(Mark
One)
|
||
R
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
DELAWARE
|
36-3150143
|
(State
or other jurisdiction of incorporation
or organization)
|
(I.R.S.
Employer Identification
No.)
|
ONE
TOWER LANE, SUITE 1000,
|
60181
|
OAKBROOK
TERRACE, ILLINOIS
|
(Zip
Code)
|
(Address
of principal executive offices)
|
Large
accelerated filer
|
R
|
Accelerated
filer
|
£
|
Non-accelerated
filer
|
£ (Do not
check if a smaller reporting company)
|
Smaller
reporting company
|
£
|
Page No.
|
||
PART I
– Financial Information
|
||
Item 1
|
||
3
|
||
4
|
||
5
|
||
6
|
||
Item 2
|
24
|
|
Item 3
|
35
|
|
Item 4
|
35
|
|
PART II
– Other Information
|
||
Item 1
|
37
|
|
Item 1A
|
38
|
|
Item
2
|
38
|
|
Item 4
|
39
|
|
Item 6
|
39
|
|
40
|
December 31,
|
June 30,
|
December 31,
|
||||||||||
2008
|
2008
|
2007
|
||||||||||
(Dollars
in thousands)
|
||||||||||||
Current
Assets:
|
||||||||||||
Cash
and Cash Equivalents
|
$ | 203,326 | $ | 217,199 | $ | 98,912 | ||||||
Marketable
Securities
|
1,861 | 2,308 | 142,144 | |||||||||
Restricted
Cash
|
31,948 | 4,113 | 9,823 | |||||||||
Accounts
Receivable, Net
|
137,602 | 55,214 | 76,842 | |||||||||
Deferred
Income Taxes, Net
|
16,312 | 14,975 | 17,938 | |||||||||
Prepaid
Expenses and Other
|
33,903 | 31,779 | 22,598 | |||||||||
Total
Current Assets
|
424,952 | 325,588 | 368,257 | |||||||||
Land,
Buildings and Equipment:
|
||||||||||||
Land
|
50,797 | 50,726 | 51,431 | |||||||||
Buildings
|
235,640 | 216,048 | 206,003 | |||||||||
Equipment
|
295,636 | 282,273 | 271,594 | |||||||||
Construction
In Progress
|
8,209 | 4,874 | 6,375 | |||||||||
590,282 | 553,921 | 535,403 | ||||||||||
Accumulated
Depreciation and Amortization
|
(325,452 | ) | (314,606 | ) | (301,362 | ) | ||||||
Land,
Buildings and Equipment, Net
|
264,830 | 239,315 | 234,041 | |||||||||
Other
Assets:
|
||||||||||||
Intangible
Assets, Net
|
187,612 | 62,847 | 65,372 | |||||||||
Goodwill
|
494,488 | 308,024 | 308,598 | |||||||||
Perkins
Program Fund, Net
|
13,450 | 13,450 | 13,450 | |||||||||
Investments
|
57,757 | 57,171 | 0 | |||||||||
Other
Assets
|
11,798 | 11,961 | 6,614 | |||||||||
Total
Other Assets
|
765,105 | 453,453 | 394,034 | |||||||||
TOTAL
ASSETS
|
$ | 1,454,887 | $ | 1,018,356 | $ | 996,332 | ||||||
LIABILITIES:
|
||||||||||||
Current
Liabilities:
|
||||||||||||
Current
Portion of Debt
|
$ | 135,124 | $ | — | $ | — | ||||||
Accounts
Payable
|
40,905 | 70,368 | 37,029 | |||||||||
Accrued
Salaries, Wages and Benefits
|
54,200 | 51,300 | 43,249 | |||||||||
Accrued
Expenses
|
41,470 | 31,175 | 31,312 | |||||||||
Advance
Tuition Payments
|
44,443 | 16,972 | 10,804 | |||||||||
Deferred
Tuition Revenue
|
181,616 | 40,877 | 124,539 | |||||||||
Total
Current Liabilities
|
497,758 | 210,692 | 246,933 | |||||||||
Other
Liabilities:
|
||||||||||||
Revolving
Loan
|
20,000 | — | — | |||||||||
Deferred
Income Taxes, Net
|
66,497 | 22,163 | 16,053 | |||||||||
Deferred
Rent and Other
|
30,463 | 29,512 | 30,181 | |||||||||
Total
Other Liabilities
|
116,960 | 51,675 | 46,234 | |||||||||
TOTAL
LIABILITIES
|
614,718 | 262,367 | 293,167 | |||||||||
SHAREHOLDERS’
EQUITY:
|
||||||||||||
Common
Stock, $0.01 Par Value, 200,000,000 Shares Authorized;
71,636,000; 71,377,000 and 71,361,000 Shares Issued and
Outstanding at December 31, 2008, June 30, 2008 and December 31,
2007, Respectively
|
726 | 724 | 721 | |||||||||
Additional
Paid-in Capital
|
181,758 | 168,405 | 158,663 | |||||||||
Retained
Earnings
|
699,027 | 627,064 | 568,463 | |||||||||
Accumulated
Other Comprehensive Loss
|
469 | (2,963 | ) | (1,788 | ) | |||||||
Treasury
Stock, at Cost (1,064,367; 989,579 and 688,706 Shares,
Respectively)
|
(41,811 | ) | (37,241 | ) | (22,894 | ) | ||||||
