Adtalem Global Education Inc.
Q2 2009 Earnings Call Transcript

Published: 28 Jan 2009

[Bob Craig:]

Mark Marostica - Piper Jaffray Andrew Steinerman - J.P. Morgan Kelly Flynn - Credit Suisse Jeff Silber - BMO Capital Markets Andrew Fones - UBS Gary Bisbee - Barclays Capital Corey Greendale - First Analysis Trace Urdan - Signal Hill Scott Schneeberger - Oppenheimer Brandon Dobell - William Blair

[Operator:]

Good day, ladies and gentlemen and welcome to DeVry’s fiscal 2009 second quarter conference call. My name is Jeremy, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) At this time, I’d like to turn the presentation over to your host for today’s call, Ms. Joan Bates.

[Joan Bates:]

Thank you, Jeremy. With me today from DeVry management are Daniel Hamburger, President and Chief Executive Officer, Rick Gunst, Senior Vice President and Chief Financial Officer. Before we begin, please be advised that statements made on this conference call may constitute forward-looking statements subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by phrases such as DeVry, Inc. or its management has a view, objective or outlook, the management believes, expects, anticipates, foresees, forecasts, estimates or other words or phrases of similar import. Actual results may differ materially from those projected or implied. Potential risks, uncertainties and other factors that could cause results to differ are described more fully in Item 1A, Risk Factors, in the company’s most recent Annual Report on Form 10-K for the year ending June 30, 2008 and filed with the Securities and Exchange Commission on August 27. Telephone and webcast replays of the call are available until February 13. To access the reply, dial 888-286-8010 or for international 617-801-6888; the pass code is 45698231. A replay is also available via webcast through the IR portion of our website. As a reminder, our press release and preliminary financial statements are available in the Investor Relations section of our website located at www.devryinc.com. I will now turn the call over to Daniel Hamburger.

[Daniel Hamburger:]

Thank you, Joan and thank you all very much for joining us on our fiscal 2009 second quarter conference call. We’re pleased to report that we delivered strong academic outcomes and financial results this quarter driven by several factors and of course first among them were the double digit enrolment growth in the fall at DeVry University. So let me start with some comments on the overall environment and then turn it over to Rick to discuss our financial results. Then I’ll come back and review operational highlights in the quarter and look forward to opening up to your questions. I’d like to frame today’s discussion with two topics that are on all of our minds, the economy in the new administration stimulus package and how those could affect DeVry. So, in terms of the economy we’re certainly mindful of the challenging economic environment that we all face. In terms of its effect on DeVry we’re really more A-cyclical than counter-cyclical and that we perform well in both good times and bad times, because there is always demand for high quality education. Another reason for this is our diversified portfolio across multiple curriculum areas in the educational levels. This purpose full planned diversification strategy has served us and our shareholders well in a time of all this economic uncertainty. Now the weak economy does give us a bit of a boost particular in two areas, student’s going back for MBAs and our Keller MBA program is one of the largest in the country, so we benefit from that and in shorter programs such as those at our Apollo College and Western Career College. Now in terms of the stimulus package, we are certainly watching with great interest of the debate that’s taking place in Washington and there are a number of proposals and several include increases in student funding. We congratulate our new President on his inauguration and we comment him for making education one of his priorities. In addition to fiscal infrastructure we believe human capital is one of the best investments that our government can make. We also thank Arne Duncan was an excellent choice for Secretary Of Education, Arne knows DeVry well, we’ve worked together closely on the DeVry Advantage Academy where high school students get both, a high school diploma and an associated degree a great example of the private sector and government working together to meet educational needs. So, we will continue to watch this events as they unfold, but in the meantime we are certainly focused on what we can control, which is making progress on our strategic plan and I can summarize that plan in three words achieve, grow and build. Achieve the full potential of DeVry University; Grow, through continue diversification across the vertical curriculum areas throughout the horizontal levels of education and in new geographic markets, including international expansion in places like Latin America as well as India and China; and then lastly build the infrastructure to support this growth. I’d like to give you just a few examples of the progress that we’ve made in the quarter and progressing our strategic plan. We recently announced two transactions as part of DeVry University’s ongoing real estate optimization program. The first is in Long Beach, California where we relocate from our current sight of about 100,000 square feet into a new 47,000 square feet campus. The new location is schedule for completion in March 2010 and it’s a Green Campus, for example it’s expected to obtain Silver Lead Certification and it includes infrastructure for future solar power. In the other real estate action we agree to buyout a portion of our lease at DeVry University’s Long Islands City New York campus. So, you can see that we continue to rebalance our capacity and to improve our asset utilization. I’m going to ask Rich to discuss the financial details of these transactions a little bit later. In the area of building our infrastructure to support our growth strategy, let me give a quick update on the project Delta, which includes replacing the student information system at DeVry University and at the Chamberlain College of Nursing to help us increased levels of the efficiency and also to strengthen student service. The highlight this quarter is that we selected SunGard Higher Education’s Banner system. Of course, this is a huge and important project and we think SunGard’s going to be a great partner for us. As I’ve done at our recent calls, I’d like to offer a brief update on the student lending environment and how it’s affecting DeVry. Well despite a weak credit market, we continue to see very little impact on our new or total student enrollments. The one impact that we have seen is on average course loss. While we are not immune to what’s going on in the credit markets, we believe we remain in a strong position for several reasons and one of them is that private loans continue to makeup a very small percentage of the loans used by DeVry students. For fiscal 2008 private loans as a percentage of our overall revenues was just under 5%, it actually declined from about 6% in the prior year. There have recently been some other positive developments that improve liquidity for student loans. These include Sallie Mae’s recent securitization of 1.5 billion of private loans that happened earlier this month, and then the Federal Reserve Bank of New York’s announcement last month to create a Term Asset-Backed Securities Loan Facility or TALF and that’s intended to improve market conditions for student loans. So, while there’s obviously the credit crunch that continues we are seeing some signs that could indicate improving liquidity in the student loan market. So with that overview and introduction let me turn the call over to Rick for the financial results and progress on our financial strategy.

