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DeVry Inc. (NYSE:DV)

F1Q09 (Qtr End 09/30/08) Earnings Call Transcript

October 23, 2008, 4:30 pm ET

Executives

Joan Bates – Director of IR

Daniel Hamburger – President and CEO

Rick Gunst – SVP, CFO and Treasurer

Analysts

Amy Junker – Robert W. Baird

Bob Craig – Stifel Nicolaus

Sara Gubins – Merrill Lynch

Andrew Steinerman – J.P. Morgan

Jeff Silber – BMO Capital Markets

Ella [ph] – Oppenheimer

Trace Urdan – Signal Hill

Gary Bisbee – Barclays Capital

Andrew Fones – UBS

Corey Greendale – First Analysis

Jennifer Childe – Credit Suisse

Brandon Dobell – William Blair

Operator

Good day, ladies and gentlemen, and welcome to the first quarter of 2009 DeVry Earnings 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 facilitate a question-and-answer session towards the end of this conference. (Operator instructions) I would now like to turn the presentation over to your host for today's call, Ms. Joan Bates. You may proceed.

Joan Bates

Thank you, Jeremy. With me today from DeVry management are Daniel Hamburger, President and Chief Executive Officer, and 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 SEC on August 27, 2008.

Telephone and webcast replays of the call are available until October 30. To access the reply, dial 888-286-8010 domestic, or 617-801-6888 international. The pass code is 29338872. A replay is also available in the Investor Relations portion of our website. And as a reminder, our press release and preliminary financial statements are available in the IR 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 today for our fiscal 2009 first quarter conference call. I will provide a brief introduction and then Rick will discuss our financial results, and then I will come back and review operational highlights in the quarter before we open it up to questions.

During the first quarter, we continued to execute our strategic plan, delivering strong financial results and increases in enrolment. At the same time, we invested in future growth through enhanced academic quality, continued diversification and investments in recruiting, marketing and technology. Of course, I’d like to highlight our key accomplishments this quarter and this is the conclusion of the U.S. Education acquisition on September 18. In this economic environment, getting any deal done, much less a $300 million one is an accomplishment, and we are certainly pleased to welcome U.S. Education to the DeVry family. Apollo College and Western Career College together serve over 9,000 students for careers in the high growth allied health sector through certificate and associatory programs. While in its early stages, the integration is on track and we are working to take advantage of the numerous opportunities we have from this combination. These include adding new programs, new locations, including co-locations, and leveraging DeVry’s high quality online capabilities.

In this quarter, we also launched the Keller Center for Corporate Learning. This program delivers educational solutions to businesses and their employees through a variety of educational offerings, including degrees, more than a dozen MBA concentrations and graduate certificates and professional education. Our objective here is to increase DeVry Inc.’s share among corporations, government organizations and the military by leveraging the DeVry University, Keller Graduate School, and Becker brand.

Now let me offer an update on the student loan situation, and how it’s affecting DeVry as well as just comment on the current economic environment generally. We’ve been closely monitoring the news regarding financial institutions that provide loans to our students. We, like all education providers, strive to ensure that students who want an education have access to the loans they need to finance it. We are concerned, we are being vigilant and we are literally monitoring the situation on a daily basis. Some lenders have announced they are exiting various loan programs for some schools. Sallie Mae has announced that they are tightening underwriting criteria for private loans, but also indicated they expect the criteria to relax somewhat by the end of the calendar year.

So given all these announcements and all these news, where does DeVry stand? We are fortunate to report that today we are not seeing a material impact on our continuing students or on our new enrolment as a result of these recent events. DeVry is well positioned in the student lending area for several reasons. First, private loans make up a very small percentage of the loans used by DeVry students. Also increases in federal loan limits and Pell grants have eased the need for private loans. Prior to these increases, private loans had been running about 5 to 6% of revenues and now we expect that level to decrease.

Second DeVry students have several alternative funding options. For example, DeVry university students are eligible for most of the state grant programs available, those are grant monies. Students of DeVry can also take advantage of the EDUCARD, the internal financing we’ve provided for more than 30 years. And then third, lenders continue to make themselves available to help DeVry student. What we are finding is that as lenders cut back on lending or increase their standards, DeVry is one of the organizations that they want to work with. When I am saying this, we are not trying to boast or anything like that, it’s just been instituted to the fundamentals, our students’ excellent record of employment outcomes and favorable loan default rates.