TOTAL
SHAREHOLDERS’ EQUITY
|
840,169 | 755,989 | 703,165 | |||||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ | 1,454,887 | $ | 1,018,356 | $ | 996,332 |
For
the Quarter
|
For
the Six Months
|
|||||||||||||||
Ended December 31,
|
Ended December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
REVENUES:
|
||||||||||||||||
Tuition
|
$ | 342,044 | $ | 250,695 | $ | 621,171 | $ | 480,916 | ||||||||
Other
Educational
|
27,571 | 23,042 | 52,161 | 43,139 | ||||||||||||
Total
Revenues
|
369,615 | 273,737 | 673,332 | 524,055 | ||||||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Cost
of Educational Services
|
167,107 | 123,887 | 306,720 | 244,915 | ||||||||||||
Loss
on Sale of Assets
|
- | - | - | 3,743 | ||||||||||||
Student
Services and Administrative Expense
|
139,968 | 102,917 | 257,260 | 194,562 | ||||||||||||
Total
Operating Costs and Expenses
|
307,075 | 226,804 | 563,980 | 443,220 | ||||||||||||
Operating
Income
|
62,540 | 46,933 | 109,352 | 80,835 | ||||||||||||
INTEREST
AND OTHER (EXPENSE) INCOME:
|
||||||||||||||||
Interest
Income
|
1,710 | 2,892 | 3,852 | 5,299 | ||||||||||||
Interest
Expense
|
(1,176 | ) | (98 | ) | (1,529 | ) | (319 | ) | ||||||||
Net
Investment Loss
|
(1,718 | ) | - | (1,718 | ) | - | ||||||||||
Net
Interest and Other (Expense) Income
|
(1,184 | ) | 2,794 | 605 | 4,980 | |||||||||||
Income
Before Income Taxes
|
61,356 | 49,727 | 109,957 | 85,815 | ||||||||||||
Income
Tax Provision
|
18,491 | 13,914 | 32,262 | 23,167 | ||||||||||||
NET
INCOME
|
$ | 42,865 | $ | 35,813 | $ | 77,695 | $ | 62,648 | ||||||||
EARNINGS
PER COMMON SHARE:
|
||||||||||||||||
Basic
|
$ | 0.60 | $ | 0.50 | $ | 1.09 | $ | 0.88 | ||||||||
Diluted
|
$ | 0.59 | $ | 0.49 | $ | 1.07 | $ | 0.87 | ||||||||
CASH
DIVIDEND DECLARED PER COMMON SHARE
|
$ | 0.08 | $ | 0.06 | $ | 0.08 | $ | 0.06 |
For
the Six Months
|
||||||||
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
(Dollars
in Thousands)
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
Income
|
$ | 77,695 | $ | 62,648 | ||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Operating
Activities:
|
||||||||
Stock-Based
Compensation Charge
|
4,809 | 2,880 | ||||||
Depreciation
|
19,200 | 17,263 | ||||||
Amortization
|
3,904 | 2,471 | ||||||
Provision
for Refunds and Uncollectible Accounts
|
34,056 | 28,080 | ||||||
Deferred
Income Taxes
|
(503 | ) | (3,632 | ) | ||||
(Gain)
Loss on Disposals of Land, Buildings and Equipment
|
(7 | ) | 3,730 | |||||
Unrealized
Net Loss on Investments
|
1,718 | — | ||||||
Changes
in Assets and Liabilities, Net of Effects from Acquisition of
Business:
|
||||||||
Restricted
Cash
|
(27,712 | ) | 4,667 | |||||
Accounts
Receivable
|
(87,520 | ) | (57,763 | ) | ||||
Prepaid
Expenses and Other
|
(592 | ) | (4,497 | ) | ||||
Accounts
Payable
|
(31,143 | ) | 2,652 | |||||
Accrued
Salaries, Wages, Benefits and Expenses
|
5,525 | (7,403 | ) | |||||
Advance
Tuition Payments
|
22,716 | (3,640 | ) | |||||
Deferred
Tuition Revenue
|
116,627 | 84,674 | ||||||
NET CASH PROVIDED BY
OPERATING ACTIVITIES
|
138,773 | 132,130 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital
Expenditures
|
(25,208 | ) | (27,957 | ) | ||||
Net
Proceeds from Sale of Land and Building
|
— | 38,528 | ||||||
Payment
for Purchase of Business, Net of Cash Acquired
|
(286,500 | ) | (27,454 | ) | ||||
Marketable
Securities Purchased
|
(37 | ) | (264,122 | ) | ||||
Marketable
Securities-Maturities and Sales
|
— | 121,836 | ||||||
NET CASH (USED IN)
INVESTING ACTIVITIES
|
(311,745 | ) | (159,169 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from Exercise of Stock Options
|
7,764 | 11,315 | ||||||
Reissuance
of Treasury Stock