[Rick Gunst:]

I’m going to take the next few minutes to walk you through our strong second quarter and year-to-date results. In doing so, I’ll breakout the impact of our recent acquisition of U.S. education, the parent of the Apollo College and Western Career College, as well as some other items to give you a better perspective on the underlying operating results. The headline is that we continue to deliver solid top and bottom line performance results while making appropriate and prudent investments for future growth. Quarterly revenue was a record of about $370 million up 35% versus prior year and up 19.5% excluding the impact of U.S. Education. Revenue through the first half of the fiscal year was up 28.5% and 19.3% excluding US Ed. Net income was $43 million in the second quarter and earnings per share $0.59, both up about 20% versus prior year. For the first half net income was $78 million, up 24% versus last year. However last year’s results included a loss of $2.3 million net of tax or about $0.03 a share from sale-leaseback activity. Year-to-date earnings per share were up about 19% excluding the discrete item from the prior year. Also we estimate the earnings per share impact of the US Education business was positive by $0.01 or $0.02 driven by incremental operating income, partially offset by the amortization of intangibles and impact on our interest income and interest expense. All these factors have been a bit more favorable than we’ve originally projected when we announced the transaction. For your reference second quarter results include expense related to share based payments of approximately $1.7 million pretax or $1.4 million net of tax. This is higher than last year’s second quarter expense of approximately $1.4 million pretax or $1.2 million net of tax, primarily due to the appreciation of our stock price over the past year. I would also like the point out that include in our second quarter finance results is a net unrealized loss of approximately $1.7 million pretax related to our auction rate securities. Now in past reported periods any unrealized loss was reflected only on our balance. However, in November 2008 we entered into an agreement with UBS with the right to sell our action rate securities at par beginning June 30, 2010 if they have not been redeemed before that time. Even though this was a positive development, it had negative accounting consequence in that securities must not be reclassified and the $1.7 million net unrealized loss must go through the income statements. This loss should reverse back into income over the next year and a half when the action rate securities are repurchased by UBS beginning June 2010. Our overall effective tax rate moved up to 30.1% in the quarter and 29.3% year-to-date primarily due to the increase in domestic sourced income realized and expected for the fiscal year. Our cost of educational service expense increased by 35% versus prior year in the quarter and was up 25% year-to-date excluding the discrete item in the year ago period. Excluding US Education, cost of educational services would have been up by about 14.5% in the quarter and 13.7% year-to-date, both lower than our revenue growth driving improved gross margins. Student services and administrative expense increased by 36% in the quarter or about 24% excluding US Education. As you recall this higher rate of growth is consistent with the perspective we provided as we entered the fiscal year, with the growth in spending driven by timing shifts last year, when we deferred some spending and had a number of open positions. In the current year, higher cost were results of online growth acceleration actions within DeVry University and Chamberlain College of Nursing, increased advertising and brand building across all of our segments and investments in facilities, people and systems to build our infrastructure and support customer service, quality and future growth. Now, while still subject to further refinement within the first year of the acquisition, we currently estimate the US Ed amortization expense for the remainder fiscal 2009 to be about $800,000 per month versus a pervious estimate of just less than $1 billion per month, primarily due a shift from intangible subject to goodwill from a intangible subject to amortization to goodwill. Now with that let me walk you through some the key highlights of our operating segment results, which are further detailed in the earnings release. First, revenue within DeVry University segment was up 18.9% versus prior year in the quarter and 18.7% year-to-date driven by the strong enrollment growth coming both form continued online expansion and improved onsite enrolments. DeVry University segment operating income increased by 23.4% in the quarter and 26.5% year-to-date excluding discrete items, this improvement was driven by gross margin leverage, offset somewhat by the higher marketing and recruiting spending versus last year. Also I want to talk about DeVry University segment; I’d like to provide a little bit more detail on the two real estate optimization actions the Daniel mentioned previously. First, we entered into agreement earlier this month to buyout of a lease on approximately 40% of the space at our Long Island City campus in New York. We will record a pretax charge of approximately $3.9 million with cost instruction in the third quarter driven by a $2.7 million cash outlet in a non-cash charge of $1.2 million related to the write-off of lease total improvements. This action favorably impacts pretax operating income by about $1.9 million per year going forward, with the cash payback of less than two years. You can see that we evaluate these real estate opportunities on an economic value basis even if there’s an accounting charge and we are able to utilizing our strong balance sheet and cash position to achieve this result. In addition we planned relocate from our current 100000 square feet in Long Beach, California to a new location at the end of our current lease. The new location is about half the space and about one half mile from our current location. There will be little if any financial impact next fiscal year given the timing of the move, but should yield about $400,000 of annual savings in fiscal 2011 and beyond. Within the Medical and Healthcare segment our reported revenue was up 130% in the quarter driven by the addition of US Education, but still up about 30% excluding the impact of US Ed. This growth was driven by Ross enrolments and Chamberlain geographic expansion into Illinois and Arizona, along with the accelerate growth of the online RN to BSN program. US Education continue to deliver strong revenue growth of its own, up about 23% in the quarter. Second quarter operating income for the Medical and Healthcare segment of $26.7 million was up about 75% versus last year. Income would have still been up about 43% excluding US Education. Finally, our Professional and Training segment results continue to reflect the economic downturn and impact on the financial firms Becker and Salaserve with revenue up only 1.2% in the quarter and 4.6% year-to-date. Operating income was actually down versus last year in the quarter and year-to-date as the impact of prior head count additions and other investments such as expansion to Hong Kong were only partially offset by cost management actions. Nevertheless, the Professional and Training segment year-to-date operating income is still about 32% and look an ahead we expect the softness in revenue to persist in the coming quarters. Shifting to our balance sheet, the cash marketable security investment balances totaled about $263 million at the end of the quarter, compared to $241 million last year. Despite the strong cash balance interest income in the quarter was $1.7 million, compared to $2.9 million last year, almost entirely due to the declining interest rate environment. Cash flow from operations in the first half of the year was $139 million versus the $132 million last year and we use some of that cash flow generation to reduce our outstanding debt to $155 million from a $166 million at the end of the first quarter. As you may recall our debt cost is pay the LIBOR, we started the quarter moving up significantly to over 4%, but has since fallen dramatically with one-month LIBOR currently have less than 0.5%. Now, we are paying 50 basis points over LIBOR, so our total cost of debt is currently less than 1%. Our net accounts receivable balance was about $138 million versus $77 million last year. Now over half of this is increase was a result of the addition of receivables of US Education. Another 20% or so can be attributed to the increase enrollment and strong revenue growth in the quarter. While we’ve made some progress resolving the issues around our new financial aid system that we noted during our last call, DeVry University receivables per account were still higher than last year as we work through the remaining issues. Capital spending to the first half of the year was $25.2 million versus $16.8 million spent last year, that’s excluding the Alpharetta purchase and immediate sale leaseback transaction last year. Capital spending is expected to the picked up significantly during the balance of the year with the total capital spending for the year in the $65 million to $70 million range including US Education. This higher rate reflects spending during the second half on our student information system called Project Delta, spending associated with Ross’ expansion into Grand Bahama, DeVry University and US Education spending on facility improvements in new locations, and continued geographic expansion within Chamberlain College of Nursing. Also during the quarter we began executing our second share repurchase program. Repurchasing approximately 98,000 shares at a total cost of about $5.4 million, or an average of $54.62 per share and we also raised our dividend by 33%. So, that concludes my overview of the continued strong results for the first half of the year. Our performance illustrates the benefits of our diversified portfolio. While Professional and Training segments experienced some softness as a result of the down economy DeVry University performance continues to improve, Ross and Chamberlain are growing and US Education is further strengthening our Medical and Healthcare segment. Overall we feel very good about delivering positive results for the balance of fiscal 2009 and meeting our long-term strategic objectives, and as we look for growth opportunities we are also focused on maintaining appropriately conservative capital structure. Now let me turn the call back over to Daniel for a little more color on the operating results.

