Adtalem Global Education Inc (ATGE) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2011 DeVry results conference call. My name is Jeff, and I will be your operator for today. At this time all participants are in a listen only mode. Later we will facilitate a question-and-answer session. (Operator Instructions).

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Joan Bates, Senior Director of Investor and Media Relations. And you have the floor, Ms. Bates.

Thank you, Jeff. With me today from DeVry management are Daniel Hamburger, President and Chief Executive Officer; Rick Gunst, Senior Vice President and Chief Financial Officer; and Pat Unzicker, Vice President and Controller.

I will now review the Safe Harbor provisions of this results call. This call may contain forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements reflect, among other things, management's current expectations, plans and strategies and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause the actual results to differ materially from those expressed or implied by these forward-looking statements.

Please see our public filings with the Securities and Exchange Commission for more information about forward-looking statements and related risk factors.

Telephone and webcast replays of today's results call are available until August 25, 2011. To access the replay, please refer to today's press release for more information.

I will now turn the call over to Daniel Hamburger.

Thanks, Joan. Thanks everyone for joining us today. Overall we are pleased with our performance in fiscal 2011 academically, operationally, and financially speaking as well. This performance was driven by our commitment to academic quality and strong execution of our diversification strategy.

While we delivered strong results for the year, we are proud that we also continued to make long-term investments in the quality of our programs and services, laying the foundation for continued growth in the future. We have now have more than 119,000 students currently enrolled in our DeVry family of institutions. And while we recognize this figure was slightly down for the year, we remain encouraged by the results we were able to achieve in one of the toughest economic environments in history.

Now it is clear that DeVry and higher education in general are facing some headwinds in the current environment caused by a number of factors. I will touch on these and then address the steps we're taking to overcome these challenges.

Now to start, one thing I would like to address is something I have been asked about quite often recently, which is the impact of increasing admissions standards on enrollment growth. Lately we have heard several universities cite new admissions standards as a reason for enrollment decline, as they have turned away students that previously would have been admitted.

That hasn't been the case for DeVry because we don't have open enrollment institutions, and have had enrollment standards in place. Some people have been surprised when I tell them this, because there is a perception that all private sector colleges are open enrollment, and that is not the case, and that is not the case at DeVry.

While we continually evaluate and make adjustments to our admissions standards, these aren't major wholesale changes to our operating model. So let me turn to the three factors that we do believe are having an impact on our enrollments.

First off, after several years of exceptional enrollment growth we all expected an industry-wide reversion toward more historic levels of enrollment growth. Google keyword searches in the whole category of education have been trending down in the last few quarters, and that is across all of higher education, not just the private sector.

In fact, just the other day somebody sent me an article about Eastern Illinois University's new student enrollments being down about 9%, and they are closing a portion of their student housing. So this is affecting public sector state universities as well as those in the private sector.

As we have discussed on past results calls, we have been anticipating this reversion to the trend. We believe over the long-term enrollment growth will likewise revert back to the long-term trend, which is in the mid to high single digit range.

The second factor is the impact of the new regulations governing higher education that went into effect July 1. Implementation of these new regulations has created an adjustment period that all schools have had to begin working through to some degree or another.

One of the main adjustments we have been addressing is reevaluating our marketing affiliates and how they stack up to the new regulation. In some instances this may mean no longer working with certain vendors. This doesn't mean these vendors are necessarily doing anything wrong, but if they're unable to demonstrate adherence to our standard we simply won't work with them until they do. And I hope they are listening.

And by the way, DeVry University's President, Dave Pauldine, he has played a leadership role for this sector in setting standards for marketing and advertising vendors. So kudos to Dave. These relationships may take time to replace, but given DeVry's conservative, risk-averse nature, we will be uncompromising where compliance is involved, I can assure you of that.

Another adjustment is compliance with the new compensation rules which apply to all colleges, whether private sector, public sector or independent. Again, I will point out a misperception here. Some people think we were paying commissions before -- people think we were paying commissions before the rule changes and that the rule changes, therefore, had an impact.

But that is not the case. We weren't paying commissions and so that wasn't an impact from the new regulation. But we did need to adjust our performance management system and our processes for employees whose compensation is covered by these Department of Education rules. We are being careful to ensure we remain in compliance and to properly assess the performance of these employees.

In addition, we are also training all our employees on the new regulation. We recently brought in 600 of our top managers across our institution for three days of training on what the new regulations mean for our institution. And we rolled out a training program on responsible communications practices to all employees. These are examples of DeVry's commitment to compliance.

While we are making these regulatory adjustments, and don't foresee them being a long-term issue, they have been a near-term distraction to our employees and likely have had a bit of a negative impact on our performance.

So, finally, the third factor, the economy. That is the one we believe has had the greatest influence on our student enrollment. Basically you don't mean the need me to tell you this, but this economy is just awful. And as the sluggishness in the economy has dragged on it has had an increasing effect on students' decisions to pursue a college degree, as I am sure it has in every other economic decision.

It is hard to overstate the increasing level of discouraging economic trends. Just recently it was released that in June consumer spending fell for the first time in two years (inaudible). You know what really brought it home for me is when I saw an article recently that even the dollar stores, Family Dollar, Dollar General, they are experiencing sales declines. They always do well in a recession, but this one has dragged on so long and so deep that even the dollar stores are down.

When you combine this declining consumer sentiment with all the uncertainty and the high employment rate, it is clear that the average person in the US has become much more risk-averse and cautious when it comes to spending or committing to anything. It is unrealistic for us to think that education would be immune from this.

So, clearly, these three factors have negatively impacted our institution and we wanted to provide as much color as we could. So that is the diagnosis. Well, what are we doing about it? So let me give you an idea of the steps we are taking at two of our institutions that have been most negatively impacted by the current environment, DeVry University undergraduate and Carrington Colleges.

For DeVry University the focal points for our improvement efforts include, first, investing in the strong DeVry University brand, which we view as one of our greatest assets. We are increasing our emphasis on generating more inquiries through organic and paid search.

To illustrate this approach, let me cite what we have been doing to support the brand at Keller Graduate School of Management. We launched a campaign with targeted TV spots and online media initiatives that underscored the value proposition of a Keller degree. Of course, the practitioner focus, flexible scheduling and having the best of both, the best of both on-site and online coursework.

We believe these efforts have been a driver of Keller's continued growth and out performance relative to the graduate market. So we will be increasing our focus on this kind of an approach at the undergraduate level as well.

The second step we are taking is improving our student outreach and recruiting processes. We are enhancing our technology tools to provide faster service to prospective students. In particular, we are focusing on a more efficient approach to how we handle inquiries received via social media. And we are increasing our investment in recruitment channels, building relationships with corporations, community colleges and government organizations.

And the third element of DeVry University's growth strategy that I want to highlight is adding new locations and new programs. I will provide some more examples a little later on the call.

Let me turn to Carrington, where we are also actively addressing our underperformance. I would like to highlight three elements of our turnaround plan here. First, is enhancing our students' academic experience. One way we've been doing this is through something we call our SimLink Experience, which we briefly mentioned, I believe, last quarter.