|
1,570 | 577 | ||||||
Repurchase
of Common Stock for Treasury
|
(5,358 | ) | (10,187 | ) | ||||
Cash
Dividends Paid
|
(4,282 | ) | (3,557 | ) | ||||
Excess
Tax Benefit from Stock-Based Payments
|
2,095 | 1,210 | ||||||
Borrowings
Under Collateralized Line of Credit
|
46,187 |
—
|
||||||
Repayments
Under Collateralized Line of Credit
|
(1,063 | ) | — | |||||
Borrowings
Under Revolving Credit Facility
|
210,000 | 25,000 | ||||||
Repayments
Under Revolving Credit Facility
|
(100,000 | ) | (26,895 | ) | ||||
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
|
156,913 | (2,537 | ) | |||||
Effects
of Exchange Rate Differences
|
2,186 | (667 | ) | |||||
NET DECREASE IN CASH AND
CASH EQUIVALENTS
|
(13,873 | ) | (30,243 | ) | ||||
Cash and Cash Equivalents at
Beginning of
Period
|
217,199 | 129,155 | ||||||
Cash and Cash Equivalents at
End of Period
|
$ | 203,326 | $ | 98,912 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
|
||||||||
Cash
Paid During the Period For:
|
||||||||
Interest
|
$ | 1,057 | $ | 231 | ||||
Income
Taxes, Net
|
18,119 | 32,679 | ||||||
Non-cash
Financing Activity:
|
||||||||
Declaration
of Cash Dividends to be Paid
|
5,732 | 4,283 |
NOTE 1:
|
INTERIM
FINANCIAL STATEMENTS
|
NOTE 2:
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Gross Unrealized
|
||||||||||||||||
Cost
|
(Loss)
|
Gain
|
Fair Value
|
|||||||||||||
Short-term
Investments:
|
||||||||||||||||
Bond
Mutual Fund
|
$ | 766 | $ | - | $ | 4 | $ | 770 | ||||||||
Stock
Mutual Funds
|
1,955 | (864 | ) | - | 1,091 | |||||||||||
Total
Short-term Investments
|
$ | 2,721 | $ | (864 | ) | $ | 4 | $ | 1,861 |
Gross Unrealized
|
||||||||||||||||
Cost
|
(Loss)
|
Gain
|
Fair Value
|
|||||||||||||
Long-term
Investments:
|
||||||||||||||||
Auction
Rate Securities (ARS)
|
$ | 59,475 | $ | (10,317 | ) | $ | - | $ | 49,158 | |||||||
Put
Rights on ARS
|
- | - | 8,599 | 8,599 | ||||||||||||
Total
Long-term Investments
|
$ | 59,475 | $ | (10,317 | ) | $ | 8,599 | $ | 57,757 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Basic
shares
|
71,597 | 71,282 | 71,511 | 71,194 | ||||||||||||
Effect of Dilutive Stock
Options
|
1,065 | 1,238 | 1,095 | 1,080 | ||||||||||||
Diluted Shares
|
72,662 | 72,520 | 72,606 | 72,274 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Balance
at Beginning of Period
|
$ | (2,557 | ) | $ | (1,550 | ) | $ | (2,963 | ) | $ | (918 | ) | ||||
Net
Unrealized Investment Losses
|
(5,112 | ) | (149 | ) | (5,253 | ) | (142 | ) | ||||||||
Net
Unrealized Investment Losses Recognized
|
6,378 | - | 6,378 | - | ||||||||||||
Translation
Adjustments
|
1,760 | (89 | ) | 2,307 | (728 | ) | ||||||||||
Balance
at End of Period
|
$ | 469 | $ | (1,788 | ) | $ | 469 | $ | (1,788 | ) |
NOTE 3:
|
STOCK-BASED
COMPENSATION
|
Options
Outstanding
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic
Value
($000)
|
|||||||||||||
Outstanding
at July 1, 2008
|
3,039,796 | $ | 26.19 | |||||||||||||
Options
Granted
|
433,283 | $ | 51.40 | |||||||||||||
Options
Exercised
|
(333,783 | ) | $ | 23.41 | ||||||||||||
Options
Canceled
|
(30,171 | ) | $ | 23.99 | ||||||||||||
Outstanding
at December 31, 2008
|
3,109,125 | $ | 30.02 | 6.71 | $ | 85,170 | ||||||||||
Exercisable
at December 31, 2008
|
1,718,792 | $ | 25.07 | 5.24 | $ | 55,597 |
Fiscal Year
|
||||||||
2009
|
2008
|
|||||||
Expected
Life (in Years)
|
6.79 | 6.60 | ||||||
Expected
Volatility
|
41.57 | % | 39.33 | % | ||||
Risk-free
Interest Rate
|
3.39 | % | 4.34 | % | ||||
Dividend
Yield
|
0.23 | % | 0.32 | % | ||||
Pre-vesting
Forfeiture Rate
|
5.00 | % | 5.00 | % |
Restricted
Stock
Outstanding
|
Weighted
Average
Grant
Date
Fair Value
|
|||||||
Nonvested
at July 1, 2008
|
- | $ | - | |||||