[Daniel Hamburger:]

Okay, thanks, Rick. Let me begin the operating review with DeVry University where our focus remains academic quality and on responding to student’s needs. First, I’m proud to report that DeVry University including its Keller Graduate School of Management is now one of only 13 Universities in the US and 21 internationally to be granted accreditation by the Project Management Institute which of course is the world leading association for project management professionals. Your work was based on a number of criteria, including faculty evaluations, proof of continuous improvement and so forth. If you think about that economics stimulus package, we would expect to see increased demand for project managers to handle all that infrastructure and during the quarter, we continued to invest in academics including new programs. In March DeVry University will launch three new undergraduate tracks in the computer information systems area; enterprise computing; health information sciences, as well as web game programming. Now enterprise computing prepares students to manage and develop applications for large-scale organization consistence. This new track was developed together with IBM and their business partners. The new track in health information sciences prepares students to implement and support electronic health records applications. Again back to the stimulus, we understand there is $20 billion allocated for health information initiatives, now if that’s pasted it could stimulate demand for these professionals. So, these are examples of been response to the needs of our employers and to the need of the society. Now, also in terms of being responsive, the magazine “Military advanced education” recently recognized DeVry University as one of the top Universities for military personnel. This honor recognizes the nation’s most military friendly schools. It’s based on the number of military students served, the availability of scholarships and other policies that benefit service members and veterans. DeVry’s online services also played a major part in receiving this honor and perhaps the most important measure of our academic success and of the value we provide is how our graduates are faring in their careers. We’ve got the latest three-term average now and even in the midst of the weak job market, I’m pleased to report that 92.1% of DeVry University graduates were employed in their field of study within six months of graduation and an average starting salary of over $45,000. As they say past performance is no guarantee of future results. So given the current economic environment, we are going to make additional investments in our career services office to maintain these excellent outcomes. Now turning to Ross University. Our first class students started courses at our new clinical training center in Freeport, Grand Bahama and planning is underway for the permanent site as well. This is another example of what we mean, when we say we are doing well by doing good, because not only it just a major achievement for Ross its also doing good things for the people of Grand Bahama. Our Dean is literally being stopped in the street by people thanking Ross for coming and investing in their country. So, we’re off to a good partnership there and looking forward to future growth. Like Ross, Chamberlain College of nursing continues to respond to the huge demand for qualified medical professionals. The nationwide nursing shortage is expected to grow in the next 10 years to over 1 million nurses and yet our educational system in this country is turning away 40,000 qualified applicants a year. At Chamberlain we see this unmet need as an enormous growth opportunity than more importantly we see it as a healthcare imperative for our country. So to fulfill the needs we are investing and we are investing in facilities and faculty and in educational technology like patient simulators. Chamberlain is recently submitted an application for a new campus in Jacksonville, Florida which pending approvals, of course we hope to launch in the fall. We are also expanding our program offerings at Chamberlain. In March, we planned to launch a new masters of science in nursing, pending final approvals. The newest part of our medical and healthcare group is of course the recently acquired US education, which comprises Apollo College and Western Career College. The integration is proceeding very well, and it’s a testament to the strategic fit and the cultural fit of our organizations. In my experience with acquisition integration, you often have performance hiccups in the first few months, here this is not been the case at all. In fact both schools are well ahead of plan and we are moving ahead with our growth strategy including new programs. For example, Apollo College opened a new dental hygiene program in its Portland campus in November. Also we’re expanding the space at our Mesa campus, which will allow us to offer a new program to students, diagnostic medical sonography or ultrasound at that location in Mesa. So, now I would like to move on to the professional education and training segment and of course Becker’s professional review after experiencing strong growth over the last several years, Becker’s rate of growth has slowed significantly and this is due in large part to the slowdown in the financial services industry and the effect that’s had on our CPA and our CFA exam review programs. We are not anticipating any pickup at Becker for the remainder of this calendar year, but we do believe that its long-term potential remain strong and therefore we are continuing to focus on long-term growth at Becker looking at additional markets and products to further leverage Becker’s strong brand. Here is an example, Becker recently partnered with our Howard University, which of course is one of the Nation’s top historically, biology colleges and universities and they were offering our students are fast-pass course on the Howard campus. The fast-pass course is designed to help prepared for the CPA exam in a shortened timeframe. So, we are proud to play a part in a powering more minorities seems to go into the accounting profession. Then to end on a true behind note, as you may have DeVry was selected by Forbes magazine for their prestigious platinum 400 list of America’s best big companies. Forbes reviewed 000 publicly traded companies with annual revenues of a $1 billion or more and they evaluated them on financial metrics such as sales, earnings growth and outlook both short-term and long-term. Balance sheet strength, stock market returns and importantly on the strength of their governance as well. Forbes selected the top performance across 26 industries to make up its list. DeVry was the only education organization selected. So, in summary while we’re all sailing through turbulent economic seas at DeVry it’s steady as she goes. Our diversification strategy is helping to mitigate risk and helping us to achieve our objective and that’s to be best long-term risk adjusted investment in the education industry. So, with that Jeremy, let’s go to the q-&-a.

[Operator:]

(Operator Instructions) Your first question comes from Sara Gubins - Banc of America Securities.

[Sara Gubins:]

On Becker, it sound like you’re taking a long-term focus, but I’m wondering if there are any shorter term cost action that’s you’re planning to take in order to stabilize operating margins?

[Daniel Hamburger:]

Sure. Absolutely Sara, and as Rick pointed out the margins are still very attractive there. Certainly down from the very high border mark of last year, but in the long-term view they are will above where we use to be just a few years ago. So, you have to balance those factors. Certainly, the management team at Becker is very much on top of the cost structure of the business and they are taking a look at deferring items or non-discretionary spending, either cutting or deferring those things and we continue to review that on a very frequent basis right now as we assess how the demand profile looks?

[Sara Gubins:]

Okay, but no plans for kind of significant costs in that group?

[Daniel Hamburger:]

No. Not at this point, nothing drastic.

[Sara Gubins:]

Okay. I know it’s early, but any sense of how spring enrollment trends are looking? Are you continuing to see strong demand for programs?

[Daniel Hamburger:]

We are and of course we’ll announce the spring enrollments for DeVry University in April, and certainly we can’t make any projection now, but I would like remind everybody that given large increases in percentage terms that we’ve seen in recent periods, eventually the comparisons on a percentage basis become a little bit more difficult.