This state-of-the-art technology offers students the latest in advanced patient simulation teaching methods. It is now fully operational -- and it is receiving stellar reviews, I might add -- at our Pomona, Mesa and Albuquerque campuses.

Secondly, we are optimizing the marketing and recruiting process at Carrington. During this quarter we successfully relocated our student qualification center in Phoenix, and we are currently training the new staff on processes to enhance student service. We expect consistent improvement in our responsiveness to prospective students as this team gets oriented to the new processes and begins to hit its stride.

Our marketing team has also been hard at work making changes to improve efficiencies and inquiry quality. We are seeing early indications of an increase in traffic at our Carrington website. We are seeing more overall inquiries and a shift in our inquiry mix that reduces our dependence on outside vendors.

And, third, at Carrington we are launching new programs in new locations. We are developing programs beyond healthcare to include business and networking technology. We recently opened a campus in Pomona, California that provides an opportunity for incremental growth. This is a co-location with DeVry University, so the efficiency is higher than a standalone campus.

We are also in development in our first Carrington campus in Texas, in the Dallas suburb of Mesquite, Texas. And in terms of new locations, we are also -- here we would also include the virtual location, if you will, of online delivery. Carrington currently only has a small online presence, so we believe there's a lot of opportunity here.

So while we are not satisfied with enrollment results at DeVry University undergraduate and at Carrington, we believe we have solid plans in place to address the issues. It is also important to note that even though we had these two institutions underperform in this difficult environment, our other institutions performed quite well and displayed strong growth.

So while there is currently softness within DeVry University undergraduate and at Carrington, the growth at Chamberlain, Ross Medical, Ross Veterinary, Keller and at DeVry Brasil, all this growth offsets the weakness. And this observation gets to the heart of our diversification strategy, when one institution is down, others are often up.

DeVry's diverse family of institution allows us to mitigate the impact of economic and curricula cycles. It keeps us on a path of long-term growth. So the DeVry formula is quality, plus diversification equals growth. Our focus is to keep investing in educational quality and to continue to position ourselves across a diverse array of educational segments, especially those that are in high demand, like technology and in healthcare.

And a great example of this, of course, is the acquisition of American University of the Caribbean that we announced last week. AUC's high-quality curriculum, faculty and facilities make this a perfect addition to DeVry's growing healthcare group.

We believe there is a compelling strategic rationale for this transaction. AUC has excellent academic quality. And as one of only three Caribbean medical schools whose students are Title IV eligible -- and of course, Ross being another -- AUC offers us the opportunity to have a firm number one position in international medical education, and to further help meet the growing demand for well-trained physicians in the US.

Secondly, the execution risk of this acquisition is relatively low. We know medical education. DeVry and AUC have highly compatible cultures and those cultures are focused on quality program, integrity and compliance and excellent student service.

Thirdly, we expect excellent financial returns well in excess of our cost of capital. The transaction will be highly accretive, accretive academically, accretive to our society as we help address the physician shortage, and accretive financially. So as we move forward we have a thorough integration plan in place.

In summary, our game plan includes the following priorities. Priority number one, two and three, quality. While AUC's academic delivery is already of high quality, we will continue to invest here, including upgrading the labs, investing in patient simulation, investing in the clinical network, curriculum and faculty development.

Next priority, build growth capacity. We have already developed a master plan working with the prior owner, and this is about a $20 million investment.

And, finally, work on synergies. AUC will continue to be a separate institution, and at the same time we see many opportunities to share best practices. Things like clinical training, faculty development, purchasing, and technological improvements, all like those that we have developed at DeVry University and at Ross University School of Medicine over the years.

Earlier this week Bill Hughson, who heads our healthcare group, and I had a chance to visit with the employees and the students at AUC, we had a chance to welcome them to the DeVry family. And I tell you, the students are really impressive. The staff is dedicated to student service. The faculty is outstanding. And we have a great relationship with the government there.

In fact, we were honored to have the St. Maarten Prime Minister and many other public officials join us for a public celebration of the transaction. We look forward to continuing the strong partnership AUC has enjoyed there over the years.

So before I turn it over to Rick and Pat, I would like to highlight a few developments in the public policy arena. First and foremost, the period of regulatory uncertainty is behind us, and we have a set of rules in place that we can work from. We firmly believe in strong metrics that can improve institutional quality, accountability and transparency.

And while we don't see the current gainful employment rule as being the best way to measure institutional quality, or even the best way to measure whether graduates are gainfully employed, we think we can work with it. And of course we will be compliant with all rules and regulations.

We have begun work on analyzing our programs under these new metrics. Our initial analysis has yet to find any programs that fail to meet the new parameters. However, we do believe there is room for improvement in these regulations and we want to be a part of the dialogue to get it right. And so what is great is that we now have certainty.

And while the process of the last two years wasn't always pleasant, there were a number of positive outcomes. For one thing, a lot of policymakers are much better educated now. And there is strong bipartisan understanding that given our huge need for education, and a shortage of resources in the public sector to meet this need, the private sector will continue to play an important role. That is huge.

There is also an increasing recognition that the laws and regulations ensuring quality must protect all students, whether they attend private sector, public sector or independent colleges. Again, that is huge, something we have been advocating for years. So we see the opportunity for a new dialogue, one that says -- clean sheet of paper. How should we regulate? How should we oversee higher education?

We think there is the opportunity for a complete policy reform. And as this dialogue unfolds on Capitol Hill, we look forward to being a part of improving the overall policy framework. Along these lines, DeVry recently had an opportunity to participate in a Senate health, education, labor and pensions committee roundtable to discuss policy solutions and ways to improve private sector education. Our presence at this meeting was an important step as we continue to build an ongoing and constructive dialogue even with those who have been critical of the sector.

We thank Senator Harkin for hosting this discussion and for enabling DeVry to have a seat at the table as a thought leader in the sector and across all of higher education.

In summary, our concept is to base the new policy framework on two pillars, metrics of accountability and standards of best practice, and to apply the framework to all colleges and universities. If you would like to read our proposed two pillar solution to college accountability, we have posted my written testimony from the roundtable on the DeVry website.

So thank you for your indulgence for that unusually long overview, but with that, I would like to turn the call over to Rick and Pat for the financial and enrollment results.

Thanks, Daniel, and good afternoon everyone. Another fiscal year has come to a close and overall we delivered solid results within a challenging external environment.

Full year revenue was $2.182 billion, up 14% versus prior year. Net income from fiscal 2011 was about $330 million, up 18% versus last year. And earnings per share were $4.68, up 21%. For the year we provided over $160 million in taxes and invested about $136 million of capital in our various educational institutions.

Fourth-quarter results reflect a slowdown of topline growth driven by lower enrollments, but continued operating leverage and focus on reinvesting in academic quality and long-term growth initiatives. Fourth-quarter revenue of about $547 million was up 8% versus prior year.

Total enrollment across our degree granting educational institutions was down about 1% for the most recent period, about 119,000 students.

Net income of $75 million in the quarter increased 5% versus prior year, and earnings per share of $1.08, up about 9%.

Our overall effective tax rate was 30.8% for the quarter and 33.1% for the year as compared to 32.1% for the full fiscal 2010. The tax rate was lower in the fourth quarter due to the lower mix of domestic source income and the true-up of state accruals and reserves.

