS GROVE, ILLINOIS
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60515 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number; including area code:
(630) 515-7700
Securities registered pursuant to section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered: |
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Common Stock $0.01 Par Value
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NYSE, CSE |
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 þ No o
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 o No þ
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such
files). Yes o No o
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 registrants
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. o
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.
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Large accelerated filer þ |
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Accelerated filer o |
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Non-accelerated filer o (Do not check if a smaller reporting company) |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
State the aggregate market value of the voting and non-voting common equity held by
nonaffiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the last business day of the Registrants
most recently completed second fiscal quarter. Shares of common stock held directly or controlled
by each director and executive officer have been excluded.
December 31, 2009 $3,965,876,075
Indicate the number of shares outstanding of each of the registrants classes of common stock,
as of the latest practicable date.
August 17, 2010 70,738,000 shares of Common Stock, $0.01 par value
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrants definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on November 10, 2010, are incorporated into Part III of this Form 10-K to
the extent stated herein.
DeVry Inc.
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED JUNE 30, 2010
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Certain statements contained in this annual report on Form 10-K, including those that affect
DeVrys 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 DeVrys results are
described more fully in Item 1A, Risk Factors and in the subsections of Item 1 Business
entitled Competition, Student Admissions, 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. BUSINESS
OVERVIEW OF DEVRY INC.
DeVry Inc. (DeVry) is a global provider of educational services and the parent organization
of Advanced Academics, Becker Professional Education, Carrington College and Carrington College
California, Chamberlain College of Nursing, DeVry Brasil, DeVry University, and Ross University.
These institutions offer a wide array of programs in business, healthcare and technology and serve
students in middle school through postsecondary education as well as accounting and finance
professionals. DeVrys purpose is to empower its students to achieve their educational and career
goals.
DeVry Inc. is incorporated under the laws of the State of Delaware. DeVrys executive offices
are located at 3005 Highland Parkway, Downers Grove, Illinois, 60515, and the telephone number is
(630) 515-7700. DeVry refers to DeVry Inc. alone or with its wholly owned subsidiaries, as the
context requires. When this report uses the words we or our, it refers to DeVry and its
subsidiaries unless the context otherwise requires.
Vision and Strategy
DeVrys vision is to become a leading global provider of career-oriented educational services.
DeVry will create value for society and all of its stakeholders by offering superior, responsive
educational programs that are supported by exceptional services to its students, and delivered with
integrity and accountability. In achieving this vision, DeVry is proud to play a vital role in
expanding access to higher education along with other schools in the public and private sectors.
To attain this vision, DeVry will achieve superior student outcomes by providing high quality
education and student services, continue to grow into new program areas, levels and geographies;
and build high-quality brands and infrastructure to compete in an increasingly competitive market.
DeVrys Educational Institutions
DeVry University, founded by Dr. Herman DeVry in 1931, provides high-quality, career-oriented
associate, bachelors and masters degree programs in technology; science; business and the arts.
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
Universitys Keller Graduate School of Management. DeVry University comprises DeVrys Business,
Technology and Management segment.
Ross University, which was founded in 1978, is one of the worlds largest providers of medical
and veterinary medical education. Ross University comprises Ross University School of Medicine,
located in the Caribbean country of Dominica with a location in Freeport, Grand Bahama, 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 associate, bachelors, masters and degree
completion programs in nursing at its seven campuses in the United States and online.
Carrington Colleges Group, Inc., (Carrington) comprised of Carrington College, formerly
Apollo College founded in 1976, and Carrington College California, formerly Western Career College
founded in 1967, prepare students for careers in healthcare
3
through certificate, associate and bachelors degree programs. DeVry acquired the parent
organization of these schools in September 2008. Ross University, Chamberlain and Carrington
comprise DeVrys Medical and Healthcare segment.
Becker Professional Education, founded in 1957 as the Becker CPA review and acquired by DeVry
in 1996, prepares candidates for the Certified Public Accountant (CPA) examination, Chartered
Financial Analyst (CFA) professional certification examinations, and the Project Management
Professional (PMP) certification examination. It also offers continuing professional education
programs and seminars in accounting and finance. Classes are taught in nearly 300 locations,
including sites in 40 foreign countries and DeVry University teaching sites. Becker Professional
Education comprises DeVrys Professional Education segment.
Advanced Academics, founded in 2000, partners with schools and districts throughout the United
States to deliver customizable online learning solutions for middle and high school education.
DeVry acquired Advanced Academics in October 2007.
DeVry Brasil, based in Fortaleza, Ceará, Brazil, is comprised of three colleges: Fanor, Ruy
Barbosa and ÁREA1. These institutions operate five campus locations in the cities of Salvador and
Fortaleza, and offer undergraduate and graduate programs focused in business management, law and
engineering. DeVry acquired a majority ownership in these schools on April 1, 2009. With Advanced
Academics, DeVry Brasil comprises DeVrys Other Educational Services segment.
Student enrollments in DeVrys U.S. degree granting programs, including DeVry University, Ross
University and Chamberlain College of Nursing, follow. Student enrollments in Carringtons degree
and certificate granting programs are included beginning with fall 2008.
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Percent of Enrollment by Degree |
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Percent of Enrollment by Program |
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Fall |
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Fall |
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Fall |
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Fall |
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Fall |
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Fall |
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2007 |
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2008 |
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2009 |
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2007 |
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2008 |
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2009 |
Doctoral |
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6.8 |
% |
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5.1 |
% |
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5.4 |
% |
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Technology |
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30.8 |
% |
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26.1 |
% |
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27.2 |
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Masters |
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21.3 |
% |
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17.2 |
% |
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16.5 |
% |
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Business |
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57.1 |
% |
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46.7 |
% |
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43.0 |
% |
Bachelors |
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61.4 |
% |
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52.0 |
% |
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51.1 |
% |
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Medical and Health |
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12.1 |
% |
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27.2 |
% |
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29.3 |
% |
Associate |
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10.5 |
% |
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14.6 |
% |
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16.0 |
% |
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Other |
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0.0 |
% |
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0.0 |
% |
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0.5 |
% |
Certificate |
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0.0 |
% |
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11.1 |
% |
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11.0 |
% |
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Financial and descriptive information about DeVrys operating segments is presented in
Note 14, Segment Information, to the Consolidated Financial Statements. Unless indicated, or the
context requires otherwise, references to years refer to DeVrys fiscal years then ended.
DEVRY UNIVERSITY
The mission of DeVry University is to foster student learning through high-quality,
career-oriented education integrating technology, science, business and the arts. The university
delivers practitioner-oriented undergraduate and graduate programs onsite and online to meet the
needs of a diverse and geographically dispersed student population.
Curriculum
DeVry Universitys academic structure is organized within five distinguished colleges.
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The College of Business & Management, which includes Keller Graduate School of
Management |
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The College of Engineering & Information Sciences |
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The College of Liberal Arts & Sciences |
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The College of Media Arts & Technology |
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The College of Health Sciences |
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The structure provides flexibility for future curricula and reflects an organization that
is more familiar to students. Degree programs are offered in the following areas. Unless
otherwise noted, all degree programs are also available online.
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College of Liberal Arts & Sciences |
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College of Health Sciences |
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College of Media Arts & Technology |
Graduate Programs |
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Associate Degree Programs |
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Associate Degree Program |
Educational Technology, Masters Degree** |
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Electroneurodiagnostic Technology* |
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Web Graphic Design |
Educational Management, Graduate Certificate |
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Health Information Technology |
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Bachelors Degree Programs |
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Bachelors Degree Program |
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Multimedia Design & Development |
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Clinical Laboratory Science* |
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with specializations in: |
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Graphic & Multimedia Design |
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Graphics & Multimedia Management |
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Web Design & Development |
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Web Game Programming |
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Keller Graduate School of |
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Management (included within |
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The College of Business and |
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College of Engineering |
College of Business and Management |
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Management) |
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& Information Sciences |
Associate Degree Program |
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Masters Degree Programs |
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Associate Degree Programs |
Accounting |
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Accounting & Financial |
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Electronics & Computer Technology |
Bachelors Degree Programs |
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Management |
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Network Systems Administration |
Business Administration |
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Human Resource Management |
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Bachelors Degree Programs |
Management |
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Project Management |
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Biomedical Engineering Technology* |
Technical Management |
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Public Administration |
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Computer Engineering Technology |
Specializations for the bachelors degree programs: |
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Information systems Management |
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Computer Information Systems with specializations in: |
Accounting |
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Network and Communications |
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Business Management |
Business Information Systems |
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Management |
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Computer Forensics |
Criminal Justice |
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Business Administration (MBA) |
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Database Management |
Finance |
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with concentrations in: |
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Enterprise Computing |
General Management |
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Accounting |
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Flex Option |
Health Information Management |
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E-Commerce Management |
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Health Information Systems |
Health Services Management |
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Finance |
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Information Systems Security |
Hospitality Management |
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General Management |
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Systems Analysis & Integration |
Human Resource Management |
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Health Services |
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Web Development & |
Operations Management |
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Hospitality Management |
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Administration |
Project Management |
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Human Resources |
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Web Game Programming |
Sales & Marketing |
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Information Security |
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Electronics Engineering Technology |
Security Management |
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Information Systems |
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Game & Simulation Programming |
Small Business Management |
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Management |
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Network & Communications |
& Entrepreneurship |
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International Business |
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Management |
Technical Communication |
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Marketing |
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Masters Programs |
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Network & Communications |
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Electrical Engineering** |
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Management |
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Information Systems Management |
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Project Management |
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Network & Communications |
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Public Security |
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Management |
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Security Management |
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Graduate Certificates |
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Accounting |
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Business Administration |
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Educational Management |
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E-Commerce Management |
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Entrepreneurship |
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Financial Analysis |
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Health Services Management |
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Human Resource Management |
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Information Security |
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Information Systems |
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Management |
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Network & Communications |
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Management |
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Project Management |
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Wireless Communications |
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* |
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Not available online |
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** |
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Only available online |
5
Students access these degree and certificate programs through a North American system of 95
locations as of June 30, 2010, as well as through DeVry Universitys online delivery platform.
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 Universitys educational offerings and respond to competitive changes in the employment
market.
Some of the more significant developments over the past two years are summarized below.
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In March 2009, DeVry University launched three undergraduate tracks in Computer
Information Systems Health Information Sciences, Web Game Programming and Enterprise
Computing. Enterprise Computing was launched jointly by IBM and DeVry University as a
member of the IBM Academic Initiative program. The IBM Academic Initiative is part of IBMs
commitment to work with leading universities to grow opportunities for enterprise systems
developers and programmers. |
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In July 2009, DeVry University began offering a bachelor of science degree in
Multimedia Design & Development within its College of Media Arts & Technology. This degree
program will prepare students for careers in the areas of multimedia design, web game
development, interactive web site development and multimedia management. |
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In response to the growing demand for business education, in October 2009, DeVry
University introduced a Bachelor of Science in Management (BSM) degree completion program.
The new BSM degree completion program is focused on developing strong general management
skills that graduates can apply to a broad array of supervisory roles in a variety of
different fields and industries. |
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 masters 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.
Kellers 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 Education.
Kellers Master of Project Management program abides by the operational and educational criteria
established by the Project Management Institute (PMI) and has earned the highest level of
accreditation and the elite designation of Global Accreditation Center (GAC). Coursework within
Kellers 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.
6
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 two 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 Universitys online students are adults attracted by the quality,
inherent flexibility and convenience of the program delivery format. We also have many students who
mix and match onsite and online courses to best meet their individual needs and schedules.
DeVry University offers nearly all of its undergraduate and graduate degree programs online.
All of the Keller masters degree programs are offered online.
In addition to our online degree programs, many undergraduate and graduate courses are taught
using an integrated learning system, or blended learning model, that incorporates both onsite and
instructor-guided online activities.
Enrollment Trends
Total undergraduate enrollment in summer 2010 reached a record high of 68,290 students, an
increase of 22.0% compared to 55,979 in the previous summer. There were 21,165 coursetakers for the
July 2010 session in DeVry Universitys graduate programs, including its Keller Graduate School of
Management, representing an increase of 17.6% over the prior year. Coursetaker enrollment in DeVry
University online program offerings in summer 2010 was 70,088, an increase of 24.4% over the prior
year. The term coursetaker refers to the number of courses taken by a student. Thus, one student
taking two courses is counted as two coursetakers.
The following table provides historical enrollment data for DeVry Universitys undergraduate
programs including both onsite and online students.
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Undergraduate New Students |
Fiscal |
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Enrollment |
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% Change Over Prior Year |
Year |
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Summer |
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Fall |
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Spring |
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Summer |
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Fall |
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Spring |
2011 |
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20,935 |
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9.9 |
% |
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2010 |
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19,057 |
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18,878 |
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17,715 |
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14.8 |
% |
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19.4 |
% |
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24.0 |
% |
2009 |
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16,595 |
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15,811 |
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14,288 |
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19.3 |
% |
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19.7 |
% |
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15.1 |
% |
2008 |
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13,906 |
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13,204 |
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12,410 |
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9.7 |
% |
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10.7 |
% |
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12.1 |
% |
2007 |
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12,671 |
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11,930 |
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11,075 |
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12.2 |
% |
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11.9 |
% |
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6.9 |
% |
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Undergraduate Total Students |
Fiscal |
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Enrollment |
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% Change Over Prior Year |
Year |
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Summer |
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Fall |
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Spring |
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Summer |
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Fall |
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Spring |
2011 |
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68,290 |
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22.0 |
% |
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2010 |
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55,979 |
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64,003 |
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66,909 |
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21.9 |
% |
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22.7 |
% |
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25.6 |
% |
2009 |
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45,907 |
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52,146 |
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53,259 |
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12.6 |
% |
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16.9 |
% |
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18.8 |
% |
2008 |
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40,774 |
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44,594 |
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44,814 |
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9.8 |
% |
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10.3 |
% |
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10.3 |
% |
2007 |
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37,132 |
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40,434 |
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40,637 |
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2.5 |
% |
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4.9 |
% |
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5.5 |
% |
7
The following table provides historical coursetaker enrollment for DeVry Universitys graduate
programs including its Keller Graduate School of Management.
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Graduate Coursetakers |
Fiscal Year |
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July |
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September |
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November |
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January |
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March |
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May |
2011 |
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21,165 |
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2010 |
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17,991 |
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20,496 |
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20,734 |
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22,679 |
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22,343 |
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22,103 |
|
2009 |
|
|
16,017 |
|
|
|
17,799 |
|
|
|
17,803 |
|
|
|
19,475 |
|
|
|
19,357 |
|
|
|
18,822 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change Over Prior Year |
Fiscal Year |
|
July |
|
September |
|
November |
|
January |
|
March |
|
May |
2011 |
|
|
17.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
12.3 |
% |
|
|
15.2 |
% |
|
|
16.5 |
% |
|
|
16.5 |
% |
|
|
15.4 |
% |
|
|
17.4 |
% |
2009 |
|
|
14.2 |
% |
|
|
12.2 |
% |
|
|
13.7 |
% |
|
|
12.1 |
% |
|
|
13.8 |
% |
|
|
13.8 |
% |
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 |
% |
The following table provides historical enrollment for DeVry Universitys undergraduate and
graduate online coursetakers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online Coursetakers* |
|
|
Enrollment |
|
% Change Over Prior Year |
Fiscal Year |
|
Summer |
|
Fall |
|
Spring |
|
Summer |
|
Fall |
|
Spring |
2011 |
|
|
70,088 |
|
|
|
|
|
|
|
|
|
|
|
24.4 |
% |
|
|
|
|
|
|
|
|
2010 |
|
|
56,321 |
|
|
|
63,264 |
|
|
|
67,744 |
|
|
|
26.6 |
% |
|
|
22.5 |
% |
|
|
21.5 |
% |
2009 |
|
|
44,503 |
|
|
|
51,628 |
|
|
|
55,745 |
|
|
|
23.6 |
% |
|
|
25.5 |
% |
|
|
27.0 |
% |
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 |
% |
|
|
|
* |
|
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 primarily traditional college-age students; and career-enhancers, who are
primarily working adults.
According to the U.S. Department of Education, between 1998 and 2008, the latest period for
which data is available, enrollment in degree-granting institutions increased by 32%, from 14.5
million to 19.1 million. Much of the enrollment growth was in full-time enrollment; the number of
full-time students rose 37%, while the number of part-time students grew 24%. Enrollment increases
may be affected both by population growth and by rising rates of individuals inspired to attend
college. Between 1998 and 2008, the number of 18- to 24-year olds increased from 26.1 million to
29.8 million, and the percentage of 18- to 24-year olds enrolled in college rose from 37% in 1998
to 40% in 2008.
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
1995 and 2007 enrollment of students under age 25 increased by 38%. Enrollment of persons 25 and
older rose by 14% during the same period. From 2007 to 2018, the National Center for Education
Statistics (NCES) projects a rise of 9% in enrollments of persons under 25, and a rise of 20% 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 a growing recognition of the importance of lifelong learning.
8
The NCES estimates that in 2009 approximately 38.2% of all college students were at least
25 years old. DeVry University believes that more than half of our undergraduate students are at
least 25 years old. Projections indicate that the percentage of this age group attending college
will remain constant at approximately 40% until 2018. The Bureau of Labor Statistics projects that
through 2010, job categories requiring at least some postsecondary education (primarily bachelors
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 2008, the average income of
U.S. employees with a bachelors degree was approximately $50,544 which was nearly 56.4% higher
than the average for those with only a high school education. The wage gap is even larger for those
with graduate degrees.
DeVry Universitys student body is diverse and many come from lower income families, or are
the 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.
Demographic information based on DeVry Universitys fall term enrollments follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Population |
|
Fall 2007 |
|
Fall 2008 |
|
Fall 2009 |
Undergraduate |
|
|
76.6 |
% |
|
|
77.2 |
% |
|
|
77.9 |
% |
Graduate |
|
|
23.4 |
% |
|
|
22.8 |
% |
|
|
22.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Age |
|
Fall 2007 |
|
Fall 2008 |
|
Fall 2009 |
24 and Under |
|
|
33.3 |
% |
|
|
31.1 |
% |
|
|
27.8 |
% |
25 - 39 |
|
|
51.3 |
% |
|
|
52.4 |
% |
|
|
53.3 |
% |
40 and Over |
|
|
15.3 |
% |
|
|
16.4 |
% |
|
|
18.9 |
% |
Unknown |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gender |
|
Fall 2007 |
|
Fall 2008 |
|
Fall 2009 |
Male |
|
|
56.3 |
% |
|
|
54.7 |
% |
|
|
53.9 |
% |
Female |
|
|
43.7 |
% |
|
|
45.3 |
% |
|
|
46.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ethnicity |
|
Fall 2007 |
|
Fall 2008 |
|
Fall 2009 |
White, non-Hispanic |
|
|
42.9 |
% |
|
|
44.5 |
% |
|
|
39.9 |
% |
Black, non-Hispanic |
|
|
29.1 |
% |
|
|
30.7 |
% |
|
|
28.5 |
% |
Hispanic |
|
|
13.2 |
% |
|
|
13.5 |
% |
|
|
14.4 |
% |
Asian / Pacific Islander |
|
|
6.6 |
% |
|
|
6.6 |
% |
|
|
5.3 |
% |
American Indian / Alaska Native |
|
|
0.8 |
% |
|
|
0.8 |
% |
|
|
0.7 |
% |
Non-resident Alien |
|
|
1.7 |
% |
|
|
1.5 |
% |
|
|
1.2 |
% |
Unknown |
|
|
5.7 |
% |
|
|
2.4 |
% |
|
|
9.3 |
% |
MEDICAL AND HEALTHCARE
DeVrys Medical and Healthcare segment includes Ross University, Chamberlain College of
Nursing and Carrington. Under the leadership of the president of DeVrys Medical and Healthcare
Group, a small management team works with each of the three schools in this segment.
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
9
schools had 4,542 students enrolled in the May 2010 semester. Over 7,000 graduates have
received Ross M.D. degrees since 1978; these individuals are practicing in all 50 states. More than
2,400 graduates have received Ross D.V.M. degrees.
Ross medical students complete a four-semester (approximately 16 months) Foundations of
Medicine curriculum in modern classrooms and laboratories at a campus located in Dominica and at a
newly opened clinical facility in Freeport, Grand Bahama. The four semesters are followed by a
one-semester course entitled Advanced Introduction to Clinical Medicine at the Dominica campus, the
Ross clinical 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 complete the
remainder of the 10-semester program by participating in clinical rotations under Ross University
direction, and conducted at nearly 70 affiliated teaching hospitals in the United States.
An element of the growth strategy at Ross University School of Medicine was the development of
a clinical education center in Freeport, Grand Bahama, located 52 miles from Fort Lauderdale. In
January 2009, Ross University School of Medicine began teaching courses at this site. The clinical
site was expected to mitigate capacity constraints at the main campus in Dominica. However, the
projected volume of Ross students studying in Freeport has not been realized due to factors
including an unforeseen delay in the review process in California and caution on the part of
existing students considering Freeport. Four states, including California, require notification
for licensing of clinical studies in their states. Ross notified all such states regarding the
Freeport location, however, California later concluded that the Freeport center would be subject to
a more extensive evaluation process. Management hopes to have a resolution to the Freeport matters
in the coming months. Currently Ross is not teaching students at its Freeport location. These
near-term challenges resulted in lower new student enrollment in the May 2010 semester and will
mean a lower new student enrollment for at least the September 2010 semester. Management remains
confident in Ross long-term opportunities for growth and is executing revised plans to add
capacity in Dominica.
Ross educational program is comparable to the educational programs 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
comparable to 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. At both the Medical and Veterinary schools, students are introduced to clinical
experiences and clinical skills earlier in their respective curriculums.
The following table provides historical enrollment data for Ross University, including both
medical and veterinary school students.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross University New Students |
|
|
Enrollment |
|
% Change Over Prior Year |
Fiscal Year |
|
September |
|
January |
|
May |
|
September |
|
January |
|
May |
2010 |
|
|
666 |
|
|
|
699 |
|
|
|
340 |
|
|
|
9.5 |
% |
|
|
14.4 |
% |
|
|
(39.5 |
%) |
2009 |
|
|
608 |
|
|
|
611 |
|
|
|
562 |
|
|
|
6.3 |
% |
|
|
10.9 |
% |
|
|
16.8 |
% |
2008 |
|
|
572 |
|
|
|
551 |
|
|
|
481 |
|
|
|
(8.9 |
%) |
|
|
11.1 |
% |
|
|
15.6 |
% |
2007 |
|
|
628 |
|
|
|
496 |
|
|
|
416 |
|
|
|
9.2 |
% |
|
|
28.2 |
% |
|
|
(5.2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross University Total Students |
|
|
Enrollment |
|
% Change Over Prior Year |
Fiscal Year |
|
September |
|
January |
|
May |
|
September |
|
January |
|
May |
2010 |
|
|
4,601 |
|
|
|
4,669 |
|
|
|
4,542 |
|
|
|
9.1 |
% |
|
|
8.0 |
% |
|
|
2.1 |
% |
2009 |
|
|
4,219 |
|
|
|
4,323 |
|
|
|
4,448 |
|
|
|
8.8 |
% |
|
|
7.8 |
% |
|
|
9.4 |
% |
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 |
% |
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
10
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
three degrees: Associate of Science in Nursing (ASN), Bachelor of Science in Nursing (BSN), or
Master of Science in Nursing (offered only online). These programs are offered at seven campuses
and/or online. In July 2010, Chamberlain began offering programs in Chicago, Illinois and
Arlington, Virginia; both of these campuses are co-located with DeVry University locations.
Chamberlain had 7,108 students enrolled in the July 2010 semester.
Chamberlains 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 Chamberlains fast track RN to BSN completion program in as few as three
semesters. The ASN program is a six-semester year round program offered onsite or online only from
the Columbus, Ohio location. 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 in Ohio. General education courses are taught through DeVry University.
Chamberlains 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 and other healthcare facilities for
this purpose. In addition, Chamberlain provides robust, hands-on instruction utilizing
high-fidelity human simulators and medical scenarios enacted in a simulated hospital environment.
The online masters degree program offers two specialty tracks: nurse educator and nurse
executive. The program is 72 credit hours and is designed to take approximately two years of
part-time study. Management courses are taught through Keller Graduate School of Management.
The following table provides historical enrollment data for Chamberlain, including both onsite
and online students.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chamberlain College of Nursing New Students |
|
|
Enrollment |
|
% Change Over Prior Year |
Fiscal Year |
|
July |
|
November |
|
March |
|
July |
|
November |
|
March |
2011 |
|
|
2,416 |
|
|
|
|
|
|
|
|
|
|
|
55.1 |
% |
|
|
|
|
|
|
|
|
2010 |
|
|
1,558 |
|
|
|
2,100 |
|
|
|
2,168 |
|
|
|
51.9 |
% |
|
|
55.3 |
% |
|
|
75.4 |
% |
2009 |
|
|
1,026 |
|
|
|
1,352 |
|
|
|
1,236 |
|
|
|
181.9 |
% |
|
|
112.9 |
% |
|
|
72.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chamberlain College of Nursing Total Students |
|
|
Enrollment |
|
% Change Over Prior Year |
Fiscal Year |
|
July |
|
November |
|
March |
|
July |
|
November |
|
March |
2011 |
|
|
7,108 |
|
|
|
|
|
|
|
|
|
|
|
65.2 |
% |
|
|
|
|
|
|
|
|
2010 |
|
|
4,302 |
|
|
|
5,617 |
|
|
|
6,691 |
|
|
|
77.8 |
% |
|
|
67.2 |
% |
|
|
72.2 |
% |
2009 |
|
|
2,419 |
|
|
|
3,360 |
|
|
|
3,885 |
|
|
|
122.1 |
% |
|
|
126.3 |
% |
|
|
113.5 |
% |
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.
Carrington
Carrington, formerly U.S. Education Corporation, was acquired by DeVry in September 2008.
Carrington is the parent organization of Carrington College (formerly Apollo College and founded in
1976) and Carrington College California (formerly Western Career College and founded in 1967). The
parent organization is headquartered in Mission Viejo, California. Carrington prepares students
for careers in healthcare through certificate and associate degree programs. The two colleges
operate 18 campuses in the western United States and offer selected programs online. Currently,
Carrington serves more than 11,000 students.
11
Carrington College and Carrington College California currently offer career specific
certificate or associate degree programs through campus based courses in the following areas:
|
|
|
Medical
|
|
Health & Fitness/Massage |
Diagnostic Medical Sonography
|
|
Fitness Training |
Health Care Administration
|
|
Massage Therapy |
Medical Assisting
|
|
Physical Therapy Technology(1) |
Medical Billing and Coding
|
|
Physical Therapist Assistant(1) |
Medical Laboratory Technology(1)
|
|
Veterinary |
Medical Office Management(1)
|
|
Veterinary Assisting(1) |
Medical Radiography(1)
|
|
Veterinary Technology(2) |
Respiratory Care
|
|
Pharmacy |
Surgical Technology(2)
|
|
Pharmacy Technology |
Nursing
|
|
Criminal Justice |
Practical Nursing(1)
|
|
Criminal Justice(2) |
Registered Nursing
|
|
Graphics |
Vocational Nursing(2)
|
|
Graphics Design(2) |
Dental
|
|
Architectural Design Drafting(2) |
Dental Assisting |
|
|
Dental Hygiene |
|
|
|
|
|
(1) |
|
Offered only at Carrington College |
|
(2) |
|
Offered only at Carrington College California |
Carrington utilizes DeVrys Online Services technology platform, further leveraging DeVrys
high quality systems to improve efficiency while maintaining institutional academic oversight.
In July 2009, Carrington College began offering online bachelors degree completion programs.
Currently, Carrington College offers online bachelors degree programs in Health Care Management
and Respiratory Care. Carrington College California offers online Programs in Accounting,
Business, Criminal Justice, General Studies, Graphic Design, Health Care Administration, Health
Information Technology, and Sales and Marketing.
The following table provides historical enrollment data for Carrington students.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrington New Students |
|
|
Enrollment |
|
% Change Over Prior Year |
Fiscal Year |
|
July |
|
November |
|
March |
|
July |
|
November |
|
March |
2011
|
|
|
4,291 |
|
|
|
|
|
|
|
|
|
|
|
(2.7 |
%) |
|
|
|
|
|
|
|
|
2010
|
|
|
4,411 |
|
|
|
5,688 |
|
|
|
4,218 |
|
|
|
15.4 |
% |
|
|
21.5 |
% |
|
|
(2.4 |
%) |
2009
|
|
|
3,821 |
|
|
|
4,681 |
|
|
|
4,323 |
|
|
|
16.7 |
% |
|
|
17.6 |
% |
|
|
26.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrington Total Students |
|
|
Enrollment |
|
% Change Over Prior Year |
Fiscal Year |
|
July |
|
November |
|
March |
|
July |
|
November |
|
March |
2011 |
|
|
11,234 |
|
|
|
|
|
|
|
|
|
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
2010 |
|
|
10,644 |
|
|
|
11,695 |
|
|
|
12,009 |
|
|
|
17.9 |
% |
|
|
14.8 |
% |
|
|
9.9 |
% |
2009 |
|
|
9,028 |
|
|
|
10,186 |
|
|
|
10,928 |
|
|
|
15.9 |
% |
|
|
19.4 |
% |
|
|
21.8 |
% |
PROFESSIONAL EDUCATION
Becker Professional Education is a global leader in professional education and training,
serving the accounting, finance and project management professions. In July 2009, the organization
adopted a master brand strategy and unified all products and services under one brand, Becker
Professional Education. This change leverages the strength of the Becker brand, emphasizes its
portfolio of products and services, and reflects the commitment to career long learning. The
Stalla Review for the CFA® Exams brand is being transitioned to Becker Professional Education.
12
Becker Professional Educations primary product lines are review courses preparing students to
take the Certified Public Accountant, Chartered Financial Analyst and Project Management
Professional certification examinations as well as continuing professional education and training
programs. Through its CPA and CFA review courses, Becker served more than 50,000 students in fiscal
year 2010. 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. In calendar year 2008 (the latest
period for which data is available) nine of the top 10 Elijah Watt Sells Award winners, individuals
who achieved the highest cumulative scores on the CPA exam, prepared with Becker. For 2007, all 10
of the Elijah Watt Sells Award winners prepared with Becker.
In 2001, DeVry acquired Stalla Seminars, a leading provider of CFA review courses and
materials. With more than three decades of experience helping candidates prepare for their CFA
exams, Stalla by Becker Professional Education 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 with more live class locations than
any other provider. Through its classes, resources and expanding partnerships with firms, local
CFA societies, universities, and other global affiliates, Stalla serves thousands of candidates
every year worldwide.
To better meet the demands of todays busy professionals, Becker Professional Educations
classes are offered in three flexible formats: live, self-study and online. The self-study and
online products are interactive, and offer the same instructor-led lectures and materials available
in the live classroom courses. The online course also provides each student an online instructor
who offers individualized guidance and assistance as needed. For the first six months of fiscal
year 2010, all three formats experienced a decline in orders when compared to the first six months
of the prior fiscal year. However, orders for all three formats experienced growth in the second
six months of fiscal year 2010, large enough to overcome the decline experienced during the first
half of the year.
Based on published exam pass rate statistics supplied by the American Institute of Certified
Public Accountants (AICPA), 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 about one-half of all students passing the CPA exam. At the mandate of the CFA Institute,
the professional association that administers the CFA exam, Stalla by Becker Professional Education
and other CFA preparation providers are prohibited from publicly disclosing pass rate performance.
Becker Professional Education also offers educational and training programs in the fields of
accounting, finance and project management to help individuals and organizations achieve superior
performance through professional development.
Enrollment trends
CPA Exam Review
The Uniform CPA Examination (CPA exam) is prepared and administered by the 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. Despite the turbulent economic times and a decrease in hiring at the
large public accounting firms, the demand for CPAs remains relatively strong and the number of exam
candidates has increased during the past several years.
Review for the CFA® Exam
The CFA program is a graduate-level curriculum and examination program intended to expand a
candidates working knowledge and skills relating to the investment decision-making process. The
curriculum is divided into three successive levels, each of which 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 areas including corporate finance, portfolio management, securities analysis, wealth management,
and ethical and professional standards. Stalla by Becker Professional Educations approach to CFA
exam preparation 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 Professional Education began offering a CFA review course for the Level I 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 II
and Level III examinations. Stalla by Becker Professional Education also offers stand alone CFA
exam study materials and seminars, and its course offerings are also available in flexible online
and self study formats.
13
Nearly 141,000 candidates from 160 countries enrolled for the June 2010 CFA exams, bringing
total enrollments for the two CFA exam cycles in fiscal year 2010 to over 202,000 matching 2009
enrollments. As an indicator of just how global the CFA program has become, of the total
enrollments for fiscal year 2010, 65% of candidates resided outside of North America, with the
majority of international candidates coming from Asia-Pacific, India, Europe and the Middle East.
While strong overall enrollment growth continues, new Level I enrollments in North America have
declined in light of the recent economic and financial sector turmoil.
OTHER EDUCATIONAL SERVICES
Advanced Academics
Advanced Academics Inc. (AAI) is a leading provider of high-quality online education to
middle and high school students. Headquartered in Oklahoma City, Oklahoma, AAI was founded in 2000
and acquired by DeVry on October 31, 2007.
The mission of AAI is to help students graduate and succeed. AAI partners with schools and
districts throughout the United States to deliver customizable online learning solutions that
include Web-based curriculum, highly qualified teachers, a twenty-four hour/seven day per week
support environment, and a proprietary technology platform specifically designed for grades 6 to
12. AAIs strategy is not to replace or complete with schools, but to enable schools to serve more
students.
AAI also operates virtual high schools in six states. Since its inception, AAI has delivered
online learning programs to more than 60,000 students in more than 300 school districts.
DeVry Brasil
DeVry Brasil is a leading provider of private postsecondary education in northeastern Brazil.
Founded in 2001 and based in Fortaleza, Ceará, Brazil, DeVry Brasil is the parent organization of
Faculdades Nordeste (Fanor), Faculdade Ruy Barbosa, and Faculdade FTE ÁREA1. These three
institutions operate five campus locations in the cities of Salvador and Fortaleza, and serve more
than 11,000 students through 28 undergraduate programs focused in business management, law and
engineering.
DeVry completed its acquisition of a majority stake in DeVry Brasil on April 1, 2009, which
further diversified DeVrys curricula and expanded DeVrys international presence.