Shares
Granted
|
81,435 | $ | 51.32 | |||||
Shares
Vested
|
- | $ | - | |||||
Shares
Canceled
|
- | $ | - | |||||
Nonvested
at December 31, 2008
|
81,435 | $ | 51.32 |
For
the Three Months
Ended December 31,
|
For
the Six Months
Ended December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
Cost
of Educational Services
|
$ | 543 | $ | 438 | $ | 1,539 | $ | 922 | ||||||||
Student
Services and Administrative Expense
|
1,155 | 929 | 3,270 | 1,959 | ||||||||||||
Income
Tax Benefit
|
(279 | ) | (184 | ) | (741 | ) | (388 | ) | ||||||||
Net
Stock-Based Compensation Expense
|
$ | 1,419 | $ | 1,183 | $ | 4,068 | $ | 2,493 |
NOTE
4:
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
Cash
Equivalents
|
$ | 165,237 | $ | - | $ | - | ||||||
Available
for Sale Investments:
|
||||||||||||
Marketable
Securities, short-term
|
1,861 | - | - | |||||||||
Trading
Securities:
|
||||||||||||
Investments,
long-term
|
- | - | 57,757 | |||||||||
Total
Assets at Fair Value
|
$ | 167,098 | $ | - | $ | 57,757 |
Investments - Long Term
|
||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||
December
31,
|
December
31,
|
|||||||
2008
|
2008
|
|||||||
Balance
at Beginning of Period
|
$ | 57,128 | $ | 57,171 | ||||
Total
Unrealized Gains (Losses) Included in Income:
|
||||||||
Recognition
of UBS Put Right
|
8,599 | 8,599 | ||||||
Transfer
of ARS to Trading Security
|
(10,317 | ) | (10,317 | ) | ||||
Net
Charged to Other Comprehensive Income (Loss) (1)
|
2,347 | 2,304 | ||||||
Purchases,
Sales and Maturities
|
- | - | ||||||
Balance
at December 31, 2008
|
$ | 57,757 | $ | 57,757 |
(1)
|
–
Upon the transfer of the auction rate securities from available for sale
to trading securities, the cumulative unrealized loss was reversed from
Other Comprehensive Income (Loss) and charged to
earnings.
|
NOTE
5:
|
DIVIDENDS
AND STOCK REPURCHASE PROGRAM
|
NOTE 6:
|
BUSINESS
COMBINATIONS
|
At October 31, 2007
|
||||
Current
Assets
|
$ | 4,556 | ||
Property
and Equipment
|
210 | |||
Other
Long-term Assets
|
3,599 | |||
Intangible
Assets
|
10,853 | |||
Goodwill
|
17,108 | |||
Total
Assets Acquired
|
36,326 | |||
Liabilities
Assumed
|
8,691 | |||
Net
Assets Acquired
|
$ | 27,635 |
As of October 31,
2007
|
|||||
Value
Assigned
|
Estimated
Useful Life
|
||||
Customer
Contracts-Direct to Student
|
$ | 4,100 |
6
yrs 8 mths
|
||
Customer
Contracts-Direct to District
|
2,900 |
4
yrs 8 mths
|
|||
Curriculum/Software
|
2,500 |
5
yrs
|
|||
Other
|
53 |
1
yr
|
At September 18, 2008
|
||||
Current
Assets
|
$ | 46,042 | ||
Property
and Equipment
|
19,558 | |||
Other
Long-term Assets
|
2,308 | |||
Intangible
Assets
|
128,600 | |||
Goodwill
|
186,267 | |||
Total
Assets Acquired
|
382,775 | |||
Liabilities
Assumed
|
80,980 | |||
Net
Assets Acquired
|
$ | 301,795 |
As of December 31,
2008
|
|||||
Value
Assigned
|
Estimated
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
|
Pro
Forma
|
||||||||||||||||
For the Three
Months ended
December 31,
|
For the Three
Months ended
December 31,
|
For the Six Months ended
December 31,
|
||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Revenues
|
$ | 369,615 | $ | 308,341 | $ | 709,239 | $ | 592,548 | ||||||||
Operating
Income
|
62,540 | 48,689 | 113,086 | 84,433 | ||||||||||||
Net
Income
|
42,865 | 34,920 | 78,730 | 60,606 | ||||||||||||
Earning
per Common Share:
|
||||||||||||||||
Basic
|
$ | 0.60 | $ | 0.49 | $ | 1.10 | $ | 0.85 | ||||||||
Diluted
|
$ | 0.59 | $ | 0.48 | $ | 1.08 | $ | 0.84 |
NOTE 7:
|
INTANGIBLE
ASSETS
|
As of December 31,
2008
|
||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
|||||||
Amortized
Intangible Assets:
|
||||||||
Student
Relationships
|
$ | 56,270 | $ | (49,697 | ) | |||