Cost of educational service expense increased by 12% for the year, and student service and administrative expense increased by 12.5% for the year.

We continue to invest resources to improve academic quality, enhance student services, consistent with our philosophy of quality plus diversification equals growth.

In the quarter cost of educational service was up 9%, and student service and administrative expense up 6% versus prior year.

With that overview, let me now shift to our operating segment results, which are further detailed in our release and 8-K filing today. You will note we have realigned our segments to better conform to our organizational structure and strategic focus.

Our two largest segments, Business, Technology and Management and Medical and Healthcare remain unchanged as our two US postsecondary educational segments.

We combined the Professional Education and Other Educational Services segments into the new International, K-12 and Professional Education segment. This segment is led by Steve Riehs and represents our educational institutions outside of US postsecondary education.

So starting with Business, Technology and Management segments, revenue was up about 8% versus prior year in the quarter, and about 16% year to date. The revenue growth continued to come down this quarter due to softening new student enrollments, as undergraduate new student enrollments were down 26% versus prior year and total student enrollment down 6%.

As Daniel mentioned earlier, there are several factors we are working through to address these slower growth trends, and will continue to update you along the way as we progress there.

Enrollment at the graduate level grew about 8% in May and 2% in the July session. Segment earnings were up 7% in the quarter, and about 24% for the year. We have been focusing on reducing cost where appropriate without compromising academics, new program developments and new location expansions, the benefit of which we will see in fiscal 2012 and beyond.

We are also continuing to pursue technological improvements within the organization. You have heard us talk about Project Delta in the past and how it has been behind schedule and over budget. But we have been committed to rolling out these modules in the right way and not harming our service to students in the process.

Recently we launched our new student accounts module. This new module will provide students with convenient ways to manage their personal accounts online 24/7. Where there used to be a lag of several days, students now get instant updates to their accounts online as tuition and student aid are posted.

And true to our word we delayed it, we spent more than we originally had planned, and in doing so ensured we did the right thing. The implementation went very smoothly. In fact, we have contracted with an outside firm to bring on a team of people to staff the phones in case any problems [ensuing a] deluge of helpdesk calls occur.

Thankfully, they ended up like the Maytag repairman, and were able to release them ahead of schedule. In the coming year we expect to launch several new modules that will continue to simplify processes and help our students provide great student service while improving efficiency. We are doing so on the heels of this success and the team is feeling very good about Project Delta.

Within the Medical and Healthcare segment revenue was up 4% in the quarter and about 10% for the fiscal year, driven primarily by the strong growth within Chamberlain College of Nursing.

Chamberlain's new student enrollments was up about 16% in the summer term, with total enrollment up 40%. This growth was driven by the impact of enrollment at our three new locations in fiscal 2011 -- Chicago and Arlington, Virginia which opened in July 2010, and Houston, which started teaching in March 2011. Chamberlain also began teaching in Miramar, Florida, just outside of Fort Lauderdale last month.

Chamberlain's growth was driven by continued increased enrollment at our existing locations and online due to the strong demand for nursing professionals.

Within Ross University new student enrollment showed growth as expected for the May class, up 38% versus prior year, due to overlapping the lower student enrollment levels last year at the medical school campus in Dominica. Total enrollment was up about 6%.

As we look forward, new student enrollment growth rates are likely to bounce around a bit, mainly the arithmetic of overlapping the uneven classes of last year -- the arithmetic of overlapping the uneven classes last year. You think I would know that one. But you should expect long-term enrollment trends to be in the mid single digit range.

Meanwhile, enrollment at Carrington continued to suffer the effects of the prolonged poor economic environment and hesitancy of prospective students to pursue further education, with new student enrollment down about 34% and total enrollment down around 26%.

Earnings for the Medical and Healthcare segment in the quarter were down 15% versus prior year and down 4% for the year, with strong performance at Chamberlain offset by softer results at Carrington. Cost containment initiatives have helped lessen the impact of the lower enrollments.

Finally, for our new segment, revenue within International, K-12 and Professional Education increased about 21% in the quarter and 13% for the year. Revenue growth for the quarter and year came from each of the institutions. DeVry Brasil is benefiting from the double digit new and total enrollment growth in the most recent term. Advanced Academics rebounded with stronger growth on the heels of new school district enrollment. And Becker saw improving trends within accounting and finance. Segment earnings were up 82% in the quarter and 64% for the year versus the softer performance in the year ago periods.

So fiscal 2011 was a year where we met our goals of delivering double digit revenue growth and roughly 20% earnings growth, despite the challenging external environment. We feel very good about that.

Looking ahead to fiscal 2012, despite the recent enrollment declines at DeVry University undergrad and Carrington, we expect fiscal 2012 total revenue to be up versus 2011 organically, with the acquisitions of AUC and ATC adding to that growth.

Earnings growth, however, while still possible, will be more challenging. First-half earnings will be below prior year, given the impact of enrollment deceleration and tougher year-over-year overlaps. We expect second-half earnings to be back up versus prior year, with the full year likely to be plus or minus the 2011 level.

We need to achieve improved enrollment trends at DeVry University undergraduate and Carrington to be able to show earnings growth for the year. Accretion from the AUC acquisition will likely add about $0.05 to EPS for the year.

So I will now turn the call over to Pat to review our cash flow and balance sheet results. Pat.

Thanks, Rick, and good afternoon everyone. Our cash flow from operations for the fiscal year was $408 million versus $391 million last year. The strong cash generation drove our cash and marketable securities balance to $450 million at the end of the year compared to $323 million last year. We also remained debt-free.

During May we replaced our $175 million revolving credit agreement, which was set to expire in January 2012, with a new $400 million five-year facility. And we have the option to expand that facility to $550 million. This facility will provide us with the flexibility to finance acquisitions at market competitive interest rates.

Our net accounts receivable balance was about $115 million versus $119 million last year. This lower accounts receivable balance was the result of our continued focus on student service and collections management, as well as our students' ability to pay back their accounts based on their positive student outcomes.

Our bad debt rates continue to reflect the focus on the receivable collection process, with bad debt expense for the fiscal year actually down to 2.1% of revenue as compared to 2.6% last year. Again, an indicator of our students paying back their accounts and the strong value proposition of our programs.

Capital spending for the year was $136 million versus $131 million spent last year. We came in a bit lower than expected as some of the project spending will carryover in the first quarter of fiscal year 2012.

The spending was driven by facility improvements to better serve students across all of our schools, and for new locations at DeVry University, and expansion within Ross University and Chamberlain College of Nursing so that we can educate more doctors and nurses in this great time of need.

For fiscal year 2012 we anticipate spending to be in the $170 million to $180 million range, which includes investment for our newly acquired AUC medical school.

Finally, during the quarter we repurchased 518,000 shares of our common stock for about $28 million, or on average $54.39 per share. We completed our fifth share repurchase program in the quarter and began executing on our sixth program, which is a $100 million program.

Also, since the inception of our share repurchase program back in November of 2006, we have repurchased approximately 5.1 million shares for just about $243 million or at an average price of about $47.50 per share.

Now let me turn the call back over to Daniel for some more color on our operating results.