COMPETITION
DeVry University
The postsecondary education market is highly fragmented and competitive; no single institution
has a significant market share. According to the NCES, there were approximately 6,550 Title IV of
the Higher Education Act (Title IV) eligible postsecondary institutions in the United States as
of the 2007-08 academic year, including approximately 2,730 private, for-profit (private-sector)
schools; approximately 2,000 public schools ( e.g. state institutions and community colleges); and
approximately 1,820 private, not-for-profit (independent) schools. According to the NCES, in 2008
approximately 18.7 million students were attending degree-granting institutions that participate in
the various financial aid programs under Title IV.
In every market in which DeVry University operates, there are numerous state institutions,
community colleges, and independent 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 (by private-sector, publicly-funded and
privately-funded institutions) and site-based private-sector school programs.
Tuition at independent 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
private-sector schools. In fact, many local community colleges offer programs similar in content to
DeVry Universitys 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: it has 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 bachelors degree at DeVry University.
For more information on DeVry University tuition, please read the section entitled Tuition
and Fees.
14
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, DeVry University offers a North
American 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 Universitys online delivery, making these programs available
to all qualified students in all
50 states and internationally 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 Universitys competitive strengths in the market for undergraduate programs include:
|
|
|
Career-oriented curricula developed with employer input to ensure that graduates
learn marketable skills; |
|
|
|
|
Faculty with relevant industry experience; |
|
|
|
|
Well-developed and professionally-staffed undergraduate career service programs; |
|
|
|
|
National name recognition and market presence; |
|
|
|
|
Regional accreditation; |
|
|
|
|
Modern facilities and well-equipped laboratories; |
|
|
|
|
Flexibility and convenience with classes offered at 95 locations and online; |
|
|
|
|
Evening, weekend, and online class schedules; |
|
|
|
|
Year-round academic schedules that permit more flexible attendance and earlier
graduation; |
|
|
|
|
Bachelors 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: and |
|
|
|
|
Small class sizes. |
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 and evening sessions, which help students
maintain part-time or full-time jobs. Undergraduate classes at DeVry University centers generally
are offered in the evening for the convenience of predominantly working adult students, but daytime
classes are offered at centers in markets where there is deemed to be sufficient demand.
Graduate Programs
DeVry Universitys competitive strengths in the market for graduate programs include:
|
|
|
A practitioner approach to education that stresses skills and strategies that
employers value; |
|
|
|
|
Excellence in teaching by a faculty of practicing professionals; |
|
|
|
|
A high level of service to the adult student, including flexible schedules and
locations that are convenient to where many students work; |
|
|
|
|
Convenience of nearly 90 onsite teaching locations in major metropolitan areas
nationwide and online; and |
|
|
|
|
Flexible schedules with six sessions each year that 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. |
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, work schedules 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 Universitys graduate
programs continue to increase, demonstrating the recognition it has earned as an innovator in
providing high quality practical education.
15
Medical and Healthcare
Ross University
In the medical education market, Ross University competes with the 131 U.S. schools of
medicine, 25 U.S. colleges of osteopathic medicine, and approximately 30 Caribbean medical schools.
In the veterinary education market, Ross competes with AVMA accredited schools, of which 28 are
U.S., five are Canadian and eight are international veterinary schools. In addition, Ross competes
with two 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 its commitment to and focus on practitioner-oriented teaching.
Others applied to U.S.-based medical or veterinary schools but were not admitted or were
wait-listed. Some students elected not to apply to U.S. schools because of self-perceived
deficiencies in their academic record or standardized test scores.
For 2009-10, it is estimated that applications to U.S. medical and veterinary medical schools
aggregated over 42,200 and 6,200, respectively. From each of these separate applicant pools,
approximately 46% were accepted. An additional estimated 5,200 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 or wait-listed at
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 increased to approximately 79,200
in 2009 (up from approximately 75,800 in 2008), 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 private sector competitors, Ross University enjoys several competitive
advantages, including a large alumni base and strong reputation, federal financial aid eligibility
for its students, and its historically large network of diverse geographical opportunities for
clinical rotations.
In the last year for which there is published data (September 2008), 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 in the United States, with more than
3.7 million licensed nurses in 2008. Nurses represent the largest occupation of all health care
workers in the United States and provide 85 percent of the health care delivery. The Bureau of
Labor Statistics reports that employment of RNs is expected to grow 22 percent from 2008 to 2018,
much faster than the average employment growth rate for all other occupations.
Despite the ongoing and increasing need for nurses, demand has not yet produced a sufficient
increase in educational capacity. It is estimated by the National League for Nursing that over
99,000 qualified applicants were turned away from U.S. nursing schools in 2008 because of lack of
capacity.
Nationally, Chamberlain competes in the nursing education market which has 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 a three-year, year-round BSN program and the opportunity to take classes both
onsite and online.
Carrington
The career college segment of the postsecondary education market is also highly
fragmented and competitive; no single institution has a significant market share. Most students
will not relocate or travel long distances to attend a career college, so competition is
16
primarily at the local level. Competitors range from large public community colleges to
professionally operated multi-campus institutions to single campus family owned institutions. In
general, community colleges offer the lowest tuition prices and have the largest enrollments.
A prospective career college student in most markets will have a choice of institutions
offering similar programs. Carrington competes successfully by focusing primarily on healthcare
and nursing programs. Both institutions are well known in their local markets for offering:
|
|
|
A wide range of healthcare program offerings; |
|
|
|
|
Attractive and conveniently located facilities; |
|
|
|
|
Learning methodologies that blend didactic instruction with experiential laboratory
exercises; |
|
|
|
|
Faculty that have relevant work experience; |
|
|
|
|
Relatively small class sizes; |
|
|
|
|
High levels of service to students; and |
|
|
|
|
Accelerated programs with a choice of class schedules. |
Professional Education
Becker Professional Education competes with other methods of CPA and CFA exam preparation,
including self-study resources from the CFA Institute, courses sponsored by affiliated CFA
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. In fiscal year 2010, Becker launched a zero percent financing program designed to
make its CPA review more affordable to recent college graduates.
With its 50-plus year history and exceptional track record of preparing students to pass the
CPA exam, Becker Professional Education differentiates itself from competitors by providing:
|
|
|
Extensive and constantly updated review and practice test materials; |
|
|
|
|
Experienced, well qualified instructors for each of the areas of specialty
included in the exam; |
|
|
|
|
Courses available in several formats, including live class, self study, and
online sessions, to meet candidate needs for flexibility and control; and |
|
|
|
|
Practice simulations and software functionality, similar to those used in the
actual exam |
Beginning in calendar year 2011, the CPA exam will undergo the most significant content and
functional change since the exam became computer based in 2004. Aware of the changes, Becker
Professional Education has invested significantly in course development to ensure that the quality
of its product remains world class.
Beckers live, self study and online courses provide a wider range of study alternatives than
other course providers. Becker students have a high success rate on the exam, passing at double the
rate of non-Becker students. Some Becker students enroll after taking other review courses or
studying independently without success.
Stalla by Becker Professional Education 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:
|
|
|
An integrated, comprehensive curriculum produced and updated by dozens of CFA
charterholders and subject matter experts; |
|
|
|
|
An instructional team that includes charterholders, practitioners and subject
matter experts, all of whom are skilled teachers; |
|
|
|
|
Materials that are continually updated to reflect the most recent CFA
curriculum, with a rigorous quality assurance process in place; |
|
|
|
|
Complete format flexibility to address unique learning styles and candidate
needs for flexibility and control. Courses are available in several formats, including live
class, self study, and online sessions; |
|
|
|
|
Unlimited access for all Stalla System candidates to a team of CFA
charterholders, upon whom they can rely for ongoing and unlimited support and expert
guidance; and |
|
|
|
|
Tested, proven learning strategy addressing the four critical components to
retention and exam success; Understand, Apply, Practice and Review. |
CPA and CFA exam candidates can take advantage of the Becker Professional Education review
course content and methodology in conjunction with their DeVry University MBA or Master of
Accounting and Financial Management programs, earning full
17
academic credit. These credits also may
be used to fulfill the 150-hour educational requirement that most states have made a prerequisite
to becoming licensed as a certified public accountant. Extending the marketing and administrative
benefits of joint operation, Becker offers classes at DeVry University locations or through online
learning.
The Stalla by Becker Professional Education CFA review course is taught live in a classroom
setting in major financial centers around the world and in an online format and self-study 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 ADMISSIONS
DeVry University
Student Admissions
DeVry University employs admissions advisors and other administrative staff who support the
admissions 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 primarily work with
admissions advisors, either at a DeVry University location, or by a central staff of admissions
advisors who are dedicated to serving online applicants. Applicants to online programs who are in
areas remote from a DeVry University location, including active military personnel on military
bases, work with a central staff of admissions advisors. DeVry University also employs Military
Education Liasons that visit military bases and conduct interviews with active military personnel.
All graduate school students work with 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 Universitys compensation practices have been designed to be in compliance with
current regulations.
Many of DeVry Universitys applicants are 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 colleges and
universities. In addition, 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 Universitys practical career-oriented education and
extensive geographic reach.
High School Programs Presenters visited more than 7,000 high schools 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. DeVry Universitys military team and
community outreach team also visited over 1,000 military bases and community colleges last year.
Admissions advisors also receive student inquiries generated by DeVry Universitys web site, the
Internet, and direct mail. Follow-up interview sessions with prospective students generally take
place at a DeVry University location or by telephone.
DeVry Universitys Keller Corporate Learning 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 Universitys career
services organization.
Marketing and Outreach
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.
DeVry University continuously updates its marketing programs in order to better communicate the
quality of its degree programs and the value of a DeVry University education. In September 2009,
we launched a highly integrated brand initiative that further refines our focus on DeVry
Universitys 30-plus years of graduate
employment success, while emphasizing DeVry University as an accredited, highly-respected
academic institution. The refined brand campaign is grounded in ongoing in-depth consumer,
marketplace and brand research, and leverages a number of channels, including
18
broadcast, print and
Internet advertising, public relations, and social media, as well as local marketing efforts. By
building upon the equity we have in preparing our students for the careers of tomorrow, as well as
the depth and breadth of our universitys degree offerings, we will re-energize the reputation and
profile of the university, and increase potential student awareness of and interest in DeVry
University.
DeVry University serves high school students in several unique ways. Since July 2004, we have
worked with the Chicago Public School system to create the DeVry University Advantage Academy. A
second program was later started in Columbus, Ohio. About 500 students have graduated from the two
schools. Students enter DeVry University Advantage Academy at the start of their junior year, and
complete two academic years and one summer term. At the conclusion of the program, students have
earned their high school diploma and an associate degree in either Network Systems Administration
or Web Graphic Design. Most students go on to bachelors degree programs, either at DeVry
University or other public or private universities. The Advantage Academy model is flexible based
on the needs of individual school districts. DeVry faculty teach all college courses and high
school classes are taught by certified high school educators. School districts can determine
whether to establish a cohort program for all students or allow students from different schools to
travel for college-level coursework. For example, in Chicago, all classes are taught at Advantage
Academy, a stand-alone, certified Chicago Public Schools high school with its own principal located
on DeVry Universitys Chicago campus. In Columbus, students take high school courses at their own
high school and travel to DeVry for college classes. The schools have a combined high school
graduation rate of 93 percent, and an associate degree completion rate of 83 percent.
In July 2010, DeVry announced a major, multi-year partnership to help increase high school and
college graduation rates across the country. The partnership will be a featured component of the
Americas Promise Alliance Grad Nation campaign. Launched in March 2010 with the support of
President Obama and U.S. Secretary of Education Arne Duncan, Grad Nation is a new 10-year campaign
to mobilize all Americans to take action in their communities to end the high school dropout crisis
and ultimately prepare young people for postsecondary education and the 21st century workforce. In
support of the partnership, DeVry will donate $1.5 million to the Americas Promise Alliance, to be
distributed over three years, and provide additional in-kind donations of up to $2.5 million over
three years in each of 10 cities to support a key goal of both organizations to see more young
people earn a postsecondary or college degree.
In-kind contributions by DeVry will include cost-sharing agreements with public school systems
to establish new dual-enrollment, high-school-to-college programs, providing its Advanced Academics
online high school curriculum to high school students who need to make up credits required for
graduation, and college and career workshops to motivate young people to pursue higher education
degrees. A key focus of the partnership will be expanding the DeVry Advantage Academy
dual-enrollment model in 10 cities across the country.
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 from a DeVry-recognized institution, 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. International applicants must provide
documentation demonstrating the required level of prior education, satisfy the English-language
proficiency requirement and meet all other admission requirements.
All applicants must meet prescribed admission qualifications and attain minimum placement
examination scores, which vary depending on the program. Students take the Accuplacer
computer-adaptive placement tests designed by The College Board or the DeVry online computer
adaptive placement tests developed internally, 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, an admissions advisor contacts 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.
19
To be admitted to a graduate program, applicants must hold a bachelors degree from a
U.S. institution that is accredited by or is in candidacy status with a U.S. regional accrediting
agency or selected national accrediting agencies or international institutions recognized as the
equivalent, and complete an interview with an admissions advisor. International applicants must
hold a degree recognized to be equivalent to a U.S. baccalaureate degree, satisfy the
English-language proficiency requirement, and meet all other admission requirements. 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 admission test. Admissions decisions are based on evaluation of a candidates
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 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 and print ads in
major magazines and newspapers.
Ross employs regional admissions representatives in 10 cities throughout the U.S. and in
Ontario, Canada, 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. 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. All candidates for admission must interview
with an associate director and 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, Ohio, Florida and Washington, D.C. metro
area 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. Chamberlains extensive informational website 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 to the pre-licensure
programs must pass the Chamberlain standard pre-admission exam or obtain a prescribed minimum score
on the ACT or SAT exam, depending upon the program in which the applicant is interested. Admissions
decisions are made by an admissions committee.
Carrington
Carrington utilizes varied marketing approaches to generate interest from potential students.
Admissions advisors visit high schools in Arizona, California, New Mexico, Nevada, Oregon,
Washington and Idaho. Carrington also conducts local advertising campaigns using broadcast media,
print media, targeted direct mail and the internet. In addition, Carrington holds open house
events for local prospective students, cultivate alumni referrals, and participate in information
seminars and career fairs.
Professional Education
Becker Professional Education markets its courses directly to potential students and to
selected employers, primarily the large global, national and regional public accounting and
financial services firms. Alumni referrals, direct mail, print advertising, e-mail, internet and
social media advertising and a network of on-campus recruiters at colleges and universities across
the country also generate new students for Beckers review courses. The Becker web-site is another
source of information for interested applicants.
Becker Professional Education has relationships with more than 2,000 public accounting firms,
corporations, government agencies and universities. Becker delivers its CPA review courses on
about 100 college campuses, recruiting students attending those
20
institutions. Becker also is the
preferred provider of CPA review for most of the countrys largest public accounting firms,
partnering with 97 of the top 100 public accounting firms, including each of the Big 4 Firms.
The CFA exam review course is offered in a 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 provider of choice for CFA preparation courses and programs. In fact, 15 of
the top 20 CFA societies in the world (in terms of membership count) have endorsed Stalla by Becker
Professional Education as their provider of choice for their local CFA member candidates. Also,
prominent investment firms and universities are on the Stalla client roster.
ACCREDITATION
Educational institutions and their individual programs are awarded 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
private sector colleges. Since 1981, DeVry University has been accredited by the Higher Learning
Commission (HLC) of the North Central Association of Colleges and Schools, which is one of the
six regional collegiate accrediting agencies in the United States. 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 candidates 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 North Central Association
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 to form DeVry University. After a comprehensive evaluation visit in August 2002,
the HLC approved a 10-year re-accreditation for DeVry University. The HLC further affirmed that
DeVry University can offer, without restriction, any of its programs onsite, online, or through any
combination of the two. In September 2008, DeVry University was accepted into the Academic Quality
Improvement Program (AQIP) of the HLC, a seven year accreditation reaffirmation process based on
creating a culture of continuous improvement, one of DeVry Universitys key values.
In addition to regional accreditation, the baccalaureate electronics engineering technology
programs at most of DeVry Universitys 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 TAC of ABET.
The associate degree program in health information technology is offered online and at DeVry
University locations in Atlanta, Chicago, Columbus, Dallas, Ft. Washington, Houston, and Southern
California. These programs 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 private-sector institution in Canada to be provincially accredited to
grant bachelors degrees. Through an arrangement with the Alberta Department of Advanced Education,
the State of Arizona, and the HLC, the computer engineering technology and network and
communications management curricula offered at DeVry Calgary fall under the accreditation of DeVry
University (Arizona) as an offsite instructional location. The computer engineering technology and
electronics engineering technology programs are accredited by the Canadian Technology Accreditation
Board.
21
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 is recognized and accredited as a University and
School of Medicine by the Dominica 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. Ross University has also received four-year
accreditation by the Caribbean Accreditation Authority for Education in Medicine and other Health
Professions. In addition, Ross University is approved by the four U.S. states California,
Florida, New Jersey and New York that have processes in place to evaluate and accredit an
international medical schools programs, allowing Ross students to participate in clinical
residency training programs in those states. In January 2009, Ross began teaching students at its
location in Freeport, Grand Bahama. Ross notified these four states regarding the new Freeport
location, however, California later concluded that the Freeport center would be subject to a more
extensive evaluation process. Currently, Ross is not teaching students at its Freeport location,
but hopes to have a resolution to this matter in the coming months..
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 21
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 a follow-up report and is implementing the AVMAs recommendations. The
University submitted its application for AVMA accreditation in July 2010. The application process
entails a site visit, which the University expects will occur in the spring of 2011 with a decision
to follow thereafter.
Chamberlain College of Nursing
Chamberlain College of Nursing is HLC accredited. The ASN, BSN and MSN programs are approved
by the respective State Boards of Nursing of Arizona, Illinois, Missouri, Ohio, Florida and
Virginia. The ASN program on the Columbus campus and the BSN program on the St. Louis and Columbus
campuses are accredited by the National League for Nursing Accrediting Commission (NLNAC). The BSN
program on the St. Louis, Columbus, Addison, Phoenix and Jacksonville campuses is also accredited
by the Commission on Collegiate Nursing Education (CCNE). NLNAC and CCNE accreditation are sought
by campuses and programs after a required wait period.
Carrington
Carrington College is nationally accredited by the Accrediting Council of Independent Colleges
and Schools. Carrington College California is regionally accredited by the Accrediting Commission
for Community and Junior Colleges of the Western Association of Schools and Colleges. In addition
to the institutional accreditations, the various individual campus locations hold a number of
programmatic accreditations and approvals, including:
|
|
|
Carrington College |
|
Carrington College California |
ABHES for Medical Assisting |
|
Commission on Accreditation of Allied Health |
Committee on Accreditation for Respiratory Care |
|
Education Programs |
Commission on Dental Accreditation |
|
American Veterinary Medical Association |
Joint Review Committee on Education in |
|
American Society of Health-System Pharmacists |
Radiologic Technology |
|
Commission on Dental Accreditation |
Joint Review Committee on Education in Diagnostic |
|
Board of Vocational Nursing and Psychiatric |
Medical Sonography |
|
Technicians |
Commission on Accreditation in Physical Therapy Education |
|
Board of Registered Nursing |
|
|
Committee on Dental Auxiliaries |
|
|
Dental Board of California |
22
Other Educational Services
Advanced Academics
Advanced Academics is accredited by the North Central Association Commission on Accreditation
and School Improvement and the Northwest Association of Accredited Schools.
DeVry Brasil
DeVry Brasils institutions are accredited by the Brazilian Ministry of 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, Ross University clinical locations, Chamberlain College of Nursing, Carrington
College and Carrington College California location is approved to grant associate, bachelors
and/or masters degrees by the respective state in which it is located.
Many states and Canadian provinces require private- sector postsecondary education
institutions to post surety bonds for licensure. In the United States, DeVry has posted
approximately $10 million of surety bonds with regulatory authorities on behalf of DeVry
University, Chamberlain College of Nursing, Carrington College, Carrington College California and
Becker Professional Education. DeVry has 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, DeVry 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 2010 term, DeVry Universitys U.S. undergraduate tuition ranges from
$580 to $600 per credit hour for students enrolling in 1 to 11 credit hours. Tuition ranges from
$350 to $360 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 3.5% as compared to the summer 2009 term. These amounts do not include the cost of
books, supplies, transportation and living expenses.
Based upon current tuition rates, a full-time student enrolling in the five-term undergraduate
network systems administration program will pay total tuition of $36,150. A full-time student
enrolled in the eight-term undergraduate business administration program will pay total tuition of
$63,690, including the application fee.
Among four-year institutions, DeVry Universitys undergraduate tuition during the 2009-2010
academic year was lower than the average tuition of private schools and comparable to the average
out-of-state (un-subsidized) tuition of public schools, but it was higher than the average in-state
(taxpayer subsidized) tuition of publicly-supported institutions, according to data published in
the Annual Survey of Colleges by the College Board. At four-year private schools, the average
annual undergraduate tuition and fees for the 2009-2010 academic year was $26,273 at not-for-profit
schools (a 4.4% increase from the prior year) and $14,174 at for-profit schools (a 6.5% increase).
The average annual undergraduate tuition and fees at four-year public schools was $7,020 for
in-state (a 6.5% increase) and $18,548 for out-of-state tuition (a 6.2% increase).
Effective with the July 2010 term, Keller Graduate School of Management program tuition per
classroom course ranges from $2,100 to $2,225, depending on location. This represents an expected
weighted average increase of 2.1%. The price for a graduate course taken online is $2,225, compared
to $2,200 previously.
If a student leaves school before completing a session, federal, state, and Canadian
provincial regulations 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 session the student
completes. Excess amounts are refunded to the student or the appropriate financial aid funding
source.
23
Some DeVry University programs, including the computer information systems and electronics and
computer technology programs require students to own a laptop computer and have it available for
class. Laptops can be purchased at some locations. Students also must purchase their own
textbooks, electronic course materials and supplies.
Medical and Healthcare
Ross University
Effective September 2010, tuition and fees for the beginning basic sciences portion of the
programs at the medical and veterinary schools will be $15,600 and $15,000, respectively, per
semester. This tuition rate represents an increase from September 2009 tuition rates of
approximately 6.4% for the medical school and 4.3% for the veterinary school. Tuition and fees for
the final clinical portion of the programs are $17,125 per semester for the medical school, and
$18,850 per semester for the veterinary school. These amounts do not include the cost of books,
supplies, transportation, and living expenses.
DeVry believes that Ross Universitys tuition is in the middle of the range among private
medical and veterinary schools, but equal to or higher than tuition in publicly-supported (taxpayer
subsidized) 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
Effective July 2010, tuition for the 2010-2011 academic year is $620 per credit hour for
students enrolled in the BSN (onsite), ADN and LPN-to-RN programs. Students enrolled on a full-time
basis (between 12 and 17 credit hours) are charged a flat tuition amount of $7,440 per semester.
This represents an increase from 2009-2010 academic year tuition rates of approximately 4.2%.
These amounts do not include the cost of books, supplies, transportation and living expenses.
Tuition for the 2010-2011 academic year is $575 per credit hour for students enrolled in the
RN-to-BSN online degree program. This tuition rate is unchanged from the 2009-2010 academic year.
Tuition for the 2010-2011 academic year is $650 per credit hour for students enrolled in the online
MSN program.
DeVry believes that Chamberlains tuition is in the middle of the range among private nursing
schools, but equal to or higher than tuition in publicly-supported (taxpayer subsidized) schools.
Tuition rates at most nursing schools have increased every year, and management believes they will
continue to increase.
Carrington
On a per credit hour basis, tuition for Carrington College and Carrington College California
programs ranges from $347 per credit hour to $1,651 per credit hour for non-general education
courses, with the wide range due to the nature of the programs. General Education courses are
charged at $325 per credit hour at Carrington College, and $364 per credit hour at Carrington
College California. Student tuition is reduced accordingly for any incoming academic credits that
are applicable. Students are charged a non-refundable registration fee ranging from $95 to $100,
and they are also charged separately for books and special (program specific) supplies and/or
testing. A student services fee ranging from $75 to $150 is charged at Carrington College as well,
depending on the program. Total program tuition ranges from approximately $12,000 for certificate
programs to over $60,000 for some advanced programs.
Tuition for programs offered by Carrington is based on the cost to provide the education as
well as market conditions affecting the programs and the locations in which they are offered.
Carringtons pricing strategy is to leverage its high-quality programs by pricing them at the high
end of the range of comparable private-sector institutions.
Professional Education
The price of Becker Professional Educations complete classroom CPA review course, including
an administrative fee, is $2,890. The complete CPA review course on DVD and the complete online
review course are offered at the same price. Exam candidates may elect to enroll for individual
sections of the exam review course at a price of $935 per section. Becker offers discounts from
these tuition rates under various enrollment promotions at college campuses, state CPA societies
and participating accounting firms.
The current list prices for the CFA exam course packages range from $1,290 to $1,590, and
Stalla by Becker Professional Education offers various promotional program discounts and stand
alone preparation prices.
24
FINANCIAL AID AND FINANCING STUDENT EDUCATION
Students attending DeVry University, Ross University, Chamberlain College of Nursing,
Carrington College and Carrington College California finance their education through a variety of
sources, including government-sponsored financial aid, private and university-provided
scholarships, employer-provided tuition assistance, veterans benefits, private loans and cash
payments. Students attending the Becker Professional Education 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 DeVrys cash receipts from tuition payments by fund source as a
percentage of total revenue for the fiscal years 2009 and 2008, respectively. Final data for
fiscal year 2010 is not yet available.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year |
Funding Source: |
|
2009 |
|
2008 |
Federal Assistance (Title IV) Program Funding: |
|
|
|
|
|
|
|
|
Grants and Loans |
|
|
73 |
% |
|
|
70 |
% |
Federal Work Study |
|
|
1 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
Total Title IV Program Funding |
|
|
74 |
% |
|
|
71 |
% |
State Grants |
|
|
2 |
% |
|
|
3 |
% |
Private Loans |
|
|
3 |
% |
|
|
5 |
% |
Student accounts, cash payments, private scholarships,
employer and military provided tuition assistance and other |
|
|
21 |
% |
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
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
governments support of postsecondary education. The HEA was last reauthorized by the United
States Congress in July 2008, and was signed into law by the President in August 2008.
Information about Particular Government Financial Aid Programs
DeVry University, Ross University, Chamberlain College of Nursing, Carrington College and
Carrington College California 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. DeVry University and Chamberlain College of Nursing undergraduate, Carrington
College and Carrington College California students may participate in the Federal Pell Grant,
Federal Supplemental Education Opportunity Grant and the Academic Competitiveness Grant programs.
Additionally, certain DeVry University undergraduate students may participate in the National
Science and Mathematics Access to Retain Talent (SMART) Grant program.
|
|
|
Federal Pell grants. These funds, available to all eligible undergraduate students
who demonstrate financial need, do not have to be repaid. For the 2010-2011 school
year, eligible students can receive Pell grants ranging from $555 to $5,550. Students
attending school year-round may receive two Pell grants. The maximum Pell funding a
DeVry student may receive for one calendar year is $8,325. |
|
|
|
|
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 |
25
|
|
|
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). Most of
DeVry Universitys 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). 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, Ross University, Chamberlain College of Nursing, Carrington
College and Carrington College California students may participate in the Stafford and PLUS
programs within the William D. Ford Federal Direct Student Loan Program. DeVry University
undergraduate students may also participate in the Federal Perkins Student Loan Program.
|
|
|
Subsidized Stafford loan: awarded on the basis of student financial need, it
is a low-interest loan (a portion of the interest is subsidized by the Federal government)
with interest charges and principal repayment deferred 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 undergraduate academic year and 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. These loans incur
interest from the time funds are disbursed, but actual principal and interest payments may
be deferred until six months after a student no longer attends school on at least a
half-time basis. Unsubsidized loan limits per academic year range from $6,000 for students
in their first and second academic year to $7,000 in later years and increasing to
$12,000 per academic year for graduate and professional program students. Additionally, a
student without financial need may borrow an additional amount of unsubsidized loans up to
the limit of the subsidized Stafford loan at their respective academic grade level. The
total Stafford Loan limit for graduate students 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 and Grad PLUS loans: enables a graduate student or parents of a
dependent undergraduate student to borrow additional funds to meet the cost of the
students 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 borrow funds up to the cost of
attendance which includes allowances for tuition, fees and living expenses. Both PLUS and
Grad PLUS are subject to credit approval, which generally requires the borrower to be free
of any current adverse credit conditions. A co-borrower may be used to meet the credit
requirements. |
|
|
|
|
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
$5,500 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, Chamberlain College of
Nursing, Carrington College and Carrington College California. Under this regulation, an
institution that derives more than 90% of its revenues from federal financial assistance programs
for two successive years may lose its eligibility to participate in the Title IV programs. The
following table details the percent of revenue from federal financial assistance programs for each
of DeVrys Title IV eligible institutions for fiscal years 2009 and 2008, respectively. Final data
for fiscal 2010 is not yet available.
26
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year |
|
|
2009 |
|
2008 |
DeVry University: |
|
|
|
|
|
|
|
|
Undergraduate |
|
|
77 |
% |
|
|
75 |
% |
Graduate |
|
|
70 |
% |
|
|
75 |
% |
Ross University |
|
|
80 |
% |
|
|
81 |
% |
Chamberlain College of Nursing |
|
|
69 |
% |
|
|
62 |
% |
Carrington: |
|
|
|
|
|
|
|
|
Carrington College |
|
|
85 |
% |
|
|
79 |
% |
Carrington College California |
|
|
83 |
% |
|
|
77 |
% |
State financial aid programs
Certain states, including Arizona, California, Colorado, Florida, Georgia, Illinois, Kentucky,
Minnesota, New Jersey, New York, 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, Ross University, Carrington College and
Carrington College California students rely on private (nonfederal) loan programs for financial
assistance. These programs are used to finance the gap between a students educational and living
costs and their financial aid awards. The amount of the typical loan varies significantly
according to the students enrollment and financial aid awards. 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
enacted in February 2006 expanded the parent loan program (PLUS) eligibility to graduate students.
This lower-cost program is now used in place of private loan programs for most U.S. citizens and
permanent residents.
Most private loans are approved using the students or co-borrowers 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 DeVrys degree granting institutions coordinate these processes to ensure that all
students receive assistance from the federal and state programs first.
DeVry does not maintain a recommended lender list, but does list all of the lenders that made
private loans to DeVry students in the previous year, in addition to providing students with a link
to an independent website that lists private loan providers. DeVry is a voluntary signatory to the
Student Loan Codes of Conduct developed by the Arizona, New Jersey and New York attorneys general.
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
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. Students attending DeVry University on-line or in the United
States or Ross University may be eligible for the Canada Student Loan program. 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.
27
DeVry-Provided Financial Assistance
DeVrys institutional loan programs are available to DeVry students and are designed to assist
students who are unable to completely cover educational costs by other means. These 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 institutional loan program
balances are developed to address the financial circumstances of the particular student. Interest
charges accrue each month on the unpaid balance. After a student leaves school, the student
typically will have a monthly installment repayment plan with all balances due within 12 to 60
months.
DeVry University undergraduate students also are eligible for numerous DeVry-sponsored
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.
DeVry University and Chamberlain College of Nursing students who receive employer tuition
assistance 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 employees income if provided under a qualified
educational assistance plan. At present, the maximum annual exclusion is $5,250.
Professional Education
Students taking the Becker Professional Education 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. In
addition, the Becker CPA Review course can be financed through Becker with a zero percent, 18 month
term program.
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, Chamberlain
College of Nursing, Carrington College and Carrington College California 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, DeVrys 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. If a proceeding were initiated and caused the
Department of Education to substantially curtail DeVrys participation in government grant or loan
programs, DeVrys enrollments, revenues and accounts receivable could be all adversely affected.
On August 6, 2010, DeVry announced that it had received a request for information from the
U.S. Senate Committee on Health, Education, Labor and Pensions relating to the Committees ongoing
hearings relating to private-sector colleges. The request seeks information to more accurately
understand how DeVrys institutions recruit and enroll students, set program price or tuition,
determine financial aid including private or institutional loans, track attendance, handle
withdrawal of students and return of Title IV dollars and manage compliance with the requirement
that no more than 90% of revenues come from Title IV dollars. The request also seeks an
understanding of the number of students who complete or graduate from programs offered by DeVrys
institutions, how many of those students find new work in their educational area, the debt levels
of students enrolling and completing programs and how DeVry tracks and manages the number of
students who risk default within the cohort default rate window. The Committee has requested that
DeVry provide information about a broad spectrum of its business, including detailed information
relating to financial results, management, operations, personnel, recruiting, enrollment,
graduation, student withdrawals, receipt of Title IV funds, institutional accreditation, regulatory
compliance and other matters. DeVry intends to cooperate with the Committee and to work with the
Committee to provide the requested information in a manner that does not compromise its sensitive
proprietary operating and other information.
The financial responsibility test for continued participation by an institutions students in
federal financial assistance programs is based upon a composite score of three ratios: an equity
ratio that measures the institutions capital resources; a primary reserve ratio
28
that measures an institutions ability to fund its operations from current resources; and a
net income ratio that measures an institutions ability to operate profitably. A minimum score of
1.5 is necessary to meet the Department of Educations financial standards.
For the past several years, DeVrys 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 Universitys 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 2003
freshman students (the latest period for which final completion statistics are available), the
graduation rate for DeVry University U.S. undergraduates was 29.9% as compared to the 2002 rate of
31.1%.
Specialized staff at DeVrys home office review, interpret, and establish procedures for
compliance with regulations governing financial assistance programs and processing 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, Ross University,
Carrington College and Carrington College California have completed and submitted all required
audits of compliance with federal financial assistance programs for fiscal year 2009. DeVrys
independent public accountants are currently conducting the required audits of the one-year period
ended June 30, 2010. In conjunction with previously filed financial aid audit reports, DeVry has
been required to post letters of credit. As of June 30, 2010, there were approximately $1.5 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 University
campuses have not resulted in any adverse material findings or adjustments.
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, higher
default rates are 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 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 institutions 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. DeVry is not
subject to any restriction or termination under any student loan program.
29
Beginning with the cohort default rate calculations for federal fiscal year 2009, the cohort
default rate will be calculated by determining that rate at which borrowers who become subject to
their repayment obligation in the relevant fiscal year, default by the end of the third federal
fiscal year. The current method of calculating cohort default rates will remain in effect and will
be used to determine institutional eligibility until three consecutive years of official cohort
default rates calculated under the new formula are available. In addition, the cohort default rate
threshold of 25% will be increased to 30% for purposes of certain sanctions and requirements
related to cohort default rates.