Now, we are doing everything we can to help our students obtain financing. We maintain strong sell and private loan options for students and we are continuing to explore options with new lenders to provide expanded private loan availability. In addition, we are fully operational with direct loans, and we are using this mechanism as needed. So the takeaway message is that while we’ve experienced no material impact to date, we continue to monitor the situation very closely and we continue to pursue all available funding options for our students.

Let me now step back and comment more generally on the global economic crisis. You are probably wondering whether given all the volatility and turmoil, we believe we can continue to grow as we have in the past. The answer is yes. Education and healthcare are less sensitive to economic downturns and we are at the intersection of both. For example, we now have in medical and healthcare education 15,000 students and $400 million in tuition revenue, up from zero five years ago. So our strategy of diversified growth is serving us well in this downturn. In fact, we are seeing somewhat of a pick up in demand as those who are unemployed or underemployed are considering going back to school, especially in allied health profession.

But to balance these comments, one area that is running a bit counter to this is our professional and training segment as softness in the financial industry is being felt at Becker Professional Review. During this crisis, our conservative capital structure is also a source of strength. We have a strong balance sheet and plenty of liquidity. In fact, we are on the look out for investment opportunities that may present themselves, such as depressed assets prices, reduced advertising rates, or management talent, which may become available. We see in the current crisis the seeds of opportunity. We will be prudent, this is DeVry we are talking about after all, but we will be aggressive where we see opportunities to enhance shareholder and academic value.

So with that as a broad introduction I will turn the call over to Rick for the numbers and for progress on our financial strategy.

Rick Gunst

Thanks, Daniel, and good afternoon, everyone.

As you’ve all seen in our press release, we delivered very strong results in the first quarter fiscal of 2009. Quarterly revenues surpassed $300 million for the first time. Revenue of $303.7 million was up 21.3% versus prior year. Reported net income of $34.8 million in the first quarter was up $8 million or about 30% versus prior year. Earnings per share of $0.48 increased $0.11 versus last year but note that fiscal 2008 first quarter results included a loss of $2.3 million net of tax or about $0.03 a share from the sale leaseback transactions at Phoenix, Seattle and Alpharetta. Earnings per share were up 20% excluding this discrete item on a more apples to apples basis of comparison.

Pretax income margin was 16% in the quarter up versus 15.9% achieved a year ago excluding the discrete item. Our reported results include U.S. Education for 12 days we owned the business during the first quarter. U.S. Education contributed $5.6 million of revenue in the quarter; therefore total revenue growth would have been up 19.1% excluding the impact of U.S. Ed. Incremental net income contributed by U.S. Education was not material, as the additional operating income was offset by incremental amortization expense and interest expense related to the acquisition. Some detail is shown in our press release on the results of the U.S. Education in the quarter and pro forma financials on a quarterly and annual basis will be filed by the end of November in accordance with SEC guidelines.

Also for your reference, first quarter results included expenses related to share based payments of approximately $3.1 million pretax or $2.6 million net of tax. This is higher than last year’s first quarter expense of approximately $1.5 million pretax or $1.3 million net of tax primarily due to appreciation of our stock over the past year and an increase in the number of retirement eligible awards, which are fully expensed upon grant. Our overall effective tax rate was 28.3% in the quarter, up from 27.4% rate for the full fiscal 2008, primarily due to the increase in domestic sourced income.

We continue to realize gross margin leverage in the quarter as cost of educational service expense increased by 15.4% versus prior year excluding the discrete item compared to 21.3% revenue growth as we continued to driver leverage within DeVry University. The increasing cost of educational services would have been up 12.7%, excluding U.S. Education. Our student services and administrative expense increased by 28% in the quarter or 26.2% excluding the U.S. Education.

The higher rate of growth is consistent with the perspective we provided last quarter, with the growth in spending driven by tiny shifts last year when we deferred some spending and had a number of open positions. The online growth acceleration actions with 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 future growth. Now we are making these investments because they are delivering positive returns on our owner’s capital by improving academic quality and driving growth.

Let me now walk you through some of the key highlights of our operating segment results, which are detailed in the earnings release. First, the DeVry University segment revenue was up 18.4% versus prior year driven by the strong summer enrolment growth coming from continued online expansion and improved onsite enrolments. The addition of Advanced Academics contributed about 100 basis points of revenue growth in the quarter. We acquired Advanced Academics October 31 of last year, so next quarter will be last before it completely overlaps. DeVry University segment operating income increased by 31% or up about $6 million in the quarter excluding discrete items. This improvement was driven by gross margin leverage, offset somewhat by the higher marketing and prudent spending versus last year.