[Sara Gubins:]

Okay and then could you give an update on your cost to acquire new students and marketing costs in general?

[Daniel Hamburger:]

Sure. The cost to attract new student to DeVry University, Ross University, Chamberlain College of Nursing, to Apollo College, Western Career College, when you look across we are pleased with how that’s going, we are seeing our marketing teams do increasingly better jobs at identifying sources at using sophisticated database marketing techniques. So there are stable to positive trends in the efficiency of that process. Given that, and also for other reasons as we’ve outlined many times, because the cost to attract the students is X, and the lifetime economic value is significantly higher than X, that is a very positive value accretive way to deploy our owners capital. So, we are going to continue to invest in academic quality initiatives first and foremost, but also here in this to your question in ways to spend more growth to marketing and recruiting activities.

[Operator:]

Your next question comes from Bob Craig - Stifel Nicolaus.

[Bob Craig:]

A couple of questions for you. First, just a sort of broaden Sara’s last question there. Could you comment on the magnitude of the growth investments you expect in the second half, at least relative to the last four quarters and perhaps Rick if you could make some updated commentary as to your expectations regarding student’s services expanses relative to revenue?

[Rick Gunst:]

Yes. I think our view is really not changed from what we said as we enter the year, we expected our growth in student services and expenses to be higher than revenue in the firs half of the year, and then to get some leverage out of that in the back half of the year and we still anticipate that to be the case, probably even more so in the fourth quarter than the third quarter. So, we are trying to prudent to looking at what’s working and continue to fuel that pump and make adjustments as Daniel mentioned to where on discretionary spending we can, but we’re trying to balance being aggressive in investing with being prudent in this environment.

[Bob Craig:]

Is it possible, I guess why don’t we use the house versions that seems to be at least from what we’ve ascertained so far a little bit more generous than the Senate version, but assuming the house stimulus proposals fly, the low limit increases and Pel increases. Could you hazard a guess as to what impact that might have on your private lending volumes?

[Daniel Hamburger:]

Yes. Of course, I just want to caveat the whole answer by saying that it’s difficult to comment on this stimulus package until its being finalize and probably you’re just being speculative, but depend on the world of the hypothetical. We would expect that the private lending volume small as it is, would go down even further and that’s been the case that we’ve seen with the past the most recent increase and in the loan amounts that one of the consequents is that was in our private loan volume small as it is actually went down.

[Bob Craig:]

Right, I take it wouldn’t entirely eliminate it?

[Daniel Hamburger:]

Probably not eliminate it, could be in the very, very small thinks, but there are always students across different institutions, they’ll have a need they were able to meet that need, it’s not like private loans have gone away. They are still there and we are still working with a number of lenders, its not just one there is multiple lenders that we are working with to provide those funds for students as part of the package, what makes sense for the students.

[Bob Craig:]

Last one, then I’ll turn it over. Any thoughts Dan on how greater Title 4 eligibility for other foreign medical or nursing schools may change the competitive dynamic there?

[Daniel Hamburger:]

Well again we are speculating because that hasn’t happened and Ross University is one of only three international schools that has Title 4 eligibility and its also distinguished in many other ways and differentiated from other international schools, most importantly by the academic outcomes achieve by the students and the way reviews received from their employers, the hospitals who love the Ross grads, I just met another one recently. Unfortunately to a personal situation we encounter a doctor and they said “on Ross loved the graduates” and so, there is a lot of ways to distinguish them and Title 4 is one of them. If other international schools were to achieve eligibility by virtue -- they have to get over some very high bars and have excellent academics and if they are able to that, that’s fine. I don’t think we would have the significant impact on Ross’ ability to meet its recruiting goals at all.

[Operator:]

Your next question comes from Mark Marostica - Piper Jaffray.

[Mark Marostica:]

A couple of questions here. The first one, according to my calculations SS&A attributable to US Education came in at about $12 million in the quarter. I could be wrong on that, so maybe clarify that for me, but based on that is that a good quarterly run rate to think about going forward?

[Rick Gunst:]

We are not going to the habit of quoting our business unit advertising. Your number that you are backed in is pretty close though and if you look at the pro forma that we provided a month and half ago that gives you some historical context for the spending by quarter.

[Mark Marostica:]

Okay, but is there any reason that numbers should up or down materially going forward? I know you’re not giving the specific guidance, but I’m just wanted to know there is anything in that numbers that’s more one-time in nature?

[Rick Gunst:]

I don’t think there is any one time nature of associate with that, but as we expand we are going to be putting the money to expand in different locations with programs our locations. We hope to be more aggressive to continue field growth within the Apollo and Western.

[Mark Marostica:]

Then regarding project Delta, can you give us a sense, while I know its early days with SunGard? Can you give us a sense of any key milestones that you might have for the project implementation as you plan going forward?

[Daniel Hamburger:]

There is a host of internal milestones that we are tracking and I am personally tracking. I mean I’m personally along with other members of the management team staying very, very close to this and the most important mile stone is assembling the right team and so far as good in that regard in terms of the internal and the external team that’s working on that. So, what we’ve done for this project is actually pull some of our very best and brightest from around system across functionally, and it’s not a just a second half that they wearing. You got a fulltime job, can you do a part time, and in your spare time could you please work with us. No we are not doing that. There are been pulled up full time dedicated people, dedicated facilities that there in to focus on the project and then we have external resources as well, including those from the professional services group at SunGuard Higher Ed, and a personal commitment and relationship in a CEO to CEO. Chris Conde over there is outstanding, he’s got a great team and we’ve met several times already on the project and also on just working together as partners generally. So, those are some of the early milestone, it’s on track. It’s definitely a long-term program, its going to be a couple of years in the making. There will be milestones and deliverables on the ways so we’ll start to get value before that time and we’ll do our best to keep you post on that, but we will make sure this is successful.

[Mark Marostica:]

So, Daniel perhaps is it a little premature to try to pin you down to a certain major implementation date of a certain module? Are we way too early for that, or do you have that --?

[Daniel Hamburger:]

I think we are doing a very good job of medicating risk around any sort of major big bang implementation where you turn the think on and then you have all these hookups. Many organizations, not just in this industry but around the world, they’ve gone through that and I’ve gone through that. It’s been a lot of pain in the past organization so it’s going to be much more of an incremental approach to turning on this module and turning on this functional area rather that turn on the whole thing at once. So, that’s just one among many other ways that we are medicating risk on project.

[Mark Marostica:]

Okay. Regarding corporate tuition reimbursement, there’s been some noise in the market around that over the last couple days, Sprint canceling the corporate tuition reimbursement program. I am curios what is your exposure to corporate tuition reimbursement and have you had any of your partner’s pullback or cutback on that item?