According to the U.S. Department of Education, the cohort default rate for all colleges and
universities eligible for federal financial aid increased from 5.2% in fiscal year 2006 to 6.7% for
fiscal year 2007 (the latest period for which data is available).
Default rates for DeVry University, Ross University, Chamberlain College of Nursing,
Carrington College and Carrington College California students follow. The latest period for which
final data is available is 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cohort Default Rate |
|
|
2007 |
|
2006 |
|
2005 |
|
2004 |
DeVry University Federal Family Education Loan Program |
|
|
9.0 |
% |
|
|
7.3 |
% |
|
|
6.6 |
% |
|
|
6.5 |
% |
DeVry University Federal Perkins Loan Program |
|
|
8.8 |
% |
|
|
6.6 |
% |
|
|
6.9 |
% |
|
|
8.5 |
% |
DeVry University Graduate Programs |
|
|
2.7 |
% |
|
|
1.4 |
% |
|
|
1.7 |
% |
|
|
2.3 |
% |
Ross University Medical School |
|
|
0.2 |
% |
|
|
0.1 |
% |
|
|
0.0 |
% |
|
|
0.2 |
% |
Ross University Veterinary School |
|
|
0.0 |
% |
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
0.4 |
% |
Chamberlain College of Nursing |
|
|
2.9 |
% |
|
|
1.8 |
% |
|
|
0.5 |
% |
|
|
0.7 |
% |
Carrington College |
|
|
7.2 |
% |
|
|
7.5 |
% |
|
|
4.8 |
% |
|
|
5.1 |
% |
Carrington College California |
|
|
10.2 |
% |
|
|
9.6 |
% |
|
|
10.3 |
% |
|
|
15.1 |
% |
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
financial literacy and student counseling programs and retaining outside loan service agencies to
contact former students and inform them of their repayment options.
CAREER SERVICES
DeVry University
DeVry University believes that the employment of its graduates is essential to the achievement
of its mission and the 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 bachelors 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 10-year period ending October 2009, DeVry Universitys U.S. campuses graduated more
than 70,000 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
59,000 graduates during this 10-year period actively pursued employment or were already employed;
88.6% 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 2009, there were 6,561
graduates from DeVry Universitys U.S. undergraduate degree and diploma programs eligible for
career service assistance, (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, 5,680 actively pursued employment or were already
employed. Within six months of graduation, 5,024, or 88.5% of those graduates were employed in
positions related to their program of study. This compares to 91.0% who were employed in positions
related to their program of study for the three classes that ended in calendar year 2008, and 92.8%
who were employed in positions related to their program of study for the three classes that ended
in calendar year 2007.
30
DeVry Universitys 2009 graduates (associate and bachelors degree programs) achieved reported
annual compensation ranging from $30,746 to $47,540 with an average compensation of $43,605.
Individual compensation levels vary depending upon the graduates previous employment experience,
program of study, and geographic area of employment.
DeVry University believes that no single employer has hired more than 5% of our graduates in
recent years. Major employers of DeVry undergraduates include Accenture, Boeing, Ericcson, GE
Healthcare, IBM, Intel, J.P. Morgan Chase, Lockheed Martin, L-3 Communications, Northrop Grumman,
State Farm, Verizon Wireless, 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.
Chamberlain College of Nursing
Chamberlain College of Nursing initiated a career services program in fiscal year 2009 at its
Columbus campus, which now extends to three campuses. The career services professionals work with
students to craft resumes, prepare for job interviews, and target employment opportunities. The
staff also maintains contact with local and national employers to proactively identify job
opportunities and arrange interviews. In addition, the career services personnel gather data
regarding employment and compensation as well as alumni perception of educational preparation for
the workplace.
Carrington
Carrington provides career service support to students through dedicated employees
at each campus location. The range of services provided includes: assistance in preparing resumes,
coaching to define a job search strategy, coaching to improve interviewing skills, employer
outreach initiatives to identify job opportunities, access to posted online job opportunities and
guidance to help graduates obtain employment in their field of study.
SEASONALITY
DeVrys 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 DeVrys fiscal year. Enrollment is
slightly lower in the spring, and the lowest enrollment generally occurs during the summer months.
DeVrys 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 15 to the Consolidated
Financial Statements, Quarterly Financial Data.
31
EMPLOYEES
As of June 30, 2010, DeVry had the following number of employees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Faculty and Staff |
|
Part-time |
|
|
|
|
Full- |
|
Part- |
|
Student |
|
|
|
|
time |
|
time |
|
Employees |
|
Total |
DeVry University |
|
|
6,296 |
|
|
|
66 |
|
|
|
740 |
|
|
|
7,102 |
|
Ross University |
|
|
887 |
|
|
|
23 |
|
|
|
109 |
|
|
|
1,019 |
|
Chamberlain College of Nursing |
|
|
273 |
|
|
|
4 |
|
|
|
49 |
|
|
|
326 |
|
Carrington |
|
|
1,135 |
|
|
|
268 |
|
|
|
46 |
|
|
|
1,449 |
|
Becker Professional Education |
|
|
203 |
|
|
|
32 |
|
|
|
|
|
|
|
235 |
|
Advanced Academics |
|
|
183 |
|
|
|
18 |
|
|
|
|
|
|
|
201 |
|
DeVry Brasil |
|
|
610 |
|
|
|
628 |
|
|
|
117 |
|
|
|
1,355 |
|
Home Office Staff |
|
|
422 |
|
|
|
8 |
|
|
|
|
|
|
|
430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
10,009 |
|
|
|
1,047 |
|
|
|
1,061 |
|
|
|
12,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 240 administrative and support employees of Ross Universitys medical school campus
in Dominica. These employees are covered by a collective bargaining agreement with a local union.
DeVry University
Each DeVry University campus and center is managed by a campus president or center director
and has a staff of academic deans, faculty and academic support staff, admissions group, career
service and student service personnel, and other professionals. 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 and online programs 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. 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.
Faculty members are evaluated periodically based on student comments and observations by an
academic dean. DeVry University does not offer tenure.
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 Ross Health Sciences, 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.
32
Chamberlain College of Nursing
Chamberlain College of Nursing campuses are managed by campus deans who are doctorally
prepared nurse administrators. The campus deans report to a vice president of campus operations
and are supported by a vice president of academic affairs who is 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. The
campuses and online program offerings are supported by a central administrative/management staff
located in Downers Grove, 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 masters degree are enrolled in a
graduate program in nursing. General education courses are taught by DeVry University faculty.
Chamberlain faculty members are not tenured.
Carrington
Carrington College and Carrington College California campuses are managed by campus executive
directors. These campus executive directors are supported by campus-based, director level support
staff in the functional areas of admissions, career services, student finance, student records, and
academics. Further support and oversight in the areas of academics, student finance, admissions,
human resources, and information technology are provided by divisional staff located in Phoenix,
Arizona (Carrington College) and Sacramento, California (Carrington College California).
The parent organization has its main office in Mission Viejo, California. Support functions
in accounting/finance, marketing, information technology, and human resources are maintained at
this office.
All Carrington College and Carrington College California faculty members must meet the minimum
academic credentialing requirements as set forth by their respective institutional and programmatic
accreditation bodies, as applicable.
Professional Education
Becker Professional Education is managed by a staff based primarily in DeVrys Downers Grove
home office 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
Hong Kong. Beckers faculty consists primarily of practicing professionals and university
professors who teach the review courses on a part-time, course-by-course basis.
Other Educational Services
Advanced Academics
The majority 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. In addition, Advanced Academics maintains several smaller offices
throughout the United States for faculty and student service employees.
DeVry Brasil
DeVry Brasils management team along with support service functions including academics,
compliance, marketing, finance, information technology and human resources are based in Fortaleza,
Brazil. Each campus is led by a president and the smaller center locations are led by a director.
Most of Fanors faculty are part-time and more than 30% hold Masters and/or Doctoral degrees.
Home Office Staff
DeVrys home office staff are located at offices in Oak Brook and Downers Grove, Illinois.
The home office staff supports the employees for all of DeVrys 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, information technology, financial aid processing, regulatory compliance, internal
audit, legal, tax, payroll, and finance and accounting.
33
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, U.S. Education, Carrington College, Carrington College
California, 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
DeVrys 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)) (the Exchange Act) 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 Shareholder 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
Government Relations Committee Charter
Governance Committee Charter
Information contained on the Web site is not incorporated by reference into this report.
Copies of the DeVrys filings with the SEC and the above-listed policies and charters also may
be obtained by written request to the Investor Relations at DeVrys executive offices. In
addition, DeVrys filings with the SEC can be read or copied at the SECs 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.
34
ITEM 1A RISK FACTORS
DeVrys business operations are subject to numerous risks and uncertainties. Investors should
carefully consider the risk factors described below and all other information contained in the
Annual Report on Form 10-K before making an investment decision with respect to DeVrys common
stock. If any of the following risks are realized, DeVrys business, results of operations,
financial condition and cash flows could be materially and adversely affected, and as a result, the
trading price of DeVrys common stock could be materially and adversely impacted. Because of their
very nature, management cannot predict all the possible risks and uncertainties that may arise.
Risks and uncertainties that may affect DeVrys business include, but are not limited to:
Risks Related to DeVrys 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 financial aid for our students.
As a provider of higher education, DeVry is subject to extensive regulation on both the
federal and state levels. In particular, the Higher Education Act, as amended and
reauthorized, (the Higher Education Act) subjects DeVrys U.S. degree granting institutions
(DeVry University, Ross University, Chamberlain College of Nursing, Carrington College and
Carrington College California) and all other higher education institutions that participate in
the various federal student financial aid programs under Title IV of the Higher Education Act
(Title IV) to significant regulatory scrutiny.
To participate in Title IV, an institution must receive and maintain authorization by the
appropriate state education agencies, be accredited by an accrediting commission recognized by
the U.S. Department of Education (USED), and be certified by the USED as an eligible
institution. Most USED requirements are applied on an institutional basis.
These regulatory requirements cover virtually all phases of our U.S. operations, including
educational program offerings, facilities, instructional and administrative staff,
administrative procedures, marketing and recruiting, financial operations, payment of refunds
to students who withdraw, acquisitions or openings of new schools or programs, addition of new
educational programs and changes in our corporate structure and ownership.
If DeVry is found to be in noncompliance with any of these regulations, standards or
policies, any one of the relevant regulatory agencies could take action including:
|
|
|
Imposing monetary fines or penalties; |
|
|
|
|
Limiting or terminating DeVrys operations or ability to grant degrees; |
|
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Restricting or revoking accreditation, licensure or other approval to operate; |
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Limit, suspend, or terminate eligibility to participate in Title IV programs or
state financial aid programs; and |
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Subjecting DeVry to other civil or criminal penalties. |
Any of the penalties, injunctions, restrictions or other forms of censure listed above
could have a material adverse effect on DeVrys business, results of operations, financial
condition and cash flows. If DeVry were to lose its Title IV eligibility, DeVry would
experience a dramatic and adverse decline in revenue and would be unable to continue business
as it is currently conducted.
The following are some of the more significant regulatory requirements and risks related
to governmental and accrediting body oversight of DeVrys business:
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DeVrys U.S. degree granting institutions may lose their eligibility to participate
in Title IV programs if their student loan default rates are greater than standards set
by the USED. An educational institution may lose its eligibility to participate in
some or all Title IV programs, if, for three consecutive federal fiscal years, 25% or
more of its students who were required to begin repaying their student loans in the
relevant federal fiscal year default on their payment by the end of the next federal
fiscal year. In addition, an institution may lose its eligibility to participate in
some or all Title IV programs if its default rate for a federal fiscal year was greater
than 40%. Beginning with the cohort default rate calculations for federal fiscal year
2009, the cohort default rate will be calculated by determining that rate at which
borrowers who become subject to their repayment obligation in the relevant fiscal year,
default by the end of the second federal fiscal year. The current method of
calculating cohort default rates will remain in effect and will be used to determine
institutional eligibility until three consecutive years of official cohort default
rates calculated under the new formula are available. In addition, the cohort default
rate threshold of 25% will be increased to 30% for purposes of certain sanctions and
requirements related to cohort default rates. If any of DeVrys U.S. degree granting
institutions |
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lose eligibility to participate in Title IV programs because of high student loan default
rates, it would have a material adverse effect on DeVrys business; |
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Any of DeVrys U.S. degree granting institutions may lose eligibility to participate
in Title IV programs if, on a cash basis, the percentage of the institutions revenue
derived from Title IV programs for two consecutive fiscal years is greater than 90%; |
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The ability of DeVrys degree granting institutions to participate in Title IV
programs may be impaired if regulators do not approve a change of control of any
institutions that DeVry may acquire; |
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DeVry may be required to accept limitations to continue its U.S. degree granting
institutions participation in Title IV programs if DeVry fails to satisfy the USED
administrative capability standards; |
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DeVry is subject to sanctions if payments of impermissible commissions, bonuses or
other incentive payments are made to the individuals involved in certain recruiting,
admissions, or financial aid activities; and |
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DeVry may be required to post a letter of credit or accept other limitations to
continue its U.S. degree granting institutions participation in Title IV programs if
DeVry does not meet the USEDs financial responsibility standards or if DeVrys
institutions do not correctly calculate and timely return Title IV program funds for
students who withdraw before completing their program of study. |
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 DeVrys 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 effect on DeVrys student enrollment and financial results.
DeVrys 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, DeVrys 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 effects DeVrys ability to recruit and retain students.
Action by the U.S. Congress to revise the laws governing the federal student financial aid
programs or reduce funding for those programs could reduce DeVrys student enrollments and/or
increase its costs of operation. Political and budgetary concerns significantly affect Title
IV Programs. The U.S. Congress enacted the Higher Education Act to be reauthorized on a
periodic basis, which most recently occurred in August 2008. The 2008 reauthorization of the
Higher Education Act made significant changes to the requirements governing the Title IV
Programs, including changes that, among other things:
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Regulated non-federal, private education loans; |
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Regulated the relationship between institutions and lenders that make education
loans; |
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Revised the calculation of the student default rate attributed to an institution and
the threshold rate at which sanctions will be imposed against an institution (as
discussed above); |
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Adjusted the types of revenue that an institution is deemed to have derived from
Title IV Programs and the sanctions imposed on an institution that derives too much
revenue from Title IV Programs; |
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Increased the type and amount of information that an institution must disclose to
current and prospective students and the public; and |
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Increased the types of policies and practices that an institution must adopt and
follow. |
The U.S. Congress can change the laws affecting Title IV Programs in the annual federal
appropriations bills and other laws it enacts between the Higher Education Act
reauthorizations. At this time, DeVry cannot predict all of the changes that the U.S. Congress
will ultimately make. Since a significant percentage of DeVrys revenue is indirectly derived
from Title IV Programs, any action by the U.S. Congress that significantly reduces Title IV
Program funding or the ability of DeVrys U.S. degree granting institutions or students to
participate in Title IV Programs could have a material adverse effect on DeVrys financial
condition, results of operations and cash flows.
The current negotiated rulemaking by the USED could lead to significant revisions to
the Title IV Program regulations. In the fall of 2009, the USED initiated the process of
negotiated rulemaking with respect to Program Integrity Issues to consider changes to certain
provisions of the regulations governing the Title IV Programs. Negotiated rulemaking is a
process whereby the USED consults with members of the higher education community to discuss
issues and attempt to agree on regulatory revisions to address those issues before the USED
36
formally proposes any regulations. On June 18, 2010, the USED issued a Notice of Proposed
Rulemaking (NPRM) covering, among other things, regulations governing the statutory
prohibition on bonuses, commissions, and other incentive payments for compensation of certain
persons involved in student recruiting and other activities. One element of this NPRM is the
proposed rescission of certain clarifying regulations that create what are commonly known as
the Safe Harbors with respect to the Incentive Compensation Prohibition (the Incentive
Compensation Proposal). On July 26, 2010 the USED issued a second NPRM covering proposed new
requirements for institutions to demonstrate that students completing its programs obtain
gainful employment, as measured against certain metrics, such as the repayment rate of the
institutions student borrowers and the debt-service to income ratio of its graduates (the
Gainful Employment Proposal).
The public comment period on those aspects of the NPRM issued on June 18, 2010, including
the Incentive Compensation Proposal, closed on August 2, 2010. The public comment period on
the Gainful Employment Proposal is set to close on September 9, 2010.
On August 13, 2010, the USED released its preliminary data regarding student loan
repayment rates for institutions that receive federal student loans under Title IV. The USED
has not disclosed the basis or the methodology used to determine the repayment rates. The
preliminary data was released by USED in conjunction with the NPRM to illustrate the potential
impact of the Gainful Employment Proposal. DeVry is currently analyzing the data released on
its institutions and intends to work collaboratively with USED to gain clarity on its
methodology and reach a resolution on inconsistencies in the data. In addition, DeVry believes
that USED intends to rectify an oversight with regard to the methodology to determine repayment
rates for students at medical schools.
The USED is expected to publish new final regulations by November 1, 2010. If adopted,
the proposed Gainful Employment rules would apply to all private-sector institutions of higher
education as well as public-sector and independent schools that offer vocational training and
non-degree certificates.
At this time, DeVry cannot be certain what requirements may be included in final
regulations resulting from the NPRM. Accordingly, DeVry cannot project how any new
requirements may affect the eligibility of DeVrys U.S. degree granting institutions to
participate in the Title IV Programs, their ability to comply with revised Title IV Program
regulations, or the potential impact of any changes on students or their ability to finance
their educations. The outcome of the NPRM could have a material adverse effect on DeVrys
financial condition, results of operations and cash flows.
On August 6, 2010, DeVry announced that it had received a request for information from the
U.S. Senate Committee on Health, Education, Labor and Pensions relating to the Committees
ongoing hearings relating to private-sector colleges. The request seeks information to more
accurately understand how DeVrys institutions recruit and enroll students, set program price
or tuition, determine financial aid including private or institutional loans, track attendance,
handle withdrawal of students and return of Title IV dollars and manage compliance with the
requirement that no more than 90% of revenues come from Title IV dollars. The request also
seeks an understanding of the number of students who complete or graduate from programs offered
by DeVrys institutions, how many of those students find new work in their educational area,
the debt levels of students enrolling and completing programs and how DeVry tracks and manages
the number of students who risk default within the cohort default rate window. The Committee
has requested that DeVry provide information about a broad spectrum of its business, including
detailed information relating to financial results, management, operations, personnel,
recruiting, enrollment, graduation, student withdrawals, receipt of Title IV funds,
institutional accreditation, regulatory compliance and other matters. DeVry intends to
cooperate with the Committee and to work with the Committee to provide the requested
information in a manner that does not compromise its sensitive proprietary operating and other
information. At this time, DeVry cannot be certain as to the outcome of this request or to
what actions, if any, that the Committee may take with respect to the ability of DeVrys U.S.
degree granting institutions or students to participate in Title IV programs.
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 DeVrys 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.
DeVrys 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.
37
DeVry is subject to risks relating to operating matters, which could have a material adverse
effect on DeVrys 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 attract, retain and develop key employees with appropriate
educational qualifications and experience. In addition, DeVry may be unable to effectively
plan and prepare for changes in key employees. Such matters may cause 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 DeVrys computer networks and system applications,
especially its online educational platforms and student operational and financial aid packaging
applications, are critical to DeVrys reputation and ability to attract and retain students.
System errors and/or failures could adversely impact DeVrys 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. There is no assurance that DeVry
would be able to enhance/expand its computer networks and system applications to meet increased
demand and future information requirements.
Security breaches of DeVrys information systems can create system disruptions, shutdowns
or unauthorized disclosure of confidential information. If DeVry is unable to prevent such
security breaches, its operations could be disrupted, or DeVry may suffer reputational damage
and/or financial loss because of lost or misappropriated information.
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.
DeVrys ability to open new campuses, offer new programs, and add capacity is dependent on
regulatory approvals and requires financial and human resources.
As part of its growth strategy, DeVry intends to open new campuses, offer new educational
programs and add capacity to existing locations. Such actions require DeVry to obtain
appropriate federal, state and accrediting agency approvals. In addition, adding new
locations, programs and capacity may require significant financial investments and human
resource needs. The failure to obtain appropriate approvals and not properly allocate
financial and human capital would adversely impact DeVrys future growth.
DeVry may not be able to successfully identify, pursue or integrate acquisitions.
As part of its growth strategy, DeVry is actively considering acquisition opportunities in
the U.S. and worldwide. DeVry has acquired and expects to acquire additional educational
institutions that complement our strategic direction, some of which could be material. Any
acquisition involves significant risks and uncertainties, including:
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Inability to successfully integrate the acquired operations into our institutions
and maintain uniform standards, controls, policies and procedures; and |
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Issues not discovered in our due diligence process, including commitments and/or
contingencies. |
Proposed changes in U.S. tax laws regarding earnings from international operations could adversely
effect our financial results.
The U.S. Treasury Department announced that it may seek legislative changes to federal tax
laws governing the taxation of foreign earnings of U.S. based companies. DeVrys effective
income tax rate reflects benefits derived from operations outside the United States. Earnings
of Ross Universitys international operations are not subject to foreign or U.S. federal income
taxes as described in Note 9, Income Taxes, to the Consolidated Financial Statements. If such
federal tax laws were changed and some of Ross Universitys international earnings were subject
to federal income tax, or if certain of DeVrys U.S. expenses were not deductible for U.S.
income tax purposes, DeVrys effective income tax rate would increase and its earnings and cash
flows would be adversely impacted.
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DeVry may experience movements in foreign currency exchange rates which could adversely affect our
operating results.
As DeVry expands internationally, DeVry will conduct more transactions in currencies other
than the U.S. Dollar. Additionally, the volume of transactions in the various foreign
currencies will continue to increase, thus increasing DeVrys exposure to foreign currency
exchange rate fluctuations. Fluctuations in foreign currency exchange rates could have a
material adverse affect on our business, financial condition, results of operations and cash
flows.
Expansion into new international markets will subject DeVry to risks inherent in international
operations.
As part of its growth strategy, DeVry has acquired and intends to acquire or establish
additional educational operations outside of the United States. To the extent that DeVry
expands internationally, DeVry will face risks that are inherent in international operations
including:
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Compliance with foreign regulatory environments; |
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Currency exchange rate fluctuations |
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Monetary policy risks, such as inflation, hyperinflation and deflation; |
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Price controls or restrictions on exchange of foreign currencies; |
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Political and economic instability in the countries in which DeVry operates; |
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Potential unionization of employees under local labor laws; |
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Multiple and possibly overlapping and conflicting tax laws; |
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Inability to repatriate cash balances; and |
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Compliance with United States regulations such as the Foreign Corrupt Practices Act. |
DeVrys goodwill and intangible assets could potentially be impaired if our business results and
financial condition were materially and adversely impacted by the risks and uncertainties
At June 30, 2010, intangible assets from business combinations totaled $194.2 million, and
goodwill totaled $514.8 million. Together, these assets equaled approximately 50% of total
assets as of such date. If DeVrys business results and financial condition were materially
and adversely impacted, then such goodwill and intangible assets could be impaired, requiring
possible write-off of up to $194.2 million of intangible assets and up to $514.8 million of
goodwill.
ITEM 1B UNRESOLVED STAFF COMMENTS
There are no unresolved SEC staff comments.
ITEM 2 PROPERTIES
DEVRY UNIVERSITY
DeVry University is headquartered within DeVrys home office in Downers Grove, Illinois.
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 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; wireless internet access; alternate texts; popular business
periodicals; videos of selected courses; and access to numerous electronic data-bases.
As of June 30, 2010, there were 95 DeVry University locations, including both campuses and
centers, in operation. These locations comprised approximately 2,709,000 in total square feet, of
which, approximately 1,903,000 square feet were under lease and approximately 806,000 square feet
were owned. No campus that is owned by DeVry is subject to a mortgage or other indebtedness.
DeVry plans to open four to five new DeVry University locations in fiscal 2011.
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MEDICAL AND HEALTHCARE
Ross University
The medical schools Foundations of Medicine facilities of approximately 201,000 total square
feet are located on an approximately 33 acre campus in the Caribbean country of Dominica, of which
approximately 22 acres are occupied under lease and 11 acres are owned. In addition to classrooms
and auditoriums, educational facilities include a gross anatomy lab, a multi-purpose learning lab,
library and learning resource centers, offices, cafeteria and recreational space. Classrooms and
laboratories are furnished with state of the art audio-visual equipment. During fiscal year 2010,
approximately 25,000 square feet was added for academic and administrative activities.
During fiscal year 2009, Ross University opened a 31,700 square foot leased location in
Freeport, Grand Bahama, and began teaching students in January 2009. Currently, Ross is not
teaching students at this location.
The veterinary schools pre-clinical instructional facilities of approximately 188,000 total
square feet are located on a 50 acre site in St. Kitts. Ross University owns 26 acres and leases
24 acres of pasture land 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. Ross University completed the construction of two 180 seat
classrooms and began using them in January 2010.
Ross Health Sciences, Inc., Ross Universitys administrative services provider is co-located
with a DeVry University facility in North Brunswick, New Jersey. In addition, Ross Health
Sciences, Inc. operates a 24,500 square foot academic and administrative center in Miami, Florida,
which is leased.
Chamberlain College of Nursing
Chamberlain is headquartered within DeVrys home office in Downers Grove, Illinois.
Chamberlain currently operates seven campuses which are all co-located with DeVry University.
During the second half of fiscal year 2010, Chamberlain relocated its St. Louis, Missouri campus to
a new location. In July 2010, Chamberlain began offer its nursing programs at two new campuses
located in Chicago, Illinois and Arlington Virginia. Chamberlain expects to open one to two new
campuses in fiscal year 2011.
Carrington
As of June 30, 2010, there were ten Carrington College campuses and eight Carrington College
California campuses in operation. These locations comprised approximately 641,400 in total square
feet, all of which were under lease. In addition, the parent organization of the Carrington
Colleges leases office space in Mission Viejo, CA; Phoenix, AZ; and Sacramento, CA, for its
administrative offices. The Carrington Colleges expect to open two to three new campuses in fiscal
year 2011.
PROFESSIONAL EDUCATION
Becker Professional Education is headquartered within DeVrys home office in Downers Grove,
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 space in Melville, New York and Hong Kong for 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.
OTHER EDUCATIONAL SERVICES
Advanced Academics
Advanced Academics is headquartered in approximately 26,000 square feet of leased office space
in Oklahoma City, Oklahoma. In addition, Advanced Academics leases 4 smaller offices of
approximately 2,000 to 3,000 square feet each in Minneapolis, MN; Reno, NV; Yakima, WA and Tracy,
CA, for its teaching faculty and student service staff.
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DeVry Brasil
DeVry Brasil currently operates three campuses and two centers in the cities of Fortaleza and
Salvador, Brazil. DeVry Brasils administrative functions are co-located with a campus in
Fortaleza, which is an owned facility.
HOME OFFICE
In January 2010, DeVry relocated its administrative offices from a leased space in Oakbrook
Terrace, Illinois, to two leased facilities in nearby Oak Brook and Downers Grove, Illinois. DeVry
leases approximately 238,000 square feet of total office space for these two locations.
In addition, DeVry owns a 108,000 square foot building in Naperville, Illinois, a nearby
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.
DeVrys leased facilities are occupied under leases whose remaining terms range from one to
15 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.
ITEM 3 LEGAL PROCEEDINGS
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 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 will have a material effect on its cash flows, results of operations
or financial position.
ITEM 4 (REMOVED AND RESERVED)
EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age and current position of each executive officer of DeVry are:
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Name, Age and Office |
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Business Experience |
Daniel M. Hamburger
President and Chief Executive Officer, DeVry Inc.
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46 |
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Mr. Hamburger joined DeVry in
November 2002 as Executive Vice
President with responsibility for
DeVrys 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. |
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David J. Pauldine
Executive Vice President, DeVry Inc. and President, DeVry University,
Inc.
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53 |
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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. |
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William Hughson
President, Medical and Healthcare Group
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46 |
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Mr. Hughson joined DeVry in
September 2009 as President of the
Medical and Healthcare group.
Prior to joining DeVry, Mr. Hughson
was promoted to Vice President of
DaVita Inc. after holding several
leadership positions from 2000 to
2009. DaVita Inc. is a leading
provider of dialysis services in
the United States. |
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Name, Age and Office |
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Business Experience |
Thomas C. Shepherd
Executive Vice President, DeVry Inc. and President, Ross University
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60 |
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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. |
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Richard M. Gunst
Senior Vice President, Chief Financial Officer and Treasurer,
DeVry Inc.
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54 |
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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. |
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Sharon Thomas Parrott
Senior Vice President, Government and Regulatory Affairs and Chief
Compliance Officer, DeVry Inc.
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60 |
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Ms. Thomas Parrott joined DeVry in
1982 after several years as an
officer in the U.S. Department of
Educations 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
DeVrys corporate and government
compliance program. She is also
responsible for managing relations
with key external audiences,
including government officials,
education policymakers and
legislators. |
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Gregory S. Davis
Senior Vice President, General Counsel and Corporate Secretary, DeVry
Inc.
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48 |
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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. |
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Donna N. Jennings
Senior Vice President, Human Resources, DeVry Inc.
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48 |
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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. |
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Eric P. Dirst
Senior Vice President, Chief Information Officer, DeVry Inc.
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43 |
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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
at SIRVA, a
relocation and
moving service
provider, from 2000
to 2008. |
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Name, Age and Office |
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|
Business Experience |
Steven Riehs
President, DeVry Online Services
|
|
|
50 |
|
|
Mr. Riehs joined
DeVry in 2004 as
Vice President and
General Manager of
all online
operations,
including
enrollment growth,
program development
and student
services. Effective
October 1, 2010,
Mr. Riehs will
become President of
a new
organizational
structure within
DeVry that will
include Advanced
Academics, Becker
Professional
Education and DeVry
Brasil. 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
Senior Vice President, DeVry Inc. and
President, Becker Professional
Education
|
|
|
63 |
|
|
Mr. Vucinic has
been the President
of Becker
Professional
Education since
July 2006 and
General Manager
since 1997. Prior
to that,
Mr. Vucinic was
DeVrys director of
financial planning
and analysis. Mr.
Vucinic will retire
at the end of
calendar year 2010. |
|
|
|
|
|
|
|
John P. Roselli
Senior Vice President, Business
Development and International, DeVry
Inc.
|
|
|
46 |
|
|
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.
Effective October
1, 2010, Mr.
Roselli will serve
as the President of
Becker Professional
Review. |
|
|
|
|
|
|
|
Patrick J. Unzicker
Vice President & Controller, DeVry Inc.
|
|
|
39 |
|
|
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, a
computer based
travel reservation
system, from May
2000 to August
2002. |
PART II
ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
DeVrys 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
Fiscal 2010 |
|
Dividends |
|
Fiscal 2009 |
|
|
Paid |
|
High |
|
Low |
|
Paid |
|
High |
|
Low |
First Quarter |
|
$ |
0.08 |
|
|
$ |
56.90 |
|
|
$ |
44.07 |
|
|
$ |
0.06 |
|
|
$ |
59.79 |
|
|
$ |
47.06 |
|
Second Quarter |
|
|
|
|
|
|
59.87 |
|
|
|
51.45 |
|
|
|
|
|
|
|
60.50 |
|
|
|
40.67 |
|
Third Quarter |
|
|
0.10 |
|
|
|
68.42 |
|
|
|
54.52 |
|
|
|
0.08 |
|
|
|
64.69 |
|
|
|
40.50 |
|
Fourth Quarter |
|
|
|
|
|
|
74.36 |
|
|
|
52.22 |
|
|
|
|
|
|
|
51.00 |
|
|
|
38.19 |
|
43
Approximate Number of Security Holders
There were 495 holders of record of DeVrys common stock as of August 1, 2010. 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, DeVrys 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 DeVrys 401(k) and profit sharing plan.
Dividends
DeVry is dependent on the earnings of its subsidiaries for funds to pay cash dividends. Cash
flow from DeVrys 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 2010 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
2010, the Board of Directors declared a dividend of $0.10 per share of common stock, paid in July
2010. DeVrys Board of Directors stated its intent to declare dividends on a semi-annual basis,
resulting in an annual dividend rate of $0.20 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. See Note 5 to
the Consolidated Financial Statements for historical dividend declaration information.
Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar |
|
|
|
|
|
|
|
|
|
|
|
Total Number of Shares |
|
|
Value of Share that |
|
|
|
|
|
|
|
|
|
|
|
Purchased as part of |
|
|
May yet be Purchased |
|
|
|
Total Number of Shares |
|
|
Average Price Paid per |
|
|
Publically Announced |
|
|
Under the Plans or |
|
Period |
|
Purchased |
|
|
Share |
|
|
Plans or Programs (1) |
|
|
Programs (1) |
|
April 2010 |
|
|
46,421 |
|
|
$ |
67.32 |
|
|
|
46,421 |
|
|
$ |
40,506,578 |
|
May 2010 |
|
|
99,100 |
|
|
$ |
60.49 |
|
|
|
99,100 |
|
|
$ |
34,512,198 |
|
June 2010 |
|
|
176,000 |
|
|
$ |
56.13 |
|
|
|
176,000 |
|
|
$ |
24,632,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
321,521 |
|
|
$ |
59.09 |
|
|
|
321,521 |
|
|
$ |
24,632,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
On November 11, 2009, the Board of Directors authorized a share repurchase program to
buyback up to $50 million of DeVry common stock through December 31, 2011. The total remaining
authorization under the repurchase program was $24,632,610 as of June 30, 2010. On August 11,
2010, DeVrys Board of Directors authorized a fourth share repurchase program, which will allow
DeVry to buy back up to $50 million of its common stock through June 30, 2012. |
Other Purchases of Equity Securities
There were no such purchases for the three month period ended June 30, 2010.
44
Performance Graph
The following graph and chart compare the total cumulative return (assuming dividend
reinvestment) on DeVrys Common Stock during the period from June 30, 2005, through June 30, 2010,
with the cumulative return on the NYSE Stock Market Index (U.S. Companies), and an industry group
index.
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE JUNE 30, 2005
AMONG DEVRY INC., NYSE MARKET INDEX, AND INDUSTRY GROUP INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
DeVry Inc. |
|
|
|
100.0 |
|
|
|
|
110.4 |
|
|
|
|
170.9 |
|
|
|
|
269.7 |
|
|
|
|
252.5 |
|
|
|
|
265.8 |
|
|
|
NYSE Market Index U.S. Companies |
|
|
|
100.0 |
|
|
|
|
114.2 |
|
|
|
|
136.8 |
|
|
|
|
120.0 |
|
|
|
|
84.6 |
|
|
|
|
95.0 |
|
|
|
Industry Group Index (1) |
|
|
|
100.0 |
|
|
|
|
79.4 |
|
|
|
|
98.9 |
|
|
|
|
77.1 |
|
|
|
|
108.1 |
|
|
|
|
82.8 |
|
|
|
Data for this graph was prepared by Zacks Investment Research.