The medical and healthcare segment revenue was up 43.1% in the quarter or 28.1% excluding the impact of U.S. Education. This growth was driven by Ross enrolments and Chamberlain’s geographic expansion into Illinois and Arizona along with accelerated growth of the online RN to BSN program. Operating income for the segment of $15.4 million was up $3.8 million or 32% versus last year. Operating income would have been up about 23% excluding the impact of U.S. Education. As footnote in the segment results within our press release, U.S. Education continues to perform very well. On a standalone basis for the full quarter, revenue was up 22.4% and operating income increased 71% driven by increased enrolments and operating leverage at the campuses.

Finally, our professional and trading segment saw revenue growth slowdown a bit to 7.9% due to the overall economic slowdown, particularly among the financial firms at Becker and Stalla serve. Operating income was actually slightly down versus last year due to the increased investment in business development and cost associated with our new Hong Kong office. It should be noted however that we are overlapping some very strong results from last year and that business continues to deliver very strong operating margins.

Our balance sheet reflects the impact of acquiring U.S. Education a couple of weeks before the end of the quarter. We borrowed $166 million in the quarter and utilized available cash to fund the acquisition. Our cash and marketable securities balance was about $242 million at the end of the quarter compared to $223 million last year. And cash flow from operations was $97 million versus $80 million last year. Our net accounts receivable balance was about $155 million versus $76 million last year. Over half of this increase was a result of the addition of receivables for U.S. Education and Advanced Academics that weren’t in last years balance.

Another 20% or so can be attributed to increased enrolment and strong revenue growth in the quarter. Most of the balance or about $15 million is because DeVry University receivables were higher than they should have been due to some hangover from our financial processing issues mentioned in our August conference call. While the system issues have be remedied, some of the processing for student accounts still need to be updated as of the close of the quarter. Improvements have already occurred in October and we should be back to normal within the next few months.

I’d also like to note that our solid liquidity position was further enhanced recently with the IRS issuing a notice providing companies such as ours with offshore cash the ability to access these funds on a short term basis without triggering a tax on the funds. In essence, this notice provides us additional liquidity by enabling to tap over 100 million offshore cash balance as needed for domestic purposes for up to 60 days, three times a year, within the next two years. This provides us short-term source of capital for debt reduction, share repurchase activity or other purposes.

Capital spending was $10.6 million during the quarter versus $6.9 million spent last year. Capital spending is expected to pick up during the balance of the year with total capital spending for the year in the $75 million range, including U.S. Education. This higher level of spending is due to spending on our student system project called Project Delta, spending associated with Ross’ expansion into Grand Bahama, DeVry University and U.S. Education spending on facility improvements in new locations, and continued geographic expansion within Chamberlain College of Nursing.

That concludes my overview of the very strong results for the first quarter. We’ll continue to focus on operating improvements going forward while making the investments needed along the way for improved academic quality and future growth. We are also very happy to have U.S. Education as part of our strong portfolio of businesses going forward. And with that let me now turn the call back over to Daniel for a bit more on our operating results.

Daniel Hamburger

Thanks, Rick.

Let me begin the operations review with DeVry University including its Keller Graduate School Of Management where for the September 2008 session, total graduate course takers were up 12.2% versus the same period in 2007. As we do every year, we will report DeVry University fall 2008 undergraduate enrolment and November session graduate enrolment in early December.

The first priority of our strategic plan is achieving the full potential of DeVry University. This involves increasing our investment in marketing and recruiting, including brand building, enhancing capacity utilization through facility rationalization and adding new programs and improving retention through customers service and academic quality. We are making solid strides in all of these areas. We are in the process of gaining approvals for three new tracks for our Computer Information Systems or CIS degree program. New tracks in CIS include enterprise computing, health information systems and web game programming. We are adding these in response to demand from students and from employers and we are structuring them as tracks within CIS rather than individual programs to make them more flexible to deploy.

And one of our largest initiatives is the implementation of Project Delta, our new student system that will take DeVry to higher levels of efficiency and service. We continue to ramp up the spending level in the first quarter as we staff up the team of subject matter experts and we are now close to selecting a vendor. And academic quality continued to be strong at DeVry University. For the past year, 92% of our graduates in active job market were employed in their field of study within six months of graduation, and this and an average starting salary of over $44,000 a year.

Moving on to Ross University, in the September 2008 term, total students increased 8.8% and new students increased 6.3%. Ross continues to make investments in faculty, classrooms, clinical affiliations and student housing to respond to capacity constraints and to continued strong student demand. One way that Ross markets itself to prospective students is through information seminars that they hold. I attended one of these a couple Saturdays ago and the place was packed. The quality of each incoming class also continues to increase. The September class, the grade point average was 3.5, and the average MCAT was 26. This demonstrates that even with our enrolment growth, we continue to attract high caliber students.