Thank you, Pat. I will start here with our Business, Technology and Management segment, which of course consists of DeVry University and its Keller Graduate School of Management.

I would like to emphasize that despite the softening enrollments we are continuing to make significant investments in expanding our programs and locations for DeVry University. And I talked quite a bit about this segment earlier, so let me just add a little color to this point.

We plan on introducing a bachelor's degree in healthcare administration in November of this year. We just opened new locations in Oxnard, California, and Lynnwood, Washington in July as we start this new fiscal year. We are targeting further expansion with the new location in Cherry Hill, New Jersey in November. We are on schedule for our second location in San Diego in the second half of fiscal 2012.

We are also investing in the Keller Graduate School of Management, developing a new website dedicated solely to Keller. And that is going to feature more user-friendly navigation tools and dynamic content that we anticipate will drive increased traffic and inquiries. This project is on track to launch the new website in the spring of 2012.

Moving to the Medical and Healthcare segment, at Ross University School of Medicine we continue to experience significant demand as the need for physicians continues to grow. Capacity constraints remain an issue, but we're making progress and plan to build out further capacity while continuing to enhance academic quality and outcomes.

At Ross University School of Veterinary Medicine demand has never been greater. And we reached an all-time high in total enrollment in the most recent period. Of course, the highlight of fiscal 2011 was earning accreditation from the American Veterinary Medical Association, the AVMA. Ross is the only AVMA accredited private sector vet school. I stumbled there. Let me say that again. Ross is the only the AVMA accredited private sector vet school.

During the quarter we also opened a tri location. So it is a three-way co-location, in Miramar, Florida. It's a unique location that's housing clinical facilities for Ross University School of Medicine, campuses for DeVry University and Chamberlain College of Nursing.

At Chamberlain we are continuing to see strong demand across all our programs. In response we are working hard on new Chamberlain campuses in Indianapolis and in Atlanta. We expect them to be opened in the second half of fiscal 2012.

During the quarter we also made investments into Chamberlain's academic quality. One example is the hiring of a new Vice President of Academic Affairs, Dr. Richard Cowling. Dr. Cowling brings an impressive depth of experience in nursing education and research. I am sure he is going to be a huge asset to Chamberlain going forward.

I would like to take a moment to highlight how we are delivering on our commitment of doing well by doing good. Recently a group of Chamberlain and Ross Medical students spent several weeks in Nairobi, Kenya, as part of an interprofessional global healthcare initiative. The group provided healthcare and education to impoverished local communities, and by the end of the trip had treated over 2,000 patients.

Programs like this provide invaluable real-world experience to our students and much needed medical attention to the local population. So that truly is doing well by doing good.

Lastly, in our Medical and Healthcare segment, while we remain focused at our Carrington Colleges and on implementing the initiatives that I had mentioned earlier, we are also investing in academic and service quality through new hires. Like a new Dean of Curriculum at Carrington College California, a new Dean of Career Services at Carrington College. And as of July 1, we officially congratulate Rob Paul on his promotion as Carrington's President. We promoted Rob from DeVry University. It is great to have a deep bench.

Finally, on to our new International, K-12 and Professional Education segment. Here we saw Becker Professional Education produce positive full-year results. The way I think of it is the same way that we began ramping up our healthcare group several years ago. We are expanding in Professional Education by finding new vertical and geographic markets that build on our core strengths.

Our recent acquisition of ATC International is a good example of this strategy, as we are broadening our reach to include the population of more than 400,000 candidates for the ACCA exam. That is the Association of Chartered Certified Accountants. The accreditation typically found in the Commonwealth countries, former British Commonwealth. So whereas there is 100,000 CPA exam candidates every year roughly, about 400,000 ACCA exam candidates. We view international exam review as a growth opportunity, and we are excited at the long-term possibilities.

Let me move to Advanced Academics just briefly to say that we're beginning to see some increased traction despite constrained state budgets. This last quarter was a profitable period, as we experienced growing success in Arizona, Texas and New York.

We are also in the process of gearing up for expansion into Florida. And at DeVry Brasil, we are continuing to benefit from sizable organic enrollment growth, largely in our high-demand engineering and healthcare programs. Growth at DeVry Brasil demonstrates the power of incorporating best practices and investing in infrastructure throughout and across our system of colleges and universities.

For example, we just recently arranged a joint project with DeVry Brasil students and students from our DeVry University's Addison, Illinois campus. The project focused on students researching the differences and similarities between the two countries in terms of fossil fuel production and conservation. The result was very impressive, as students freely collaborated to create a wonderful international learning experience. Plans are currently underway to replicate this experience in the fall. And it could lead to a dedicated exchange program in the future.

So we have been very pleased with the results at DeVry Brasil, and we remain focused on driving future growth there. We are continuing to build out our Ruy Barbosa campus, and our first organic expansion to a new city, Sao Luis. That one remains on track to open next year.

So overall I believe we have the right equation in place to continue executing on our plan toward successful student outcomes and long-term growth. The simplest way I can describe that equation is quality plus diversification equals growth for DeVry, and that means success for our students. We are confident that equation will continue to see us through this challenging environment as we focus on our students first in everything we do.

Our priorities in fiscal year 2012 are aligned with our enterprise strategy, which as you know, we summarize as achieve, grow, build. Achieve our academic quality goals, including student exam results, persistence and supporting student services.

Grow, means grow and diversify our educational offerings. Improve results at DeVry University, expand our healthcare offerings while continuing to improve student outcomes. And expand beyond our core US postsecondary offerings in Professional, K-12 and International areas.

And third, build. Build the infrastructure to support this growth over the long-term. Accelerate our online services that support all our institutions. Further implement Project Delta, enhance our reputation as the employer of choice in education, and build our bench strength through talent management and succession planning. And leverage DeVry's reputation to work with government in developing a long-term policy framework for higher education.

Before I turn the call back to Joan, I want to recognize and thank all of our colleagues at DeVry for their hard work in fiscal year 2011. Their commitment to our students is the foundation of our success.

Okay, great. Before we open the call for your questions, I would like to point out that we've changed the date of our fall enrollment release, because the original date conflicts with an internal meeting that we are having. The new date of the release is Monday, December 12.

So, Jeff, if you would give our participants the instructions, we would like to begin.

(Operator Instructions). James Samford, Citigroup.

A quick arithmetic question for Rick. Operating margins look like they were down slightly this quarter at the university level on the Business and Technology and Management. Actually theirlowest levels in years. I was wondering how much of that deleverage was really a function of enrollment or was that most impacted by the procedural changes, and anything else there that might have driven that margin decline? Thanks.

The margin was actually up a little bit, because we had revenue growth of about 8% in the quarter and earnings growth of about 7%. So it was down slightly, I guess. Yes, it was down slightly.

But, again, for the year we still had really good operating leverage, and we expect it to be that way. When you have decelerating enrollments, as we did in the quarter, it is not surprising that we had a slight dip in margin.

Okay, fair enough. But --.

I will just jump in and say, I think we saw some opportunities to make some investment in the quarter as well that -- there is always timing. It could have happened this quarter, it could have happened next quarter.

Right.

But over the long term that should be a margin neutral or expanding kind of business under-accelerating, I guess, enrollment trends?

Yes.