Customer
Contracts
|
7,000 | (1,615 | ) | |||||
License
and Non-compete Agreements
|
2,684 | (2,684 | ) | |||||
Class Materials
|
2,900 | (1,600 | ) | |||||
Curriculum/Software
|
3,300 | (628 | ) | |||||
Trade
Names
|
3,210 | (813 | ) | |||||
Outplacement
Relationships
|
3,900 | (74 | ) | |||||
Other
|
639 | (639 | ) | |||||
Total
|
$ | 79,903 | $ | (57,750 | ) | |||
Unamortized
Intangible Assets:
|
||||||||
Trade
Names
|
$ | 22,272 | ||||||
Trademark
|
1,645 | |||||||
Ross
Title IV Eligibility and Accreditations
|
14,100 | |||||||
Intellectual
Property
|
13,940 | |||||||
Chamberlain
Title IV Eligibility and Accreditations
|
1,200 | |||||||
USEC
Title IV Eligibility
|
112,300 | |||||||
Total
|
$ | 165,457 |
As of December 31,
2007
|
||||||||
Gross
Carrying
Amount
|
Accumulated
Amortization
|
|||||||
Amortized
Intangible Assets:
|
||||||||
Student
Relationships
|
$ | 47,770 | $ | (46,307 | ) | |||
Customer
Contracts
|
7,000 | (224 | ) | |||||
License
and Non-compete Agreements
|
2,684 | (2,641 | ) | |||||
Class Materials
|
2,900 | (1,400 | ) | |||||
Curriculum/Software
|
2,500 | (83 | ) | |||||
Trade
Names
|
110 | (110 | ) | |||||
Other
|
639 | (623 | ) | |||||
Total
|
$ | 63,603 | $ | (51,388 | ) | |||
Unamortized
Intangible Assets:
|
||||||||
Trade
Names
|
$ | 22,272 | ||||||
Trademark
|
1,645 | |||||||
Ross
Title IV Eligibility and Accreditations
|
14,100 | |||||||
Intellectual
Property
|
13,940 | |||||||
Chamberlain
Title IV Eligibility and Accreditations
|
1,200 | |||||||
Total
|
$ | 53,157 |
Fiscal Year
|
||||
2009
|
$ | 9,752 | ||
2010
|
6,955 | |||
2011
|
2,426 | |||
2012
|
2,118 | |||
2013
|
1,198 |
Fiscal Year
|
Direct
to
Student
|
Direct
to
District
|
||||||
2008
|
12 | % | 14 | % | ||||
2009
|
18 | % | 24 | % | ||||
2010
|
19 | % | 25 | % | ||||
2011
|
17 | % | 21 | % | ||||
2012
|
14 | % | 16 | % | ||||
2013
|
11 | % | - | |||||
2014
|
9 | % | - |
NOTE 8:
|
SALE
OF FACILITIES
|
NOTE 9:
|
REDUCTION
IN WORKFORCE CHARGES
|
NOTE 10:
|
INCOME
TAXES
|
NOTE 11:
|
DEBT
|
December 31, 2008
|
||||||||
Revolving
Credit Facility:
|
Outstanding Debt
|
Average Interest Rate
|
||||||
DeVry
Inc. as borrower
|
$ | 110,000 | 1.93 | % | ||||
GEI
as borrower
|
-- | -- | ||||||
Total
|
$ | 110,000 | 1.93 | % | ||||
Auction
Rate Securities Collateralized Line of Credit:
|
||||||||
DeVry
Inc. as borrower
|
45,124 | 0.93 | % | |||||
Total
Outstanding Debt
|
$ | 155,124 | 1.64 | % | ||||
Current
Maturities of Debt
|
135,124 | 1.60 | % | |||||
Total
Long-term Debt
|
$ | 20,000 | 1.93 | % |
NOTE 12:
|
COMMITMENTS
AND CONTINGENCIES
|
NOTE 13:
|
SEGMENT
INFORMATION
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
Ended December 31,
|
Ended December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues:
|
(Dollars
in Thousands)
|
|||||||||||||||
DeVry
University
|
$ | 253,667 | $ | 213,394 | $ | 484,347 | $ | 408,159 | ||||||||
Medical and
Healthcare
|
97,979 | 42,586 | 151,257 | 79,826 | ||||||||||||
Professional
and Training
|
17,969 | 17,757 | 37,728 | 36,070 | ||||||||||||
Total
Consolidated Revenues
|
$ | 369,615 | $ | 273,737 | $ | 673,332 | $ | 524,055 | ||||||||
Operating
Income:
|
||||||||||||||||
DeVry
University
|
$ | 34,835 | $ | 28,220 | $ | 60,123 | $ | 43,781 | ||||||||
Medical and
Healthcare
|
26,666 | 15,262 | 42,017 | 26,863 | ||||||||||||
Professional
and Training
|
4,526 | 5,374 | 12,249 | 13,732 | ||||||||||||
Reconciling
Items:
|
||||||||||||||||
Amortization
Expense
|
(2,919 | ) | (1,355 | ) | (3,835 | ) | (2,401 | ) | ||||||||
Depreciation
and Other
|
(568 | ) | (568 | ) | (1,202 | ) | (1,140 | ) | ||||||||
Total
Consolidated Operating Income
|
$ | 62,540 | $ | 46,933 | $ | 109,352 | $ | 80,835 | ||||||||