The new clinical center in Freeport, Grand Bahama that was announced in July is on track for a January 2009 opening in its temporary location. Hiring is on track and the Dominica Medical Board has given its approval for the new location. Boy, that was easy to say, but let me tell you it is not easy to achieve; there are lot of moving parts here and the Ross team is doing one heck of a job.

At the Chamberlain College of Nursing, Chamberlain like Ross continues to respond to this huge unmet need for healthcare professionals. We believe of course that there are tremendous growth opportunities for Chamberlain. There’s currently a nationwide shortage of approximately 200,000 nurses, and that shortage is expected to grow in the coming years to over 1.1 million nurses, and yet at the same time, the U.S. educational system is turning away 40,000 qualified applicants every year. So at Chamberlain, we are investing in facilities, faculty and technology to help meet this market need. Our goal is to open at least one new location per year and you’ll recall we opened two new sites last year. We’ve submitted an application for a new site in Jacksonville, Florida and expect approval to open in fiscal 2010. We expect to launch a masters of science in nursing program next year as well.

Let me also make a few additional comments about U.S. Education as it joins our medical and healthcare group. Both Apollo College and Western Career College are performing well and a joint integration team is doing a super job. They’ve only on board a few weeks now but we are actively moving ahead focused initially on infrastructure integration, such as finance and accounting, information systems and human resources. Next we will begin looking at process improvement and best practice sharing and several key operational areas, and then the final phase of integration will be focused on execution of the growth plan, which includes site co-locations, program rollouts and online expansion. Let me also add that enrolments at Apollo College and Western Career College do not appear to have been negatively impacted by the tightening credit environment.

I recently had the opportunity to visit several other campuses to welcome U.S. Education employees to the DeVry family. And you know prior to DeVry my past experience was that when there is an acquisition, everyone at the acquired organization has a lot of fear and trepidation stirring around. The experience with U.S. Ed has been quite different from that, it’s been great and quite similar to what we saw with Ross, Chamberlain and Advanced Academics. People are excited and people are glad that it was DeVry because there’s a very good match of cultures. Both organizations share the values of teamwork, respect for employees and accountability for quality academic outcomes.

Let me turn to our third segment, Becker Professional Review. After experiencing remarkable growth over the last four years, Becker’s rate of growth slowed this past quarter. We believe seasonality played a role as well as market dynamics such as layoffs and hiring slowdowns at some of the accounting and financial firms. We also think that the focus on the accounting industry in the wake of Sarbanes-Oxley is beginning to run its course and that may also have had an impact. We continue to believe that Becker’s longstanding market leadership positions us well to take advantage of increased demand for accountants as a result of the credit crisis and forthcoming switch to International Financial Reporting Standards or IFRS.

A new initiative at Becker that launched in the quarter is Becker CPE, this is our new online continuing professional education product. Becker CPE offers webcasts, complete with streaming video, audio and chat, on-demand courses that are available 24x7 and online Q&A capability. These tools further enhance the interactive experience for professionals when they are satisfying their CPE requirements.

Second at Stalla Review for the CFA, we continue to establish new partnerships, both domestically and international. Most recently, we partnered with the German CFA Society, a press release was just launched this week, and that’s to provide our exam product to its members in the German CFA society. Stalla now has agreements with seven of the fifteen largest CFA societies in the world.

Finally, I would like to just comment on DeVry’s online initiatives that span across the segment. Advanced Academics, our virtual high school program, continues to expand and recently initiated 14 new contracts with school districts in five states, and launched our first online Passport to College program in Minnesota. Our passport to college is a program where we let high school students take college course tuition free, helping them jumpstart their college education. We’ve run this program for years at DeVry University campuses, and are now offering it online, illustration a synergy with our acquisition of Advanced Academics.

I am also pleased to announce that Steve Riehs was recently promoted to President of Online Services for DeVry Inc. in recognition of the great job that he and his team have done with enhancing quality and driving growth in online education. The online services group is powering growth on a shared services basis for all DeVry’s institutions. I was at an educational conference recently where many providers were just announcing their blended learning capability, and DeVry’s offered a blend of both online and onsite learning since we launched online back in 1997. This best of both, online and onsite, across 92 locations, is a competitive differentiator from regional universities or online only players.