Okay, thank you.

Suzi Stein, Morgan Stanley.

We appreciate the guidance for fiscal 2012. And you went into a lot of detail about some of the initiatives to drive enrollments, but can you give us a sense of what is embedded in that guidance as far as any cost cutting, and where there could be some levers going forward in terms of cost cutting?

Suzi, thanks for that. I don't think it is -- cost cutting is never going to be our driver. We are a growth organization, growth oriented set of colleges and universities. And so that is always going to be the dominant. We are always at the same time looking for opportunities to be more efficient. And typically that ends up looking like maybe a slower growth in the rate of cost as it grows slower than revenue.

So where you could see that is in some of the functional areas, as Project Delta continues to rollout and fully mature that can give us a better productivity. So you might not see it as cost cutting, but restraining the growth of expenditure and not needing to hire as many new people.

But we have also been careful stewards of capital and of resources. And clearly there has been opportunities -- we are very mindful and don't hesitate to take those kinds of actions. So we are very mindful of those and I think that is what you will see going forward.

And we look at an institution by institution and location by location for that matter. So across DeVry University, as an example, we have about 100 locations, some are growing, some are about flat and others might be declining. So you have opportunities in different areas to invest and other opportunities may be to rightsize the organization.

Okay, great. Thank you.

Peter Appert, Piper Jaffray.

This is George Tong for Peter Appert. You spoke at length about long-term investments you're making. Will those investments weigh on margins going forward, assuming we don't see any operating leverage in 2012, or should we see some improvements in margins in the context of less investment spending in fiscal 2012 versus 2011?

Just in general, the investments that we are making we see as highly accretive. Investments will pay dividends, because as we invest in student services, academic qualities, we invest in building our reputation and our brand, that leads to growth and they have positive returns.

So you might see -- in the near term sometimes because of timing, you know, one quarter, another quarter, this year, that year, it can depress margins. And we have done that historically over the years many times.

Chamberlain is a great example of that. When we first acquired Chamberlain College of Nursing we purposely told everybody the margins would go down because we would be investing in the academic technology. We redid the dorms. I remember taking asbestos out of the dorms -- on many projects like that.

So in the near term there was a depression. In fact, that has been supplanted by investments in new campuses. Chamberlain is still in very much a growth mode. And as you rollout new campus -- several new campuses on the base of nine or ten we have now, we rollout three new campuses, you are going to see a depression in the near term, but that is a project that is a great return on educational investment, great return on capital. So those are the kinds of -- that is the way we look at it.

I guess what I am trying to get at is when do you expect that investment spend to end?

Never.

Never, yes.

Hopefully, never. When it starts to end than that is not a very good sign.

And we are not a growth organization anymore.

Okay, you talked a bit about launching a campaign on TV and media to emphasize degree benefits. Do you see rising media costs as being prohibitive to your return on those efforts?

Thanks. Not prohibitive. We are seeing some increases, but it is not dramatic and not unexpected. So I would put it in that sort of order of magnitude for you.

Andrew Steinerman, JPMorgan.

My question is about the Keller's school, the graduate business school, which seems to be faring a lot better than the undergraduate business school at DVU. Could you give us some sense on what's different about Keller? From the coursetaker count it definitely seems like it continues to grow nicely. If you were looking at new enrollment is that also the direction for Keller?

Yes, certainly it is a more challenging -- and thank you, Andrew, for that -- it is a more challenging environment for all the reasons that I tried to elaborate on and give as much color as we could.

At the graduate level we do seem to be -- we are pretty proud and grateful for the recent performance, which relative to the best data that we can get on the market seems to be an outperformance. Maybe we are taking a little share there.

And one of the things that I would point to is we have known -- our market research has shown that Keller has very high consideration, but not as high awareness as we would like. In other words, once you know about Keller, you really like it. But not enough people know about it. So we just weren't getting to the plate enough times, I guess, but our batting average was pretty good when we did.

So we instituted a marketing approach to try to build the awareness and the brand of Keller. You may have seen some of the television ads. It is not just television, believe me it's plenty of other media and so forth. We have had really good response to that. So I think that might be one example of a driver there.

Okay. Thank you very much. Also, Daniel, the other part was about do you feel like new enrollment at Keller are in the same direction as total enrollments?

It is softening a little bit. And that is why you have seen the total growth, which is what we show, total coursetaker growth, you have seen that come down. So that has been a function of both new and graduations.

Fair enough, thank you very much.

Gary Bisbee, Barclays Capital.

I guess a two-part question. What gives you confidence in the ability to say you expect revenue to be up year-over-year organically in fiscal 2012? Just given the trend in enrollment here, particularly at DeVry University, which we know is the largest business by a wide margin. I guess I am having -- I am struggling to figure out how you can say that confidently. Maybe the second part of the question is what from an enrollment perspective is baked into that comment? Thank you.

I will start off, and maybe Daniel will add on. But if you look at DeVry University we have had now three consecutive periods of new student declines after having, I think, 10 consecutive periods of pretty sizable increases. But if you look at it over the long term, over the past two, three, four years the compound growth is still very strong, in like the 10%, 11%, 12% range.

So we view what has happened here near term is not being a long-term trend, but due to a lot of the matters that Daniel talked about earlier, and as we start to have now easier overlaps, easier comparisons to prior year on both new and total students come the fall and spring of next year, we will see -- we expect to see that improve. And therefore that will drive improvements in the growth rates on both the top and bottom line.

But don't you need -- doesn't the three straight terms of pretty significant year-over-year decline in starts have to flow through, and doesn't take a while? This term you just gave us was August enrollment for DeVry University, right? So last quarter, which drove -- last term, excuse me, enrollment which drove this 7% or 8% revenue increase at DeVry University was actually still a positive number for total undergrad enrollment, it was up 6%. Now you have got a down 6%.

I guess I still struggle with how you could get positive -- I'm not trying to give you a hard time, I am just trying to understand if I am thinking about the math wrong.

Well, the math is -- you're looking at one piece of it and DeVry University is going to -- for the first half of the year you're going to have some challenges. We hope to see some improvements in trends as we get in the back half of the year. But again, DeVry Inc. is not just DeVry University, that is part of the quality plus diversification equals growth.

When we look across our portfolio, we do have other pieces of our portfolio -- of our institutions that are growing, and will help offset some of that flatness or slight decline at DeVry University, so that overall organically we still see a positive on the revenue line. And then when you add in the acquisitions that just adds to that.

If I could sneak in one other. Is there some anything you could tell us about AUC, like what the margins were? Does that have an abnormally low tax rate like Ross did when you bought it? Any sense what the amortization might be? And I will stop there. Thank you.

From the tax perspective quite similar to what you would be familiar with, and I think that gives you some color there. Margins, I don't think we are disclosing. In terms of amortization -- Pat, anything you want to say about amortization?

I think amortization, if you look back kind of similar from a purchase price perspective when we acquired Ross University. There will be a large amount of amortization attributable to the existing student enrollments. We expect that to be $8 million, $8.5 million for the first couple of years and then trailing off after that and about a five-year life on that. So that will be the biggest [lump] of amortization. But even incorporating the amortization and our integration costs we still expect this to be about $0.05 accretive for FY 2012.