Assumes $100 was invested on June 30, 2005 in DeVry Inc. Common Stock, the NYSE Stock Market
Index (U.S. Companies), and the Industry Group (1), and that all dividends were reinvested.
|
|
|
(1) |
|
The Industry Group 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. |
45
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 105 of this report.
ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of DeVrys 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
DeVrys continued focus on academic quality, successful student outcomes and execution of its
diversification strategy has produced another year of solid financial results. Financial and
operational highlights for fiscal year 2010 include:
|
|
|
Total revenues rose 31.0%, reaching a record high of $1,915.2 million, and
record net income of $279.9 million increased 69.0% over the year-ago period, while at the
same time DeVry made investments to enhance academic quality and drive future growth. |
|
|
|
|
Revenue growth was driven by higher total student enrollments and increased
retention at DeVry University, Ross University, Chamberlain College of Nursing, Carrington
College and Carrington College California along with the acquisition of DeVry Brasil on
April 1, 2009. |
|
|
|
|
As a result of DeVrys diversification strategy, solid performance within the
Business, Technology and Management and Medical and Healthcare segments more than offset a
decline in profits within the Professional Education and Other Educational Services
segments. The Professional Education segment results reflect the impact of the economic
downturn on the financial firms the segment serves. The Other Educational Services
segment results reflect increased investment to drive future enrollment growth at Advanced
Academics and DeVry Brasil. |
|
|
|
|
Chamberlain College of Nursing began offering nursing programs at its new
campus in Jacksonville Florida in July 2009. In addition, in July 2010, Chamberlain began
teaching courses in two new locations in Arlington, Virginia and Chicago. All Chamberlain
locations are co-located with DeVry University campuses. |
|
|
|
|
On July 1, 2010, Apollo College and Western Career College were renamed
Carrington College and Carrington College California, respectively. Carrington College
was chosen after extensive research and testing. The name contains the word caring,
which connotes the care and dedication faculty and staff take to help students achieve
their career goals and aspirations. It also coincides with the schools emphasis on health
care programs. |
|
|
|
|
In November 2009, DeVry completed its second share repurchase program and
during January 2010, DeVry began repurchasing shares of its common stock under its third
share repurchase program, which was approved by its Board of Directors in November 2009.
During fiscal year 2010, DeVry repurchased a total of 741,905 shares of its common stock
at an average cost of $56.18 per share. |
|
|
|
|
DeVrys financial position remained strong generating $391.5 million of
operating cash flow during fiscal year 2010, driven primarily by strong operating results
and working capital improvements. As of June 30, 2010, cash, marketable securities and
investment balances totaled $323.4 million with no debt outstanding. |
USE OF NON-GAAP FINANCIAL INFORMATION AND SUPPLEMENTAL RECONCILIATION SCHEDULE
DeVry executed certain real estate transactions in fiscal years 2008 and 2009, which resulted
in significant lease termination charges and/or losses on the sales of facilities. Also, DeVry
recorded a litigation settlement reserve in fiscal year 2009. The following table illustrates the
effects of the real estate transactions and litigation settlement reserve on DeVrys earnings.
Management believes that the non-GAAP disclosure of net income and earnings per share provides
investors with useful supplemental information regarding the underlying business trends and
performance of DeVrys ongoing operations and is useful for period-over-period comparisons of such
operations given the discrete nature of the real estate transactions and litigation settlement
reserve. DeVry uses these supplemental
46
financial measures internally in its budgeting process. However, the non-GAAP financial
measures should be viewed in addition to, and not as a substitute for, DeVrys reported results
prepared in accordance with GAAP. The following table reconciles these items to the relevant GAAP
information (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year |
|
|
2010 |
|
2009 |
|
2008 |
Net Income |
|
$ |
279,909 |
|
|
$ |
165,613 |
|
|
$ |
125,532 |
|
Earnings per Share (diluted) |
|
$ |
3.87 |
|
|
$ |
2.28 |
|
|
$ |
1.73 |
|
Loss on Real Estate Transactions (net of tax) |
|
$ |
|
|
|
$ |
2,543 |
|
|
$ |
2,279 |
|
Effect on Earnings per Share (diluted) |
|
$ |
|
|
|
$ |
0.03 |
|
|
$ |
0.03 |
|
Litigation Settlement Reserve (net of tax) |
|
$ |
|
|
|
$ |
3,131 |
|
|
$ |
|
|
Effect on Earnings per Share (diluted) |
|
$ |
|
|
|
$ |
0.05 |
|
|
$ |
|
|
Net Income Excluding the Loss on Real Estate Transactions and Litigation Settlement Reserve (net of tax) |
|
$ |
279,909 |
|
|
$ |
171,287 |
|
|
$ |
127,811 |
|
Earnings per Share Excluding the Loss on Real Estate Transactions and Litigation Settlement Reserve (diluted) |
|
$ |
3.87 |
|
|
$ |
2.36 |
|
|
$ |
1.77 |
|
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 two fiscal years. Percents
may not add because of rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year |
|
|
2010 |
|
2009 |
|
2008 |
Revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of Educational Service |
|
|
43.1 |
% |
|
|
45.8 |
% |
|
|
46.1 |
% |
Loss on Real Estate Transactions |
|
|
0.0 |
% |
|
|
0.3 |
% |
|
|
0.3 |
% |
Litigation Settlement Reserve |
|
|
0.0 |
% |
|
|
0.3 |
% |
|
|
0.0 |
% |
Student Services and Administrative Expense |
|
|
35.4 |
% |
|
|
37.5 |
% |
|
|
38.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Costs and Expense |
|
|
78.5 |
% |
|
|
83.9 |
% |
|
|
85.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
21.5 |
% |
|
|
16.1 |
% |
|
|
14.9 |
% |
Interest Income |
|
|
0.1 |
% |
|
|
0.4 |
% |
|
|
1.0 |
% |
Interest Expense |
|
|
(0.1 |
%) |
|
|
(0.2 |
%) |
|
|
0.0 |
% |
Net Investment Gain |
|
|
0.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest and Other Income (Expense) |
|
|
0.1 |
% |
|
|
0.2 |
% |
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Minority Interest and Income Taxes |
|
|
21.5 |
% |
|
|
16.2 |
% |
|
|
15.8 |
% |
Income Tax Provision |
|
|
6.9 |
% |
|
|
4.9 |
% |
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
14.6 |
% |
|
|
11.3 |
% |
|
|
11.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED JUNE 30, 2010 VS. FISCAL YEAR ENDED JUNE 30, 2009
REVENUES
Total consolidated revenues for fiscal 2010 of $1,915.2 million increased $453.7 million, or
31.0%, as compared to last year. Revenues increased within all four of DeVrys business segments as
a result of continued enrollment growth and improved student retention. In addition, Carrington,
which was acquired on September 18, 2008, and DeVry Brasil, which was acquired on April 1, 2009,
contributed $101.6 million to the revenue growth in fiscal year 2010. Professional Education
segment revenues were down during the first half, but increased during the second half to end up
nearly 1% for fiscal year 2010.
47
Business, Technology and Management
During fiscal year 2010, Business, Technology and Management segment revenues increased by
27.7% to $1,263.6 million as compared to fiscal year 2009 driven primarily by strong enrollment
growth and improved retention. The Business, Technology and Management segment is comprised solely
of DeVry University. Key trends in enrollment and tuition pricing are set forth below.
Total undergraduate enrollment by term:
|
|
|
Increased by 21.9% from summer 2008 (45,907 students) to summer 2009 (55,979
students); |
|
|
|
|
Increased by 22.7% from fall 2008 (52,146 students) to fall 2009 (64,003
students); |
|
|
|
|
Increased by 25.6% from spring 2009 (53,259 students) to spring 2010 (66,909
students); and |
|
|
|
|
Increased by 22.0% from summer 2009 (55,979 students) to summer 2010 (68,290
students). This was a record high enrollment at DeVry University and marked the fourteenth
consecutive term of positive total undergraduate student enrollment growth from the year-ago
level. |
New undergraduate enrollment by term:
|
|
|
Increased by 14.8% from summer 2008 (16,595 students) to summer 2009 (19,057
students); |
|
|
|
|
Increased by 19.4% from fall 2008 (15,811 students) to fall 2009 (18,878
students); |
|
|
|
|
Increased by 24.0% from spring 2009 (14,288 students) to spring 2010 (17,715
students); and |
|
|
|
|
Increased by 9.9% from summer 2009 (19,057 students) to summer 2010 (20,935
students). The summer 2010 term was the seventeenth 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 12.3% from the July 2008 session (16,017 coursetakers) to the July
2009 session (17,991 coursetakers); |
|
|
|
|
Increased by 15.2% from the September 2008 session (17,799 coursetakers) to the
September 2009 session (20,496 coursetakers); |
|
|
|
|
Increased by 16.5% from the November 2008 session (17,803 coursetakers) to the
November 2009 session (20,734 coursetakers); |
|
|
|
|
Increased by 16.5% from the January 2009 session (19,475 coursetakers) to the
January 2010 session (22,679 coursetakers); |
|
|
|
|
Increased by 15.4% from the March 2009 session (19,357 coursetakers) to the
March 2010 session (22,343 coursetakers); |
|
|
|
|
Increased by 17.4% from the May 2009 session (18,822 coursetakers) to the May
2010 session (22,103 coursetakers); and |
|
|
|
|
Increased by 17.6% from the July 2009 session (17,991 coursetakers) to the July
2010 session (21,165 coursetakers). |
Tuition rates:
|
|
|
Effective July 2009, DeVry Universitys U.S. undergraduate tuition ranges from
$550 to $595 per credit hour for students enrolling in 1 to 11 credit hours. Tuition ranges
from $330 to $355 per credit hour for each credit hour in excess of 11 credit hours. These
tuition rates vary by location and/or program and represented a weighted average increase of
approximately 6.6% as compared to the summer 2008 term. However, effective with the summer
2009 term, DeVry University consolidated several of its student fees including graduation,
transcript, technology and student activity fees into a lesser student services charge. The
effective weighted average tuition increase was approximately 5.5% when the fee reduction is
taken into account. |
48
|
|
|
Effective July 2009, Keller Graduate School of Management program tuition per
classroom course (four quarter credit hours) ranges from $1,995 to $2,200, depending on
location. This represents an expected weighted average increase of 4.6%. The price for a
graduate course taken online is $2,200, compared to $2,100 previously. |
Management believes the increased undergraduate student enrollments were most significantly
impacted by DeVrys strong track record of high-quality education and academic outcomes, continued
strong demand for DeVry Universitys online programs and improved retention of existing students.
Management believes efforts to enhance the Keller Graduate School of Management brand awareness
through improved messaging have produced positive graduate enrollment results. In addition,
management believes that the economic downturn has had a small, but positive, impact on
enrollments, as individuals have returned to post-secondary education for job re-tooling.
Medical and Healthcare
Medical and Healthcare segment revenues increased 39.8% to $507.0 million in fiscal year 2010
as compared to the prior year. Higher student enrollments at both Ross University and Chamberlain
College of Nursing (Chamberlain) was a key driver of the segment revenue growth. In addition,
Carrington, which was acquired on September 18, 2008, contributed $71.3 million to the revenue
growth in fiscal year 2010. Key trends for Ross University, Chamberlain and Carrington are set
forth below.
Ross University total enrollment by term:
|
|
|
Increased by 9.4% from May 2008 (4,064 students) to May 2009 (4,448 students); |
|
|
|
|
Increased by 9.1% from September 2008 (4,219 students) to September 2009 (4,601
students); |
|
|
|
|
Increased by 8.0% from January 2009 (4,323 students) to January 2010 (4,669
students); and |
|
|
|
|
Increased by 2.1% from May 2009 (4,448 students) to May 2010 (4,542 students). |
Ross University new student enrollment by term:
|
|
|
Increased by 16.8% from May 2008 (481 students) to May 2009 (562 students); |
|
|
|
|
Increased by 9.5% from September 2008 (608 students) to September 2009 (666
students); |
|
|
|
|
Increased by 14.4% from January 2009 (611 students) to January 2010 (699
students); and |
|
|
|
|
Decreased by 39.5% from May 2009 (562 students) to May 2010 (340 students). |
Chamberlain College of Nursing total enrollment by term:
|
|
|
Increased by 77.8% from summer 2008 (2,419 students) to summer 2009 (4,302
students); |
|
|
|
|
Increased by 67.2% from fall 2008 (3,360 students) to fall 2009 (5,617
students); |
|
|
|
|
Increased by 72.2% from spring 2009 (3,885 students) to spring 2010 (6,691
students); and |
|
|
|
|
Increased by 65.2% from July 2009 (4,302 students) to July 2010 (7,108
students). |
Chamberlain College of Nursing new student enrollment by term:
|
|
|
Increased by 51.9% from summer 2008 (1,026 students) to summer 2009 (1,558
students); |
|
|
|
|
Increased by 55.3% from fall 2008 (1,352 students) to fall 2009 (2,100
students); |
|
|
|
|
Increased by 75.4% from spring 2009 (1,236 students) to spring 2010 (2,168
students); and |
|
|
|
|
Increased by 55.1% from summer 2009 (1,558 students) to summer 2010 (2,416
students). |
49
Carrington total enrollment by term:
|
|
|
Increased by 17.9% from July 2008 (9,028 students) to July 2009 (10,644
students); |
|
|
|
|
Increased by 14.8% from November 2008 (10,186 students) to November 2009 (11,695
students); |
|
|
|
|
Increased by 9.9% from March 2009 (10,928 students) to March 2010 (12,009
students); and |
|
|
|
|
Increased by 5.5% from July 2009 (10,644 students) to July 2010 (11,234
students). |
Carrington new student enrollment by term:
|
|
|
Increased by 15.4% from July 2008 (3,821 students) to July 2009 (4,411
students); |
|
|
|
|
Increased by 21.5% from November 2008 (4,681 students) to November 2009 (5,688
students); |
|
|
|
|
Decreased by 2.4% from March 2009 (4,323 students) to March 2010 (4,218
students); and |
|
|
|
|
Decreased by 2.7% from July 2009 (4,411 students) to July 2010 (4,291 students). |
Tuition rates:
|
|
|
Effective September 2009, tuition and fees for the beginning basic sciences
portion of the programs at the Ross University medical and veterinary medical schools are
$14,665 and $14,375, respectively, per semester. This represents an increase from September
2008 tuition rates of approximately 7.4% for the medical school and 5.3% for the veterinary
school. |
|
|
|
|
Effective September 2009, tuition and fees for the final clinical portion of the
Ross University programs are $16,100 per semester for the medical school, and $18,050 per
semester for the veterinary medical school. This represents an increase from September 2008
tuition rates of approximately 7.3% for the medical school and 5.2% for the veterinary
school. These amounts do not include the cost of books, supplies, transportation, and living
expenses. |
|
|
|
|
Effective July 2009, tuition is $595 per credit hour for Chamberlain students
enrolled in the BSN (onsite), ADN and LPN-to-RN programs. Students enrolled on a full-time
basis (between 12 and 17 credit hours) are charged a flat tuition amount of $7,140 per
semester. This represents an increase from 2008-2009 academic year tuition rates of
approximately 9%. However, effective with the summer 2009 term, Chamberlain consolidated
several of its student fees into a lesser student services charge. The effective weighted
average tuition increase was approximately 8% when the fee reduction is taken into account.
These amounts do not include the cost of books, supplies, transportation, or living
expenses. |
|
|
|
|
Effective July 2009, for students enrolled in Chamberlains RN-to-BSN online
degree program, tuition is $575 per credit hour. Students enrolled on a full-time basis
(between 12 and 17 credit hours) are charged a flat tuition amount of $6,900 per semester.
The tuition rate represents an increase from July 2008 tuition rates of approximately 5%.
Tuition for the 2009-2010 academic year is $735 per credit hour for students enrolled in the
online MSN program. |
|
|
|
|
Effective July 2009, tuition for students of Carrington College and Carrington
College California was raised approximately 3.5% as compared to the prior year. On a per
credit hour basis, tuition for Carrington College and Carrington College California programs
ranges from $338 per credit hour to $1,602 per credit hour for non-general education
courses, with the wide range due to the nature of the program. General Education courses
are charged at $295 per credit hour at Carrington College, $345 per credit hour at
Carrington College California. |
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 the solid reputation of its
academic programs and student outcomes, enhancements made to its marketing and recruiting
functions, as well as steps taken to meet increasing student demand such as adding faculty and
classrooms.
An element of the growth strategy at Ross University School of Medicine was the development of
a clinical education center located in Freeport, Grand Bahama. The clinical site was expected to
mitigate capacity constraints at the main campus in Dominica. However, the projected volume of
Ross students studying in Freeport has not been realized due to factors including an unforeseen
50
delay in the review process in California and caution on the part of existing students
considering Freeport. Four states, including California, require notification for licensing of
clinical studies in their states. Ross notified all such states regarding the Freeport location,
however, California later concluded that the Freeport center would be subject to a more extensive
evaluation process. Management hopes to have a resolution to the Freeport matters in the coming
months. Currently, Ross is not teaching students at its Freeport location. These near-term
challenges resulted in lower new student enrollment in the May 2010 semester and will result in
lower growth for at least the coming September semester. Management remains confident in Ross
long-term opportunities for growth and is executing revised plans to add capacity in Dominica.
The increase in student enrollments at Chamberlain was largely attributable to its growing
RN-to-BSN online completion program. In July 2009, Chamberlain began offering nursing programs at
its campus in Jacksonville, Florida. In July 2010, Chamberlain began offering its nursing programs
at two new locations in Arlington, Virginia and Chicago. All of these campuses are co-located with
DeVry University.
Management believes the increased total student enrollments at Carrington were most
significantly impacted by the continued demand for healthcare personnel. In addition, management
believes that the economic downturn has had a positive impact on enrollments, as individuals have
returned to post-secondary education for job retooling. Management believes that the benefit on
enrollment growth from the economic downturn will come to an end as the economy recovers and
unemployment levels decline.
Professional Education
Professional Education segment revenues rose 0.8% to $84.8 million in fiscal year 2010 as
compared to the prior year. Professional Education segment revenues were down during the first
half, but increased during the second half of fiscal year 2010 as demand for Beckers CPA review
course improved. The revenue growth rate for the Professional Education segment slowed during
fiscal year 2010 as compared to prior years due to the economic downturn, particularly among the
accounting and financial firms that the segment serves.
Other Educational Services
Other Educational Services segment revenues grew by $34.7 million or 138.0% to $59.8 million
in fiscal year 2010 as compared to the prior year. DeVry Brasil, which was acquired on April 1,
2009, contributed $30.3 million to the revenue growth. In addition, segment revenues increased
driven by enrollment growth at Advanced Academics. However, the revenue growth rate at Advanced
Academics slowed during the second half of fiscal year 2010 as a result of state budget constraints
and lower summer school enrollments.
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, adjunct
faculty, supplies, bookstore and other educational materials, student education-related support
activities, and the provision for uncollectible student accounts.
DeVrys Cost of Educational Services increased 23.4% to $826.1 million during fiscal year 2010
as compared to the prior year. Carrington, which was acquired by DeVry on September 18, 2008, and
DeVry Brasil, which was acquired on April 1, 2009, accounted for nearly one-third of the increase
in Cost of Educational Services during fiscal year 2010. Cost increases were also incurred in
support of expanding DeVry University online and onsite enrollments and operating a higher number
of locations as compared to the prior year. In addition, higher costs were incurred to support
increasing student enrollments and the higher cost of medical clinical rotations for Ross
University. Also, cost increases were incurred for the operation of the Chamberlain campus in
Jacksonville, Florida, which began offering programs in July 2009 and start-up costs for the July
2010 opening of campuses in Arlington, Virginia and Chicago. Expense attributed to stock-based
awards included in Cost of Educational Services increased during fiscal year 2010 as a result of an
increase in the value of the awards granted during the current year.
As a percent of revenue, Cost of Educational Services decreased to 43.1% in fiscal year 2010
from 45.8% 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 to maintain the high quality of DeVrys educational offerings and to drive
future revenue growth.
51
Student Services and Administrative Expense
This expense category includes student admissions, 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 23.7% to $678.2 million during fiscal year
2010 as compared to the prior year. The fiscal year 2009 acquisitions of Carrington and DeVry
Brasil accounted for approximately one-fifth of the increase in Student Services and Administrative
Expense for fiscal year 2010. The balance of the increase in expenses primarily represented
additional investments in advertising and recruiting to drive and support future growth in new
student enrollments. In addition, cost increases were incurred in information technology and
student services. Expense attributed to stock-based awards included in Student Services and
Administrative Expense increased during fiscal year 2010 as a result of an increase in value of the
awards granted during the current year.
Amortization of finite-lived intangible assets in connection with acquisitions of businesses
increased during fiscal year 2010 as compared to the year-ago period, as a result of increased
amortization of finite-lived intangible assets resulting from the acquisitions of Carrington and
Fanor. Amortization expense is included entirely in the Student Services and Administrative
Expense category.
As a percent of revenue, Student Services and Administrative Expense decreased to 35.4% in
fiscal year 2010 from 37.5% during the prior year period. The decrease was the combined result of
increased operating leverage from advertising and student recruiting costs, which more than offset
incremental investments in student services and support personnel.
OPERATING INCOME
Total consolidated operating income for fiscal year 2010 of $410.9 million increased $176.1
million, or 75.0%, as compared to the prior year. Operating income increased at DeVrys respective
Business, Technology and Management and Medical and Healthcare segments. These increases were
partially offset by a decline in operating profit at DeVrys Professional Education and Other
Educational Services segments.
Business, Technology and Management
Business, Technology and Management segment operating income increased 129.3% to $291.1
million during fiscal year 2010, as compared to the prior year. The increase in operating income
was the result of higher revenue and a significant increase in operating leverage, while at the
same time, continuing to make investments in academic quality and student service, including
additional full time faculty, new programs and additional career services professionals to drive
future enrollment growth. Also, the prior year period results included a $4.9 litigation
settlement reserve and a $4.0 million pre-tax charge related to the buy-out of a portion of a lease
of the DeVry University campus in Long Island City, New York. Excluding the impact of the
litigation settlement reserve and real estate transaction in the prior year of $8.9 million,
Business, Technology and Management segment fiscal year 2010 operating income increased 114.4% as
compared to the year-ago period.
Medical and Healthcare
Medical and Healthcare segment operating income increased 21.2% to $111.1 million during
fiscal year 2010 as compared to the prior year. Increases in student enrollments and tuition
produced higher revenues and operating income for the current year period as compared to the prior
year even as faculty, staff and facilities were being added in connection with respective expansion
programs at both Ross University and Chamberlain. Carrington, which was acquired on September 18,
2008, also accounted for $9.7 million, or 50%, of the operating profit growth for this segment.
Professional Education
Professional Education segment operating income declined 13.0% to $26.7 million during fiscal
year 2010 as compared to the prior year. The decrease in operating income was the result of slowed
revenue growth and investments to expand the business-to-business sales channel.
Other Educational Services
For fiscal year 2010, Other Educational Services segment recorded an operating loss of $6.8
million as compared to an operating loss of $1.0 million during fiscal year 2009. The higher
operating loss was the result of lower revenues experienced at Advanced Academics during the second
half of the fiscal year and increased investments at both Advanced Academics and DeVry Brasil to
drive future enrollment growth.
52
NET INTEREST AND OTHER INCOME (EXPENSE)
Interest income decreased 60.4%, to $2.1 million during fiscal year 2010 as compared to the
prior year. Despite an increase in invested balances as compared to the prior year periods,
interest income decreased because of lower interest rates earned on invested balances during fiscal
year 2010. The increase in invested cash balances, marketable securities and investments was
attributable to improved operating cash flow over the past twelve months partially offset by cash
used in connection with the acquisition of DeVry Brasil (Fanor), increased share repurchases and
debt repayment.
Interest expense decreased by $1.2 million, or 42.9%, to $1.6 million during fiscal year 2010
as compared to the prior year. The decrease in interest expense was attributable to lower average
borrowings outstanding and lower average interest rates during the current year periods as compared
to the prior year.
DeVry recorded net investment gains of $1.2 million during fiscal year 2010. These gains were
the result of changes in the valuation of DeVrys auction rate security portfolio and related put
option (as discussed in Note 2 to the Consolidated Financial Statements). As of early July 2010,
DeVry had fully liquidated its auction rate security portfolio at par value.
INCOME TAXES
Taxes on income were 32.1% of pretax income for fiscal year 2010, compared to 30.2% for the
prior year. The higher effective tax rates in fiscal year 2010 were attributable to a greater
proportion of pre-tax income being generated by U.S. operations versus the international operations
of Ross University in the current year as compared to the prior year. DeVrys effective income tax
rate reflects benefits derived from significant operations outside the United States. Earnings of
these international operations are not subject to U.S. federal or state income taxes, so long as
such earnings are not repatriated, as discussed below. Three of our subsidiaries, Ross University
School of Medicine (the Medical School) incorporated under the laws of the Commonwealth of
Dominica, Ross University School of Veterinary Medicine (the Veterinary School) incorporated
under the laws of the Federation of St. Christopher, Nevis, St. Kitts in the West indies, and DeVry
Brasil incorporated under the laws of Brazil, all benefit from local tax incentives. The Medical
and Veterinary Schools have agreements with the respective governments that exempt them from local
income taxation through the years 2043 and 2023, respectively, while DeVry Brasils effective tax
rate reflects benefits derived from their participation in PROUNI, a Brazilian program for
providing scholarships to a portion of its undergraduate students.
DeVry intends to indefinitely reinvest international 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, 2009 VS. FISCAL YEAR ENDED JUNE 30, 2008
REVENUES
Total consolidated revenues for fiscal 2009 of $1,461.5 million increased $369.6 million, or
33.9%, as compared to the prior year. Revenues increased at all four of DeVrys business segments
as a result of continued growth in total student enrollments, improved student retention and
tuition price increases. In addition, Carrington, which was acquired on September 18, 2008, and
DeVry Brasil, which was acquired on April 1, 2009, contributed a total of $150.7 million of revenue
growth in fiscal year 2009. The revenue growth rate for Becker Professional Education slowed
significantly during fiscal year 2009 due to the economic downturn.
Business, Technology and Management
During fiscal year 2009, Business, Technology and Management segment revenues increased by
18.8% to $989.5 million as compared to fiscal year 2008 driven primarily by strong enrollment
growth. The Business, Technology and Management segment is comprised solely of DeVry University.
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 12.6% from summer 2007 (40,774 students) to summer 2008 (45,907
students); |
|
|
|
|
Increased by 16.9% from fall 2007 (44,594 students) to fall 2008 (52,146
students); |
53
|
|
|
Increased by 18.8% from spring 2008 (44,814 students) to spring 2009 (53,259
students); and |
|
|
|
|
Increased by 21.9% from summer 2008 (45,907 students) to summer 2009 (55,979
students). This was a record high enrollment at DeVry University and marked the eleventh
consecutive term of positive total undergraduate student enrollment growth from the year-ago
level. |
New undergraduate enrollment by term:
|
|
|
Increased by 19.3% from summer 2007 (13,906 students) to summer 2008 (16,595
students); |
|
|
|
|
Increased by 19.7% from fall 2007 (13,204 students) to fall 2008 (15,811
students); |
|
|
|
|
Increased by 15.1% from spring 2008 (12,410 students) to spring 2009 (14,288
students); and |
|
|
|
|
Increased by 14.8% from summer 2008 (16,595 students) to summer 2009 (19,057
students). The summer 2009 term was the fourteenth 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 14.2% from the July 2007 session (14,023 coursetakers) to the July
2008 session (16,017 coursetakers); |
|
|
|
|
Increased by 12.2% from the September 2007 session (15,857 coursetakers) to the
September 2008 session (17,799 coursetakers); |
|
|
|
|
Increased by 13.7% from the November 2007 session (15,657 coursetakers) to the
November 2008 session (17,803 coursetakers); |
|
|
|
|
Increased by 12.1% from the January 2008 session (17,377 coursetakers) to the
January 2009 session (19,475 coursetakers); |
|
|
|
|
Increased by 13.8% from the March 2008 session (17,005 coursetakers) to the
March 2009 session (19,357 coursetakers); |
|
|
|
|
Increased by 13.8% from the May 2008 session (16,537 coursetakers) to the May
2009 session (18,822 coursetakers); and |
|
|
|
|
Increased by 12.3% from the July 2008 session (16,017 coursetakers) to the July
2009 session (17,991 coursetakers). |
Tuition rates:
|
|
|
Undergraduate program tuition increased by approximately 4.3% in July 2008 as
compared to the prior year; and |
|
|
|
|
Graduate school program tuition increased by approximately 3.1% in July 2008 as
compared to the prior year. |
Management believes the increased undergraduate student enrollments were most significantly
impacted by DeVrys strong track record of high-quality education and career outcomes, improved
marketing and recruiting efforts, continued strong demand for DeVry Universitys online programs
and a heightened focus on the retention of existing students. Management believes efforts to
enhance the Keller Graduate School of Management brand awareness through improved messaging have
produced positive graduate enrollment results. In addition, management believes that the economic
downturn has had a small, but positive, impact on enrollments, as individuals have returned to
post-secondary education for job re-tooling. 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 enrollment growth and higher tuition rates was
a decline in average course load per student driven by the continued mix shift toward online
enrollments and economic conditions.
54
Medical and Healthcare
Medical and Healthcare segment revenues increased 113.6% to $362.7 million in fiscal year 2009
as compared to the prior year. Carrington, which was acquired on September 18, 2008, contributed
$141.7 of revenue growth in fiscal year 2009. Excluding the impact of the acquisition, fiscal
year 2009 segment revenues grew 30.1% over the prior year. In addition, increases in student
enrollments and tuition rates at both Ross University and Chamberlain College of Nursing
(Chamberlain) also contributed to segment revenue growth. Key trends for Ross University,
Chamberlain and Carrington are set forth below.
Ross University total enrollment by term:
|
|
|
Increased by 7.9% from May 2007 (3,767 students) to May 2008 (4,064 students); |
|
|
|
|
Increased by 8.8% from September 2007 (3,876 students) to September 2008 (4,219
students); |
|
|
|
|
Increased by 7.8% from January 2008 (4,011 students) to January 2009 (4,323
students); and |
|
|
|
|
Increased by 9.4% from May 2008 (4,064 students) to May 2009 (4,448 students). |
Ross University new student enrollment by term:
|
|
|
Increased by 15.6% from May 2007 (416 students) to May 2008 (481 students); |
|
|
|
|
Increased by 6.3% from September 2007 (572 students) to September 2008 (608
students); |
|
|
|
|
Increased by 10.9% from January 2008 (551 students) to January 2009 (611
students); and |
|
|
|
|
Increased by 16.8% from May 2008 (481 students) to May 2009 (562 students). |
Chamberlain College of Nursing total enrollment by term:
|
|
|
Increased by 122.1% from July 2007 (1,089 students) to July 2008 (2,419
students). The student enrollments for July 2008 have been revised from the amount
previously reported based on a change in Chamberlains enrollment reporting process.
Enrollments are now reported on a basis consistent with the enrollment term as opposed to
reporting enrollments at a point-in-time. |
|
|
|
|
Increased by 116.0% from November 2007 (1,485 students) to November 2008 (3,207
students); |
|
|
|
|
Increased by 104.5% from March 2008 (1,820 students) to March 2009 (3,722
students); and |
|
|
|
|
Increased by 77.8% from July 2008 (2,419 students) to July 2009 (4,302
students). |
Chamberlain College of Nursing new student enrollment by term:
|
|
|
Increased by 182.0% from July 2007 (364 students) to July 2008 (1,026 students).
The student enrollments for July 2008 have been revised from the amount previously reported
based on a change in Chamberlains enrollment reporting process. Enrollments are now
reported on a basis consistent with the enrollment term as opposed to reporting enrollments
at a point-in-time. |
|
|
|
|
Increased by 114.6% from November 2007 (635 students) to November 2008 (1,363
students); |
|
|
|
|
Increased by 72.9% from March 2008 (717 students) to March 2009 (1,240
students); and |
|
|
|
|
Increased by 51.9% from July 2008 (1,026 students) to July 2009 (1,558
students). |
Carrington total enrollment by term:
|
|
|
Increased by 15.9% from July 2007 (7,792 students) to July 2008 (9,028
students); |
55
|
|
|
Increased by 19.4% from November 2007 (8,534 students) to November 2008 (10,186
students); |
|
|
|
|
Increased by 21.8% from March 2008 (8,973 students) to March 2009 (10,928
students); and |
|
|
|
|
Increased by 17.9% from July 2008 (9,028 students) to July 2009 (10,644
students). |
Carrington new student enrollment by term:
|
|
|
Increased by 16.7% from July 2007 (3,273 students) to July 2008 (3,821
students); |
|
|
|
|
Increased by 17.6% from November 2007 (3,980 students) to November 2008 (4,681
students); |
|
|
|
|
Increased by 26.8% from March 2008 (3,408 students) to March 2009 (4,323
students); and |
|
|
|
|
Increased by 15.4% from July 2008 (3,821 students) to July 2009 (4,411
students). |
Tuition rates:
|
|
|
Tuition and fees for the Ross University core sciences programs increased by
approximately 6.8% for the September 2007 term and approximately 5.4% effective with the
September 2008 term. |
|
|
|
|
Tuition and fees for the Ross University final clinical portion of the programs
increased by approximately 7.5% for the September 2007 term and approximately 5.3% for the
medical school and 5.5% for the veterinary school effective with the September 2008 term. |
|
|
|
|
Tuition for Chamberlain increased approximately 5% 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 the solid reputation of its
academic programs and student outcomes, 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 Addison, Illinois, and Phoenix, Arizona, campuses
in March 2008. These locations are co-located with existing respective DeVry University campuses.
Beginning July 2009, Chamberlain began offering nursing programs at its newly opened campus in
Jacksonville, Florida.
Professional Education
Professional Education segment revenues rose 3.8% to $84.2 million in fiscal year 2009 as
compared to the prior year. The primary reason for the increase in revenues was a tuition price
increase of approximately 5% partially offset by a decline in enrollments in CFA review courses and
self-study CPA review courses. The revenue growth rate for the Professional Education segment
slowed during fiscal year 2009 as compared to the year-ago period due to the economic downturn,
particularly among the financial firms that the segment serves. Management expects that the
softness in revenue will persist at least through calendar 2009.