So to wrap up my comments here, we are continuing to execute our strategic plan. In summary, our strategy is to achieve the full potential of DeVry University, to grow, to continue diversification across vertical curriculum areas throughout the horizontal levels of education in a new geographic market with an eye toward international expansion particularly in Latin America, and to build the infrastructure such as our online services group to support this growth.

Our strong first quarter results were driven by solid enrolments across all our operations both on site and online and our earnings benefited from continued operating leverage. We welcome the newest member of the DeVry family through the acquisition of U.S. Education, and our strategy of diversified growth is serving us well despite the economic downturn. We believe the investments that we continued to make across all segments of the business will drive improved academic quality and even greater momentum in the long run.

So, Joan, would you please go to the Q&A.

Joan Bates

Wonderful. Thanks, Daniel.

We are very excited to take your questions and hopefully we have some people in the queue. So Jeremy, if you could give the instructions for the callers and we will begin that portion.

Question-and-Answer Session

Operator

I would be happy to, Joan. Thank you. (Operator instructions) And your first question will come from the line of Amy Junker with Robert Baird. You may proceed.

Amy Junker – Robert W. Baird

Good afternoon. Hi, everyone.

Daniel Hamburger

Hi, Amy.

Amy Junker – Robert W. Baird

If I could just start, Rick, the margins came in better than I think, certainly than we’d expected, and you’d kind of guided that that would be down, and I just want to make sure I understand, was it an issue that you spent less or some of the spend that you had anticipated got pushed into maybe the second quarter or just because the enrolments have been so strong, you’ve seen better than expected leverage perhaps?

Rick Gunst

Well, I think when I – when we talked last conference call, I focused in on the operating expense increase. I don’t think I gave any specific guidance on margin. I said that it could be some slower growth in the first half of the year versus the back half of the year, but I think we did get a little bit more leverage given our top line growth and the operating expenses were about in the range we said, maybe a little bit less.

Amy Junker – Robert W. Baird

And just your thoughts now going forward in terms of second quarter I know seasonally that’s a higher quarter and now you are going to have your certification corp in there, any thoughts or any comments you’d be willing to make in terms of the SS&A spend in the second quarter?

Rick Gunst

Well, it’s harder to make comparisons on a run rate basis or even versus last year given the U.S. Ed piece. So I think the comments that I gave before still hold true where our run rate on operating expenses are still running well above prior year because we still have the overlap issues that we’ve been talking about with some of the investment spending we made in the back half of fiscal ’08 and some of the timing that was deferred from the first half to the second half last year, and so I think you will still see a sizable increase in SS&A expenses in the second quarter.

Amy Junker – Robert W. Baird

Great. Then last question then I’ll get back, I will let other people take a turn, but now that you’ve closed the U.S. Education Corp acquisition and congratulations on getting that done. You know, can you maybe just share with us what your expectations are for how much they are going to contribute in terms of revenue or margin, or what your growth expectations are so we can have some sense in terms of modeling going forward. We have the numbers on a June year-end basis, and I guess is the growth that you experienced in the fourth quarter kind of indicative of what you would expect for the remainder of the year?

Rick Gunst

Well, I think U.S. Education is, as Danny mentioned, and I mentioned as well, they are doing very well. I think they, given their shorter programs, they are benefactor of a softer economy and they are in the healthcare industry, which is a high demand field. So, I think the momentum has been positive in terms of the enrolments and revenue growth, and with that they are able to get more leverage in their P&L. So relative to the numbers that we talked about at the report last year and we will have that in our disclosure when we give you the pro formas in November, we expect to see further improvements in their results, both top line and bottom line as we go through the balance of the year.

Amy Junker – Robert W. Baird

Great. Thanks so much.

Operator

And your next question is from the line of Bob Craig with Stifel Nicolaus. Go ahead.

Bob Craig – Stifel Nicolaus

Good afternoon, everybody.

Daniel Hamburger

Hi, bob.

Bob Craig – Stifel Nicolaus

Just a follow-up on Amy’s last question. Rick is it reasonable to assume that U.S. Education revenue and operating profit contributions in the second quarter will be very similar to what the pro forma numbers were for the first?

Rick Gunst

The pro forma numbers?

Bob Craig – Stifel Nicolaus

Yes, the $41.5 million and the $6.5 million respectively?

Rick Gunst

Well, again, they don’t have as much seasonality, so I think it’s probably as a percent of the total not too far off. Again, when we issue our pro formas, you’ll be able to see the breakout of their results by quarter last year and be able to extrapolate that with what you saw in the first quarter.

Bob Craig – Stifel Nicolaus

Okay, but that’s as a starting point, that’s probably okay.