Thank you.

Paul Ginocchio, Deutsche Bank.

Just going back to that guidance, I think last quarter you said you're going to grow revs and EPS. And again I don't want to belabor the point. This time I think you said plus or minus. Is that a slight change, and if so, is that really because of the DeVry new enrollment we just saw?

And maybe, Daniel, could you maybe just aggregate maybe what is market-driven as in the tough comps and the economy versus adjustments to -- any adjustments you're making to the admission criteria -- I know they are minor -- or does the new regulatory environment, anyway to kind of disaggregate for at least DeVry itself, the impact of both of those?

Right. Rick, why don't you go ahead and address the first part, and I will address the second part.

I guess, honestly, you're right. It is a slight change in terms of that perspective on earnings. As we said in the beginning of the call, our enrollments at DeVry University undergrad and Carrington were a bit softer than we anticipated, and that is going to flow through, as Gary said earlier, throughout the year.

But so we were -- previously had a little more confidence in terms of the earnings growth. Now it is, as I said, likely plus or minus where we are going to be this year.

Then you ask to disaggregate the various factors, and you asked how much of it was due to new -- having new admissions standards. And for us I would say zero, because we had admission standards.

Again, that is something that when I mentioned it to people sometimes they are surprised or they don't realize or there is a misperception that all private sector colleges and universities are open enrollment.

By the way, there is absolutely nothing wrong in many things -- it is a great thing to be open enrollment, provide open access. Many public sector colleges and universities, community colleges are open enrollment. That's great. We have just chosen to have admission standards.

So while we always are adjusting those and looking at those, it is an adjustment, it is not a wholesale change or turning ourselves upside down or our operating model. So for us that really was not an explanatory factor in the results.

In terms of the economy, I would parse that out to say that is the biggest factor. That is -- you've got to put yourselves in the shoes of the prospective students, and the prospective students that our institutions are serving. It is really tough out there.

I remember 1981, 1982. I am from Detroit, 25% unemployment in Flint. I thought that was bad. That is what I grew up with; this is worse. Maybe not quite that level of unemployment, although it is reasonably in some areas, Like my hometown, Detroit, but it is really bad.

I think the psychology -- it is really the psychology that is out there. I was just listening the other night to the pundits on cable and everything. They were talking about how people aren't -- they're just not buying a house. That is probably a very smart rational thing to do would be to buy a house right now while prices are down, and rates are all-time low. But they're not doing it just because the psychology is -- I just don't want to commit. I am not confident in what the future is going to hold.

So people are just frozen or deferring delaying decisions to go to school. We are seeing that across -- that impact across the board. So that is by far the biggest factor as far as we can tell.

So just to be -- so when it comes to the new regulatory stuff and any adjustments you're making, that is not really having an impact in everything -- (multiple speakers) 80% to were 90% what we are seeing is tough comps and/or economy?

I would like to put a number on it, but yes, I would say that adjustments to the new regulations are a factor. Maybe I want to be clear, some people -- and I have seen this misreported so many times in the general media, that I want to -- even though I know everyone on this call I am sure know, but it has been misreported. Oh, they were paying commission and now they are not allowed to pay commission. So that is what -- that is is completely misinformation or misreporting.

First of all, it was not lawful to pay commissions before July 1. And we did not pay commissions before July 1. We certainly don't now either, but we certainly didn't before July 1. So that is not a change.

But what I am saying is a factor is just adjusting to the new regulations in terms of the advertising world. I mentioned holding some of our marketing vendors to very high standards and having to demonstrate their adherence to those standards.

So even if they didn't do anything wrong, or if they just couldn't show us or demonstrate compliance with our standards, we took the high ground and cut them off. So that means some inquiries that might have been perfectly valid inquiries from a prospective student would not have flowed through to us. So that is an adjustment to the regulations that is an example and some color for you that could've had a bit of an impact.

Thanks very much, Daniel.

By the way, another example of that was before you could reflect graduation in compensation. You could hold people accountable for student academic outcomes like graduation, which made sense. Like you see in K-12 holding teachers or principals accountable, including holding the competition accountable to those kind of outcomes.

The new rules you can't do that in higher education. We disagree with that. We will continue to point that out to people who -- the more we point it out, people seem to think, wait a minute, that doesn't make sense. But in the meantime we will absolutely be compliant with that. We will work within the rules, while continuing to have a seat at the table to get them right in the long term. Thanks.

Sara Gubins, Bank of America Merrill Lynch.

More on the thoughts on 2012. If the starts are down largely due to the economy then is guidance assuming -- a much lower unemployment rate in the second half of 2012? I guess I'm wondering what we drive starts back up, aside from much easier comparisons?

Well, that is certainly one of the drivers. And we are taking a number of actions. We see the market situation, the external market, we understand that, we embrace that reality. But we don't just accept that. It is our job as managers to go ahead and compete with our competition in the public sector, in the private sector, independent colleges and university and show prospective students and their families our value proposition, whether it is the Chamberlain College of Nursing or Ross University School of Medicine, or DeVry University or Carrington College. We are out there fighting them on the beaches. So that is what we intend to do, and we intend to turn that situation around.

Okay, great. Then can you give us an update on the CFO search?

Yes, that continues. And we are seeing some excellent, excellent candidates. And we'll keep you posted as it goes forward. There is a lot of interest in -- it is a pretty hot job. A lot of people would love to compete for it and are. And so we are really pleased with how it is going. It is a very inclusive, diverse search. And I'm pleased with how it is going. And we will keep you posted as we have more information.

Thank you.

Jeff Silber, BMO Capital.

I just wanted to focus a little bit more on the DeVry undergraduate enrollment trends. I know you guys don't give specific guidance, but considering that the comps are getting a little bit easier as the year rolls on, do you think that the decline in the summer is the worse we are going to see for that specific unit for the rest of the year?

This is Rick. I would anticipate that would be the bottom. That is why I am saying it is based upon our perspective on revenue and earnings to hit the numbers that we talked about, we need to see some improvement in those trends. And, thankfully, the overlap, the comparisons do get easier and the absolute numbers we can work off this space.

And just a quick follow-up numbers question on the tax rate for this year. Does it make sense the tax rate will go down once you add AUC, and considering the trends at DeVry undergrad? And if so, if you can give us an order of magnitude that will be great.

You know, there is a lot of moving pieces in that tax rate. I think with the addition of AUC that will have a slight downward impact on the rate. But offsetting that we have some increases in other, so it is a mix of domestic and international. I would expect the rate to be up a little bit based upon our current thinking, but not dramatically.

All right, great. Thanks so much.

Amy Junker, Robert W. Baird.

Since there are two pieces of the equation to enrollment, can you maybe talk a little bit about retention and persistence that you are seeing in DeVry? And I would be curious to hear your comments on underlying retention trends if you were to strip out the graduation rates and the fact that we are seeing lower starts, and wondering if it is fair to assume continued persistence pressure given those lower starts and high graduation rates? I am just wondering how those underlying retention rates look.

Yes, I think there is some cause for that. In the context of over the past several periods we have driven higher rates of persistence by investing in the academic quality initiatives, the student services -- the surrounding student services, like our student central concept.