[Daniel Hamburger:]

We have had one. We know of one employer who has stopped offering the benefit and at this point we keep asking and so far we have one that we know off. In terms of our exposure we don’t break it out, but I say it’s within the 20% or so of DeVry revenues that are in the category of tuition reimbursement as well as self pay, EDUCARD and military tuition assistance I think is in that bucket, as well. You know it’s a direct relationship in many cases between the employer and the student, so it’s not easy to pinpoint exactly but what we have seen from talking to students and talking to employers is that with that one exception, the overwhelming majority are continuing the benefit and what we found from past experience and past downturns is that it’s not the last, one of the last benefits as an employer that you want to cut. Really it’s very popular, it’s very important. Student to employers that you have are already on it. It is very painful to then withdraw that. So it’s very steady. It doesn’t boom up in good time; at the same time it doesn’t dip way down or anything in bad times; that’s going to exit our experience with corporate tuition reimbursement.

[Mark Marostica:]

And just one last question added to that; can you mention what industry that particular partner was in?

[Rick Gunst:]

Manufactory or manufacturing, heavy manufacturing

[Operator:]

Your next question comes from Andrew Steinerman - J.P. Morgan.

[Andrew Steinerman:]

Hi Dan or Rick. Could you go over our student persistence; what had been the kind of year-over-year trends in student persistence?

[Daniel Hamburger:]

Sure, it’s been positive and that has been the case that all the institution. That’s another area where we get a little bit of the lift in a weaker job market. It does appear that in addition to new students, some people going back to school if you will, we also tend see students staying in school at a little bit higher rate, but there at the same time, we have also been investing and improving the academic delivery and the student experiences, student services that around the classroom for quite some time before the economic downturn. So, it’s hard for us tees out those two factors, because our own internal efforts which are continuing have been giving us an improvement and we expect to continue that and then more reasonably we’ve seen some lift from the economy.

[Operator:]

Your next question comes from Kelly Flynn - Credit Suisse.

[Kelly Flynn:]

A couple of questions here. The core idea placement rate which was obviously quite strong, could you just remind us what the year-over-year change in that was and then I have a couple other small ones.

[Daniel Hamburger:]

Sure, it’s pretty consistent. A year ago it was about 92, 42 I think. We also always talk about the 90/40 at DeVry University; sort of the minimum expectation is at 90%. Employees had a salary of $40,000 and we’ve been running ahead that; we’ve been over delivering on that value proposition for sometime. For last year I think we got 92/42, now it’s about 92 or 92.1 in the $45,000 salary.

[Kelly Flynn:]

Okay, great and then a couple more. The color you gave on student services is a very helpful, but on the growth margin line, is there any way you could help us out this quarter given that the acquisition rolled in fully this quarter on the gross margin and what you expect. Is it reasonable to extrapolate the year-over-year change in gross margin to the rest of the year or are there any seasonal factors that you would highlight to move away from doing or not?

[Rick Gunst:]

Well. I think part of the seasonal fact would have been what I’ve referred to in terms of some of the open headcount that we had in the first half of the year last year and those positions were filled in the latter part of the year and we have been continuing to open up new locations, DeVer UCs. So, if you look at what I said in the first half we had revenue growth excluding US education about 19.5% across the rest the portfolio and our growth and cost of instruction was around 14%, so we’re getting leverage there and we would expect to continue to get some gross margin leverage in the back half of the years as well; may be not to the same extent.

[Kelly Flynn:]

Okay, great and then could you just remind us what you said about the goodwill and you kind of ran through that quickly. What’s the impact of that on the financial statements, the change and how account for that?

[Rick Gunst:]

Are you talking about the amortization for US assumption?

[Kelly Flynn:]

Yes.

[Rick Gunst:]

Previously, based upon our initial estimates, preliminary estimate when we completed the transaction, on the various different pieces it would qualify for intangible accounting, some of that’s been shifted to goodwill that doesn’t get amortize. So going forward for fiscal 2009 it’s going to be about $800,000 per month of amortization expense for US Education and then as we go to next year, some of that will fall off. So, that we will fall off and it will be a little bit more in the first half of the year and then fall off and it’ll be probably about $400,000 to $500,000 per month on average; a little bit more in the first half than the second half from that average.

[Kelly Flynn:]

Okay, and was it 800 so far?

[Rick Gunst:]

Sorry.

[Kelly Flynn:]

It has been 800 so far per month.

[Rick Gunst:]

We did an adjustment in the second quarter retroactively to get it to 800 for what we did; that little bit in Q1 and then on a year-to-date basis, that’s what it’s been yes. There’ll be more detail in the 10-Q that we will be filing in early September, we’ll give you all the breakout of what we had before, what we have now and more detail in terms of the line items.

[Kelly Flynn:]

Right, just to be clear, in the second half of this year is the run rate different than what I was in the second quarter? Okay.

[Daniel Hamburger:]

No, the back half of the year the run rate will be about $1,000 per month. Kelly, just in case we’re getting into some of the details, the big picture on US education is that we are exceeding the initial expectation for this financial contribution that we laid out when we first announced the transaction. We try to say what we do and do what we say and we can do a little better, even better.

[Operator:]

Your next question comes from Jeff Silber - BMO Capital Markets.

[Jeff Silber:]

Thanks so much. Can you remind us what tuition increases if any are planned over the next 6, 12 months or so?

[Daniel Hamburger:]

Well we haven’t announced that yet Jeff, so there’s nothing to remind other than that we continue to take a look at it in the competitive environment and we are in an environment where we’re seeing pretty hefty tuition increases out there and so we’re mindful of that and at the same time we’re trying not to straight too far from the plus or minus 5% range. So, we try to balance all the factors.

[Jeff Silber:]

Will any potential increase in loan limits in the stimulus package affective you’re thinking on that all for instance if the 2,000 limits goes up?

[Daniel Hamburger:]

No, I’m sorry to cut you off, but no. I’m so emphatic that the answer is no. We look at the competitive environment and we’re constantly recalibrating and recalculating the return on educational investments, the ROI that our students are achieving. So, as that continues to improve and that is exemplified for example by the 90/40 or in this case 92/45, that is what in the long run underpins the ability. It’s not cheap to go DeVry University for example; it’s not cheap to go to Chamberlain College of Nursing, it’s not cheap to go to Ross University School of Medicine, we understand that, but as long as that is underpinned by the value proposition that the students are achieving, then it works.

[Jeff Silber:]

Okay, great I understand. Dan, in your prepared remarks you talked about the impact on the average course load per student. Can you give us a little bit more detail when did you start seeing that or any specific program area being effective more than other?