Rick Gunst

As a starting point, it’s pretty good.

Bob Craig – Stifel Nicolaus

Okay. Next question, I think know the answer to it, but I will ask it anyway, any indications on the general health of the session A start which I think is on Monday in terms of either starts that you have in the book to date or enquiry flow, et cetera?

Daniel Hamburger

You are right, Bob. You know the answer.

Bob Craig – Stifel Nicolaus

I was hoping with Ron’s departure you might answer that one, Dan.

Daniel Hamburger

Well, no. We learned carefully and for many years. It’s a long transition and apprenticeship here. Bob, overall, things continue to move along and we are just executing. The overall theme we’ve been saying, I think if you step back and look at the big picture we’ve gone through, a few years ago was more of a turnaround sort of a story and now we are back in growth mode. And as we are with that renewed confidence, we are not being shy about making investments, because those are positive return on investment on our owner capital.

So, that’s all this commentary that we had over several quarters and Rick’s done a tremendous job of that and appreciate it and many on the call have as well, has really been to try to help illustrate that fundamental point. And so that increase in spend will continue, as long as it drives that, positive return on quality and positive return on academic results and positive return on growth and their link. Quality leads to growth, quality begets growth. So those are the kinds of investments that we are making, and as long as we continue to see good results what we did in the summer from a new student perspective and we will continue to do that.

Bob Craig – Stifel Nicolaus

Okay, last one, and I’ll turn it over. Just focus on the marketing side for a second, could you comment on cost per start trends. I mean earlier today we heard ITT talking about lower ad spot cost, are you seeing that, and also comment if you could on the recruiter levels. where you stand now in terms of that build on a productivity basis are they where they should be?

Daniel Hamburger

Yes, I think it’s generally where it should be from a recruiter standpoint. We see opportunities to improve productivity and we have a relatively new leader of that function that we brought over from another school system and came to DeVry and she’s doing a great job, so there are definitely opportunities to improve that. The advertising, we are on the look out for that. I think it is too soon to say that there’s a definitive answer there. But as I mentioned in my opening comments, that’s one of the things that while we are being very prudent and being very careful in the overall economic crisis environment, we also want to be mindful that the flip side of crisis is opportunity. So if there are soft spots in the advertising market, we are going to look to take advantage of that if that makes sense. At this point. I would just say that’s something we are looking at, at this point. So that’s pretty – and then in terms of cost per start, no real news to report there, it’s pretty steady as she goes.

Bob Craig – Stifel Nicolaus

Okay, are the recruiter levels still up around 20% year-over-year?

Daniel Hamburger

Yes, pretty similar level of – the overall level is pretty similar to the last time we reported.

Bob Craig – Stifel Nicolaus

Okay. Great, Dan. Thanks.

Daniel Hamburger

Thanks.

Operator

And your next question comes from the line of Sara Gubins with Merrill Lynch. You may proceed, ma’am.

Sara Gubins – Merrill Lynch

Hi, thanks. Good afternoon.

Daniel Hamburger

Hello, Sara.

Rick Gunst

Hi, Sara.

Sara Gubins – Merrill Lynch

I wanted to get back to Amy’s question about cost and particularly the SS&A cost. I guess I was a bit surprised to see that number down sequentially from the fourth quarter, particularly now that you have U.S. Education in there even if it is only for a few days, and there is higher option expenses in the quarter. So I am wondering if you can just help us understand a little bit more about what sequentially came down in that cost item and whether or not that’s something that should continue and also presumably you expect the stock expense level to stay where it is or maybe go down a bit, but if you could give us some color on that for the rest of the year, that would be helpful?

Rick Gunst

Sure. The last time, as I mentioned on the call, Sara, and said we thought it was going to stay pretty much in line with what we had sequentially, experienced in Q4 give or take, and it was a little bit lower. I think as you look back there are some hiring costs that we have a little bit higher in Q4, some project spending, and then there is always advertising timing of spending in Q4 versus Q1 that was down a little bit on a run rate basis. And the stock option expense, that is accounted for both in SS&A and cost of educational services, so it’s split. And the reason it was up is a good portion of it is a one time recognition of that expense because of those retirement eligible awards that get expensed right upfront as opposed to over the grant life.

Sara Gubins – Merrill Lynch

Okay. So it should go back down to more normal levels by the second quarter?

Rick Gunst

Yes, it’s really more of a timing issue, more of it got expensed in Q1 than would have been typically in the past.

Sara Gubins – Merrill Lynch

Okay, thanks. And then back to student lending, just for a minute, are you using your EDUCARD program anymore than you had in the past?