So retention rates are at a very high level, and of late I think starting to ease off in a similar sort of fashion here, not same order of magnitude. We talked about the arithmetic around enrollment, so there is a little bit of that going on. And I don't know if you want to comment on graduation.

We do, given the enrollments we had three, four years ago we are seeing graduates increase. Graduates were up about 15% for the most recent term. So that -- when you look at your implicit calculation of retention that is a factor as well.

So just to clarify though, if you were to adjust for that you're still seeing retention down a bit?

Down a bit, yes.

Okay, great. Thank you.

Off of high levels.

Bob Wetenhall, RBC Capital.

This is [Stephen Backman] in for Bob. So do recent developments in the economy that you mentioned, and also this past enrollment performance, does it change your thoughts regarding the expectation of a long-term growth rate of 20% or does that target kind of stay in place and this is a more of a short-term bump in the road?

This is Rick. If you look at that perspective of what we said before, mid single digit enrollment growth, double digit revenue growth and roughly 20% earnings growth, and take first a look backwards on that scorecard. We will outperform that. If you look at over a three-, four-, five-year perspective that growth rate has been 30%, 40, 50% compounded over those time periods.

So I guess we are well ahead of the score looking back. We're going through a change period here without a doubt. As we mentioned next year is going to be a period where we are going to be way under that -- those numbers. But as things in the economy improve and as education continues to be a high priority, for our country and the world, we think that those growth rates of mid single digit enrollment growth will come back.

It was the case in the ;90s. It was the case in the early decade of the century, and we think it will be the case going forward. And with that, and with some pricing, you get to double digit revenue. And we are not stating a long-term earnings growth number until a lot of the stuff settles out, but you would be able to get back to stronger earnings growth longer-term.

Okay, great. And just an additional question. Have you seen any change in the general competitive environment in this marketplace, either from other for-profits or also from the public sector, given the lower number of students that are out there ready to make a decision as you mentioned, have you noticed anything there?

Thanks for that. You know, I have been asked that question for the nine years almost than I have been here, and the answer is always yes. We are always seeing more competition globally. This also applies in Brazil for example. It applies throughout our different degree programs. So, yes, we do see increased competition.

We feel very strongly that we have a very strong value proposition in order to compete and to be competitive with those other competitors. And, yes, those competitors are in the private sector. They are in the public sector or state schools and they are among the independents. So that is how we view the competition.

Okay, great. Thank you very much.

Jerry Herman, Stifel Nicolaus.

The topic of the day, 2012 expectations. Just, again, following up on some of the thoughts earlier. It would appear that that would require a pretty abrupt improvement in starts so as to drive total, so as to drive the better performance in the second half of the year. Is that the current expectation?

No, not abrupt. I think the expectation is that we are at a trough and that we will begin to see improvements from this point forward for DeVry University, for Carrington Colleges, continue to see the benefit of the growth we have seen in Chamberlain College of Nursing. Ross University is -- we had some slowdown in enrollments for strategic purposes in the past. We expect that to be back on a growth pace.

The other, Brasil, Advanced Academics, Becker Professional Education will add to that growth in that portfolio of institutions. And so, again, when you go across the mix of all that and see improvement occurring, albeit not abrupt, but see gradual improvement in DeVry University undergrad and Carrington, you end up with what we are looking at today.

Okay, great. Daniel, just a quick follow-up with regard to your comments on the economy. This one certainly does look different than a lot of the ones we have seen, and in light of that there seems to be a lot of reluctancy for potential students to pay the price. And the question is about pricing, in fact and your strategies and there's on pricing in this economy.

We are not really seeing that being affected very much, because our tuition pricing is generally viewed in the context of the competition. Since the competitive comparison is often to the public sector, colleges and universities, which after all, about 70% plus of all colleges out there, plus the independent colleges and universities, another 15%. So about 90% is non-private sector competition, and their rates of tuition increase are ranging -- I have seen 9%, I have seen 15%, I have seen 20% rates of tuition increase.

So we have raised our tuition in the 3% range at DeVry University undergraduate, or maybe a little bit higher than that in some of the healthcare schools. By comparison from a competitive standpoint that is where we find ourselves. So, no, we don't really see a big difference there in the near term.

Okay, great. I will turn it over. Thanks, guys.

Corey Greendale, Analysis.

I apologize, it is a little noisy where I am, so I'm going to ask a couple of questions then go on mute. So hopefully the questions will be clear.

The first is actually following up on what Gary just asked. And it is true that the public schools keep raising their tuition, but they are facing a different set of challenges. Obviously you keep raising at whatever rate the competition does, but in the meantime it seems like in this economy it is hard to imagine that people haven't gotten at least somewhat more price sensitive. And so the question is what would you need to see before you would consider using more scholarships or more aggressively using scholarships or selective tuition discounting?

The second question, going back to the guidance question is more philosophical. Historically, DeVry didn't give any guidance to speak of. And given that there is still so little visibility from our perspective, we appreciate that you're giving more guidance now. But the formula of giving or guidance at a time when it seems like there is less visibility, it just makes it hard from our perspective to feel like that we can have a lot of confidence in that. I think that is a lot of why people keep coming back to this.

So if there is anything you can say about what it is that you're seeing, whether it is response rates to your marketing or anything else that gives you confidence that this summer term is the bottom would be appreciated. Thank you.

And we will also correct, your firm's name is First Analysis, not Analysis. So we'll get that in there too for you while you are on mute.

So the tuition in the terms of scholarships, well, we do offer scholarships. In fact, last year it was about 10% of our earnings we gave back in the subsequent year in terms of scholarships. So several tens of millions in scholarships.

And we are taking a look at the level, but also -- but not a dramatic -- I wouldn't say a dramatic increase in the level of scholarship, but a difference in the way we allocate that. Can we be more strategic and more impactful and help our students finance their education?

And that is -- and I am glad you asked it -- that way, because it is really more of helping students with affordability than it is about lowering the tuition level itself. So that is, I think, the right way from our experience to look at tuition.

In terms of the guidance and getting more comfort here on what we are seeing -- Rick, you may want to add some things here -- but I think part of it is we did see ourselves in this last period lose a step at DeVry University undergraduate and at Carrington, the two places where we have talked quite a bit. And the fact that we talked about it, and then some of the internal metrics that you asked about, we did see ourselves lose a step in some of the conversion ratios and some of the inquiries, the levels of inquiries.

And so we do think that internal execution and being more effective in optimizing our marketing and recruiting processes are part of the formula for improving that performance, as I cited at the beginning of the call. So that is something that we are putting an effort on. And we have a lot of confidence in our operating managers and their ability to execute and improve our operations.

So that may give you a little more confidence and comfort. That is going to be for you to judge, and you will have to judge us by our results, hold us accountable.

And the perspective we provided for the year -- we don't give guidance for a quarter or anything, but we do -- coming into a new year we want to at least give some thoughts as to how we see it. It is based upon our plans and strategies and executional improvements that Daniel mentioned. It is all incumbent upon that, and also continuing to deal with this uncertain and not totally stable economic environment.

So it is -- I guess from a confidence level probably not as confident, quite honestly, as we were two or three years ago. But it is based upon what we see as our plans and strategies, the risks that we see out there and how it can manage through that.