Interest:
|
||||||||||||||||
Interest
Income
|
$ | 1,710 | $ | 2,892 | $ | 3,852 | $ | 5,299 | ||||||||
Interest
Expense
|
(1,176 | ) | (98 | ) | (1,529 | ) | (319 | ) | ||||||||
Net
Investment Loss
|
(1,718 | ) | - | (1,718 | ) | - | ||||||||||
Net
Interest Income
|
(1,184 | ) | 2,794 | 605 | 4,980 | |||||||||||
Total
Consolidated Income before Income Taxes
|
$ | 61,356 | $ | 49,727 | $ | 109,957 | $ | 85,815 | ||||||||
Segment
Assets:
|
||||||||||||||||
DeVry
University
|
$ | 484,270 | $ | 476,413 | $ | 484,270 | $ | 476,413 | ||||||||
Medical and
Healthcare
|
887,058 | 427,077 | 887,058 | 427,077 | ||||||||||||
Professional
and Training
|
64,105 | 72,555 | 64,105 | 72,555 | ||||||||||||
Corporate
|
19,454 | 20,287 | 19,454 | 20,287 | ||||||||||||
Total
Consolidated Assets
|
$ | 1,454,887 | $ | 996,332 | $ | 1,454,887 | $ | 996,332 | ||||||||
Additions
to Long-lived Assets:
|
||||||||||||||||
DeVry
University
|
$ | 6,906 | $ | 35,261 | $ | 13,298 | $ | 49,413 | ||||||||
Medical and
Healthcare
|
26,248 | 2,383 | 343,144 | 6,357 | ||||||||||||
Professional
and Training
|
27 | 147 | 76 | 161 | ||||||||||||
Total
Consolidated Additions to Long-lived Assets
|
$ | 33,181 | $ | 37,791 | $ | 356,518 | $ | 55,931 | ||||||||
Reconciliation
to Consolidated Financial Statements:
|
||||||||||||||||
Capital
Expenditures
|
$ | 14,570 | $ | 9,817 | $ | 25,208 | $ | 27,957 | ||||||||
Increase
in Capital Assets from Acquisitions
|
- | 210 | 9,558 | 210 | ||||||||||||
Increase
in Intangible Assets and Goodwill
|
18,611 | 27,764 | 311,752 | 27,764 | ||||||||||||
Total
Increase in Consolidated Long-lived Assets
|
$ | 33,181 | $ | 37,791 | $ | 356,518 | $ | 55,931 | ||||||||
Depreciation
Expense:
|
||||||||||||||||
DeVry
University
|
$ | 7,240 | $ | 7,095 | $ | 14,244 | $ | 13,858 | ||||||||
Medical and
Healthcare
|
2,857 | 1,480 | 4,411 | 2,802 | ||||||||||||
Professional
and Training
|
90 | 103 | 177 | 198 | ||||||||||||
Corporate
|
188 | 180 | 368 | 405 | ||||||||||||
Total
Consolidated Depreciation
|
$ | 10,375 | $ | 8,858 | $ | 19,200 | $ | 17,263 | ||||||||
Intangible
Asset Amortization Expense:
|
||||||||||||||||
DeVry
University
|
$ | 488 | $ | 317 | $ | 985 | $ | 317 | ||||||||
Medical and
Healthcare
|
2,382 | 982 | 2,748 | 1,965 | ||||||||||||
Professional
and Training
|
49 | 56 | 102 | 119 | ||||||||||||
Total
Consolidated Amortization
|
$ | 2,919 | $ | 1,355 | $ | 3,835 | $ | 2,401 |
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
Ended December 31,
|
Ended December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues
from Unaffiliated Customers:
|
(Dollars
in Thousands)
|
|||||||||||||||
Domestic
Operations
|
$ | 326,354 | $ | 234,375 | $ | 591,478 | $ | 450,296 | ||||||||
International
Operations:
|
||||||||||||||||
Dominica
and St. Kitts/Nevis
|
40,905 | 36,763 | 77,017 | 68,471 | ||||||||||||
Other
|
2,356 | 2,599 | 4,837 | 5,288 | ||||||||||||
Total
International
|
43,261 | 39,362 | 81,854 | 73,759 | ||||||||||||
Consolidated
|
$ | 369,615 | $ | 273,737 | $ | 673,332 | $ | 524,055 | ||||||||
Long-lived
Assets:
|
||||||||||||||||
Domestic
Operations
|
$ | 650,984 | $ | 315,129 | $ | 650,984 | $ | 315,129 | ||||||||
International
Operations:
|
||||||||||||||||
Dominica
and St. Kitts/Nevis
|
320,831 | 312,612 | 320,831 | 312,612 | ||||||||||||
Other
|
363 | 334 | 363 | 334 | ||||||||||||
Total
International
|
321,194 | 312,946 | 321,194 | 312,946 | ||||||||||||
Consolidated
|
$ | 972,178 | $ | 628,075 | $ | 972,178 | $ | 628,075 |
·
|
Total
revenues rose 35.0%, reaching a quarterly record high of $369.6 million,
and net income of $42.9 million increased 19.7% over the prior year
period.