Other Educational Services
Other Educational Services segment revenues grew by $17.0 million or 210.4% to $25.1 million
in fiscal year 2009 as compared to the prior year. The primary reason for the increase was
continued enrollment growth at Advanced Academics. In addition, DeVry Brasil, which was acquired
on April 1, 2009, contributed $8.9 million of revenue growth.
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, adjunct
faculty, supplies, bookstore and other educational materials, student education-related support
activities, and the provision for uncollectible student accounts.
56
DeVrys Cost of Educational Services increased 33.1% to $669.7 million during fiscal year 2009
as compared to the prior year. Carrington, which was acquired by DeVry on September 18, 2008, and
DeVry Brasil, which was acquired on April 1, 2009 accounted for more than half of the increase in
Cost of Educational Services during fiscal year 2009. Cost increases were also incurred in support
of expanding DeVry University online and onsite enrollments and operating a higher number of DeVry
University locations as compared to the prior year. In addition, higher costs were incurred to
support increasing student enrollments and capacity expansion to drive future growth at Ross
University. During the third quarter of fiscal 2009, Ross University began teaching courses at its
newly opened clinical training center in Freeport, Grand Bahama. Also, cost increases were
incurred for the operation of two additional Chamberlain campuses which began offering programs in
March 2008 and a newly opened campus in Jacksonville, Florida, which began offering programs in
July 2009. Expense attributed to stock-based awards included in Cost of Educational Services
increased during fiscal year 2009 as a result of an increase in the fair value of the awards
granted during the current year and an increase in the number of awards to retirement eligible
employees, which are fully expensed upon grant.
Clinical rotation costs for Ross University medical students are included in Cost of
Educational Services. Over the past several years, Ross University has entered into long-term
contracts with a hospital group to secure clinical rotations for its students at fixed rates in
exchange for prepayment of the rotation fees. Under the contracts, the established
rate-per-clinical rotation was being deducted from the prepaid balance and charged to expense as
the medical students utilized the clinical clerkships. Recently, the hospital group closed two of
its hospitals due to financial difficulties. To date, the hospital group has provided Ross with a
limited number of additional clinical clerkships at its remaining hospital, but not nearly enough
to offset the void created by the closure of its other two hospitals. During April 2009, Ross
filed a lawsuit against the hospital group to enforce the contract. The suit seeks specific
performance of the hospital groups obligations to provide Ross with the prepaid clinical
clerkships. As of June 30, 2009, the outstanding balance of prepaid clinical rotations with this
hospital group was approximately $8.1 million. Though Ross has a contractual right to utilize
other clinical rotations within the hospital groups system, given the business uncertainty of this
situation, a reserve of $1.5 million was provided against the prepaid balance during the third
quarter of fiscal year 2009.
As a percent of revenue, Cost of Educational Services decreased to 45.8% in fiscal year 2009
from 46.1% 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 to maintain the high quality of DeVrys educational offerings and to drive
future revenue growth.
Loss on Real Estate 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 first quarter of fiscal year 2008. The recorded
net loss on the sale of the facilities 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 January 2009, DeVry entered into an agreement to buyout the lease for approximately 40
percent of the space DeVry University occupied at its Long Island City, New York, campus. In
connection with this transaction, DeVry recorded a pre-tax charge of approximately $4.0 million.
The charge was composed of a $2.7 million cash outlay and a non-cash charge of $1.3 million related
to the write-off of leasehold improvements, net of a deferred rent credit. After-tax, the charge
was $2.5 million or $0.04 per share. This action favorably impacts future pre-tax operating income
by approximately $1.9 million per year through the end of the lease, which expires in April 2014,
and has a cash payback of less than two years.
These transactions were executed as a part of DeVrys real estate optimization strategy, which
involves evaluating DeVrys 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 the markets 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 of
U.S. Education and 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 facilities involved are owned or leased, with the ultimate goal
being to drive economic value.
Litigation Settlement Reserve
During the fourth quarter of fiscal year 2009, DeVry recorded an accrual of $4.9 million for a
litigation settlement that was eventually completed after obtaining government approval.
57
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 29.7% to $548.1 million during fiscal year
2009 as compared to the prior year. The fiscal year 2009 acquisitions of Carrington and DeVry
Brasil accounted for nearly one-third of the increase in Student Services and Administrative
Expense. The balance of the increase in expenses primarily represented additional investments in
advertising and recruiting to drive and support future growth in new student enrollments. In
addition, cost increases were incurred in information technology and student services. Expense
attributed to stock-based awards included in Student Services and Administrative Expense increased
during fiscal year 2009 as a result of an increase in the fair value of the awards granted and an
increase in the number of awards to retirement eligible employees, which are fully expensed upon
grant.
As a percent of revenue, Student Services and Administrative Expense decreased to 37.5% in
fiscal year 2009 from 38.7% during the prior year. The decrease was the combined result of
increased operating leverage from advertising and student recruiting costs, which more than offset
incremental investments in student services and home office support personnel.
Amortization of finite-lived intangible assets in connection with acquisitions of businesses
increased during fiscal year 2009 as compared to the year ago period. Increased amortization of
finite-lived intangible assets resulting from the acquisitions of Carrington and DeVry Brasil was
partially offset by a decrease in amortization of finite-lived intangible assets related to Ross
University and Chamberlain, as such assets are fully amortized. Amortization expense is included
entirely in the Student Services and Administrative Expense category.
OPERATING INCOME
Total consolidated operating income for fiscal year 2009 of $234.8 million increased $72.5
million, or 44.7%, as compared to the prior year. Operating income increased at DeVrys respective
Business, Technology and Management and Medical and Healthcare segments. These increases were
partially offset by a decline in operating profit at DeVrys Professional Education and Other
Educational Services segments.
Business, Technology and Management
Business, Technology and Management segment operating income increased 53.1% to $126.9 million
during fiscal year 2009, as compared to the prior year. The increase in operating income was the
result of higher revenue and gross margins, which were partially offset by increased spending on
advertising and recruiting as compared to the prior year. Fiscal year 2009 results include a $4.9
litigation settlement reserve and a $4.0 million pre-tax charge related to the buy-out of a portion
of a lease of the DeVry University campus in Long Island City, New York. Fiscal year 2008 results
included a $3.7 million pre-tax loss from sale leaseback transactions. Excluding the impact of
the litigation settlement reserve and real estate transactions in both fiscal year 2009 of $8.9
million and the prior year period of $3.7 million, Business, Technology and Management segment
fiscal year 2009 operating income of $135.8 million increased 56.7% as compared to the year-ago
period.
Medical and Healthcare
Medical and Healthcare segment operating income increased 75.4% to $91.7 million during fiscal
year 2009 as compared to the prior year. Increases in student enrollments and tuition produced
higher revenues and operating income for the current year period as compared to the prior year even
as faculty, staff and facilities were being added in connection with respective expansion programs
at both Ross University and Chamberlain. Carrington Colleges Group, Inc., which was acquired on
September 18, 2008, also accounted for a significant portion of the operating profit growth for
this segment.
Professional Education
Professional Education segment operating income declined 9.4% to $30.7 million during fiscal
year 2009 as compared to the prior year. The decrease in operating income was the result of slowed
revenue growth and increased investments in advertising and marketing related to expanding its
business-to-business sales channel and costs associated with operating a new office in Hong Kong.
58
Other Educational Services
For fiscal year 2009, Other Educational Services segment recorded an operating loss of $1.0
million as compared to operating income of $0.5 million during fiscal year 2008. The decrease in
operating loss was the result of increased investments at Advanced Academics to drive future
enrollment growth partially offset by operating income from DeVry Brasil, in which DeVry acquired a
majority stake on April 1, 2009.
NET INTEREST AND OTHER INCOME (EXPENSE)
Interest income decreased 49.8%, to $5.3 million during fiscal year 2009 as compared to the
prior year. Despite an increase in invested balances as compared to the prior year, interest
income decreased because of lower interest rates earned on invested balances throughout fiscal year
2009. The increase in invested cash balances, marketable securities and investments was
attributable to improved operating cash flow over the past twelve months partially offset by cash
used in connection with the acquisition of Carrington and DeVry Brasil.
Interest expense increased by $2.2 million to $2.8 million during fiscal year 2009 as compared
to the prior year. The increase in interest expense was attributable to higher average borrowings
during the current year. DeVry borrowed approximately $166 million in September 2008 to finance
the acquisition of Carrington. As of June 30, 2009, total outstanding borrowings were $124.8
million.
During fiscal year 2009, DeVry recorded a net investment gain of $43,000. This net gain was
comprised of a $1,266,000 gain from the settlement of a foreign exchange contract entered into in
connection with DeVrys signing of a definitive agreement to purchase a majority share in DeVry
Brasil. Partially offsetting this gain was a $1,223,000 net loss associated with the changes in
the valuation of DeVrys auction rate security portfolio and related put option (as discussed in
Note 2 to the Consolidated Financial Statements).
INCOME TAXES
Taxes on income were 30.2% of pretax income for fiscal year 2009, compared to 27.1% for the
prior year. The higher effective tax rate was attributable to a greater proportion of pre-tax
income being generated by U.S. operations versus the offshore operations of Ross University in the
current year as compared to the prior year. Earnings of Ross Universitys 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 their respective 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.
CRITICAL ACCOUNTING POLICIES
Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial
Statements for the fiscal year ended June 30, 2010, describes the method of application of
significant accounting policies and should be read in conjunction with the discussion below.
Revenue Recognition
DeVry University tuition, Ross University tuition for the basic science semesters, Carrington
College, Carrington College California, Chamberlain College of Nursing and DeVry Brasil tuition all
are billed at the start of each academic term. Such revenue is recognized ratably on a
straight-line basis over the academic term. Revenue from Ross University clinical terms is
recognized based upon the students weekly schedule of actual attendance. Refunds of tuition are
reported as a reduction of revenues. Revenues from sales of textbooks, electronic course materials
and other educational supplies, and commissions received on sales by bookstores (which are operated
by an outside party), are recognized upfront when the product or service is delivered. Tuition
revenue from Advanced Academics Inc. is recognized ratably on a straight-line basis over the course
term or the license period depending on the type of contract.
Tuition revenue from Becker Professional Education is recognized ratably on a straight-line
basis over the course term. Becker Professional Education self-study CD ROM, textbook and other
educational product revenues are recognized when the product or service is delivered. Revenue from
training services, which are generally short-term in duration, is recognized when the training
service is provided.
59
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 aging of
accounts receivable and historical 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 DeVrys information technology systems have been
capitalized in accordance with the rules on accounting for costs of computer software developed for
internal use. Capitalized software development costs for projects not yet complete are included as
construction in progress in the Land, Buildings and Equipment section of the Consolidated Balance
Sheets. Upon completion of the projects the costs are transferred to equipment and amortized using
the straight-line method over the estimated useful lives of the software.
Stock-Based Compensation
Stock-based compensation is recorded as compensation expense over the vesting period.
Expenses relating to stock-based awards are included in the appropriate expense categories.
If factors change and different assumptions are utilized 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 U.S. generally accepted accounting principles, goodwill and
indefinite-lived intangibles arising from a business combination are not amortized and charged to
expense over time. Instead, these assets must be reviewed annually for impairment or more
frequently if circumstances arise indicating potential impairment. This impairment review was most
recently completed during the fourth quarter of fiscal year 2010 at which time there was no
impairment loss associated with recorded goodwill or indefinite-lived intangible assets, as
estimated fair values exceeded the carrying amounts.
DeVry did not perform interim impairment reviews during fiscal year 2010. The estimated fair
values of the reporting units and indefinite-lived intangible assets exceeded their carrying values
by at least 32% as of the end of fiscal year 2009 and management did not believe business
conditions had deteriorated in any of its reporting units to the extent that the fair values of the
reporting units or intangible assets would have differed materially from their fiscal year 2009
fair values. In this regard, revenues grew for all reporting units in fiscal year 2010 and
operating results and cash flows improved over the prior year for all but the Becker Professional
Education (Becker) and Advanced Academics (AAI) reporting units. Though the Becker reporting unit,
which carries a goodwill balance of $24.7 million, has experienced a slowdown in growth and
declining operating profits, this slowdown is considered to be temporary. This reporting unit
remains highly profitable with operating margins exceeding 31%. In regards to the AAI reporting
unit, which carries a goodwill balance of $17.1 million, revenues grew by more than 25% from the
prior year. The decline in operating profit was the result of increased investment to initiate
programs designed to further enhance future revenue growth. Moreover, the fair values of both of
these reporting units significantly exceeded their carrying values as of the fiscal year 2009
impairment analysis. Management believes the negative trends at both Becker and AAI will be
temporary and believes its planned business and operational strategies will reverse these negative
trends in the foreseeable future. However, if operating improvements are not realized, all or some
of the goodwill could be impaired in the future.
Management does consider certain triggering events when evaluating whether interim impairment
analysis is warranted. Among these would be a significant long-term decrease in the market
capitalization of DeVry based on events specific to DeVrys operations. As of June 30, 2010,
DeVrys market capitalization exceeded its book value by approximately 300%. This premium was
consistent with that as of June 30, 2009. Other triggering events that could be cause for an
interim impairment review would be changes in the accreditation, regulatory or legal environment;
unexpected competition; and changes in the market acceptance of our educational programs and the
graduates of those programs.
60
Determining the fair value of a reporting unit or an intangible asset involves the use of
significant estimates and assumptions. Management bases its fair value estimates on assumptions it
believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty.
Actual results may differ from those estimates.
For goodwill, DeVry estimates the fair value of its reporting units using a discounted cash
flow model utilizing inputs which include projected operating results and cash flows from
managements long term plan. 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.
DeVry had seven reporting units which contained goodwill as of the fourth quarter fiscal year
2010 analysis. These reporting units constitute components for which discrete financial
information is available and regularly reviewed by management. Determining the fair value of a
reporting unit involves the use of significant estimates and assumptions. The estimate of fair
value of each reporting unit is based on managements projection of revenues, gross margin,
operating costs and cash flows considering planned business and operational strategies over a
long-term planning horizon of 5 years along with a terminal value calculated based on discounted
cash flows. These measures of business performance are similar to those management uses to
evaluate the results of operations on a regular basis. The growth rates used to project cash
flows, operating results and terminal values of reporting units are commensurate with historical
results and analysis of the economic environment in which the reporting units operate. The
valuations employ present value techniques to estimate fair value and consider market factors.
Management believes the assumptions used for the impairment testing are consistent with those
utilized by a market participant in performing similar valuations of its reporting units. Discount
rates of 11% to 16% were utilized for the reporting units. The discount rate utilized by each unit
takes into account managements assumptions on growth rates and risk, both company specific and
macro-economic, inherent in that reporting unit. Management bases its fair value estimates on
assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent
uncertainty. Actual results may differ from those estimates. All of the reporting units estimated
fair values exceeded their carrying values as of the fourth quarter impairment analysis by at least
40%. The results of this analysis indicate no impairment of goodwill existed as of June 30, 2010.
An increase of 100 basis points in the discount rate used in this analysis would result in a
minimum 27% premium of fair value over carrying value. Management considers the use of this level
of sensitivity in the discount rate reasonable considering the strength of DeVrys sustained
operations. If the impairment analysis resulted in any reporting units fair value being less than
the carrying value, an additional step would be required to determine the implied fair value of
goodwill associated with that reporting unit. The implied fair value of goodwill is determined by
first allocating the fair value of the reporting unit to all its assets and liabilities and then
computing the excess of the reporting units fair value over the amounts assigned to the assets and
liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, such
excess represents the amount of goodwill impairment, and, accordingly such impairment is
recognized.
For indefinite-lived intangible assets, DeVry determines their fair value based on the nature
of the asset using various valuation techniques including a royalty rate model for Trade Names,
Trademarks and Intellectual Property, a discounted income stream model for Title IV Eligibility and
a discounted cash flow model for Accreditation. The estimated fair values of these
indefinite-lived intangible assets are based on managements projection of revenues, gross margin,
operating costs and cash flows considering planned business and operational strategies over a
long-term planning horizon of 5 years. The assumed royalty rates and the growth rates used to
project cash flows and operating results are commensurate with historical results and analysis of
the economic environment in which the reporting units that record indefinite-lived intangible
assets operate. The valuations employ present value techniques to measure fair value and consider
market factors. Management believes the assumptions used for the impairment testing are consistent
with those that would be utilized by a market participant in performing similar valuations of its
indefinite-lived intangible assets. The discount rates of 11% to 16% that were utilized in the
valuations take into account managements assumptions on growth rates and risk, both company
specific and macro-economic, inherent in each reporting unit that records indefinite-lived
intangible assets. These intangible assets are closely tied to the overall risk of the reporting
units in which they are recorded so management would expect the discount rates to also match those
used for valuing these reporting units. Management bases its fair value estimates on assumptions
it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty.
All of the fair value estimates of indefinite-lived intangible assets exceed the carrying
values of those assets as of the 2010 fourth quarter impairment analysis by at least 50% except
those acquired with the acquisitions of Carrington and DeVry Brasil where fair values exceeded
carrying values by at least 14%. The smaller premium for the newly acquired assets would be
expected considering all have been acquired within twenty months of the fourth quarter valuation
date. Since no fair values were estimated to be below carrying value, no impairment of intangible
assets was recorded as of June 30, 2010. If the carrying amount of an indefinite-lived
intangible asset exceeds the fair value, an impairment loss is recognized in an amount equal to
that excess.
At June 30, 2010, intangible assets from business combinations totaled $194.2 million, and
goodwill totaled $514.9 million. Together these assets equal approximately 44% of total assets, and
any impairment could significantly affect future results of operations.
61
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. No
such circumstances existed in fiscal year 2010.
Income Taxes
DeVry accounts for income taxes using the asset and liability method. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences of temporary
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. DeVry also recognizes future tax benefits associated with tax loss and
credit carryforwards as deferred tax assets. DeVrys deferred tax assets are reduced by a valuation
allowance, when in the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. DeVry measures deferred tax assets and
liabilities using enacted tax rates in effect for the year in which DeVry expects to recover or
settle the temporary differences. The effect of a change in tax rates on deferred taxes is
recognized in the period that the change is enacted. DeVry reduces its net tax assets for the
estimated additional tax and interest that may result from tax authorities disputing uncertain tax
positions DeVry has taken.
Estimates and Assumptions
DeVrys 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 has 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
thereby materially affecting results in the future.
DeVrys financial statements reflect the following significant estimates and assumptions:
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the method of revenue recognition across 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. DeVrys
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 $0.7 million would be required; |
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the useful lives of equipment and facilities whose value is a significant
portion of DeVrys total assets; |
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the value and useful lives of acquired finite-lived intangible assets; |
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the value of goodwill and other 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
authoritative guidance; |
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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. |
The methodology management used to derive each of the above estimates for fiscal 2010 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 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 will have a material effect on its cash flows, results of operations
or financial position.
62
LIQUIDITY AND CAPITAL RESOURCES
Student Payments
DeVrys primary source of liquidity is the cash received from payments for student tuition,
books, other educational materials 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. Private loans as a percent of DeVrys total revenue are relatively small.
In connection with the turmoil in the credit markets and economic downturn over the past two
years, some lenders changed or exited certain private loan programs. Also, certain lenders have
tightened underwriting criteria for private loans. To date, these actions have not had a material
impact on DeVrys students ability to access funds for their educational needs and thus its
enrollments. DeVry monitors the student lending situation very closely and continues to pursue all
available financing options for its students, including DeVrys institutional loan programs.
The following table summarizes DeVrys cash receipts from tuition and related fee payments by
fund source as a percentage of total revenue for the fiscal years 2009 and 2008, respectively.
Final data for fiscal year 2010 is not yet available.
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Fiscal Year |
Funding Source: |
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2009 |
|
2008 |
Federal Assistance (Title IV) Program Funding: |
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Grants and Loans |
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73 |
% |
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70 |
% |
Federal Work Study |
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1 |
% |
|
|
1 |
% |
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Total Title IV Program Funding |
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74 |
% |
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71 |
% |
State Grants |
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2 |
% |
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3 |
% |
Private Loans |
|
|
3 |
% |
|
|
5 |
% |
Student accounts, cash payments, private scholarships,
employer and military provided tuition assistance and other |
|
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21 |
% |
|
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21 |
% |
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|
|
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Total |
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100 |
% |
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100 |
% |
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The pattern of cash receipts during the year is somewhat seasonal. DeVrys accounts receivable
peak immediately after bills are issued each semester. Historically, accounts receivable reach
their lowest level at the end of each semester/session, dropping to their lowest point during the
year at the end of June.
At June 30, 2010, total accounts receivable, net of related reserves, was $119.2 million,
compared to $104.4 million at June 30, 2009. The increase in net accounts receivable was
attributable to the impact on receivables from revenue growth across all four business segments as
compared to the year-ago period.
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, 2010, DeVry had
reserved for and recognized as expense the amount of DeVrys share of the default risk.
Financial Aid
DeVry is highly dependent upon the timely receipt of federal financial aid funds. 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
governments support of postsecondary education. If there are changes to financial aid programs
that restrict student eligibility or reduce funding levels, DeVrys financial condition and cash
flows could be materially and adversely effected. Please see Item 1A Risk Factors for a discussion
of student financial aid related risks.
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,
DeVrys 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
63
Department of Education and state regulatory agency program reviews have not resulted in
material findings or adjustments against DeVry.
A U.S. Department of Education regulation known as the 90/10 Rule affects only proprietary
postsecondary institutions, such as DeVry University, Ross University, Chamberlain, Carrington
College and Carrington College California. 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 DeVrys Title IV eligible institutions for fiscal
years 2009 and 2008, respectively. Final data for fiscal year 2010 is not yet available.
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Fiscal Year |
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|
2009 |
|
2008 |
DeVry University: |
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Undergraduate |
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77 |
% |
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75 |
% |
Graduate |
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70 |
% |
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75 |
% |
Ross University |
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80 |
% |
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81 |
% |
Chamberlain College of Nursing |
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69 |
% |
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62 |
% |
Carrington College Group, Inc.: |
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Carrington College |
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85 |
% |
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79 |
% |
Carrington College California |
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83 |
% |
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77 |
% |
Under the terms of DeVrys 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 have been authorized.
At June 30, 2010, cash in the amount of $2.1 million was held in restricted bank accounts, compared
to $5.3 million at June 30, 2009.
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 DeVrys
composite score at June 30, 2010, and determined that it exceeds 1.5. Management believes DeVry
will continue to demonstrate the required level of financial stability.
Cash from Operations
Cash generated from operations in fiscal year 2010 was $391.5 million, compared to
$249.5 million in the prior year period. Cash flow from operations increased $114.4 million due to
higher net income. In addition, cash flow from operations increased by a $30.9 million from a
greater source of cash compared to the prior year for changes in levels of prepaid expenses,
accounts payable and accrued expenses. An increase in non-cash expenses for depreciation,
amortization and stock-based compensation resulted in a $14.4 million greater source of cash.
Also, cash flow from operations increased $2.5 million as a result of a decrease in accounts
receivable, net of related reserves. These increases in operating cash flow were partially offset
by a decrease in deferred tuition revenue and advanced tuition payments of $10.4 million driven by
timing in the receipt of student payments prior to the start of the term as compared to the prior
year period. Variations in the levels of accrued and prepaid expenses and accounts payable from
period to period are caused, in part, by the timing of the period-end relative to DeVrys payroll
and bill payment cycles.
Investing Activities
Capital expenditures in fiscal year 2010 were $131.0 million compared to $74.0 million in the
year-ago period. The increase in capital expenditures was the result of a higher level of spending
on Project DELTA (implementation of a new student information system for DeVry University and
Chamberlain); facility expansion at the Ross University medical and veterinary schools; spending
for the new Chamberlain Arlington, Virginia, and Chicago campuses; new location openings and
capacity expansion at Carrington; and facility improvements at DeVry University. In addition,
capital expenditures were incurred in connection with the relocation of the DeVry Inc. home
offices.
For fiscal year 2011, management expects capital expenditures to increase in comparison to
fiscal year 2010 to support future growth including continued implementation of a new student
information system at DeVry University and Chamberlain College of
64
Nursing; continued capacity expansion at Ross University; facility improvements and new
locations for DeVry University, Chamberlain College of Nursing, Carrington and DeVry Brasil.
Management anticipates full year fiscal 2011 capital spending in the $140 to $150 million range.
During fiscal year 2010, DeVry recognized a net gain of $1.2 million related to its
investments in municipal auction rate securities. During the fourth quarter of fiscal year 2010,
DeVry liquated $46.0 million of auction-rate securities at par value. As of June 30, 2010, the
fair market value of DeVrys auction-rate securities was $13.5 million, and such securities were
liquidated at par value in early July 2010.
Cash from Financing Activities
During fiscal year 2010, DeVry had cumulative borrowings of $70 million and made cumulative
repayments of $150 million under its existing revolving line of credit. As of June 30, 2010, there
were no outstanding borrowings under DeVrys revolving credit facility. DeVry made cumulative
repayments of $45.1 under a short-term uncommitted line of credit. As of June 30, 2010, there were
no outstanding borrowings under the short-term uncommitted line of credit and such facility has
been terminated.
DeVry repurchased a total of 741,905 shares of its stock, on the open market, for
approximately $41.7 million during fiscal year 2010. In November 2009, DeVry completed its second
share repurchase program, the first having been completed in April 2008. DeVrys Board of
Directors authorized a third stock buy-back program in November 2009, providing up to $50 million
of share repurchases through December 31, 2011. DeVry began repurchasing shares under the third
program in January 2010, and as of June 30, 2010, the total remaining authorization under this
repurchase program was $24.6 million. On August 11, 2010, DeVrys Board of Directors authorized a
fourth share repurchase program, which will allow DeVry to buy back up to $50 million of its common
stock through June 30, 2012. The timing and amount of any future repurchases will be determined by
DeVry 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.
Cash dividends paid during fiscal year 2010 were $12.8 million. DeVrys Board of Directors
declared a dividend on May 12, 2010 of $0.10 per share to common stockholders of record as of June
15, 2010. The total dividend of $7.1 million was paid on July 8, 2010.
DeVry believes that it has sufficient liquidity despite the disruption in the credit markets
over the past two years. Management believes that current balances of unrestricted cash, cash
generated from operations and revolving loan facility will be sufficient to fund both DeVrys
current operations and current growth plans for the foreseeable future unless future significant
investment opportunities, similar to the acquisition of Carrington, should arise.
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 maturity to January 2012;
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.
65
The following table summarizes the terms of the revolving credit agreement, as amended in
January 2007, and its status as of June 30, 2010:
Revolving Credit Agreement, as amended in January 2007
|
|
|
|
|
|
|
DeVry, Inc. |
|
GEI |
|
|
$175 million, with options to increase to
$275 million, less any outstanding GEI
borrowings under the revolving credit
agreement
|
|
$50 million sub limit
|
|
|
At DeVrys discretion, either the prime
rate or a LIBOR rate plus 0.50% -
1.25%, depending upon the
achievement of certain financial ratios.
|
|
At DeVrys discretion, either
the prime
rate or a LIBOR rate plus 0.50% -
1.25%, depending upon the
achievement of certain financial
ratios.
|
|
|
January 11, 2012 |
|
January 11, 2012 |
Outstanding borrowings at June 30, 2010
|
|
$0 |
|
$0 |
Interest Rate at June 30, 2010
|
|
N/A |
|
N/A |
Outstanding Letters of credit at June
30, 2010 |
|
$4.5 Million |
|
$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.
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 to comply with other covenants contained
in the agreement will constitute an event of default and could result in termination of the
agreements and require payment of all outstanding borrowings. DeVry was in compliance with all debt
covenants as of June 30, 2010.
Other Contractual Arrangements
DeVrys long-term contractual obligations consist of its $175 million revolving line of credit
(discussed above), operating leases on facilities and equipment, and agreements for various
services. DeVry has the option to expand the revolving credit facility to $275 million. At June
30, 2010, there were no outstanding borrowings under DeVrys revolving credit agreement, and there
were no required payments under this borrowing agreement prior to its maturity. DeVrys letters of
credit outstanding under the revolving credit facility were approximately $4.5 million as of June
30, 2010.
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 did not enter into
any significant derivatives, swaps, futures contracts, calls, hedges or non-exchange traded
contracts during fiscal year 2010. DeVry had no open derivative positions at June 30, 2010.
DeVrys consolidated cash balances of $307.7 million at June 30, 2010, included approximately
$209.8 million of cash attributable to DeVrys international operations. It is DeVrys intention
to indefinitely reinvest this cash and subsequent earnings and cash flow to improve and expand
facilities and operations of its international schools and pursue future business opportunities
outside the United States. Therefore, cash held by international operations will not be available
for domestic general corporate purposes on a long-term basis.
As of the end of the fiscal year, DeVry had posted more than $10 million of surety bonds to
various governmental jurisdictions on behalf of DeVry University, Chamberlain College of Nursing,
Carrington College, Carrington College California 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
66
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 DeVrys contractual obligations at June 30, 2010, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due In |
|
|
|
|
|
|
Less Than |
|
|
|
|
|
|
|
|
|
After |
|
All |
|
|
Total |
|
1 Year |
|
1-3 Years |
|
4-5 Years |
|
5 Years |
|
Other |
|
|
(Dollars in thousands) |
Operating Leases |
|
$ |
580,800 |
|
|
$ |
71,300 |
|
|
$ |
199,800 |
|
|
$ |
109,800 |
|
|
$ |
199,900 |
|
|
$ |
|
|
Employment Agreements |
|
|
4,191 |
|
|
|
1,010 |
|
|
|
849 |
|
|
|
584 |
|
|
|
1,748 |
|
|
|
|
|
Uncertain Tax Positions |
|
|
5,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,200 |
|
|
|
|
Total Cash Obligation |
|
$ |
590,191 |
|
|
$ |
72,310 |
|
|
$ |
200,649 |
|
|
$ |
110,384 |
|
|
$ |
201,648 |
|
|
$ |
5,200 |
|
|
|
|
Management believes that current balances of unrestricted cash, cash generated from operations
and the revolving loan facility will be sufficient to fund both DeVrys 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
In December 2007, the FASB issued and revised authoritative guidance for business combinations
and identifying, measuring and recognizing intangible assets and goodwill. The new accounting
requirements changed how business acquisitions are to be accounted for both on the acquisition date
and in subsequent periods. This guidance also established accounting and reporting standards to
improve the relevance, comparability and transparency of the financial information provided in a
companys financial statements as it relates to minority interests in the equity of a subsidiary.
These minority interests will be recharacterized as noncontrolling interests and generally
classified as a component of equity. This guidance was effective for DeVry beginning in fiscal
year 2010 and all disclosure requirements were fully implemented in the first quarter Consolidated
Financial Statements.
In January 2010, the FASB issued and revised authoritative guidance for improving disclosure
on fair value measurements. This guidance requires reporting entities to provide information about
movements of assets among levels of the three-tier fair value hierarchy. The guidance is effective
for fiscal years that begin after December 15, 2010, and it should be used for quarterly and annual
filings. DeVry management does not believe the application of this guidance will have a significant
impact on its financial disclosures.
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 DeVrys 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 Universitys 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 DeVrys 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 1.0% of DeVrys overall assets, and its Canadian
liabilities constitute approximately 5% of overall liabilities, changes in the value of Canadas
currency at rates experienced during the past several years are unlikely to have a material effect
on DeVrys 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.
The financial position and results of operations of DeVrys investment in DeVry Brasil are
measured using the Brazilian Real as the functional currency. DeVry Brasil has not entered into
any material long-term contracts to purchase or sell goods and services, other than the lease
agreements on teaching facilities and contingencies relating to prior acquisitions. Currently,
DeVry does not have any foreign exchange contracts or derivative financial instruments designed to
mitigate changes in the value of the Brazilian Real. Because Brazilian-based assets constitute
less than 3.0% of DeVrys overall assets, and its Brazilian liabilities constitute
67
approximately 3% of overall liabilities, changes in the value of Brazils currency at rates
experienced during the past several years are unlikely to have a material effect on DeVrys results
of operations or financial position. Based upon the current value of the net assets in Fanors
operations, a change of $0.01 in the value of the Brazilian Real relative to the U.S. dollar would
result in a translation adjustment of less than $100,000.
The interest rate on DeVrys debt is based upon LIBOR interest rates for periods typically
ranging from one to three months. Based upon borrowings of $50 million, a 100 basis point increase
in short-term interest rates would result in approximately $0.5 million of additional annual
interest expense. At June 30, 2010, 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.
DeVrys 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.
DeVrys 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.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplemental schedules of DeVry and its subsidiaries
are included below on pages 70 through 103 of this report:
|
|
|
|
|
|
|
10K Report |
|
|
Page |
|
|
|
70 |
|
|
|
|
71 |
|
|
|
|
72 |
|
|
|
|
73 |
|
|
|
|
74 |
|
|
|
|
102 |
|
|
|
|
103 |
|
|
|
|
1 |
|
Schedules 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.
ITEM 9A CONTROLS AND PROCEDURES
Principal Executive, CEO, and Principal Financial Officer, CFO, Certificates
The required compliance certificates signed by DeVrys 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 DeVrys reports filed under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified by the applicable rules and forms.
DeVrys Chief Executive Officer and Chief Financial Officer have concluded, based on their
evaluation as of the end of the period covered by this report, that DeVrys disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Exchange Act are effective to ensure that
information required to be disclosed in the reports that DeVry files or submits under the Exchange
Act is (i) recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms, and (ii) is accumulated and communicated to
DeVrys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
68
Managements Annual 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, 2010, DeVrys 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 Commissions 1992 report Internal Control Integrated Framework. Based upon this
assessment, DeVry concluded that as of June 30, 2010, its internal control over financial reporting
was effective based upon these criteria.
The effectiveness of DeVrys internal control over financial reporting as of June 30, 2010 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 that occurred during the
fourth quarter of fiscal year 2010 that materially affected, or are reasonably likely to materially
affect, DeVrys internal control over financial reporting.
ITEM 9B OTHER INFORMATION
None.