[Daniel Hamburger:]

Yes, we are talking about it, there’s more color in that. It’s not like A times B equals exactly C, it’s a little bit less. So a student who for example may have previously taken four courses; I’m just making up an example, maybe are there taking three courses. It’s not all students. It’s not across the board, but we’re seeing a little bit more of that as one and probably the main impact of the economy that we’ve seen. Just take a little bit later academic loads at DeVry University, undergraduate in particular and so we’re active on that, we’re counseling students on the benefits of taking heavier course load in order to graduate sooner and achieve that value proposition, the 90/40 and 92/45 now. Helping to advise them on achieving co-borrowers and many other things to counteract that, but that is one piece of color that we wanted to provide.

[Jeff Silber:]

Okay and Rick just one quick follow-up for you. You mentioned the net investment loss. Can you tell us what there was either on an after tax basis or per share basis?

[Rick Gunst:]

Well. On a per share basis it’s going to be about a penny and a half. That’s something that when contemplated as we entered in the back half for the second quarter and on an after-tax basis it’s pretty much at a US rates. So you take 60% of that that gives you that. So it’s about $1 million after-tax.

[Operator:]

Your next question comes from Andrew Fones - UBS.

[Andrew Fones:]

I was wondering if you’ve noticed any impact from the economy on those choosing an online course that is an on ground course. Obviously we’ve seen very strong growth in your online courses that seem to be very popular?

[Daniel Hamburger:]

Yes. Thanks Andrew. Yes we have seen very strong growth in our online programs; for example the Chamberlain College of Nursing and the Keller Graduate School of Management of DeVry University under graduate, just to name three examples. It’s a major opportunity and I would say that some of that growth perhaps can be attributed to the economy and that students are saying very well, instead of driving, especially when we saw the high gas prices last summer, we heard of some anecdotes about that, but it’s basically anecdotal at this point. I would say the much bigger factor is our own operational improvements, the investments that we’ve made in marketing and recruiting and several people asked about the investments that we’ve made that show up in the SS&A line; other, they’re paying off, because we’re attracting more students. So, I would say that’s a much bigger factor in the online growth than the economy.

[Andrew Fones:]

Okay, thank and then just a follow up to the last question in terms of the numbers of course the students are taking. Where you have seen students pull back in the number of courses they’re taking a little bit. Has that been the more expensive courses would you say and there’s been perhaps a little bit less of that kind of activity with the lower cost courses or any comments there? Thanks.

[Daniel Hamburger:]

Sure. Yes, it’s been more DeVry University and not so much for example Apollo College or Western Career College with their associate degree or certificate programs. So, that’s a good observation Andrew.

[Operator:]

Your next question comes from Gary Bisbee - Barclays Capital.

[Gary Bisbee:]

I guess the first question; with the interest rate on the line of credit so low, are you going to continue to rebuke that or does this make you look to may be more aggressive buybacks or acquisitions and just given the cost of capital there is so low?

[Daniel Hamburger:]

Well, as I mentioned we’re buying back our shares, so that activity is underway. We are always opened in looking at the opportunities of whether there’ll be any acquisition fund or what have you and so with borrowing rates less than a percent and we’re earning about the same amount of money, there’s less risk in terms of taking that out, so it’s a good return. We did give more back to our shareholders with the increase in our dividend too; we had a 33% increase in our dividend that we paid out in January; so another way of using that capital.

[Gary Bisbee:]

Okay and so did I hear you say that the US Ed Corp deal is a penny or two accretive so far or this quarter or something like that?

[Daniel Hamburger:]

In the current quarter it ended up being about a penny or two better than what we have projected and a last part of that is due to the amortization I talked about. Well, first and foremost I think their operating results are doing better than we anticipated. The amortization is lower, like I said by about a couple of hundred thousand dollars per month. Then when you look at the impact of the acquisition, the cost of the cash that we used and the cost of the debt is much lower than we would have projected back four, five months ago. So, that helped sort of the accretion to go from a slightly diluted to accretive acquisition when you look at it in a vacuum, but also keep in mind we still pretty high cash balances and so relative to last year, relative to our own internal projections of a few months ago, we’re running less on that cash too; so some have been offset to that for the total company.

[Gary Bisbee:]

Yes and I guess then unless something changes dramatically with your spending pattern, the deal could likely be -- I hear your on the lower interest on the cash, but you could likely be a nickel accretive or something in the full year. Other than the interest income that you’re earning on your cash being lower, is there anything else that you would likely overspend on relative to your prior plan; if the deal does end up being quite a bit accretive or is that already based in your commentary around the back half margin potentially being better than what we’ve seen in the first half?

[Daniel Hamburger:]

I think the deal will be accretive based up on the changes we just mentioned and then when your looking at it across our whole portfolio we got a lot of moving pieces with the Becker professional review segments, worse than some we anticipate as we entered the year given the economic situation. We are making up for some of that with strong results in US education and DeVry University and Ross and Chamberlain. So, that’s again the benefit of our diversified portfolio.

[Rick Gunst:]

Yes, a quick comment I would make on that Gary, if you’ll indulge me is that when we always knew US education was going to be very accretive in the long run, we didn’t know it was in the stub year of its first year with us and now we’re glad to see as Rick said number one factor being their strong performance. That it does look like it will be accretive even in its very first year.

[Gary Bisbee:]

Okay and then just one cleanup question. Could you go through the accounting again for this charge in the auction rates? You took the charge now; you said you’ll get that back into income at some point, is that overtime or is that going to be sort of a one time shot when they buy this back from you?

[Daniel Hamburger:]

Well, if everything goes as expected and nothing happens in terms of redeeming these auction rate securities over the next year and a half, we’ll sell these securities back to UBS at par in June 2010. So, each quarter between now and then will go through a whole reevaluation process of auctioning securities in this put option and over time that $1.7 million of unrealized loss should come back in the income, so that the end of it in six quarters from now will be back to a push.

[Gary Bisbee:]

Okay, but you would likely then break that out like you did this quarter, so we’ll have a sense on an ongoing basis?

[Daniel Hamburger:]

Yes.

[Operator:]

Your next question comes from Corey Greendale - First Analysis.

[Corey Greendale:]

A couple of questions; first of all, I know people have touched on the change in the course load per student, but first of all, is there anyway you can quantify that it all, like the percentage changed in average courses per student or anything like that and second of all, is there a differential between what your seeing online versus on ground or there’s a mix shift towards online may be accounting for some other change in the number of classes?

[Daniel Hamburger:]

Sure. I’ll just quantify it to say that we can’t quantify it, but I think it’s being overblown; like maybe even a lot here on this call and other calls that I’ve heard about. So, it was just a little color in just letting people know that enrollment times tuition increase, A plus B does not equals C exactly, it’s a little bit less then C. In terms of mixed shift, yes, there’s also a little bit of mix shift, because online undergraduate and this is not the case at the Keller graduate school management, but online undergraduate, the students do tend to take a slightly lower course load. So, there’s a little bit of mix shift to online that depresses the overall course load for the university and then a little bit of international degradation, but I think we are getting a little carried away with it I think.