|
·
|
The
Fall 2008 term marked DeVry University’s twelfth consecutive period of
positive undergraduate new student growth and the ninth consecutive period
of positive total student enrollment
growth.
|
·
|
During
November 2008, DeVry began repurchasing shares of its common stock under a
$50 million repurchase program, which was approved by its Board of
Directors in May 2008. During the second quarter of fiscal year
2009, DeVry repurchased 98,100 shares at a total cost of approximately
$5.4 million.
|
·
|
In
November 2008, DeVry’s Board of Directors approved a 33.3 percent dividend
increase, raising its annual dividend rate from $0.12 to $0.16 per
share. Payable on a semi-annual basis, the most recent dividend
of $0.08 per share was paid on January 9,
2009.
|
·
|
DeVry’s
financial position remained strong as it generated $138.8 million of
operating cash flow during the first six months of fiscal year 2009,
driven primarily by strong operating results. As of December 31, 2008,
cash and short- and long-term investment balances totaled $262.9
million.
|
For
the Six Months
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Net
Income
|
$ | 77,695 | $ | 62,648 | ||||
Earnings
per Share (diluted)
|
$ | 1.07 | $ | 0.87 | ||||
Loss
on Sale of Assets (net of tax)
|
-- | $ | 2,279 | |||||
Effect
on Earnings per Share (diluted)
|
-- | $ | 0.03 | |||||
Net
Income Excluding the Loss on Sale of Assets (net of tax)
|
$ | 77,695 | $ | 64,927 | ||||
Earnings
per Share Excluding the Loss on Sale of Assets (diluted)
|
$ | 1.07 | $ | 0.90 |
For
the Three Months
Ended
December 31,
|
For
the Six Months
Ended
December 31,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenue
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of Educational Services
|
45.2 | % | 45.3 | % | 45.6 | % | 46.7 | % | ||||||||
Loss
on Sale of Assets
|
-- | -- | -- | 0.7 | % | |||||||||||
Student
Services & Admin. Exp
|
37.9 | % | 37.6 | % | 38.2 | % | 37.1 | % | ||||||||
Total
Operating Costs and Expenses
|
83.1 | % | 82.9 | % | 83.8 | % | 84.6 | % | ||||||||
Operating
Income
|
16.9 | % | 17.1 | % | 16.2 | % | 15.4 | % | ||||||||
Interest
Income
|
0.5 | % | 1.1 | % | 0.6 | % | 1.0 | % | ||||||||
Interest
Expense
|
(0.3 | %) | (0.0 | %) | (0.2 | %) | (0.1 | %) | ||||||||
Net
Investment Loss
|
(0.5 | %) | -- | (0.3 | %) | -- | ||||||||||
Net
Interest and Other (Expense) Income
|
(0.3 | %) | 1.1 | % | 0.1 | % | 0.9 | % | ||||||||
Income
Before Income Taxes
|
16.6 | % | 18.2 | % | 16.3 | % | 16.4 | % | ||||||||
Income
Tax Provision
|
5.0 | % | 5.1 | % | 4.8 | % | 4.4 | % | ||||||||
Net
Income
|
11.6 | % | 13.1 | % | 11.5 | % | 12.0 | % |
·
|
Increased
by 10.3% from spring 2007 (40,637 students) to spring 2008 (44,814
students);
|
·
|
Increased
by 12.6% from summer 2007 (40,774 students) to summer 2008 (45,907
students); and
|
·
|
Increased
by 16.9% from fall 2007 (44,594 students) to fall 2008 (52,146
students). This was DeVry University’s ninth consecutive period
of positive total undergraduate student enrollment
growth.
|
·
|
Increased
by 12.1% from spring 2007 (11,075 students) to spring 2008 (12,410
students);
|
·
|
Increased
by 19.3% from summer 2007 (13,906 students) to summer 2008 (16,595
students); and
|
·
|
Increased
by 19.7% from fall 2007 (13,204 students) to fall 2008 (15,811 students).
The fall 2008 term was the twelfth consecutive term in which new
undergraduate student enrollments increased from the year-ago
level.
|
·
|
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);
and
|
·
|
Increased
by 13.7% from the November 2007 session (15,657 coursetakers) to the
November 2008 session (17,803
coursetakers).
|
·
|
Effective
July 2008, DeVry University’s undergraduate tuition ranges from $515 to
$560 per credit hour for students enrolling in 1 to 11 credit
hours. Tuition ranges from $310 to $330 per credit hour for
each credit hour in excess of 11 credit hours. These tuition
rates vary by location and/or program and represent an expected weighted
average increase of approximately 4.3% as compared to the summer 2007
term.