69
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(Dollars in thousands) |
|
ASSETS: |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
$ |
307,702 |
|
|
$ |
165,202 |
|
Marketable Securities and Investments |
|
|
15,666 |
|
|
|
60,174 |
|
Restricted Cash |
|
|
2,102 |
|
|
|
5,339 |
|
Accounts Receivable, Net |
|
|
119,210 |
|
|
|
104,413 |
|
Deferred Income Taxes, Net |
|
|
22,340 |
|
|
|
21,562 |
|
Prepaid Expenses and Other |
|
|
32,627 |
|
|
|
28,756 |
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
499,647 |
|
|
|
385,446 |
|
|
|
|
|
|
|
|
Land, Building and Equipment: |
|
|
|
|
|
|
|
|
Land |
|
|
53,914 |
|
|
|
53,694 |
|
Building |
|
|
283,044 |
|
|
|
250,542 |
|
Equipment |
|
|
346,979 |
|
|
|
328,637 |
|
Construction in Progress |
|
|
38,188 |
|
|
|
10,587 |
|
|
|
|
|
|
|
|
|
|
|
722,125 |
|
|
|
643,460 |
|
Accumulated Depreciation |
|
|
(333,988 |
) |
|
|
(335,889 |
) |
|
|
|
|
|
|
|
Land, Building and Equipment, Net |
|
|
388,137 |
|
|
|
307,571 |
|
|
|
|
|
|
|
|
Other Assets: |
|
|
|
|
|
|
|
|
Intangible Assets, Net |
|
|
194,195 |
|
|
|
203,195 |
|
Goodwill |
|
|
514,864 |
|
|
|
512,568 |
|
Perkins Program Fund, Net |
|
|
13,450 |
|
|
|
13,450 |
|
Other Assets |
|
|
17,533 |
|
|
|
12,069 |
|
|
|
|
|
|
|
|
Total Other Assets |
|
|
740,042 |
|
|
|
741,282 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
1,627,826 |
|
|
$ |
1,434,299 |
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Current Portion of Debt |
|
$ |
|
|
|
$ |
104,811 |
|
Accounts Payable |
|
|
90,364 |
|
|
|
71,564 |
|
Accrued Salaries, Wages and Benefits |
|
|
92,368 |
|
|
|
74,174 |
|
Accrued Expenses |
|
|
53,565 |
|
|
|
39,162 |
|
Advance Tuition Payments |
|
|
20,930 |
|
|
|
27,642 |
|
Deferred Tuition Revenue |
|
|
86,627 |
|
|
|
74,664 |
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
343,854 |
|
|
|
392,017 |
|
|
|
|
|
|
|
|
Other Liabilities: |
|
|
|
|
|
|
|
|
Revolving Loan |
|
|
|
|
|
|
20,000 |
|
Deferred Income Taxes, Net |
|
|
43,368 |
|
|
|
51,895 |
|
Deferred Rent and Other |
|
|
56,216 |
|
|
|
40,257 |
|
|
|
|
|
|
|
|
Total Other Liabilities |
|
|
99,584 |
|
|
|
112,152 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
443,438 |
|
|
|
504,169 |
|
COMMITMENTS AND CONTINGENCIES (NOTE 13) |
|
|
|
|
|
|
|
|
NON-CONTROLLING INTEREST |
|
|
5,007 |
|
|
|
3,188 |
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Common Stock, $0.01 Par Value, 200,000,000 Shares Authorized: 71,030,000 and
71,233,000 Shares Outstanding at June 30, 2010 and 2009, Respectively |
|
|
734 |
|
|
|
729 |
|
Additional Paid-in Capital |
|
|
224,209 |
|
|
|
197,096 |
|
Retained Earnings |
|
|
1,055,591 |
|
|
|
791,677 |
|
Accumulated Other Comprehensive Income |
|
|
9,896 |
|
|
|
7,157 |
|
Treasury Stock, at Cost (2,394,000 and 1,663,000 Shares, Respectively) |
|
|
(111,049 |
) |
|
|
(69,717 |
) |
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS EQUITY |
|
|
1,179,381 |
|
|
|
926,942 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
1,627,826 |
|
|
$ |
1,434,299 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
70
DEVRY INC.
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Dollars in thousands except for per share amounts) |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
Tuition |
|
$ |
1,795,814 |
|
|
$ |
1,354,925 |
|
|
$ |
1,004,029 |
|
Other Educational |
|
|
119,367 |
|
|
|
106,528 |
|
|
|
87,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues |
|
|
1,915,181 |
|
|
|
1,461,453 |
|
|
|
1,091,833 |
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Educational Service |
|
|
826,089 |
|
|
|
669,673 |
|
|
|
503,133 |
|
Loss on Real Estate Transactions |
|
|
|
|
|
|
3,977 |
|
|
|
3,743 |
|
Litigation Settlement Reserve |
|
|
|
|
|
|
4,900 |
|
|
|
|
|
Student Services and Administrative Expense |
|
|
678,190 |
|
|
|
548,070 |
|
|
|
422,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Costs and Expense |
|
|
1,504,279 |
|
|
|
1,226,620 |
|
|
|
929,498 |
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
410,902 |
|
|
|
234,833 |
|
|
|
162,335 |
|
INTEREST AND OTHER (EXPENSE) INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
2,080 |
|
|
|
5,251 |
|
|
|
10,463 |
|
Interest Expense |
|
|
(1,585 |
) |
|
|
(2,775 |
) |
|
|
(522 |
) |
Net Investment Gain |
|
|
1,225 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
|
1,720 |
|
|
|
2,519 |
|
|
|
9,941 |
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
412,622 |
|
|
|
237,352 |
|
|
|
172,276 |
|
Income Tax Provision |
|
|
132,639 |
|
|
|
71,700 |
|
|
|
46,744 |
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
279,983 |
|
|
|
165,652 |
|
|
|
125,532 |
|
Net Income Attributable to Non-controlling Interest |
|
|
(74 |
) |
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO DEVRY INC. |
|
$ |
279,909 |
|
|
$ |
165,613 |
|
|
$ |
125,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO DEVRY INC. SHAREHOLDERS |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
3.92 |
|
|
$ |
2.32 |
|
|
$ |
1.76 |
|
Diluted |
|
$ |
3.87 |
|
|
$ |
2.28 |
|
|
$ |
1.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH DIVIDEND DECLARED PER COMMON SHARE |
|
$ |
0.20 |
|
|
$ |
0.16 |
|
|
$ |
0.12 |
|
The accompanying notes are an integral part of these consolidated financial statements.
71
DEVRY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Dollars in thousands) |
|
CASH FLOW FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
279,983 |
|
|
$ |
165,613 |
|
|
$ |
125,532 |
|
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock Based Compensation Expense |
|
|
10,148 |
|
|
|
7,550 |
|
|
|
5,724 |
|
Depreciation |
|
|
51,225 |
|
|
|
39,825 |
|
|
|
34,808 |
|
Amortization |
|
|
10,997 |
|
|
|
10,625 |
|
|
|
5,066 |
|
Provision for Refunds and Uncollectible Accounts |
|
|
88,202 |
|
|
|
72,395 |
|
|
|
51,881 |
|
Deferred Income Taxes |
|
|
(9,549 |
) |
|
|
344 |
|
|
|
3,110 |
|
Loss on Disposal of Land, Buildings and Equipment |
|
|
666 |
|
|
|
2,394 |
|
|
|
3,882 |
|
Unrealized Net (Gain) Loss on Investments |
|
|
(1,225 |
) |
|
|
1,224 |
|
|
|
|
|
Changes in Assets and Liabilities, Net of Effects from Acquisition of Business: |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Cash |
|
|
3,247 |
|
|
|
(1,097 |
) |
|
|
10,374 |
|
Accounts Receivable |
|
|
(102,588 |
) |
|
|
(89,249 |
) |
|
|
(59,952 |
) |
Prepaid Expenses and Other |
|
|
5,654 |
|
|
|
7,292 |
|
|
|
(21,867 |
) |
Accounts Payable |
|
|
18,776 |
|
|
|
(3,084 |
) |
|
|
35,997 |
|
Accrued Salaries, Wages, Benefits and Expenses |
|
|
30,854 |
|
|
|
20,130 |
|
|
|
533 |
|
Advance Tuition Payments |
|
|
(6,805 |
) |
|
|
5,889 |
|
|
|
2,546 |
|
Deferred Tuition Revenue |
|
|
11,963 |
|
|
|
9,675 |
|
|
|
1,012 |
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
|
391,548 |
|
|
|
249,526 |
|
|
|
198,646 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
(131,009 |
) |
|
|
(74,044 |
) |
|
|
(62,806 |
) |
Net Proceeds from Sales of Land and Building |
|
|
|
|
|
|
|
|
|
|
52,571 |
|
Payment for Purchase of Business, Net of Cash Acquired |
|
|
|
|
|
|
(315,318 |
) |
|
|
(27,603 |
) |
Marketable Securities Purchased |
|
|
(79 |
) |
|
|
(63 |
) |
|
|
(247,013 |
) |
Marketable Securities Sales |
|
|
46,000 |
|
|
|
|
|
|
|
184,854 |
|
Other |
|
|
(700 |
) |
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES |
|
|
(85,788 |
) |
|
|
(389,386 |
) |
|
|
(99,997 |
) |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Exercise of Stock Options |
|
|
13,041 |
|
|
|
12,157 |
|
|
|
17,703 |
|
Proceeds from Stock Issued Under Employee Stock Purchase Plan |
|
|
997 |
|
|
|
2,066 |
|
|
|
1,021 |
|
Repurchase of Common Stock for Treasury |
|
|
(41,683 |
) |
|
|
(33,684 |
) |
|
|
(24,465 |
) |
Cash Dividends Paid |
|
|
(12,839 |
) |
|
|
(10,015 |
) |
|
|
(7,840 |
) |
Excess Tax Benefit from Stock-Based Payments |
|
|
3,455 |
|
|
|
3,571 |
|
|
|
4,201 |
|
Borrowing Under Revolving Credit Facility |
|
|
70,000 |
|
|
|
290,000 |
|
|
|
25,000 |
|
Repayments Under Revolving Credit Facility |
|
|
(150,000 |
) |
|
|
(210,000 |
) |
|
|
(26,895 |
) |
Repayments of Fanor Debt |
|
|
|
|
|
|
(12,740 |
) |
|
|
|
|
Borrowing Under Collateralized Line of Credit |
|
|
300 |
|
|
|
46,419 |
|
|
|
|
|
Repayments Under Collateralized Line of Credit |
|
|
(45,111 |
) |
|
|
(1,608 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
|
|
(161,840 |
) |
|
|
86,166 |
|
|
|
(11,275 |
) |
|
|
|
|
|
|
|
|
|
|
Effects of Exchange Rate Differences |
|
|
(1,420 |
) |
|
|
1,697 |
|
|
|
670 |
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
142,500 |
|
|
|
(51,997 |
) |
|
|
88,044 |
|
Cash and Cash Equivalents at Beginning of Year |
|
|
165,202 |
|
|
|
217,199 |
|
|
|
129,155 |
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year |
|
$ |
307,702 |
|
|
$ |
165,202 |
|
|
$ |
217,199 |
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Paid During the Year For: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
867 |
|
|
$ |
2,167 |
|
|
$ |
369 |
|
Income Taxes, Net |
|
|
130,502 |
|
|
|
60,609 |
|
|
|
58,387 |
|
Non-cash Investing and Financing Activity: |
|
|
|
|
|
|
|
|
|
|
|
|
Declaration of Cash Dividend to be Paid |
|
|
7,117 |
|
|
|
5,705 |
|
|
|
4,283 |
|
Accretion of Non-controlling Interest Put Option |
|
|
1,745 |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
72
DEVRY INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
For the Years Ended June 30, 2010, 2009, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Amount |
|
|
Additional |
|
|
|
|
|
|
Comprehensive |
|
|
|
|
|
|
|
|
|
$.01 Par |
|
|
Paid-In |
|
|
Retained |
|
|
Income |
|
|
Treasury |
|
|
|
|
|
|
Value |
|
|
Capital |
|
|
Earnings |
|
|
(Loss) |
|
|
Stock |
|
|
Total |
|
|
|
(Dollars in thousands except per share amounts) |
|
Balance at June 30, 2007 |
|
$ |
716 |
|
|
$ |
143,580 |
|
|
$ |
521,416 |
|
|
$ |
(918 |
) |
|
$ |
(12,391 |
) |
|
$ |
652,403 |
|
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 |
|
|
|
637,501 |
|
|
|
(2,963 |
) |
|
|
(37,241 |
) |
|
|
766,426 |
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income in 2009 |
|
|
|
|
|
|
|
|
|
|
165,613 |
|
|
|
|
|
|
|
|
|
|
|
165,613 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,972 |
|
|
|
|
|
|
|
8,972 |
|
Reclassification adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,378 |
|
|
|
|
|
|
|
6,378 |
|
Unrealized investment gains (losses),
net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,230 |
) |
|
|
|
|
|
|
(5,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
7,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,550 |
|
Cash dividends of $0.16 per common share |
|
|
|
|
|
|
|
|
|
|
(11,437 |
) |
|
|
|
|
|
|
|
|
|
|
(11,437 |
) |
Proceeds from exercise of stock options |
|
|
5 |
|
|
|
12,510 |
|
|
|
|
|
|
|
|
|
|
|
(358 |
) |
|
|
12,157 |
|
Tax benefit from exercise of stock options |
|
|
|
|
|
|
8,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,131 |
|
Proceeds from stock issued under Employee
Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase Plan |
|
|
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
1,566 |
|
|
|
2,066 |
|
Repurchase of common shares for treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,684 |
) |
|
|
(33,684 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009 |
|
|
729 |
|
|
|
197,096 |
|
|
|
791,677 |
|
|
|
7,157 |
|
|
|
(69,717 |
) |
|
|
926,942 |
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income in 2010 |
|
|
|
|
|
|
|
|
|
|
279,909 |
|
|
|
|
|
|
|
|
|
|
|
279,909 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,623 |
|
|
|
|
|
|
|
2,623 |
|
Unrealized investment gains (losses),
net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of Noncontrolling Interest |
|
|
|
|
|
|
|
|
|
|
(1,745 |
) |
|
|
|
|
|
|
|
|
|
|
(1,745 |
) |
Stock-based compensation |
|
|
|
|
|
|
10,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,148 |
|
Cash dividends of $0.20 per common share |
|
|
|
|
|
|
|
|
|
|
(14,250 |
) |
|
|
|
|
|
|
|
|
|
|
(14,250 |
) |
Proceeds from exercise of stock options |
|
|
5 |
|
|
|
13,489 |
|
|
|
|
|
|
|
|
|
|
|
(453 |
) |
|
|
13,041 |
|
Tax benefit from exercise of stock options |
|
|
|
|
|
|
3,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,283 |
|
Proceeds from stock issued under Employee
Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase Plan |
|
|
|
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
804 |
|
|
|
997 |
|
Repurchase of common shares for treasury |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,683 |
) |
|
|
(41,683 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010 |
|
$ |
734 |
|
|
$ |
224,209 |
|
|
$ |
1,055,591 |
|
|
$ |
9,896 |
|
|
$ |
(111,049 |
) |
|
$ |
1,179,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
73
DEVRY INC.
Notes to Consolidated Financial Statements
NOTE 1: NATURE OF OPERATIONS
DeVry Inc. (DeVry) is a global provider of educational services and one of the largest
publicly-held educational organizations in the world. DeVrys wholly owned subsidiaries consist
of:
|
|
|
Advanced Academics Inc.
|
|
|
|
Becker Professional Education
|
|
|
|
Chamberlain College of Nursing
|
|
|
|
DeVry University |
|
|
|
Ross University |
|
|
|
Carrington Colleges Group, Inc. |
|
|
In addition, DeVry owns a majority stake in DeVry Brasil (formerly known as Fanor); a
Brazilian based postsecondary education organization. These institutions offer degree and
non-degree programs in business, healthcare and technology and serve students in secondary through
postsecondary education as well as accounting and finance professionals.
DeVry University is one of the largest regionally accredited higher education systems in North
America, offering associate, bachelors and masters degree programs in technology; healthcare
technology; business and management. At June 30, 2010, DeVry University programs were offered at
more than 95 locations in the United States and Canada and through DeVry Universitys online
platform.
Ross University comprises the Ross University School of Medicine with a campus in the
Caribbean country of Dominica and a location in Freeport, Bahamas and the Ross University School of
Veterinary Medicine with a campus in the Caribbean country of St. Kitts. The schools are
collectively referred to as Ross University. 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) through its 5 locations in the United States;
offers associate, bachelors and masters degree programs in nursing. In addition, Chamberlain
offers a bachelors 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.
Carrington (formerly known as U.S. Education) comprises Carrington College (formerly known as
Apollo College), with 10 campuses in six western states, and Carrington College of California
(formerly known as Western Career College), with eight campuses in California. Carrington College
offers degree and diploma programs in health care, dental, and veterinary career fields. Carrington
College of California provides career training in the areas of health care, graphics design and
criminal justice. Non-clinical coursework is offered both on campus and online at all Carrington
Colleges.
Becker Professional Education (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 nearly 300 locations, including sites in 40 foreign countries and some DeVry
University teaching sites.
Advanced Academics Inc (AAI) supplements traditional high school classroom programs through
online course instruction using highly qualified teachers and a proprietary technology platform
specifically designed for secondary education. AAI also operates virtual high schools in six
states.
DeVry Brasil is based in Fortaleza, Ceará, Brazil, and is the parent organization of
Faculdades Nordeste, Faculdade Ruy Barbosa, and Faculdade FTE ÁREA1. These institutions operate
five campus locations in the cities of Salvador and Fortaleza, and serve more than 11,000 students
through undergraduate and graduate programs in business management, law and engineering.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of DeVry and its wholly-owned and
majority-owned domestic and foreign subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation. Where our ownership interest is less than 100 percent, the
noncontrolling ownership interests are reported on our consolidated balance sheet. The
noncontrolling
74
ownership interest in our earnings is classified as Net Income Attributable to Noncontrolling
Interest in our Consolidated Statements of Income. Unless indicated, or the context requires
otherwise, references to years refer to DeVrys 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,
Chamberlain, Carrington College and Carrington College California 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 and, such restricted funds
are held in separate bank accounts. Once the financial aid authorization and disbursement process
for the student has been completed, the funds are transferred to unrestricted accounts, and these
funds then become available for use in DeVrys 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.
In fiscal year 2010, 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 and Investments
DeVry owns investments in marketable securities that have been designated as available for
sale or trading securities in accordance with authoritative guidance. Available for sale
securities are carried at fair value with the unrealized gains and losses reported in the
Consolidated Balance Sheets as a component of Accumulated Other Comprehensive Income (Loss).
Trading securities are carried at fair value with unrealized gains and losses reported in the
Consolidated Statements of Income as a component of Interest and Other Income (Expense).
Marketable securities and investments consist of auction-rate securities and put rights on
these securities which are classified as trading securities and investments in mutual funds which
are classified as available-for-sale securities. The following is a summary of our
available-for-sale marketable securities at June 30, 2010 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
Cost |
|
|
(Loss) |
|
|
Gain |
|
|
Value |
|
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bond Mutual Fund |
|
$ |
826 |
|
|
$ |
|
|
|
$ |
82 |
|
|
$ |
908 |
|
Stock Mutual Funds |
|
|
1,980 |
|
|
|
(717 |
) |
|
|
|
|
|
|
1,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Marketable Securities |
|
$ |
2,806 |
|
|
$ |
(717 |
) |
|
$ |
82 |
|
|
$ |
2,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. All mutual fund investments are recorded at fair market value based upon
75
quoted market prices. At June 30, 2010, all of the Bond and Stock mutual fund investments are
held in a rabbi trust for the purpose of paying benefits under DeVrys non-qualified deferred
compensation plan.
As of June 30, 2010, all unrealized losses in the above table have been in a continuous
unrealized loss position for more 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 issuer, and DeVrys 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 other-than-temporarily impaired as of June 30,
2010.
The following is a summary of our investments at June 30, 2010 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
Cost |
|
|
(Loss) |
|
|
Gain |
|
|
Value |
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction Rate Securities (ARS) |
|
$ |
13,495 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
13,495 |
|
Put Right on ARS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments |
|
$ |
13,495 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
13,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As shown in the table above, as of June 30, 2010, DeVry held auction-rate debt securities in
the aggregate principal amount of $13.5 million. The auction-rate securities are investment-grade,
long-term debt obligations with contractual maturities ranging from 17 to 32 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 had allowed DeVry and
other investors in these instruments to obtain immediate liquidity by selling the securities at
their face amounts. Disruptions in credit markets over the past two years, however, have adversely
affected the auction market for these types of securities. Auctions for these securities have not
produced sufficient bidders to allow for successful auctions since February 2008. However,
beginning in the fourth quarter of fiscal 2010, DeVrys broker, UBS Financial Services (UBS) began
buying back these securities at face value. During the fourth quarter, $46.0 million of these
securities were redeemed with UBS. The $13.5 million in outstanding securities at June 30, 2010,
were redeemed by UBS in early July 2010.
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 committed to provide liquidity solutions to
institutional investors, including DeVry. During the second quarter of fiscal year 2009, DeVry
agreed to accept Auction Rate Security Rights (the Rights) from UBS. The Rights permitted DeVry to
sell, or put, its auction rate securities back to UBS at par value at any time during the period
from June 30, 2010 through July 2, 2012.
Prior to accepting the Rights agreement, DeVry had the intent and ability to hold the auction
rate securities until anticipated recovery. As a result, DeVry had recognized the unrealized loss
previously as a temporary impairment in Other Comprehensive Income in Stockholders Equity. After
accepting the Rights, DeVry no longer had the intent to hold the auction rate securities until
anticipated recovery. As a result, DeVry had elected to reclassify its investments in auction rate
securities as trading securities on the date of the acceptance of the Rights. Therefore, we
recognized an other-than-temporary impairment charge of approximately $10.3 million in the second
quarter of fiscal 2009. The charge was measured as the difference between the par value and market
value of the auction rate securities on December 31, 2008. However, as DeVry will be permitted to
put the auction rate securities back to UBS at par value, DeVry accounted for the Rights as a
separate asset measured at its fair value, which resulted in a gain of approximately $8.6 million
recorded at December 31, 2008. As of June 30 2009, DeVry revalued the auction rate securities and
the Rights using current discount rates and risk premiums. This resulted in a gain in the value of
the auction rate securities decreasing the net loss for fiscal 2009 to approximately $6.6 million
and a loss in the value of the Rights decreasing the net gain for fiscal 2009 to approximately $5.4
million, both of which were recorded in fiscal 2009 operating results. As of June 30, 2010, since
the auction rate securities were redeemed in early July 2010 at face value they are recorded at
cost. This resulted in a net gain for fiscal 2010 of $6.6 million on these securities. This was
offset by a net loss of $5.4 million on the value of the Rights which were valued at zero as of
June 30, 2010. Under authoritative accounting guidance, the Rights do not meet the definition of a
derivative instrument. Instead the guidance
76
allows the Rights to be measured at fair value. This permitted DeVry to elect the fair value
option for recognized financial assets to match the changes in the fair value of the auction rate
securities.
Realized gains and losses are computed on the basis of specific identification and are
included in Interest and Other income/(expense) in the Consolidated Statements of Income. DeVry
has not recorded any realized gains or realized losses for fiscal 2010. See Note 4 for further
disclosures on the Fair Value of Financial Instruments.
On March 10, 2009, the Company signed an agreement to acquire a majority stake in DeVry
Brasil( formerly known as Fanor), a leading provider of private postsecondary education in
northeastern Brazil (see Note 6 Business Combinations). The purchase was closed on April 1,
2009. Under the terms of the agreement, the purchase price was paid in Brazilian Real. During
March 2009, DeVry purchased a non-deliverable foreign exchange forward contract in the amount of
the expected cash outlay to close the transaction, in order to protect against a strengthening in
the value of the Brazilian Real. This contract was settled in March 2009 by purchasing another
foreign exchange contract to offset the first position, once the necessary cash was delivered to
Brazil. DeVry recognized a gain in the third quarter of fiscal 2009 on the settlement of
approximately $1.3 million due to the strengthening of the Brazilian Real. This gain is included in
Interest and Other (Expense) Income in the Consolidated Statements of Income.
Revenue Recognition
DeVry University tuition 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. Carrington, Chamberlain and DeVry Brasil 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 course term or the license
period depending on the type of contract. 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 ratable fashion as revenue to most
appropriately match these costs with the tuition revenue in that term.
Estimates of DeVrys 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. The allowance for
uncollectible accounts is determined by analyzing the current aging of accounts receivable and
historical 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. Related reserves with respect to
uncollectible accounts and refunds totaled $63.1 million and $55.1 million at June 30, 2010 and
June 30, 2009, respectively.
Sales of textbooks, electronic course materials, and other educational products, including
training services and the Becker DVD 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. Revenues from training services, which are
generally short-term in duration, are recognized when the training service is provided. In
addition, fees from international licensees of the Becker programs are included in Other
Educational Revenues and recognized in 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 and cost 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.
77
Land, Buildings and Equipment
Land, buildings and equipment, including both purchased and internal-use software development
costs, are recorded at 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.
Internal-Use Software Development Costs
DeVry capitalizes certain internal-use 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 equipment, materials and services consumed in
developing or obtaining internal-use software and payroll-related costs for employees directly
associated with the internal-use 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 internal-use software development costs for projects not yet complete are included as
construction in progress in the Land, Buildings and Equipment section of the Consolidated Balance
Sheets. Costs capitalized during fiscal 2010 and 2009, were approximately $31.3 million and $8.7
million, respectively, primarily related to Project DELTA (a new student information system for
DeVry University and Chamberlain College of Nursing). No costs were capitalized in fiscal 2008. As
of June 30, 2010 and 2009, the net balance of capitalized software development costs was $38.8
million and $8.7 million, respectively.
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.
In accordance with U.S. generally accepted accounting principles, 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 as of May 31, 2010. 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 DeVrys 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 2009. DeVry carries its
investment in such contributions at original values, net of allowances for expected losses on loan
collections, of $2.6 million at June 30, 2010 and 2009. The allowance for future loan losses is
based upon an analysis of actual loan losses
78
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.
Fair Value of Financial Instruments
The carrying amounts reported in the Consolidated Balance Sheets for cash and cash
equivalents, restricted cash, marketable securities and investments (see Note 4 Fair Value of
Financial Instruments), 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 DeVrys current maturities and long-term debt (see
Note 10-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 DeVrys long-term debt,
if any, approximates fair value.
Foreign Currency Translation
The financial position and results of operations of Ross Universitys 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. DeVry Brasil and DeVrys Canadian operations are
measured using the local currency as the functional currency. Assets and liabilities of the these
entities 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 June
30, 2010, 2009 and 2008 were not material.
DeVry accounts for income taxes using the asset and liability method. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences of temporary
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. DeVry also recognizes future tax benefits associated with tax loss and
credit carryforwards as deferred tax assets. DeVrys deferred tax assets are reduced by a valuation
allowance, when in the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. DeVry measures deferred tax assets and
liabilities using enacted tax rates in effect for the year in which DeVry expects to recover or
settle the temporary differences. The effect of a change in tax rates on deferred taxes is
recognized in the period that the change is enacted. DeVry reduces its net tax assets for the
estimated additional tax and interest that may result from tax authorities disputing uncertain tax
positions DeVry has taken.
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 (SeeNote 9-Income Taxes).
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 DeVrys request in such capacity.
The indemnification agreement period is for an officers or directors 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 as of June 30, 2010 and 2009.
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
79
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 in earnings.
There were no outstanding derivatives at June 30, 2010 or June 30, 2009.
Prepaid Clinical Fees
Clinical rotation costs for Ross University medical students are included in Cost of
Educational Services. Over the past several years, Ross University has entered into long-term
contracts with a hospital group to secure clinical rotations for its students at fixed rates in
exchange for prepayment of the rotation fees. Under the contracts, the established
rate-per-clinical rotation was being deducted from the prepaid balance and charged to expense as
the medical students utilized the clinical clerkships. Last year, the hospital group closed two
of its hospitals due to financial difficulties. To date, the hospital group has provided Ross with
a limited number of additional clinical clerkships at its remaining hospital, but not nearly enough
to offset the void created by the closure of its other two hospitals. During April 2009, Ross
filed a lawsuit against the hospital group to enforce the contract. The suit seeks specific
performance of the hospital groups obligations to provide Ross with the prepaid clinical
clerkships. As of June 30, 2010, the outstanding balance of prepaid clinical rotations with this
hospital group was approximately $5.0 million. Though DeVry believes that Ross has a contractual
right to utilize other clinical rotations within the hospital groups system, given the business
uncertainty of this situation, a reserve of $1.6 million has been provided against the prepaid
balance and charged to Cost of Educational Services in the Consolidated Statements of Income during
the third quarter of fiscal 2009.
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, 2010, 2009 and
2008 computations of diluted earnings per share were options to purchase 759,000, 426,000 and
495,000 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 or the
assumed proceeds upon exercise under the Treasury Stock Method resulted in the repurchase of more
shares than would be issued; thus, their effect would be anti-dilutive.
The following is a reconciliation of basic shares to diluted shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Weighted Average Shares Outstanding |
|
|
71,140 |
|
|
|
71,515 |
|
|
|
71,277 |
|
Unvested participating Restricted
Shares |
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Shares |
|
|
71,332 |
|
|
|
71,515 |
|
|
|
71,277 |
|
Effect of Dilutive Stock Options |
|
|
935 |
|
|
|
1,001 |
|
|
|
1,129 |
|
|
|
|
|
|
|
|
|
|
|
Diluted Shares |
|
|
72,267 |
|
|
|
72,516 |
|
|
|
72,406 |
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock
DeVrys Board of Directors has authorized stock repurchase programs on two occasions (see
Note 5 Dividends and Stock Repurchase Program). The first repurchase program was completed in
April 2008 and the second repurchase program completed in November 2009. The third repurchase
program was approved by the DeVry Board of Directors in November 2009. Shares that are repurchased
by DeVry 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.
80
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 first quarter of fiscal year
2009, 21,575 treasury shares were resold at a 10% discount to market value to three employees of
Carrington upon the acquisition of that business (see Note 6 Business Combinations). 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 Income (Loss)
Accumulated Other Comprehensive Income (Loss) is composed of the change in cumulative
translation adjustment and unrealized gains and losses on available-for-sale marketable securities,
net of the effects of income taxes. The following are the amounts recorded in Accumulated Other
Comprehensive Income (Loss) for the years ended June 30, 2010, 2009 and 2008 (dollars in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Balance at Beginning of Period |
|
$ |
7,157 |
|
|
$ |
(2,963 |
) |
|
$ |
(918 |
) |
Net Unrealized Investment Losses |
|
|
116 |
|
|
|
(5,230 |
) |
|
|
(1,657 |
) |
Net Unrealized Investment Losses Recognized |
|
|
|
|
|
|
6,378 |
|
|
|
|
|
Translation Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to DeVry, Inc. |
|
|
1,970 |
|
|
|
7,637 |
|
|
|
|
|
Attributable to Non-controlling Interest |
|
|
653 |
|
|
|
1,335 |
|
|
|
(388 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at End of Period |
|
$ |
9,896 |
|
|
$ |
7,157 |
|
|
$ |
(2,963 |
) |
|
|
|
|
|
|
|
|
|
|
The Accumulated Other Comprehensive Income balance at June 30, 2010, consists of $10.3 million
($8.3 million attributable to DeVry Inc. and $2.0 million attributable to non-controlling
interests) of cumulative translation gains and $0.4 million of unrealized losses on
available-for-sale marketable securities, net of tax of $0.2 million and all attributable to DeVry
Inc. At June 30, 2009, this balance consisted of $7.7 million of cumulative translation gains
($6.3 million attributable to DeVry Inc. and $1.4 million attributable to non-controlling
interests) and $0.5 million of unrealized losses on available-for-sale marketable securities, net
of tax of $0.3 million and all attributable to DeVry Inc.
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 $224.1 million, $179.4
million, and $135.1 million for the fiscal years ended June 30, 2010, 2009 and 2008, respectively.
The increase in advertising expense in fiscal year 2010 was the result of the the acquisitions of
Carrington and DeVry Brasil and investments in marketing initiatives to increase enrollments.
Recent Accounting Pronouncements
In December 2007, the FASB issued and revised authoritative guidance for business combinations
and identifying, measuring and recognizing intangible assets and goodwill. The new accounting
requirements changed how business acquisitions are to be accounted for both on the acquisition date
and in subsequent periods. This guidance also established accounting and reporting standards to
improve the relevance, comparability and transparency of the financial information provided in a
companys financial statements as it relates to minority interests in the equity of a subsidiary.
These minority interests will be recharacterized as noncontrolling interests
81
and generally classified as a component of equity. This guidance was effective for DeVry
beginning in fiscal year 2010 and all disclosure requirements were fully implemented in the first
quarter Consolidated Financial Statements.
In January 2010, the FASB issued and revised authoritative guidance for improving disclosure
on fair value measurements. This guidance requires reporting entities to provide information about
movements of assets among levels of the three-tier fair value hierarchy. The guidance is effective
for fiscal years that begin after December 15, 2010, and it should be used for quarterly and annual
filings. DeVry management does not believe the application of this guidance will have a significant
impact on its financial disclosures.
NOTE 3: STOCK-BASED COMPENSATION
DeVry maintains four stock-based award plans: 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 DeVrys 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 and the 2005 Incentive Plan
are 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, 2010, 4,734,872 authorized but unissued shares of common stock were reserved for
issuance under DeVrys stock incentive plans.
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, reduced by an estimated
forfeiture rate.
The following is a summary of options activity for the fiscal year ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
Aggregate |
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
Options |
|
|
Exercise |
|
|
Contractual |
|
|
Value |
|
|
|
Outstanding |
|
|
Price |
|
|
Life |
|
|
($000) |
|
Outstanding at July 1, 2009 |
|
|
2,881,404 |
|
|
$ |
30.51 |
|
|
|
|
|
|
|
|
|
Options Granted |
|
|
322,800 |
|
|
$ |
52.32 |
|
|
|
|
|
|
|
|
|
Options Exercised |
|
|
(505,155 |
) |
|
$ |
26.81 |
|
|
|
|
|
|
|
|
|
Options Canceled |
|
|
(64,508 |
) |
|
$ |
40.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2010 |
|
|
2,634,541 |
|
|
$ |
33.76 |
|
|
|
6.15 |
|
|
$ |
49,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2010 |
|
|
1,454,322 |
|
|
$ |
27.23 |
|
|
|
4.80 |
|
|
$ |
36,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total intrinsic value of options exercised for the years ended June 30, 2010, 2009 and
2008 was $16.8 million, $15.9 million and $21.1 million, respectively.
The fair value of DeVrys 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.