Rick Gunst

We’ve increased it a bit. We’ve had some takers on an expanded focus on that, but we’ve also always used it to sort of for timing related issues like what we saw at the end of the quarter where some of the packaging wasn’t happening on a timing basis because of some of those financial aid processing system issues. But we have a good balance sheet and we are prepared to use that as necessary, but sort of avenue of last resort.

Sara Gubins – Merrill Lynch

Okay, and then last question, and I will turn it over, are you seeing any shift in terms of more students decided to go to school part time?

Daniel Hamburger

No, haven’t really seen – I mean there’s been an overall seminal trend in that direction for years now, so nothing departing from that overall trend.

Sara Gubins – Merrill Lynch

Okay, thanks very much.

Daniel Hamburger

If you are kind of saying well maybe with the economy maybe more people are going to go part time. We certainly on a look out for that as we share your concern but haven’t seen it yet.

Sara Gubins – Merrill Lynch

Okay, thank you.

Operator

Your next question is from the line of Andrew Steinerman with J.P. Morgan. You may proceed.

Andrew Steinerman – J.P. Morgan

Hi, it’s Andrew from J.P. Morgan. Just a follow up on the last question, what about high school recruiting efforts? Surely this would sort of be the time for it and I know we’ve been talking about this for years, but my thought is maybe the multi-year shift too part time would be kind of pushed in the direction if the high school recruiting was successful?

Daniel Hamburger

Yes, I hear you, but I think at the same time, the high school recruiting is improving. There’s continued growth in the adult student market, so when you put both of those into the same pot, that – there still an overall, it still looks and feels like a mix shift is going on and you could model it that way.

Andrew Steinerman – J.P. Morgan

You are saying both is growing, but it is still the part time growing faster?

Daniel Hamburger

Exactly.

Andrew Steinerman – J.P. Morgan

I got you. And then could you just give us a quick if it is not too soon a quick estimate on amortization stream that we should model in because of the U.S. Ed acquisition?

Rick Gunst

Yes, the amortization cost on a go forward basis, approximately is going to be about $1 million a month for the balance of fiscal ’09.

Andrew Steinerman – J.P. Morgan

And then after that how does it look?

Rick Gunst

Well, after that, we are still finalizing the amortization schedule given the make up of the intangibles. There will be likely a drop off in fiscal ’10 given the shorter duration of the programs that U.S. Ed has. A big piece of it is student relationships and given that their programs are a year to two years, they could amortize over that period of time.

Andrew Steinerman – J.P. Morgan

Okay, thank Rick. I appreciate it.

Rick Gunst

Sure.

Operator

And your next question comes from the line of Jeff Silber with BMO Capital Markets. Go ahead.

Jeff Silber – BMO Capital Markets

Thank you so much. Wanted to drill down a little bit in the professional and training area, can you just give us a little bit more background in terms of how much of that is related to the CPA and the related market as opposed to the CFA market? And if you are having or seeing any kind of diverging trend in terms of the softness on either of those side?

Daniel Hamburger

Yes. Thank Jeff. That’s an excellent question. We are analyzing that ourselves. I would say there is a softness really in both of those markets but being that accounting is a much larger portion of our professional training segment than the Stalla CFA Review is, it was the accounting that was the bigger driver in the quarter.

Jeff Silber – BMO Capital Markets

When you say much larger, is there any way to quantify that for us?

Daniel Hamburger

Much larger.

Jeff Silber – BMO Capital Markets

Well, I appreciate that, thank you. And also I think in your prepared comments when you talked about the funding environment, you talked about being direct lending ready, can you just tell us how that’s been going in terms of that’s been increasing, have there been any issues related? I know some of the other schools have talked about some funds, some of the delays involved there. Thanks.

Daniel Hamburger

That’s right, and that’s – thank you, and that’s why with direct lending, as we’d indicated before, we’d be ready to go, and sure enough we did what we said we’d do. We’ve got all those pipes cleaned out and there’s water flowing through the pipes. So we are up and running with direct lending, but we are really doing that as needed. So if a student comes in with a direct lending situation, we need to continue that, or if there’s some of the smaller lenders who dropped out or Pell [ph] and then there’s a reversion to the direct lending, it’s an administrative system to get those funds to the students. For all those reasons and maybe some others, we got the pipes flowing. So in case there turned out to be need for a bigger volume going through direct lending, the good news on that is that it wouldn’t take us weeks or months as it might have if we were somebody else and didn’t have all that, that’s flowing now.