[Corey Greendale:]

Second question is you’ve been very clearly that you’re looking at international acquisition just operationally. Would you be comfortable about closing an acquisition or announcing an acquisition tomorrow or would you rather wait until you’ve had US education Corp. for a little while longer, make sure there’s no bumps there before you would do an acquisition?

[Daniel Hamburger:]

We are very comfortable with closing an acquisition today, tomorrow and we have the management team in place and that’s been our stated strategy. You mentioned international, that not the only place that we could do that, but yes, specifically to your question about international, yes, we would be comfortable.

[Corey Greendale:]

Okay and then I wanted to ask; among your investments, could you quantify for us how much of that is in admissions reps or just I guess more specifically how many more admissions you actually have now than you did a year ago, either a number or percentage?

[Daniel Hamburger:]

Yes. I don’t think we’ve got that, but I don’t have the exact figure in front of me. If somebody has that or we can get back to you, we include that in our filings. Just to give you some color on that, the investments are in the marketing recruiting area generally and it is a sort of continuous process and those groups work very closely together. So, that value chain sort of all has to go up together. So, as you spend more in marketing then you need to hire more admissions advisors to enroll the students or respond to the perspective students who enquire. You need more student financially aid, representatives to handle that, academic advisors, the whole chain goes up. So the investments are sort of across the board with and perhaps a little bit of addition investments, particularly at DeVry University in Grand Building and we’re continuing to invest in enhancing this wonderfully powerful brand of DeVry University, this 78 year old brand that just keeps getting stronger and stronger based on the academic results; that what gives the brand value. We just think we haven’t done enough and there’s more that we can do to communicate that value, that really endemic in that 1940, that’s why the new tag line of “We major in careers,” which really is seeming to resonate with people. I think that was a very good choice on the part of our marketing team. So we just need to do a better job of telling that story, telling that message and carrying that through all the different media, especially today is modern media electronic and so that may be a little bit of extra emphasis on top of everything else that I mentioned.

[Operator:]

Your next question comes from Trace Urdan - Signal Hill.

[Trace Urdan:]

Could you elaborate a little bit more on Project Delta? What prompted the decision to go with a new SIS system now? What kinds of return you’re hoping to achieved after having this new system put in? How it’s going to change your processes, make them better, more efficient etc?

[Daniel Hamburger:]

We have not had satisfactory results from the former system that we put in and we’re just satisfied with that. We can see that there is a very high degree of improvement and not just the efficiency, that’s certainly true and we’re certainly interested in that, but even more importantly improvements in our levels of customer service which is so critical and going to be absolutely a key differentiator more and more into the future of this world of higher education. So both efficiency and improving customer service, those are the drivers of project Delta. Then this also applies in the sort of the what people typically think of the core of an SIS, of enrolling students and scheduling them into classes and keeping track of all that, but it also applies upstream into what many people call CRM, Customer Relationship Management. So there is a lot of value that we can drive there and become much more efficient in that process and throughout the enrollment process. So those are really the drivers and the value that we’re looking to achieve with the project Trace.

[Trace Urdan:]

So when you were looking at this and evaluating around an ROI basis, what were the factors that went into that decision?

[Daniel Hamburger:]

Well, it will be efficiency throughout that core process as well as the enrollment process and even more importantly customer service gains that our students would see; enhancement in the level of service that is provided by our internal people, as well as enhanced self-service capabilities so students can serve themselves which is the way many people, many students wanted to be served today, which has the double whammy of, “hey, if that’s that we want it, great and its more efficient, because you’re serving yourself as a customer.” Then just some technical considerations in terms of scalability and reliability and then sort of efficiency from a technical capability standpoint in terms of servers and that kind of efficiency.

[Trace Urdan:]

And does the SIS, does it extend all the way into the enrollment process or into the admissions process or does it just start when a student actually enrolls?

[Daniel Hamburger:]

It extends into the enrollment process. I need to do better job of explaining. That includes that enrollment process what we call CRM or Customer Relationship Management, in the IT world they will call that; that is part of the project as well.

[Trace Urdan:]

So, a system that the admissions counselors interface with; it will swap out what you have in there currently.

[Daniel Hamburger:]

Yes

[Trace Urdan:]

Okay, one of the things that we’ve noticed; if you just look at the ROI business in the segment detail, it looks like the incremental margin and the incremental revenue in that business has been declining sequentially. In other words, the margin on the new revenue in the DeVry business keeps going lower and lower and I presume that that relates to some investments you’ve been making in that business, but I’m wondering if you might able to speak to that. What kind of incremental investments were you experiencing in the DeVry business on a year-over-year basis and when do you think the investment spending in that business might stable us?

[Daniel Hamburger:]

Well, I think the margins are still improving, year-over-year, quarter-over-quarter.

[Trace Urdan:]

The pace is declining. When you look at the new students coming in, each new student is not as profitable as the one before?

[Rick Gunst:]

Well remembered last year we had a tremendous benefit from the production in force we had in our campus staffs and faculty at the beginning of fiscal 2008 and we benefited from that throughout the whole year. Also, we had a tremendous amount of real estate optimization activity during that same time period and so all that was a big one time benefit helped the year-over-year comparison, quarter-over-quarter comparison throughout fiscal ‘08. Now in fiscal ‘09 we’re still showing improvement, but we continue to make as Dan mentioned, continued investments and inquiries and people and brand building and that does somewhat soften the increase, but still there’s still some improvement.

[Daniel Hamburger:]

Yes and Trace, if you did the microeconomic analysis, which obviously we have access to that you don’t, I could tell you, the incremental student is accretive, is value adding from an academic perspective and from a financial perspective?

[Trace Urdan:]

Yes, no I’m not suggesting they’re not accretive; it’s just that the pace of the accretion seems to be going backwards and logic would suggest that it should go the other way right.

[Daniel Hamburger:]

It might be slowing from what it was, but that again has been purposeful and that’s consistent with what we’ve been saying we’re going to do in this…

[Trace Urdan:]

No, I know it has. I’m just looking for some kind of guidance as to when do you think that might stabilize; you’re still sort of layering in new investments here?

[Daniel Hamburger:]

Yes Trace, as you know, I mean from studying this industry as long as you have, whenever you’re in growth mode, that dynamics is going to be there, because your adding new students at a faster rate and we know that when you look at the life cycle of the student, an investment and a new student is accretive typical of the second year, so you adding to your existing mix of new student who also don’t persist in the same level as you do. So, on a percentage basis if you had a mature or slowing rate of growth, you’d see a nice pickup in your margin, but you wouldn’t like it. So, that’s sort of as you’re in the growth mode, which is where we like to be and we’re going to continue to be. You’ll see that dynamic when you look at it from the overall headline perspective.

[Operator:]

Your next question comes from Scott Schneeberger - Oppenheimer.