82
The weighted average estimated grant date fair values for options granted at market price
under DeVrys stock option plans during fiscal years 2010, 2009 and 2008 were $23.11, $23.54 and
$16.41, per share, respectively. The fair values of DeVrys stock option awards were estimated
assuming the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year |
|
|
2010 |
|
2009 |
|
2008 |
Expected life (in years) |
|
|
6.77 |
|
|
|
6.79 |
|
|
|
6.60 |
|
Expected volatility |
|
|
41.06 |
% |
|
|
41.57 |
% |
|
|
39.33 |
% |
Risk-free interest rate |
|
|
3.02 |
% |
|
|
3.39 |
% |
|
|
4.34 |
% |
Dividend yield |
|
|
0.31 |
% |
|
|
0.23 |
% |
|
|
0.32 |
% |
Pre-vesting forfeiture rate |
|
|
5.00 |
% |
|
|
5.00 |
% |
|
|
5.00 |
% |
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. DeVrys expected volatility is
computed by combining and weighting the implied market volatility, the most recent volatility over
the expected life of the option grant, and DeVrys long-term historical volatility. The pre-vesting
forfeiture rate is based on DeVrys historical stock option forfeiture experience.
If factors change and different assumptions are employed in the valuation of stock-based
awards in future periods, the stock-based compensation expense that DeVry records may differ
significantly from what was recorded in previous periods.
During the fiscal year 2010, DeVry granted 162,700 shares of restricted stock to selected
employees and non-employee directors. Of these, 45,200 are performance based shares which are
earned by the recipients over a three year period based on achievement of specified DeVry return on
invested capital targets. The remaining 117,500 shares and all other previously granted shares of
restricted stock are subject to restrictions which lapse ratably over three and four-year periods
on the grant anniversary date based on the recipients continued service on the Board of Directors
or employment with DeVry, or upon retirement. During the restriction period, the recipient of the
non-performance based shares shall have a beneficial interest in the restricted stock and all
associated rights and privileges of a stockholder, including the right to receive dividends. These
rights do not pertain to the performance based shares. The following is a summary of restricted
stock activity for the year ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
Restricted |
|
|
Grant |
|
|
|
Stock |
|
|
Date Fair |
|
|
|
Outstanding |
|
|
Value |
|
Nonvested at July 1, 2009 |
|
|
82,864 |
|
|
$ |
51.28 |
|
Shares Granted |
|
|
162,700 |
|
|
$ |
52.61 |
|
Shares Vested |
|
|
(21,577 |
) |
|
$ |
52.49 |
|
Shares Cancelled |
|
|
(9,889 |
) |
|
$ |
51.45 |
|
|
|
|
|
|
|
|
|
Nonvested at June 30, 2010 |
|
|
214,098 |
|
|
$ |
52.16 |
|
|
|
|
|
|
|
|
The following table shows total stock-based compensation expense included in the Consolidated Statement of Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
(Dollars in thousands) |
|
Cost of Educational Services |
|
$ |
3,247 |
|
|
$ |
2,416 |
|
|
$ |
1,832 |
|
Student Services and Administrative Expense |
|
|
6,901 |
|
|
|
5,134 |
|
|
|
3,892 |
|
Income Tax Benefit |
|
|
(1,641 |
) |
|
|
(1,540 |
) |
|
|
(962 |
) |
|
|
|
|
|
|
|
|
|
|
Net Stock-Based Compensation Expense |
|
$ |
8,507 |
|
|
$ |
6,010 |
|
|
$ |
4,762 |
|
|
|
|
|
|
|
|
|
|
|
83
As of June 30, 2010, $20.5 million of total pre-tax unrecognized compensation costs related to
non-vested awards is expected to be recognized over a weighted average period of 2.7 years. The
total fair value of options vested during the years ended June 30, 2010, 2009 and 2008 was
approximately $6.6 million, $5.4 million and $4.9 million, respectively.
There were no capitalized stock-based compensation costs at June 30, 2010 and 2009.
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: FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective July 1, 2008, DeVry adopted the authoritative guidance for fair value measurements
and the fair value option for financial assets and financial liabilities. The guidance was revised
in February 2008 to delay the effective date of its adoption for fair value measurements of all
nonfinancial assets and liabilities until DeVrys fiscal year beginning July 1, 2009. As permitted
by the guidance, DeVry has elected not to measure any assets or liabilities at fair value other
than those previously measured at fair value such as financial assets and liabilities required to
be measured at fair value on a recurring basis and assets measured at fair value on a non-recurring
basis such as goodwill and intangible assets. The adoptions did not have a material effect on the
results of operations or financial position.
In October 2008, authoritative guidance was issued clarifying the application of fair value
measurements in a market that is not active. Management has fully considered this guidance when
determining the fair value of DeVrys financial assets as of June 30, 2010.
In April 2009, authoritative guidance was issued providing additional clarification for
estimating fair value when the volume and level of activity for an asset or liability have
significantly decreased. This guidance also identifies circumstances that indicate a transaction is
not orderly. Additional guidance also established a new method of recognizing and reporting
other-than-temporary impairments of debt securities and contains additional disclosure
requirements. Management has fully considered this guidance when determining the fair value of
DeVrys financial assets as of June 30, 2010 and 2009
Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants. The guidance specifies a fair
value hierarchy based upon the observability of inputs used in valuation techniques. Observable
inputs (highest level) reflect market data obtained from independent sources, while unobservable
inputs (lowest level) reflect internally developed market assumptions. The guidance establishes
fair value measurement classifications under the following hierarchy:
Level 1 Quoted prices for identical instruments in active markets.
Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations in which
all significant inputs or significant value-drivers are observable in active markets.
Level 3 Model-derived valuations in which one or more significant inputs or significant
value-drivers are unobservable.
When available, DeVry uses quoted market prices to determine fair value, and such measurements
are classified within Level 1. In some cases where market prices are not available, DeVry makes
use of observable market based inputs to calculate fair value, in which case the measurements are
classified within Level 2. If quoted or observable market prices are not available, fair value is
based upon internally developed models that use, where possible, current market-based parameters
such as interest rates and yield curves. These measurements are classified within Level 3.
Fair value measurements are classified according to the lowest level input or value-driver
that is significant to the valuation. A measurement may therefore be classified within Level 3
even though there may be significant inputs that are readily observable.
84
The following tables present DeVrys financial assets at June 30, 2010, that are measured at
fair value on a recurring basis and are categorized using the fair value hierarchy (dollars in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Cash and Cash Equivalents |
|
$ |
307,702 |
|
|
$ |
|
|
|
$ |
|
|
Available for Sale Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Securities, short-term |
|
|
2,171 |
|
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
ARS Portfolio |
|
|
|
|
|
|
|
|
|
|
13,495 |
|
UBS Put Right |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Assets at Fair Value |
|
$ |
309,873 |
|
|
$ |
|
|
|
$ |
13,495 |
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents and investments in short-term Marketable Securities are valued using a market
approach based on the quoted market prices of identical instruments. Investments consist of auction
rate securities and put rights on the auction rate securities. Both are valued using a discounted
cash flow model using assumptions that, in managements judgment, reflect the assumptions a
marketplace participant would use. Significant unobservable inputs include collateralization of
the respective underlying security, credit worthiness of the issuer and duration for holding the
security. In early July 2010, the balance of the auction rate securities was redeemed at face
value. This redemption resulted in a zero value being assigned to the put rights as of June 30,
2010. See Note 2-Summary Of Significant Accounting Policies-Marketable Securities and
Investments for further information on these investments.
Below is a roll-forward of assets measured at fair value using Level 3 inputs for the twelve
months ended June 30, 2010 (dollars in thousands).
|
|
|
|
|
|
|
Investments |
|
|
|
For the Year Ended |
|
|
|
June 30, 2010 |
|
Balance at Beginning of Period |
|
$ |
58,251 |
|
Total Unrealized Gains (Losses) Included in Income: |
|
|
|
|
Change in Fair Value of ARS Portfolio |
|
|
6,635 |
|
Change in Fair Value of UBS Put Right |
|
|
(5,391 |
) |
|
|
|
|
|
Purchases, Sales and Maturities |
|
|
(46,000 |
) |
|
|
|
|
Balance at June 30, 2010 |
|
$ |
13,495 |
|
|
|
|
|
NOTE 5: DIVIDENDS AND STOCK REPURCHASE PROGRAM
During fiscal years 2010 and 2009, DeVrys Board of Directors declared the following cash
dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
Declaration |
|
Record |
|
Payment |
|
Dividend |
|
Dividend |
Date |
|
Date |
|
Date |
|
Per Share |
|
Amount |
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
|
December 12, 2008
|
|
January 9, 2009
|
|
$ |
0.08 |
|
|
$ |
5,732 |
|
|
|
June 16, 2009
|
|
July 9, 2009
|
|
$ |
0.08 |
|
|
$ |
5,705 |
|
|
|
December 11, 2009
|
|
January 7, 2010
|
|
$ |
0.10 |
|
|
$ |
7,133 |
|
|
|
June 15, 2010
|
|
July 8, 2010
|
|
$ |
0.10 |
|
|
$ |
7,117 |
|
The dividend paid on July 8, 2010 of $7.1 million was recorded as a reduction to retained
earnings as of June 30, 2010. Future dividends will be at the discretion of the Board of
Directors.
85
On November 11, 2009, the DeVry Board of Directors authorized a third share repurchase
program, which will again allow DeVry to repurchase up to $50 million of its common stock through
December 31, 2011. Under this plan as of June 30, 2010, DeVry has repurchased, on the open market,
422,021 shares of its common stock at a total cost of approximately $25.4 million. 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.
DeVry completed its first share repurchase program in April 2008. On May 13, 2008, the DeVry
Board of Directors authorized a second share repurchase program, which allowed DeVry to repurchase
up to $50 million of its common stock through December 31, 2010. As of November 30, 2009, DeVry
completed this share repurchase program, repurchasing, on the open market, 1,027,417 shares of its
common stock at a total cost of approximately $50.0 million.
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 6: BUSINESS COMBINATIONS
Carrington
On September 18, 2008, DeVry Inc. acquired the operations of U.S. Education, the parent
organization of Apollo College and Western Career College, for $290 million. On July 1, 2010,
Apollo College changed its name to Carrington College and Western Career College changed its name
to Carrington College of California. Collectively these institutions are now referred to as
Carrington. Including working capital adjustments and direct costs of acquisition, total
consideration paid was approximately $303 million in cash. The results of Carringtons operations
have been included in the consolidated financial statements of DeVry since that date. The total
consideration was comprised of approximately $137 million of internal cash resources, approximately
$120 million of borrowings under DeVrys existing credit facility and approximately $46 million of
borrowings against its outstanding auction rate securities.
Carrington prepares students for careers in healthcare through certificate, associate and
bachelors 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. The two colleges operate 17 campus locations in the western United
States and currently serve approximately 11,000 students and have more than 65,000 alumni. The
addition of Carrington has further diversified DeVrys 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 September 18, |
|
|
|
2008 |
|
Current Assets |
|
$ |
46,042 |
|
Property and Equipment |
|
|
19,558 |
|
Other Long-term Assets |
|
|
3,179 |
|
Intangible Assets |
|
|
128,600 |
|
Goodwill |
|
|
185,717 |
|
|
|
|
|
Total Assets Acquired |
|
|
383,096 |
|
Liabilities Assumed |
|
|
80,121 |
|
|
|
|
|
Net Assets Acquired |
|
$ |
302,975 |
|
|
|
|
|
Goodwill was all assigned to the Carrington reporting unit which is classified within the
Medical and Healthcare segment. Approximately $57 million of the goodwill acquired is expected to
be deductible for income tax purposes. Of the $128.6 million of acquired intangible assets, $112.3
million was assigned to the value of the Carrington Title IV Eligibility and Accreditations 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):
86
|
|
|
|
|
|
|
|
|
|
|
At September 18, 2008 |
|
|
Value |
|
Estimated |
|
|
Assigned |
|
Useful Life |
Trade Name WCC |
|
$ |
1,500 |
|
|
1 yr 3 months |
Trade Name Apollo |
|
|
1,600 |
|
|
1 yr 3 months |
Student Relationships |
|
|
8,500 |
|
|
1 yr 3 months |
Curriculum |
|
|
800 |
|
|
5 yrs |
Outplacement Relationships |
|
|
3,900 |
|
|
15 yrs |
As of December 31, 2009, the Western Career College and Apollo College trade names and student
relationships were fully amortized.
The following unaudited pro forma financial information presents the results of operations of
DeVry and Carrington as if the acquisition had occurred at the beginning of each period. The pro
forma information is based on historical results of operations and does not necessarily reflect the
actual results that would have occurred, nor is it necessarily indicative of future results of
operations of the combined enterprises (dollars in thousands except for per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Pro Forma For the Year |
|
|
Ended |
|
|
June 30, |
|
|
|
|
|
|
2009 |
|
|
2010 |
|
(Unaudited) |
Revenues |
|
$ |
1,915,181 |
|
|
$ |
1,497,360 |
|
Operating Income |
|
|
410,902 |
|
|
|
238,567 |
|
Net Income |
|
|
279,909 |
|
|
|
166,648 |
|
Earnings per Common Share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
3.92 |
|
|
$ |
2.33 |
|
Diluted |
|
$ |
3.87 |
|
|
$ |
2.30 |
|
DeVry Brasil
On April 1, 2009, DeVry Inc. acquired 82.3 percent of the outstanding stock of Fanor
Faculdades Nordeste S/A (Fanor), a leading provider of private postsecondary education in
northeastern Brazil for $40.8 million in cash, including costs of acquisition. Funding was provided
from DeVrys existing operating cash balances. During the second quarter of fiscal year 2010, the
Fanor parent organization began using the name DeVry Brasil. The results of DeVry Brasils
operations have been included in the consolidated financial statements of DeVry since the date of
acquisition. The current management of DeVry Brasil retained the remaining 17.7 percent ownership
interest, as of June 30, 2009. In July 2009, DeVry increased its ownership percentage in DeVry
Brasil to 83.5 percent through the infusion of an additional $2.5 million in capital. Beginning
January 2013, DeVry has the right to exercise a call option and purchase any remaining DeVry Brasil
stock from DeVry Brasil management. Likewise, DeVry Brasil management has the right to exercise a
put option and sell its remaining ownership interest in DeVry Brasil to DeVry. These options may
become exercisable prior to January 2013 if DeVry Brasils management ownership interest falls
below five percent. Since the put option is out of the control of DeVry, authoritative guidance
requires the non-controlling interest, which includes the value of the put option, to be displayed
outside of the equity section of the consolidated balance sheet.
The DeVry Brasil management put option, which is not currently redeemable but is probable of
becoming redeemable, is being accreted to its expected redemption value according to a fair market
value formula contained in the stock purchase agreement. The adjustment to increase or decrease
the put option to its expected redemption value each reporting period is recorded to retained
earnings in accordance with the authoritative guidance. This adjustment resulted in a $1.7 million
increase in the non-controlling interest balance and a corresponding decrease to retained earnings
as of June 30, 2010. The adjustment to increase or decrease the DeVry Brasil non-controlling
interest each reporting period for its proportionate share of DeVry Brasils profit/loss will
continue to flow through the consolidated income statement based on DeVrys historical
non-controlling interest accounting policy.
Based in Fortaleza, Ceará, Brazil, DeVry Brasil is comprised of three colleges: Fanor, Ruy
Barbosa, and ÁREA1. These institutions operate five campus locations in the cities of Salvador and
Fortaleza, and serve more than 11,000 students through
87
undergraduate and graduate programs focused in business management, law and engineering. This
acquisition has further diversified DeVrys curricula and expanded its geographic presence.
The following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition (dollars in thousands).
|
|
|
|
|
|
|
At April 1, 2009 |
|
Current Assets |
|
$ |
16,208 |
|
Property and Equipment |
|
|
14,415 |
|
Other Long-term Assets |
|
|
167 |
|
Intangible Assets |
|
|
18,941 |
|
Goodwill |
|
|
18,839 |
|
|
|
|
|
Total Assets Acquired |
|
|
68,570 |
|
Liabilities Assumed |
|
|
24,662 |
|
Minority Interest |
|
|
3,149 |
|
|
|
|
|
Net Assets Acquired |
|
$ |
40,759 |
|
|
|
|
|
Goodwill was all assigned to the DeVry Brasil reporting unit which is classified within the
Other Educational Services segment. Approximately $12.0 million of the goodwill acquired is
expected to be deductible for income tax purposes. Of the $18.9 million of acquired intangible
assets, approximately $10.0 million was assigned to the value of the DeVry Brasil Accreditations
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):
|
|
|
|
|
|
|
|
|
|
|
At April 1, 2009 |
|
|
Value |
|
Estimated |
|
|
Assigned |
|
Useful Life |
Trade Name Fanor |
|
$ |
359 |
|
|
5 years |
Trade Name Area 1 |
|
|
1,653 |
|
|
10 years |
Trade Name Ruy Barbosa |
|
|
359 |
|
|
5 years |
Student Relationships |
|
|
6,362 |
|
|
5 years |
Curriculum |
|
|
252 |
|
|
5 years |
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 DeVrys
existing operating cash balances. The results of AAIs 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 six states. Since its inception, AAI has
delivered online learning programs to more than 60,000 students in more than 300 school districts.
The addition of AAI has further diversified DeVrys curricula.
88
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 |
|
|
3,599 |
|
Intangible Assets |
|
|
10,853 |
|
Goodwill |
|
|
17,074 |
|
|
|
|
|
Total Assets Acquired |
|
|
36,292 |
|
Liabilities Assumed |
|
|
8,689 |
|
|
|
|
|
Net Assets Acquired |
|
$ |
27,603 |
|
|
|
|
|
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):
|
|
|
|
|
|
|
|
|
|
|
At October 31, 2007 |
|
|
Value |
|
Estimated |
|
|
Assigned |
|
Useful Life |
Customer Contracts Direct to Student |
|
$ |
4,100 |
|
|
6 yrs 8 months |
Customer Contracts Direct to District |
|
|
2,900 |
|
|
4 yrs 8 months |
Curriculum/ Software |
|
|
2,500 |
|
|
5 yrs |
Other |
|
|
53 |
|
|
1 yr |
The $17.1 million of goodwill is all assigned to the AAI reporting unit which is classified
within the Other Educational Services segment.
There is no pro forma presentation of operating results related to this acquisition due to the
insignificant effect on consolidated operations.
89
NOTE 7: INTANGIBLE ASSETS
Intangible assets relate mainly to acquired business operations. These assets consist of the
acquisition fair value of certain identifiable intangible assets acquired and goodwill. Goodwill
represents the excess of the purchase price over the fair value of assets acquired less liabilities
assumed.
Intangible assets consist of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
|
Weighted |
|
|
|
Gross |
|
|
|
|
|
|
Avg. |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Amortization |
|
|
|
Amount |
|
|
Amortization |
|
|
Period |
|
Amortizable Intangible Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Student Relationships |
|
$ |
64,365 |
|
|
$ |
(59,393 |
) |
|
|
(1) |
|
Customer Contracts |
|
|
7,000 |
|
|
|
(3,836 |
) |
|
6 years |
License and Non-compete Agreements |
|
|
2,684 |
|
|
|
(2,684 |
) |
|
6 years |
Class Materials |
|
|
2,900 |
|
|
|
(1,900 |
) |
|
14 years |
Curriculum/Software |
|
|
3,620 |
|
|
|
(1,699 |
) |
|
5 years |
Outplacement Relationships |
|
|
3,900 |
|
|
|
(464 |
) |
|
15 years |
Trade Names |
|
|
8,128 |
|
|
|
(4,651 |
) |
|
|
(2) |
|
Other |
|
|
639 |
|
|
|
(639 |
) |
|
6 years |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
93,236 |
|
|
$ |
(75,266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived Intangible Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Trade Names |
|
$ |
20,372 |
|
|
|
|
|
|
|
|
|
Trademark |
|
|
1,645 |
|
|
|
|
|
|
|
|
|
Ross Title IV Eligibility and Accreditations |
|
|
14,100 |
|
|
|
|
|
|
|
|
|
Intellectual Property |
|
|
13,940 |
|
|
|
|
|
|
|
|
|
Chamberlain Title IV Eligibility and Accreditations |
|
|
1,200 |
|
|
|
|
|
|
|
|
|
Carrington Title IV Eligibility and Accreditations |
|
|
112,300 |
|
|
|
|
|
|
|
|
|
DeVry Brasil Accreditations |
|
|
12,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
176,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The respective Ross University, Chamberlain College of Nursing, and the Carrington Student Relationships
were fully amortized at December 31, 2009. The total weighted average estimated amortization period for
Student Relationships is 5 years for DeVry Brasil. |
|
(2) |
|
The Apollo College and Western Career College trade names were fully amortized at December 31, 2009.
The total weighted average estimated amortization period for Trade Names is 2 years and 8.5 years for Stalla
and DeVry Brasil (Fanor, Ruy Barbosa and AREA1), respectively. |
90
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009 |
|
|
|
Gross |
|
|
|
|
|
|
Carrying |
|
|
Accumulated |
|
|
|
Amount |
|
|
Amortization |
|
Amortizable Intangible Assets: |
|
|
|
|
|
|
|
|
Student Relationships |
|
$ |
63,734 |
|
|
$ |
(53,716 |
) |
Customer Contracts |
|
|
7,000 |
|
|
|
(2,332 |
) |
License and Non-compete Agreements |
|
|
2,684 |
|
|
|
(2,684 |
) |
Class Materials |
|
|
2,900 |
|
|
|
(1,700 |
) |
Curriculum/Software |
|
|
3,595 |
|
|
|
(973 |
) |
Outplacement Relationships |
|
|
3,900 |
|
|
|
(203 |
) |
Trade Names |
|
|
5,994 |
|
|
|
(2,142 |
) |
Other |
|
|
639 |
|
|
|
(639 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
90,446 |
|
|
$ |
(64,389 |
) |
|
|
|
|
|
|
|
Indefinite-lived 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 |
|
|
|
|
|
Carrington Title IV Eligibility and Accreditations |
|
|
112,300 |
|
|
|
|
|
DeVry Brasil Accreditations |
|
|
11,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
177,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for amortized intangible assets was $10.8 million and $10.5 million for
the years ended June 30, 2010 and 2009, respectively. Estimated amortization expense for amortized
intangible assets for the next five fiscal years ending June 30, by reporting unit, is as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advanced |
|
|
|
|
|
DeVry |
|
|
|
|
Fiscal Year |
|
Academics |
|
Becker |
|
Brasil |
|
Carrington |
|
Total |
2011 |
|
$ |
1,806 |
|
|
$ |
1,150 |
|
|
$ |
2,458 |
|
|
$ |
420 |
|
|
$ |
5,834 |
|
2012 |
|
|
1,538 |
|
|
|
160 |
|
|
|
2,058 |
|
|
|
420 |
|
|
|
4,176 |
|
2013 |
|
|
618 |
|
|
|
160 |
|
|
|
1,559 |
|
|
|
420 |
|
|
|
2,757 |
|
2014 |
|
|
369 |
|
|
|
160 |
|
|
|
664 |
|
|
|
295 |
|
|
|
1,488 |
|
2015 |
|
|
|
|
|
|
160 |
|
|
|
210 |
|
|
|
260 |
|
|
|
630 |
|
All amortizable intangible assets, except for the AAI Customer Contracts and DeVry Brasil
Student Relationships, are being amortized on a straight-line basis.
91
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:
|
|
|
|
|
|
|
|
|
|
|
Direct to |
|
Direct to |
Fiscal Year |
|
Student |
|
District |
2008 |
|
|
12 |
% |
|
|
14 |
% |
2009 |
|
|
18 |
% |
|
|
24 |
% |
2010 |
|
|
19 |
% |
|
|
25 |
% |
2011 |
|
|
17 |
% |
|
|
21 |
% |
2012 |
|
|
14 |
% |
|
|
16 |
% |
2013 |
|
|
11 |
% |
|
|
|
|
2014 |
|
|
9 |
% |
|
|
|
|
The amount being amortized for the DeVry Brasil Student Relationships is based on the
estimated progression of the students through the respective 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 years of estimated economic life as
follows:
|
|
|
|
|
Fiscal Year |
|
|
|
|
2009 |
|
|
8.3 |
% |
2010 |
|
|
30.3 |
% |
2011 |
|
|
24.7 |
% |
2012 |
|
|
19.8 |
% |
2013 |
|
|
13.6 |
% |
2014 |
|
|
3.3 |
% |
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. Beginning in fiscal year 2010, the Trade Name associated with the Stalla CFA
Review was reclassified to a finite lived intangible asset and amortized on a straight line basis
over two years. This asset has a book value of $1.0 million as of June 30, 2010. As of the latest
impairment analysis completed during the fourth quarter of fiscal year 2010, the assets fair value
exceeded this book value.
Authoritative guidance 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 during the fourth quarter of fiscal year 2010 at which time there was no impairment loss
associated with recorded goodwill or indefinite-lived intangible assets, as estimated fair values
exceeds the carrying amount.
The table below summarizes the goodwill balances by reporting unit as of June 30, 2010 (dollars in
thousands):
|
|
|
|
|
Reporting Unit |
|
|
|
|
DeVry University |
|
$ |
22,196 |
|
Becker Professional Review |
|
|
24,715 |
|
Ross University |
|
|
237,173 |
|
Chamberlain College of Nursing |
|
|
4,716 |
|
Advanced Academics |
|
|
17,074 |
|
Carrington |
|
|
185,717 |
|
DeVry Brasil |
|
|
23,273 |
|
|
|
|
|
Total |
|
$ |
514,864 |
|
|
|
|
|
92
The table below summarizes goodwill balances by reporting segment as of June 30, 2010 (dollars in thousand):
|
|
|
|
|
Reporting Segment: |
|
|
|
|
Business, Technology and Management |
|
$ |
22,196 |
|
Medical and Healthcare |
|
|
427,606 |
|
Professional Education |
|
|
24,715 |
|
Other Educational Services |
|
|
40,347 |
|
|
|
|
|
Total |
|
$ |
514,864 |
|
|
|
|
|
Total goodwill increased by $2.3 million from June 30, 2009. This increase is the result of
the recognition of a preacquisition related liability of $0.7 million and an increase in the value
of the Brazilian Real as compared to the U.S. dollar. Since DeVry Brasil goodwill is recorded in
the local Brazilian currency, fluctuations in its value in relation to the U.S. dollar will cause
changes in the balance of this asset.
The table below summarizes the indefinite-lived intangible assets balances by reporting unit
as of June 30, 2010 (dollars in thousands):
|
|
|
|
|
Reporting Unit: |
|
|
|
|
DeVry University |
|
$ |
1,645 |
|
Becker Professional Review |
|
|
27,912 |
|
Ross University |
|
|
19,200 |
|
Chamberlain College of Nursing |
|
|
1,200 |
|
Advanced Academics |
|
|
1,300 |
|
Carrington |
|
|
112,300 |
|
DeVry Brasil |
|
|
12,668 |
|
|
|
|
|
Total |
|
$ |
176,225 |
|
|
|
|
|
The changes in the indefinite-lived intangible assets balances from June 30, 2009, include the
$1.9 million transfer on July 1, 2009 of the Becker Professional Review Stalla Trade Name asset to
finite lived intangible assets and the effects of foreign currency translation on the DeVry Brasil
assets. Since DeVry Brasil intangible assets are recorded in the local Brazilian currency,
fluctuations in the value of the Brazilian Real in relation to the U.S. dollar will cause changes
in the balance of this asset.
NOTE 8: REAL ESTATE TRANSACTIONS
In January 2009, DeVry bought out the lease on approximately 40 percent of the space it
occupied at its DeVry University campus in Long Island City, New York. In the third quarter of
fiscal year 2009, DeVry recorded a pre-tax charge of approximately $4.0 million. The charge is
composed of a $2.7 million cash outlay and a non-cash charge of $1.3 million related to the
write-off of leasehold improvements, net of a deferred rent credit. This loss is separately
classified in the Consolidated Statements of Income as a component of Total Operating Costs and
Expenses and is related to the Business, Technology and Management reportable segment.
In the second quarter of fiscal 2009, DeVry moved its Decatur, Georgia campus to a new leased
facility. The campus was previously located in an owned facility that is currently held as
available for sale. DeVry estimates the fair value of this property less costs to sell to be in
excess of its carrying value; therefore, no impairment loss was recognized.
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.
93
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 Business, Technology and
Management reportable segment.
NOTE 9: INCOME TAXES
The components of income before income taxes are as follows (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
U.S. |
|
$ |
345,850 |
|
|
$ |
179,517 |
|
|
$ |
123,101 |
|
Foreign |
|
|
66,772 |
|
|
|
57,835 |
|
|
|
49,175 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
412,622 |
|
|
$ |
237,352 |
|
|
$ |
172,276 |
|
|
|
|
|
|
|
|
|
|
|
The income tax provisions (benefits) related to the above results are as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
Income Tax Provision: |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Current Tax Provision |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
$ |
115,541 |
|
|
$ |
58,638 |
|
|
$ |
36,624 |
|
State and Local |
|
|
24,563 |
|
|
|
6,532 |
|
|
|
3,009 |
|
Foreign |
|
|
14 |
|
|
|
(1,418 |
) |
|
|
(1,330 |
) |
|
|
|
|
|
|
|
|
|
|
Total Current |
|
|
140,118 |
|
|
|
63,752 |
|
|
|
38,303 |
|
Deferred Tax Provision |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Federal |
|
|
(6,371 |
) |
|
|
7,722 |
|
|
|
6,296 |
|
State and Local |
|
|
(1,108 |
) |
|
|
226 |
|
|
|
2,145 |
|
|
|
|
|
|
|
|
|
|
|
Total Deferred |
|
|
(7,479 |
) |
|
|
7,948 |
|
|
|
8,441 |
|
|
|
|
|
|
|
|
|
|
|
Income Tax Provision |
|
$ |
132,639 |
|
|
$ |
71,700 |
|
|
$ |
46,744 |
|
|
|
|
|
|
|
|
|
|
|
The income tax provisions differ from those that would be computed using the statutory
U.S. federal rate as a result of the following items (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Income Tax at Statutory Rate |
|
$ |
144,418 |
|
|
|
35.0 |
% |
|
$ |
83,073 |
|
|
|
35.0 |
% |
|
$ |
60,297 |
|
|
|
35.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lower Rates on Foreign Operations |
|
|
(22,524 |
) |
|
|
-5.5 |
% |
|
|
(19,186 |
) |
|
|
-8.1 |
% |
|
|
(17,211 |
) |
|
|
-10.0 |
% |
State Income Taxes |
|
|
13,129 |
|
|
|
3.1 |
% |
|
|
8,574 |
|
|
|
3.6 |
% |
|
|
5,480 |
|
|
|
3.2 |
% |
Stock Options |
|
|
(164 |
) |
|
|
0.0 |
% |
|
|
372 |
|
|
|
0.2 |
% |
|
|
(537 |
) |
|
|
-0.3 |
% |
Tax Credits and Other |
|
|
(2,220 |
) |
|
|
-0.5 |
% |
|
|
(1,133 |
) |
|
|
-0.5 |
% |
|
|
(1,285 |
) |
|
|
-0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Provision |
|
$ |
132,639 |
|
|
|
32.1 |
% |
|
$ |
71,700 |
|
|
|
30.2 |
% |
|
$ |
46,744 |
|
|
|
27.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
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, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Loss Carryforwards, net |
|
$ |
14,290 |
|
|
$ |
14,958 |
|
|
$ |
16,163 |
|
Employee Benefits |
|
|
4,330 |
|
|
|
5,585 |
|
|
|
6,164 |
|
Stock-Based Payments |
|
|
7,250 |
|
|
|
6,239 |
|
|
|
206 |
|
Deferred Rent |
|
|
13,909 |
|
|
|
7,132 |
|
|
|
5,259 |
|
Receivable Reserve |
|
|
19,951 |
|
|
|
17,235 |
|
|
|
12,313 |
|
Depreciation |
|
|
2,778 |
|
|
|
5,062 |
|
|
|
1,144 |
|
Other Reserves |
|
|
910 |
|
|
|
647 |
|
|
|
2,956 |
|
Less: Valuation Allowance |
|
|
(10,089 |
) |
|
|
(12,437 |
) |
|
|
(13,616 |
) |
|
|
|
|
|
|
|
|
|
|
Gross Deferred Tax Assets |
|
|
53,329 |
|
|
|
44,421 |
|
|
|
30,589 |
|
|
|
|
|
|
|
|
|
|
|
Amortization of Intangible Assets |
|
|
(74,357 |
) |
|
|
(74,754 |
) |
|
|
(37,777 |
) |
|
|
|
|
|
|
|
|
|
|
Gross Deferred Tax Liability |
|
|
(74,357 |
) |
|
|
(74,754 |
) |
|
|
(37,777 |
) |
|
|
|
|
|
|
|
|
|
|
Net Deferred Taxes |
|
$ |
(21,028 |
) |
|
$ |
(30,333 |
) |
|
$ |
(7,188 |
) |
|
|
|
|
|
|
|
|
|
|
DeVry has net operating loss carryforwards in various tax jurisdictions expiring at various
times through the years ending June 30, 2030.
DeVrys effective income tax rate reflects benefits derived from significant operations
outside the United States. Earnings of these international operations are not subject to U.S.
federal or state income taxes, so long as such earnings are not repatriated, as discussed below.
Three of our subsidiaries, Ross University School of Medicine (the Medical School) incorporated
under the laws of the Commonwealth of Dominica, Ross University School of Veterinary Medicine (the
Veterinary School) incorporated under the laws of the Federation of St. Christopher, Nevis, St.
Kitts in the West indies, and DeVry Brasil incorporated under the laws of Brazil, all benefit from
local tax incentives. The Medical and Veterinary Schools have agreements with the respective
governments that exempt them from local income taxation through the years 2043 and 2023,
respectively, while DeVry Brasils effective tax rate reflects benefits derived from their
participation in PROUNI, a Brazilian program for providing scholarships to a portion of its
undergraduate students.
As of June 30, 2010, valuation allowances have been established for approximately
$10.1 million as compared to $12.4 million as of June 30, 2009. The decrease in valuation
allowances in fiscal year 2010 was primarily related to the expected realization of additional
state net operating loss carryforwards. The valuation allowances are composed of $6.5 million
related to our Canadian subsidiary and $0.6 million for certain state net operating loss
carryforwards that may expire before their benefits are utilized and $3.0 million related to the
historical federal net operating losses acquired as a result of the Advanced Academics acquisition
for which DeVry is limited in utilizing for tax purposes. 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 DeVrys 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.