And there is some -- it is only as good as a forecast can be and there is probably wiggle room up and down from there. But that is why it could be equal to this year's level or a bit below, but we are going to do our best to see some growth.

All right thank you.

Earnings.

In terms of earnings, I think Rick was mentioning. We do think we can grow revenue. But there is no guarantees in life either. Okay.

Arvind Bhatia, Sterne Agee.

Actually I just wanted to go back to AUC for a second. I was wondering if you can provide some color on what kind of growth rate in topline it is experiencing, enrollment growth rate, et cetera?

And then I guess backing into the numbers from the $0.05 accretion you are talking about, tax rate and amortization, et cetera, it looks like the margins might be in the high 20s. So I wanted to see if we are on the right track.

Then in terms of the multiple of EBITDA it looks like you might have paid mid to high teens. Even if you don't want to be specific, can you help us get some help there that is on the right track?

Then the second question is on -- we are all trying to figure out the growth, et cetera, where that is coming from. The business Tech and Management section, is that also -- do you expect growth in that segment as well, I guess, as part of the revenue growth you're talking about?

Thanks, let me try the AUC, and then maybe turn it over to Rick to talk about -- and Pat, jump in too if you like -- on the growth in BTM. So, AUC, we are not going to give a percentage or a specific number, a forecasted growth rate. But it is -- AUC is growing. We expect it to continue to grow because there is such a tremendous need to serve -- the need to solving the physician shortage. So we do expect growth, but it will be growth -- I think it will be relatively -- the kind of enrollment growth that historically will be the long-term trend that you have seen at Ross University School of Medicine, as well would be one marker you could look to.

And the most important thing is that our -- we will continue to increase and invest in the resources, the academic resources and support resources needed to support whatever level of growth that we have.

The margins, the number that you had was quite a bit low. But whatever it is, I would expect it in the near term to come down. Because we are going to be investing in academic quality, just like we did, as I mentioned earlier in the call, at Chamberlain College of Nursing, and actually just as we did at Ross University School of Medicine, and Ross University School of veterinary Medicine.

Many people will remember back in 2003 when we made that acquisition, we told everybody just like I told you now, you see the margins, they are coming down, because we're investing in academic quality. And by investing in quality that leads to higher levels of student success, and that leads to more applications and that leads to growth for quality, plus diversification equals growth.

In terms of the acquisition price to be paid, I'm holding here in my hand the first and only case in the court of human history of an analyst going back and saying, we got it wrong.

This one says, taking another look at the acquisition price of Ross University -- now that we take another look at it -- this was about a year after -- I'm not going to name -- because I know you're on the call. You wrote this. But it really does not appear that the expenses when you look at the strong financial results, put in the context of the income tax, and look at the low cost of debt, or in this case no cost of debt, used to fund the acquisition.

And so I think you'll find that in this case as well it will be returns we expect to be well in excess of our cost of capital. So what do you see in terms of growth in the BTM segment, Pat?

Sure. In terms BTM, for full-year revenue we still expect that to be up year-over-year based on the enrollment trends in the second half of the year improving, as well as our year-over-year tuition price increase. But if you split the year, revenue will be down in the first half of the year.

Great, that's helpful. Thank you.

Brandon Dobell, William Blair.

Maybe Rick or Daniel, any sense as we look at fiscal 2011 of the magnitude of the dollar spend on some of the initiatives that ramped up during fiscal 2010, such as Project Delta, the student services initiative, those kinds of things? I guess I'm just trying to get a sense of what the year-over-year comparison on that spend may have looked like for the P&L, excluding obviously what capital spend you made. But I am just trying to get a better sense of what that incremental spend or lower spending may look like in fiscal 2012.

Maybe I will just clarify that question a little bit. Are you talking about from 2010 to 2011 or from 2011 to 2012?

Well, obviously, there was a ramp up in spend from 2010 to 2011, so I'm trying to get a sense of as you look at comparing 2012 versus 2011, some of those bigger initiatives that were kind of decent drags on the P&L for you in 2011, how much of an abatement in spending could we expect in 2012?

So things like Delta, things like new campuses. Any sense of that?

Delta is largely capital, and we will be seeing the impact of that really now going for the next few years in increased depreciation expense.

But you set that aside, I am just looking at the operating margins for BTM year-over-year. We ended fiscal 2011 at 24.6% compared to fiscal 2010 at 23%. So despite the new campus openings, location opening, et cetera, we more than offset that with operating leverage and revenue growth.

If you move down to medical and healthcare, you see some compression in the operating margin, which was largely driven by Carrington. And despite some new campus openings in Chamberlain we were able to improve our operating margins there. So based on from 2010 to 2011 we were able to more than offset that increased investment. And going into 2011 to 2012 we wouldn't necessarily expect that same improvement due to a lesser effect of operating leverage because of declining enrollments.

All right, fair enough. Then just a quick one. You mentioned how many locations you expect to add in the BTM segment. How do we think about capacity expansion within Chamberlain and Carrington, or if any in Carrington this year?

Yes, I think Carrington we've got the new Pomona campus. It opened at the latter part of this past year, 2011. So we expect -- would certainly hope to see that to be an incremental growth opportunity as we move into this new year of fiscal '12. And then we have Mesquite, Texas on the horizon. Chamberlain is the new -- late in the year was Houston, and now we just started up in Miramar. And I mentioned a couple others, Indianapolis, Atlanta later in the year.

And so I think -- and I think I mentioned the DeVry University ones earlier. So we have got -- what is that -- seven or eight or nine across. Plus DeVry Brasil, Sao Luis we are working on that. And also a new campus building Ruy Barbosa. So, seven, eight, nine, something like that this year for new campuses across the family.

Then a final question for me. Within the online business -- well, I guess both Keller as well as the undergrad online, any sense of new program rollouts or introductions, or it is just a continuation of the programs you already have? Thanks.

New programs, what was that?

For online.

Oh, for online. Yes, pretty much all the programs that we roll out, we roll out online. There is exceptions, but in general it really does add to the online -- which is a great opportunity. And it also gives us great information and regionally where as most of the interest coming from. That helps us sort of the best (inaudible) real time market research you can have to help identify which campus rollouts to take those programs to as well. So online will be gaining more programs as well.

Okay, thanks a lot.

Ladies and gentlemen, that will conclude the question-and-answer portion of today's event. I would now like to turn the presentation back over to Mr. Daniel Hamburger for closing remarks.

Okay. Well, by the way, one of the things I should have mentioned in response to one of the questions is there is still a great long-term value proposition here for going to college. The jobless rate for college grads is still like half the jobless rate for people without college and so forth. You all know those statistics. So while we're in this near-term discontinuity, the long-term value proposition is very strong.

And it is interesting even with all the craziness around the debt ceiling coming out of that one thing I've noticed was bipartisan agreement for the need to support higher education, because without an educated workforce we have no economic growth, that is for sure.

So I would like to thank everyone for all your questions. We did run long to try to get it all the questions that we could. Our next results call is scheduled -- our quarterly results call is scheduled for October 25. And we will be announcing first-quarter results and enrollment for the period.

So thank you all for your continued support of DeVry. Have a great afternoon.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.