|
·
|
Effective
July 2008, DeVry University’s graduate program tuition per classroom
course (four quarter credit hours) ranges from $1,845 to $2,100, depending
on location. This represents an expected weighted average increase of
3.1%. The price for a graduate course taken online is $2,100, compared to
$2,050 previously.
|
·
|
Increased
by 7.0% from January 2007 (3,747 students) to January 2008 (4,011
students);
|
·
|
Increased
by 7.9% from May 2007 (3,767 students) to May 2008 (4,064 students);
and
|
·
|
Increased
by 8.8% from September 2007 (3,876 students) to September 2008 (4,219
students).
|
·
|
Increased
by 11.1% from January 2007 (496 students) to January 2008 (551
students);
|
·
|
Increased
by 15.6% from May 2007 (416 students) to May 2008 (481 students);
and
|
·
|
Increased
by 6.3% from September 2007 (572 students) to September 2008 (608
students).
|
·
|
Increased
by 99.0% from July 2007 (1,089 students) to July 2008 (2,167
students).
|
·
|
Effective
September 2008, tuition and fees for the beginning basic sciences portion
of the programs at Ross University’s medical and veterinary schools are
$13,650 per semester. This tuition rate represents an increase from
September 2007 tuition rates of approximately
5.4%.
|
·
|
Effective
September 2008, tuition and fees for the final clinical portion of the
Ross University programs are $15,000 per semester for the medical
school, and $17,150 per semester for the veterinary
school. These tuition rates represent an increase from
September 2007 tuition rates of approximately 5.3% for the medical school
and approximately 5.5% for the veterinary
school.
|
·
|
Effective
July 2008, Chamberlain tuition is $546 per credit hour. Students enrolled
on a full-time basis (between 12 and 17 credit hours) are charged a flat
tuition amount of $6,552 per semester. This represents an increase of
approximately 5% from July 2007.
|
Fiscal
Year
|
||||||||
Funding
Source:
|
2008
|
2007
|
||||||
Federal
Assistance (Title IV) Program Funding:
|
||||||||
Grants
and Loans
|
70 | % | 64 | % | ||||
Federal
Work Study
|
1 | % | 1 | % | ||||
Total
Title IV Program Funding
|
71 | % | 65 | % | ||||
State
Grants
|
3 | % | 3 | % | ||||
Private
Loans
|
5 | % | 6 | % | ||||
Student
accounts, cash payments, private scholarships, employer and military
provided tuition assistance and other
|
21 | % | 26 | % | ||||
Total
|
100 | % | 100 | % |
Fiscal
Year
|
||||||||
2008
|
2007
|
|||||||
DeVry
University:
|
||||||||
Undergraduate
|
75 | % | 70 | % | ||||
Graduate
|
75 | % | 65 | % | ||||
Ross
University
|
81 | % | 80 | % | ||||
Chamberlain
College of Nursing
|
62 | % | 70 | % | ||||
U.S.
Education:
|
||||||||
Apollo
College
|
79 | % | 76 | % | ||||
Western
Career College
|
77 | % | 61 | % |
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as part of Publicly Announced
Plans or Programs1
|
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or
Programs1
|
||||||||||||
October
2008
|
-- | $ | -- | -- | $ | 50,000,000 | ||||||||||
November
2008
|
49,700 | $ | 53.53 | 49,700 | 47,339,388 | |||||||||||
December
2008
|
48,400 | $ | 55.73 | 48,400 | 44,642,082 | |||||||||||
Total
|
98,100 | $ | 54.62 | 98,100 | $ | 44,642,082 |
Period
|
Total
Number of Shares Purchased2
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as part of Publicly Announced
Plans or Programs
|
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or
Programs
|
||||||||||||
October
2008
|
-- | $ | -- | N/A | N/A | |||||||||||
November
2008
|
-- | $ | -- | N/A | N/A | |||||||||||
December
2008
|
1,340 | $ | 56.85 | N/A | N/A | |||||||||||
Total
|
1,340 | $ | 56.85 | N/A | N/A |
(a)
|
DeVry
held its Annual Meeting of Stockholders on November 13,
2008.
|
(b)
|
All
Board of Director nominees were
elected.
|
(c)
|
Certain
matters voted upon at the meeting and the votes cast with respect to such
matters are as follows:
|
Director
|
Affirmative Votes
|
Votes Withheld
|
David
S. Brown
|
55,699,308
|
1,025,877
|
Lisa
W. Pickrum
|
55,852,940
|
872,245
|
Fernando
Ruiz
|
56,052,946
|
672,239
|
Affirmative Votes
|
Votes Against
|
Abstain
|
56,561,275
|
150,211
|
13,699
|
Certification
Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange
Act of 1934, as Amended.
|
Certification
Pursuant to Title 18 of the United States Code Section
1350
|
DeVry
Inc.
|
||
Date:
February 6, 2009
|
By
|
/s/ Daniel M.
Hamburger
|
Daniel
M. Hamburger
|
||
Chief
Executive Officer
|
||
Date:
February 6, 2009
|
By
|
/s/ Richard M.
Gunst
|
Richard
M. Gunst
|
||
Senior
Vice President and Chief Financial
Officer
|