[Scott Schneeberger:]

Thanks and very nice work on your progression of placement. I guess though, that tracks up through probably the ended the summer, the 92 and the 45 and really before we get into the tough time. Is that what’s driving what you announced today as increased investment in carrier services. Could you elaborate on that a little bit more, please?

[Daniel Hamburger:]

Sure and I know that we’ve been flagged that we’re overtime, but we’re going to continue to make sure there’s a couple of more people, so we don’t want to cut anybody off. Scott, your question about, that actually is not -- the last class, the June graduates but we measured this through the six month period following graduations. That just closed. I mean that closed well after September 18 and all the meltdowns in the markets. So, it is very recent data and we don’t breakout each individual class, we give you the three time average, but if we did you’d see the most recent pieces in line with that average. So, watch driving my comments about increased investment in our career services offices and by the way, I don’t have this definitively, but I think DeVry University has the largest career service office of any university on the planet and I’m trying to get that confirmed; there’s over 125 career services professionals, but we are just being proactive. So it’s not in response to fall off it’s being proactive to say “Oh, my God look at the world” lest if there’s anywhere who want to invest, it’s in that value proposition and its in academics and part of that academic outcomes is the career success. So, we are looking to invest more in career services offices across people, technology other things we need to do, to protect and preserve that wonderful outcome.

[Scott Schneeberger:]

Okay, thanks and a real quick housekeeping follow up. On the tax rate creeping up, Rick can you speak a little bit to how we should think about that going forward? Thanks.

[Richard Gunst:]

Sure. Well as I said the rate for the first six months is at 29.3% and that’s our best estimate of where we think the year is going to shake out. So, the rate was a little bit higher in the quarter, because we had to catch up for the rate in the first quarter; it was a little bit below that and it’s really the factor of the mix of income between Domestic and international sources and our rate of income on our tax rebuilding that’s also lower per municipal bond investment. So, that’s ahead of factoring as well, but 29.3 should be our current estimate for the full year.

[Operator:]

Your next question comes from Brandon Dobell - William Blair.

[Brandon Dobell:]

Going about the corporate reinvestment question, you’d mentioned you’d lost one corporation. I guess the question from my perspective is has it made a difference. Do you people that because of a corporate action say “Well that’s it, I’m not going to school or not taking a Becker or a Stella class” or do they say, “Well, I can find the money someplace else” and they keep going and does that decision hinge on how far long they are, in their degree program?

[Daniel Hamburger:]

Yes Brandon, it’s the former and just to remind everybody which was the former and which was the latter, I always forget which one I said first. The first one was that they are not stopping; they’re continuing in their school. We’re not seeing, we’re not losing students over it or anything like that.

[Brandon Dobell:]

Okay. Turning it to professional and training for a second, any sense of how the revenue trend should look in that business. I mean did December give you a better feel for what the right run rate should be or what the right year-over-year decline should be. I’m just trying to get a sense of how to model that business or how much visibility you have looking out into the next two quarters or so.

[Daniel Hamburger:]

It’s quite honestly a hard one to put a real tight band on it. I mean obviously this is one of our segments that has the most direct impact on what’s going on in the economy. Our run rate on revenue, last year we were double digit, low teens and we were 7% in the first quarter, down to 1% in the second quarter. We think that we’ll be roughly what we’ve been year-to-date for the balance of the year, but again in these changing times its hard to really get a strong handle on it, but it’s going to be give or take that amount compared to prior year.

[Brandon Dobell:]

Okay and then going back to the question about the hypothetical around the Stafford and Pel impacting EDUCARD to your private lending, any sense Rick of kind of what the bad debt is that you carry from the EDUCARD program or how should we think about the hypothetical impact on the P&L or not just kind of from a cash flow impact, but how much bad debt we could expect that might go away?

[Daniel Hamburger:]

We haven’t really seen a major impact on bad debt over the past months or quarters. I mean our debt has range historically in the 2% to 3% range and we’re in that range today. So, we keep a lookout and we try to make sure that we’re being appropriately factored in, what’s going on out there and looking at the students that are in school and those that we have balances on and we feel confident that we’ve got it under control.

[Brandon Dobell:]

Okay and final question; from a placement perspective, if you look at the stats from the most recent graduating classes; a different way to look at it would be, the gradually, they tend to find the jobs in their local area and if you see any significant variances around the different locations, around the DeVry Universities, based on what types of companies were in those local geographies or something like that or is it just too scattered to make that kind of assumption or that kind of analysis work?

[Daniel Hamburger:]

Sure. We do see variability around that. By the way we call them employment statistics and I’m not trying to criticize anybody, but we’re not a placement office. It’s a professional level and its employment statistic. They do very by geography and that gives us opportunities because we can compare best practices of what one employment there, one career services office is doing and then transfer that best practice. We also have the opportunity to do that with the newly acquired friends like Apollo College, Western Career College and others. So, other is some variability around the mean there and you would expect that given the difference in the appointment picture around this great country of ours.

[Brandon Dobell:]

And then a final question for you. Since you guys spend a lot of time with corporate partners in terms of identifying opportunities with curriculum, how much visibility do you have into their potential need or lack thereof for your graduates. I would imagine if you had a pretty good view looking out; three, six, nine months; how much of those conversations color your judgment or your decisions to add more career service officers? Are you changing programs now that the economy has changed? I’m trying to get a feel for how much impact that back channel information has?

[Daniel Hamburger:]

It does have an impact. We spoke with an energy company yesterday who is interested in talking to us about green jobs and what is that going to mean; biomedical engineering technology, which really seems to be taking off now. We were in that early, we were in that I think about four or five years ago and now does seem to be picking up. We’re seeing it with the stimulus and may with the engineering, may be mechanical, civil engineering, so we’re taking a look at things like that, as well as I mentioned project management that we do with IBM and I mentioned enterprise computing track; working with employers actually to help us with the curriculum. I mean that’s a strength of the market funded institutions. They tend to be very responsive to the needs of employers; one of the only one who does this, but I think DeVry University does it very well. Also I as the company Chamberlain’s President, Susan Greenwell and several meetings with hospital CEOs and CNOs, Chief Nursing Officers and a couple of weeks ago at the end of the meeting they said “Oh by the way, you’re the only nursing company that’s ever come in here and asked us what we’re looking for.” So we do change our curriculum based on the input of the employers and certainly our career services offices adapt this well and that informs where we go from a curriculum standpoint in launching new programs. So, with that I know we’ve gone way over, but that’s in an effort to be responsive. I want to thank everyone for your questions and remind everyone that DeVry’s next conference call will be held on April 23 and that will not only be third quarter results, but also the Spring enrollment results. So thanks again everyone and talk to you next time.

[Operator:]

Thank you for your participation in today’s conference. Ladies and gentlemen this does conclude the presentation and you may now disconnect. Have yourselves a wonderful day or evening.