During the fourth quarter of fiscal year 2009, DeVry performed a detailed reconciliation of
its deferred tax accounts and identified errors impacting prior years. These errors had no impact
on consolidated net income in fiscal years 2007, 2008, or 2009 and were immaterial to all
individual prior years impacted. As a result, and due to the fact that all of the errors related
to financial periods prior to those presented in these Consolidated Financial Statements, DeVry has
recorded an adjustment to decrease its deferred tax liabilities by $10.4 million and increase
retained earnings by a corresponding amount as of July 1, 2006. The fiscal year 2008 amounts
included within this 2010 Form 10-K have been revised to reflect this adjustment.
DeVry has not recorded a U.S. federal or state tax provision for the undistributed earnings of
its international subsidiaries. It is DeVrys intention to indefinitely reinvest accumulated cash
balances, future cash flows and post-acquisition undistributed earnings and profits to improve the
facilities and operations of its international Schools and pursue future opportunities outside the
United States. In accordance with this plan, cash held by the international subsidiaries will not
be available for general company purposes
95
and under current laws will not be subject to U.S. taxation. As of June 30 2010 and 2009,
cumulative undistributed earnings attributable to international operations were approximately
$266.8 million and $201.9 million, respectively.
The effective tax rate was 32.1% for fiscal year 2010, compared to 30.2% for the prior year.
The higher effective income tax rate in fiscal year 2010 was primarily due to an increase in the
proportion of income generated by U.S. operations versus the offshore operations of Ross University
as compared to the prior year.
DeVry adopted the provisions of authoritative guidance on Accounting for Uncertainty in Income
Taxes on July 1, 2007. The cumulative effects of applying the provisions 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.
As of June 30, 2010 the total amount of gross unrecognized tax benefits for uncertain tax
positions, including positions impacting only the timing of tax benefits, was $5.2 million. The
amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was
$5.2 million. As of June 30, 2009, our gross unrecognized tax benefits, including positions
impacting only the timing of benefits, was $2.3 million. The total amount of unrecognized tax
benefits that, if recognized, would impact the effective tax rate is $1.5 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, 2010 was $0.7 million. Interest and penalties recognized during the
current year ended June 30, 2010 were $0.2 million. The changes in our unrecognized tax benefits
were (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Beginning Balance, July 1 |
|
$ |
2.3 |
|
|
$ |
2.6 |
|
|
$ |
6.0 |
|
Increases from Positions Taken During Prior Periods |
|
|
|
|
|
|
|
|
|
|
0.7 |
|
Decreases from Positions Taken During Prior Periods |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
Increases from Positions Taken During the Current Period |
|
|
3.0 |
|
|
|
0.3 |
|
|
|
0.2 |
|
Decreases Related to Settlements with Taxing Authorities |
|
|
|
|
|
|
(0.4 |
) |
|
|
(0.1 |
) |
Decreases Related to Change in Tax Accounting Method |
|
|
|
|
|
|
|
|
|
|
(4.0 |
) |
Decreases Relating from the Lapse in the Statute of Limitations |
|
|
|
|
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
Ending Balance, June 30 |
|
$ |
5.2 |
|
|
$ |
2.3 |
|
|
$ |
2.6 |
|
|
|
|
|
|
|
|
|
|
|
DeVry generally remains subject to examination for all tax years beginning on or after July 1,
2005.
NOTE 10: DEBT
Debt consists of the following at June 30, 2010 and, June 30, 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
Outstanding Debt |
|
|
Rate |
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
Revolving Credit Facility: |
|
|
|
|
|
|
|
|
|
|
|
|
DeVry Inc. as borrower |
|
$ |
|
|
|
$ |
80,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
80,000 |
|
|
|
|
|
Auction Rate Securities Collateralized Line of Credit: |
|
|
|
|
|
|
|
|
|
|
|
|
DeVry Inc. as borrower |
|
$ |
|
|
|
$ |
44,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Outstanding Debt |
|
$ |
|
|
|
$ |
124,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Maturities of Debt |
|
$ |
|
|
|
$ |
104,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-term Debt |
|
$ |
|
|
|
$ |
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
Revolving Credit Facility
All of DeVrys 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. 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 not to exceed $175.0 million, and
GEI aggregate commitments cannot exceed $50.0 million. At the request of DeVry, the maximum
borrowings and letters of credit can be increased to $275.0 million in total with GEI aggregate
commitments not to exceed $50.0 million. 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, any borrowings would be 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 $4.6 million and $13.7 million
as of June 30, 2010 and 2009, respectively. As of June 30, 2010, if there were outstanding
borrowings under this agreement they would bear interest, payable quarterly or upon expiration of
the interest rate period, at the prime rate or at a LIBOR 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
DeVrys 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 agreement. 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 to comply with other covenants contained
in the agreement will constitute an event of default and could result in termination of the
agreement and require payment of all outstanding borrowings. DeVry was in compliance with all debt
covenants as of June 30, 2010.
The stock of certain subsidiaries of DeVry is pledged as collateral for the borrowings under
the revolving credit facility.
Auction Rate Securities Collateralized Line of Credit
In connection with the completion of the acquisition of Carrington, on September 18, 2008,
(see Note 6 Business Combinations) DeVry borrowed approximately $46 million against its
portfolio of auction rate securities under a temporary, uncommitted, demand revolving line of
credit facility between DeVry Inc. and UBS Bank USA (the Lender). This borrowing totaled
approximately 80% of the fair market value on September 18, 2008, of DeVrys auction rate
securities portfolio held through its broker, UBS, which is the maximum borrowing permitted under
this credit facility. These borrowing were fully repaid as of June 30, 2010, and the lending
agreement was terminated.
NOTE 11: EMPLOYEE BENEFIT PLANS
Success Sharing Retirement Plan
All employees, except those of DeVry Brasil, who meet certain eligibility requirements can
participate in DeVrys 401(k) Success Sharing Retirement Plan. DeVry contributes to the plan an
amount up to 4.0% of the total eligible compensation of employees who make contributions under the
plan. Prior to fiscal 2009, this match was up to 2% of total eligible compensation. Matching
contributions under the plans were approximately $15.2 million, $11.4 million and $4.8 million in
fiscal 2010, 2009 and 2008, respectively. In addition, DeVry may also make discretionary
contributions for the benefit of all eligible employees. Provisions for discretionary contributions
under the plan were approximately $12.2 million, $8.0 million and $5.9 million in fiscal 2010, 2009
and 2008, respectively. Prior to January 1, 2010, employees of Ross Health Sciences Inc. (RHSI)
and Ross University participated in two separate plans and received matching contributions of up to
5% of total eligible compensation. After this date, these employees became eligible to participate
in the DeVry 401(k) Success Sharing Retirement Plan.
Employee Stock Purchase Plan
Under provisions of DeVrys 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, 2010, 2009 and 2008. Total shares issued to the Plan were 18,502 and 19,075 in fiscal 2010
and 2009, respectively. This Plan is intended to
97
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
NOTE 12: SHAREHOLDER RIGHTS PLAN
On November 24, 2004, DeVry adopted a shareholder rights plan. In connection with this plan,
DeVrys 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 DeVrys Common Stock certificates, currently entitles the holder
to buy one one-thousandth of a share of DeVrys 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 DeVrys Common Stock. The Rights will expire on December 6,
2014.
NOTE 13: COMMITMENTS AND CONTINGENCIES
DeVry, DeVry University, Becker, Ross University, Chamberlain, Carrington and DeVry Brasil
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, 2010, are as follows (dollars in thousands):
|
|
|
|
|
Year Ended June 30, |
|
Amount |
2011 |
|
$ |
71,300 |
|
2012 |
|
|
73,000 |
|
2013 |
|
|
65,800 |
|
2014 |
|
|
61,000 |
|
2015 |
|
|
57,700 |
|
Thereafter |
|
|
252,000 |
|
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, 2010, 2009 and 2008 were $82.4 million, $69.7
million and $50.7 million, 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 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 will have a material effect on its cash flows, results of operations
or financial position.
NOTE 14: SEGMENT INFORMATION
DeVrys 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
four reportable segments: Business, Technology and Management, as which includes DeVry University
undergraduate and graduate operations; Professional Education, which includes the professional
exam review and training operations of Becker CPA Review and Stalla Review for the CFA Exams;
Medical and Healthcare which includes the operations of Ross University medical and veterinary
schools, Chamberlain College of Nursing and Carrington; and Other Educational which includes the
DeVry Brasil and AAI operations.
98
These segments are consistent with the method by which the Chief Operating Decision Maker
(DeVrys President and CEO) evaluates performance and allocates resources. Such decisions are
based, in part, on each segments operating income, which is defined as income before interest
income and expense, amortization, minority interest 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 operating income 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, 2010, 2009 and 2008. Corporate information is included where it is
needed to reconcile segment data to the consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Business, Technology and Management |
|
$ |
1,263,553 |
|
|
$ |
989,472 |
|
|
$ |
832,849 |
|
Medical and Healthcare |
|
|
507,037 |
|
|
|
362,715 |
|
|
|
169,814 |
|
Professional Education |
|
|
84,824 |
|
|
|
84,151 |
|
|
|
81,079 |
|
Other Educational Services |
|
|
59,767 |
|
|
|
25,115 |
|
|
|
8,091 |
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated Revenues |
|
$ |
1,915,181 |
|
|
$ |
1,461,453 |
|
|
$ |
1,091,833 |
|
|
|
|
|
|
|
|
|
|
|
Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Business, Technology and Management |
|
$ |
291,060 |
|
|
$ |
126,909 |
|
|
$ |
82,909 |
|
Medical and Healthcare |
|
|
111,081 |
|
|
|
91,651 |
|
|
|
52,243 |
|
Professional Education |
|
|
26,673 |
|
|
|
30,670 |
|
|
|
33,844 |
|
Other Educational Services |
|
|
(6,791 |
) |
|
|
(1,001 |
) |
|
|
516 |
|
Reconciling Items: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization Expense |
|
|
(10,812 |
) |
|
|
(10,476 |
) |
|
|
(4,926 |
) |
Depreciation and Other |
|
|
(309 |
) |
|
|
(2,920 |
) |
|
|
(2,251 |
) |
|
|
|
|
|
|
|
|
|
|
Total Consolidated Operating Income |
|
$ |
410,902 |
|
|
$ |
234,833 |
|
|
$ |
162,335 |
|
|
|
|
|
|
|
|
|
|
|
Interest and Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
$ |
2,080 |
|
|
$ |
5,251 |
|
|
$ |
10,463 |
|
Interest Expense |
|
|
(1,585 |
) |
|
|
(2,775 |
) |
|
|
(522 |
) |
Net Investment Gain |
|
|
1,225 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest and Other Income (Expense) |
|
|
1,720 |
|
|
|
2,519 |
|
|
|
9,941 |
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated Income Before Income Taxes |
|
$ |
412,622 |
|
|
$ |
237,352 |
|
|
$ |
172,276 |
|
|
|
|
|
|
|
|
|
|
|
Segment Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Business, Technology and Management |
|
$ |
406,505 |
|
|
$ |
434,443 |
|
|
$ |
409,842 |
|
Medical and Healthcare |
|
|
939,854 |
|
|
|
792,075 |
|
|
|
465,950 |
|
Professional Education |
|
|
78,492 |
|
|
|
74,445 |
|
|
|
82,382 |
|
Other Educational Services |
|
|
118,321 |
|
|
|
108,112 |
|
|
|
32,508 |
|
Corporate |
|
|
84,654 |
|
|
|
25,224 |
|
|
|
27,674 |
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated Assets |
|
$ |
1,627,826 |
|
|
$ |
1,434,299 |
|
|
$ |
1,018,356 |
|
|
|
|
|
|
|
|
|
|
|
Additions to Long-lived Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Business, Technology and Management |
|
$ |
98,314 |
|
|
$ |
45,683 |
|
|
$ |
53,345 |
|
Medical and Healthcare |
|
|
26,453 |
|
|
|
358,096 |
|
|
|
9,349 |
|
Professional Education |
|
|
757 |
|
|
|
207 |
|
|
|
195 |
|
Other Educational Services |
|
|
5,485 |
|
|
|
53,294 |
|
|
|
27,891 |
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated Additions to Long-lived Assets |
|
$ |
131,009 |
|
|
$ |
457,280 |
|
|
$ |
90,780 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Financial Statements: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
131,009 |
|
|
$ |
74,044 |
|
|
$ |
62,806 |
|
Increase in Capital Assets from Acquisitions |
|
|
|
|
|
|
33,973 |
|
|
|
210 |
|
Increase in Intangible Assets and Goodwill |
|
|
|
|
|
|
349,263 |
|
|
|
27,764 |
|
|
|
|
|
|
|
|
|
|
|
Total Increase in Consolidated Long-lived Assets |
|
$ |
131,009 |
|
|
$ |
457,280 |
|
|
$ |
90,780 |
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Depreciation Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Business, Technology and Management |
|
$ |
32,814 |
|
|
$ |
27,644 |
|
|
$ |
27,895 |
|
Medical and Healthcare |
|
|
14,591 |
|
|
|
10,376 |
|
|
|
5,662 |
|
Professional Education |
|
|
220 |
|
|
|
358 |
|
|
|
414 |
|
Other Educational Services |
|
|
2,919 |
|
|
|
800 |
|
|
|
72 |
|
Corporate |
|
|
681 |
|
|
|
647 |
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated Depreciation |
|
$ |
51,225 |
|
|
$ |
39,825 |
|
|
$ |
34,808 |
|
|
|
|
|
|
|
|
|
|
|
Intangible Asset Amortization Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Business, Technology and Management |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Medical and Healthcare |
|
|
4,750 |
|
|
|
7,598 |
|
|
|
3,428 |
|
Professional Education |
|
|
1,150 |
|
|
|
202 |
|
|
|
231 |
|
Other Educational Services |
|
|
4,912 |
|
|
|
2,676 |
|
|
|
1,267 |
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated Amortization |
|
$ |
10,812 |
|
|
$ |
10,476 |
|
|
$ |
4,926 |
|
|
|
|
|
|
|
|
|
|
|
In January 2009, DeVry bought out the lease on approximately 40% of the space it occupied at
its DeVry University campus in Long Island City, New York. As a result, DeVry recorded a pre-tax
charge of approximately $4.0 million. The charge is composed of a $2.7 million cash outlay and a
non-cash charge of $1.3 million related to the write-off of leasehold improvements, net of a
deferred rent credit. This loss is included in operating income of the current Business, Technology
and Management reportable segment and the previous 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 current Business, Technology and Management reportable segment and the
previous 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 current Business, Technology and Management reportable segment and the
previous DeVry University reportable segment.
DeVry conducts its educational operations in the United States, Canada, the Caribbean
countries of Dominica and St. Kitts/Nevis, Brazil, Europe, the Middle East and the Pacific Rim.
Other international revenues, which are derived principally from Brazil and Canada, were less than
5% of total revenues for the years ended June 30, 2010, 2009 and 2008. Revenues and long-lived
assets by geographic area are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenue from Unaffiliated Customers: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Operations |
|
$ |
1,669,517 |
|
|
$ |
1,281,875 |
|
|
$ |
937,902 |
|
International Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Dominica and St. Kitts/Nevis |
|
|
193,024 |
|
|
|
161,361 |
|
|
|
142,762 |
|
Other |
|
|
52,640 |
|
|
|
18,217 |
|
|
|
11,169 |
|
|
|
|
|
|
|
|
|
|
|
Total International |
|
|
245,664 |
|
|
|
179,578 |
|
|
|
153,931 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
1,915,181 |
|
|
$ |
1,461,453 |
|
|
$ |
1,091,833 |
|
|
|
|
|
|
|
|
|
|
|
Long-lived Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Operations |
|
$ |
730,710 |
|
|
$ |
663,689 |
|
|
$ |
380,560 |
|
International Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Dominica and St. Kitts/Nevis |
|
|
331,682 |
|
|
|
324,112 |
|
|
|
311,833 |
|
Other |
|
|
65,787 |
|
|
|
61,051 |
|
|
|
375 |
|
|
|
|
|
|
|
|
|
|
|
Total International |
|
|
397,469 |
|
|
|
385,163 |
|
|
|
312,208 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
1,128,179 |
|
|
$ |
1,048,852 |
|
|
$ |
692,768 |
|
|
|
|
|
|
|
|
|
|
|
No one customer accounted for more than 10% of DeVrys consolidated revenues.
100
NOTE 15: QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized unaudited quarterly data for the years ended June 30, 2010 and 2009, are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter |
|
Total |
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
Year |
2010 |
|
(Dollars in thousands, except for per share amounts) |
Revenues |
|
$ |
431,110 |
|
|
$ |
473,012 |
|
|
$ |
504,385 |
|
|
$ |
506,674 |
|
|
$ |
1,915,181 |
|
|
Operating Profit |
|
|
79,385 |
|
|
|
108,929 |
|
|
|
122,020 |
|
|
|
100,568 |
|
|
|
410,902 |
|
Net Income Attributable to DeVry Inc. |
|
$ |
54,727 |
|
|
$ |
72,454 |
|
|
$ |
81,152 |
|
|
$ |
71,576 |
|
|
$ |
279,909 |
|
Earnings per Common Share Attributable
to DeVry Inc. Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.77 |
|
|
$ |
1.02 |
|
|
$ |
1.14 |
|
|
$ |
1.00 |
|
|
$ |
3.92 |
|
Diluted |
|
$ |
0.76 |
|
|
$ |
1.00 |
|
|
$ |
1.12 |
|
|
$ |
0.99 |
|
|
$ |
3.87 |
|
Cash Dividend Declared per Common Share |
|
$ |
|
|
|
$ |
0.10 |
|
|
$ |
|
|
|
$ |
0.10 |
|
|
$ |
0.20 |
|
|
|
|
Quarter |
|
Total |
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
Year |
2009 |
|
(Dollars in thousands, except for per share amounts) |
|
|
Revenues |
|
$ |
303,717 |
|
|
$ |
369,615 |
|
|
$ |
391,882 |
|
|
$ |
396,239 |
|
|
$ |
1,461,453 |
|
Operating Profit |
|
|
46,812 |
|
|
|
62,540 |
|
|
|
71,787 |
|
|
|
53,694 |
|
|
|
234,833 |
|
Net Income Attributable to DeVry Inc. |
|
$ |
34,830 |
|
|
$ |
42,865 |
|
|
$ |
50,886 |
|
|
$ |
37,032 |
|
|
$ |
165,613 |
|
Earnings per Common Share Attributable
to DeVry Inc. Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.49 |
|
|
$ |
0.60 |
|
|
$ |
0.71 |
|
|
$ |
0.52 |
|
|
$ |
2.32 |
|
Diluted |
|
$ |
0.48 |
|
|
$ |
0.59 |
|
|
$ |
0.70 |
|
|
$ |
0.51 |
|
|
$ |
2.28 |
|
Cash Dividend Declared per Common Share |
|
$ |
|
|
|
$ |
0.08 |
|
|
$ |
|
|
|
$ |
0.08 |
|
|
$ |
0.16 |
|
On September 18, 2008, DeVry Inc. acquired the operations of U.S. Education, the parent
organization of Apollo College and Western Career College, for $290 million. On July 1, 2010,
Apollo College changed its name to Carrington College and Western Career College changed its name
to Carrington College of California. Collectively these institutions are now referred to as
Carrington. Including working capital adjustments and direct costs of acquisition, total
consideration paid was approximately $303 million in cash. The results of U.S. Educations
operations have been included in the consolidated financial statements of DeVry since that date.
On April 1, 2009, DeVry Inc. acquired the 82.3% of the outstanding stock of Fanor, a leading
provider of private postsecondary education in northeastern Brazil for $40.8 million in cash,
including costs of acquisition. During the second quarter of fiscal year 2010, the Fanor parent
organization began using the name DeVry Brasil. Funding was provided from DeVrys existing
operating cash balances. The results of DeVry Brasils operations have been included in the
consolidated financial statements of DeVry since the date of acquisition.
In January 2009, DeVry bought out the lease on approximately 40 percent of the space it
occupied at its DeVry University campus in Long Island City, New York. In the third quarter of
fiscal year 2009, DeVry recorded a pre-tax charge of approximately $4.0 million. The charge is
composed of a $2.7 million cash outlay and a non-cash charge of $1.3 million related to the
write-off of leasehold improvements, net of a deferred rent credit. This loss is separately
classified in the Consolidated Statements of Income as a component of Total Operating Costs and
Expenses and is related to the Business, Technology and Management reportable segment.
In the second quarter of fiscal 2009, DeVry moved its Decatur, Georgia campus to a new leased
facility. The campus was previously located in an owned facility that is currently held as
available for sale. DeVry estimates the fair value of this property less costs to sell to be in
excess of its carrying value; therefore, no impairment loss was recognized.
101
DEVRY INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended June 30, 2010, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
to Costs |
|
Charged to |
|
|
|
|
|
Balance at |
|
|
Beginning |
|
and |
|
Other |
|
|
|
|
|
End of |
Description of Allowances and Reserves |
|
of Period |
|
Expenses |
|
Accounts |
|
Deductions (c) |
|
Period |
|
|
(Dollars in thousands) |
FY2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted from accounts receivable for refunds |
|
$ |
4,423 |
|
|
$ |
37,959 |
(d) |
|
$ |
1,750 |
(g) |
|
$ |
37,266 |
|
|
$ |
6,866 |
|
Deducted from accounts receivable for uncollectable
accounts |
|
|
50,695 |
|
|
|
43,361 |
|
|
|
34 |
(a) |
|
|
37,833 |
|
|
|
56,257 |
|
Deducted from notes receivable for uncollectable notes |
|
|
5,454 |
|
|
|
6,809 |
|
|
|
|
|
|
|
4,533 |
|
|
|
7,730 |
|
Deducted from contributions to Perkins loan program for
uncollectable loans |
|
|
2,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,562 |
|
Deducted from deferred tax assets for valuation allowances |
|
|
12,400 |
|
|
|
|
|
|
|
|
|
|
|
2,300 |
(f) |
|
|
10,100 |
|
FY2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted from accounts receivable for refunds |
|
$ |
748 |
|
|
$ |
30,481 |
(d) |
|
$ |
4,410 |
(b) |
|
$ |
31,216 |
|
|
$ |
4,423 |
|
Deducted from accounts receivable for uncollectable
accounts |
|
|
35,132 |
|
|
|
41,560 |
|
|
|
6,324 |
(b) |
|
|
32,321 |
|
|
|
50,695 |
|
Deducted from notes receivable for uncollectable notes |
|
|
5,370 |
|
|
|
285 |
|
|
|
(8) |
(a) |
|
|
193 |
|
|
|
5,454 |
|
Deducted from contributions to Perkins loan program for
uncollectable loans |
|
|
2,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,562 |
|
Deducted from deferred tax assets for valuation allowances |
|
|
13,600 |
|
|
|
|
|
|
|
|
|
|
|
1,200 |
(f) |
|
|
12,400 |
|
FY2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted from accounts receivable for refunds |
|
$ |
937 |
|
|
$ |
26,067 |
(d) |
|
$ |
1 |
(a) |
|
$ |
26,257 |
|
|
$ |
748 |
|
Deducted from accounts receivable for uncollectable
accounts |
|
|
34,952 |
|
|
|
24,769 |
|
|
|
16 |
(a) |
|
|
24,605 |
|
|
|
35,132 |
|
Deducted from notes receivable for uncollectable notes |
|
|
4,519 |
|
|
|
1,121 |
|
|
|
22 |
(a) |
|
|
292 |
|
|
|
5,370 |
|
Deducted from contributions to Perkins loan program for
uncollectable loans |
|
|
2,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,562 |
|
Deducted from deferred tax assets for valuation allowances |
|
|
10,300 |
|
|
|
500 |
|
|
|
2,800 |
(e) |
|
|
|
|
|
|
13,600 |
|
|
|
|
(a) |
|
Effects of foreign currency translation charged to Accumulated Other Comprehensive Income. |
|
(b) |
|
Amounts represent opening balances of reserve accounts of acquired businesses. |
|
(c) |
|
Write-offs of uncollectable amounts and cash refunds for accounts receivable related reserves. |
|
(d) |
|
Amounts recorded as a reduction of revenue. |
|
(e) |
|
Charges to goodwill in purchase accounting. |
|
(f) |
|
Utilization of deferred tax assets and expected realization of net operating loss carryforwards. |
|
(g) |
|
Charged to deferred revenue accounts. |
102
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, 2010 and 2009, and the results of their operations and their cash flows for each of the three
years in the period ended June 30, 2010 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, 2010, based on criteria established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Companys 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 Managements 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 Companys 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.
A companys 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
companys 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 companys 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 25, 2010
103
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 DeVrys definitive Proxy Statement to be filed
in connection with the solicitation of proxies for the Annual Meeting of Stockholders to be held
November 10, 2010 (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 DeVrys 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 DeVrys 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 DeVrys 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 DeVrys audit committee financial
experts and identification of the DeVrys audit committee is incorporated by reference to the Proxy
Statement.
ITEM 11. EXECUTIVE COMPENSATION
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).
104
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
(1) Financial Statements
The required financial statements of DeVry and its subsidiaries are included in Part II,
Item 8, on pages 70 through 103 of this Annual Report on Form 10-K.
(2) Supplemental Financial Statement Schedules
The required supplemental schedule of DeVry and its subsidiaries is included in Part II,
Item 8 on page 102 of this Annual Report on Form 10-K.
(3) Exhibits
A complete listing of exhibits is included on pages 106 through 107 of this Annual Report
on Form 10-K.
FIVE-YEAR SUMMARY OPERATING, FINANCIAL AND OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June 30, |
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
|
(Dollars in thousands except for per share amounts) |
OPERATING: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
1,915,181 |
|
|
$ |
1,461,453 |
|
|
$ |
1,091,833 |
|
|
$ |
933,473 |
|
|
$ |
839,513 |
|
Depreciation |
|
|
51,225 |
|
|
|
39,825 |
|
|
|
34,808 |
|
|
|
35,979 |
|
|
|
37,616 |
|
Amortization of Intangible Assets and Other |
|
|
10,997 |
|
|
|
10,625 |
|
|
|
5,066 |
|
|
|
8,028 |
|
|
|
10,492 |
|
Interest Income |
|
|
2,080 |
|
|
|
5,251 |
|
|
|
10,463 |
|
|
|
7,437 |
|
|
|
3,785 |
|
Interest Expense |
|
|
1,585 |
|
|
|
2,775 |
|
|
|
522 |
|
|
|
4,784 |
|
|
|
10,190 |
|
Net Income |
|
|
279,909 |
|
|
|
165,613 |
|
|
|
125,532 |
|
|
|
76,188 |
|
|
|
43,053 |
|
Diluted Earnings per Common Share (EPS) -
Net Income |
|
|
3.87 |
|
|
|
2.28 |
|
|
|
1.73 |
|
|
|
1.07 |
|
|
|
0.61 |
|
Shares Used in Calculating Diluted EPS (in
thousands) |
|
|
72,267 |
|
|
|
72,516 |
|
|
|
72,406 |
|
|
|
71,400 |
|
|
|
70,800 |
|
Cash Dividend Declared Per Common Share |
|
|
0.20 |
|
|
|
0.16 |
|
|
|
0.12 |
|
|
|
0.10 |
|
|
|
|
|
FINANCIAL POSITION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
|
|
307,702 |
|
|
|
165,202 |
|
|
|
217,199 |
|
|
|
129,155 |
|
|
|
130,583 |
|
Total Assets |
|
|
1,627,826 |
|
|
|
1,434,299 |
|
|
|
1,018,356 |
|
|
|
844,113 |
|
|
|
872,482 |
|
Total Funded Debt |
|
|
|
|
|
|
124,811 |
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
Total Shareholders Equity (1) |
|
|
1,179,381 |
|
|
|
926,942 |
|
|
|
766,426 |
|
|
|
652,403 |
|
|
|
575,044 |
|
OTHER SELECTED DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Provided by Operating Activity |
|
|
391,548 |
|
|
|
249,526 |
|
|
|
198,646 |
|
|
|
125,176 |
|
|
|
90,822 |
|
Capital Expenditures |
|
|
131,009 |
|
|
|
74,044 |
|
|
|
62,806 |
|
|
|
38,558 |
|
|
|
25,265 |
|
Shares Outstanding at Year-end (in thousands) |
|
|
71,030 |
|
|
|
71,233 |
|
|
|
71,377 |
|
|
|
71,131 |
|
|
|
70,757 |
|
Closing Price of Common Stock at Year-end |
|
|
52.49 |
|
|
|
50.04 |
|
|
|
53.62 |
|
|
|
34.02 |
|
|
|
21.97 |
|
Price Earnings Ratio on Common Stock (2) |
|
|
14 |
|
|
|
22 |
|
|
|
31 |
|
|
|
32 |
|
|
|
36 |
|
|
|
|
(1) |
|
As discussed in Note 9 to the Financial Statements, Total Shareholders Equity was revised as a result of a $10.4
million adjustment made to correct errors identified in DeVrys deferred tax accounts. For purposes of this table, Total
Stockholders Equity for the respective fiscal years ended June 30, 2006, 2007 and 2008 have been revised. |
|
(2) |
|
Computed on trailing four quarters of earnings per common share. |
105
INDEX TO EXHIBITS
|
|
|
|
|
|
|
|
|
Exhibit |
|
|
|
Sequentially |
|
|
Number |
|
Exhibit |
|
Numbered Page |
|
Incorporated by Reference to: |
|
|
Stock Purchase Agreement and amendments regarding
purchase of Dominica Management, Inc. dated as of
March 19, 2003
|
|
|
|
|
|
Exhibit 2 to the
Registrants 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
Registrants 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
Registrants Form S-8,
333-130604 dated
December 22, 2005 |
|
|
|
|
|
|
|
|
|
3(b) |
|
Amended and Restated By-Laws of the Registrant
|
|
|
|
|
|
Exhibit 3.1 to the
Registrants Form 8-K dated
February 11, 2009 |
|
|
|
|
|
|
|
|
|
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 Registrants 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
Registrants 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
Registrants 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
Registrants 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
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Exhibit 4 to the
Registrants Form 10-Q dated
November 9, 2005 |
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4(f) |
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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
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Exhibit 4.1 to the
Registrants 8-K dated
January 11, 2007 |
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10(a) |
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Registrants 1994 Stock Incentive Plan
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Exhibit 10.2 to the
Registrants Form S-3, File
No. 333-22457 dated
February 27, 1997 |
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10(b) |
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Registrants Amended and Restated 1999 Stock
Incentive Plan
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Exhibit 10(e) to the
Registrants Form 10-K for
the year ended June 30, 2002
(File No. 1-13988) |
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10(c) |
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Registrants 2003 Stock Incentive Plan
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Exhibit A to the
Registrants definitive
Proxy Statement for the
Annual Meeting of
Shareholders on November 18,
2003 |
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10(d) |
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Registrants Amended Stock Incentive Plan of 2005
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Exhibit 10(h) to the
Registrants Form 10-K for
the year ended June 30, 2006 |
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10(e) |
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Registrants Nonqualified Deferred Compensation
Plan
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Exhibit 10(k) to the
Companys Form 10-K for the
year ended June 30, 1999
(File No. 1-13988) |
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10(f) |
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Form of Indemnification Agreement between the
Registrant and its Directors
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109 |
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Filed herewith |
106
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Exhibit |
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Sequentially |
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Number |
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Exhibit |
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Numbered Page |
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Incorporated by Reference to: |
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Employment Agreement between the Registrant and
Ronald L. Taylor
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Exhibit 10(a) to the
Registrants Form 10-Q for
the quarter ended
December 31, 2002 (File No.
1-13988) |
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10(h) |
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Senior Advisor Agreement between the Registrant
and Ronald L. Taylor
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Exhibit 10(b) to the
Registrants Form 10-Q for
the quarter ended
December 31, 2002 (File No.
1-13988) |
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10(i) |
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Letter Agreement between the Registrant and
Ronald L. Taylor, CEO, dated August 15, 2006
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Exhibit 10.1 to the
Registrants Form 8-K dated
August 16, 2006 |
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10(j) |
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Employment Agreement between the Registrant and
Daniel M. Hamburger
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Exhibit 10.1 to the
Registrants Form 8-K dated
November 21, 2006 |
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10(k) |
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Executive Employment Agreement between the
Registrant and Thomas C. Shepherd dated October
12, 2009
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Exhibit 10.1 to the
Registrants Form 8-K dated
October 16, 2009 |
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10(l) |
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Executive Employment Agreement between the
Registrant and Richard M. Gunst dated October 12,
2009
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Exhibit 10.2 to the
Registrants Form 8-K dated
October 16, 2009 |
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10(m) |
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Executive Employment Agreement between the
Registrant and Daniel M. Hamburger dated October
12, 2009
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Exhibit 10.3 to the
Registrants Form 8-K dated
October 16, 2009 |
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10(n) |
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Executive Employment Agreement between the
Registrant and William Hughson dated September 9,
2009
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Exhibit 10.1 to the
Registrants Form 8-K dated
September 15, 2009 |
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21 |
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Subsidiaries of the Registrant
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115 |
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23 |
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Consent of PricewaterhouseCoopers LLP,
independent registered public accounting firm
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117 |
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31 |
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Rule 13a-14(a)/15d-14(a) Certifications
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118 |
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32 |
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Section 1350 Certifications
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120 |
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107
SIGNATURES
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.
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DeVry Inc.
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Date: August 25, 2010
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By |
/s/ Daniel M. Hamburger
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Daniel M. Hamburger |
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Chief Executive Officer |
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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.
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Signature |
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Title |
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Date |
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/s/ Harold T. Shapiro
Harold T. Shapiro
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Board Chair and Director
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August 25, 2010 |
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/s/ Daniel M. Hamburger
Daniel M. Hamburger
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Chief Executive Officer and Director
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August 25, 2010 |
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/s/ Richard M. Gunst
Richard M. Gunst
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Senior Vice President, Chief Financial Officer,
and Principal
Accounting Officer
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August 25, 2010 |
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/s/ Ronald L. Taylor
Ronald L. Taylor
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Director
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August 25, 2010 |
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/s/ Darren R. Huston
Darren R. Huston
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Director
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August 25, 2010 |
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/s/ David S. Brown
David S. Brown
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Director
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August 25, 2010 |
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/s/ Connie R. Curran
Connie R. Curran
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Director
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August 25, 2010 |
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/s/ William T. Keevan
William T. Keevan
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Director
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August 25, 2010 |
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/s/ Lyle Logan
Lyle Logan
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Director
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August 25, 2010 |
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/s/ Julie A. McGee
Julie A. McGee
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Director
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August 25, 2010 |
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/s/ Lisa W. Pickrum
Lisa W. Pickrum
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Director
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August 25, 2010 |
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/s/ Fernando Ruiz
Fernando Ruiz
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Director
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August 25, 2010 |
108