Jeff Silber – BMO Capital Markets

Okay. I appreciate the color. I’ll jump back in the queue. Thank you.

Daniel Hamburger

Sure. Thanks, Jeff.

Operator

and your next question comes from the line of Scott Schneeberger with Oppenheimer. You may proceed.

Ella – Oppenheimer

Hi, good afternoon. This is Ella [ph] for Scott and congratulations on a great quarter.

Daniel Hamburger

Thank you.

Ella – Oppenheimer

First, just to follow on the prior question, on EDUCARD, how much capacity do you think you could provide if necessary?

Daniel Hamburger

On what?

Joan Bates

On EDUCARD.

Daniel Hamburger

On EDUCARD?

Ella – Oppenheimer

Yes.

Daniel Hamburger

How much additional capacity –

Ella – Oppenheimer

How much capacity do you think your balance sheet is able to provide if necessary?

Rick Gunst

I think we could take on a bit. Our balance sheet is quite strong. We’ve got the ability to take on more but again as I said earlier, that’s not our strategy, not our plan. It’s more the avenue of last resort.

Ella – Oppenheimer

Okay. And have you seen other than the private lending and the federal, have you seen any changes in other funding resources such as cooperative funding, the cooperative endorsements?

Daniel Hamburger

Sure, thanks. So the question is have we seen changes in the corporate reimbursement funding and that source. Actually no, and we get asked that question a lot, and what we’ve seen over a long period of years in a number of different upturns and downturn in the economy, it may be surprising or counter intuitive, but it tends to be pretty stable. So it doesn’t go up a lot in good times, direct corporate reimbursements is what I am talking about, don’t seem to go up a lot in good times, and yet they don’t seem to go down a lot in bad times.

And I guess if you stop and think about it, it makes sense, because if you are a corporation or a government entity or the military or an employer, and one of your employee benefit is tuition reimbursement for those employees to go back to school, that’s a real retention weapon. And most of our corporate partners that we have in the Keller Center For Corporate Learning that I talked about, report to us that they see that benefit, that employee benefit of sending employees back to school to get a degree or improve a degree or improve their credentials is a real retention tool. So it’s sort of a last thing that they want – or one of the last things anyway that from an employee benefit standpoint that you want to cut in your benefits package. That seems to be the reason that explains this relative stability of corporate tuition reimbursement in good times and bad times.

Ella – Oppenheimer

Okay, thank you. And the last question, can you just talk a bit about your pricing environment? Have you seen any pressure from pricing any of your segments, are you – do you think you will be continue to be able to increase price by maybe mid to low to mid single digits?

Daniel Hamburger

Yes, we do, and that’s what we are seeing in the environment. that’s how we – and thank you for that question about tuition levels and pricing strategy, that’s exactly how we look at our tuition pricing strategy is on a competitive basis. We look at what the state schools are doing, what other institutions are doing and that is – and we’ve actually invested resources to make sure that we are current on that, and we are, and that’s pretty much what we are seeing.

In fact, there are a number of data points that are suggesting that many of the state or government funded institutions rely on state tax for their funds and if those funds start to decrease, might be in a position of having to increase tuition even more. So we may see high single digit or more increase on the part of many of the state schools. I doubt you would see us do that. We tend to be a little bit more stable and take a long term approach to it to not take advantage of short term opportunities so much, but we do expect that tuition will continue to increase across the various institutions of DeVry, whether we are talking about Ross University or Chamberlain College of Nursing or Becker DeVry University and so forth. Thank you.

Joan Bates

Okay, we can go to the next question.

Operator

Your next question is from the line of Trace Urdan with Signal Hill. Go ahead.

Trace Urdan – Signal Hill

Thanks. Rick, I am thinking that Amy let you off the hook a little bit too easily there, so I am going to go back to this question. You were pretty clear with us last time that you saw operating expenses increasing in the first half faster than revenues. And given that the professional and training segment came in a little bit. I think in your prepared remarks you suggested weaker than expected, I am wondering if you can focus for us on where the leverage that was unexpected really came from in the business, where did you spend less than you thought, or where was there more revenue than you expected?

Rick Gunst

Well, I think the revenue growth was really an outgrowth of the enrolments that we saw last summer, and you know the revenue per student numbers that came through is a little bit better and the operating expense timing. We are not perfect on this, and we try and estimate what we think the operating expenses are going to be and we came in within a couple percent in terms of the growth rate. And the difference is due to the timing of spending on advertising and some project spending that occurred in the fourth quarter that then teed [ph] in the first quarter, some open positions, and so we base that on what we saw in our forecast and we beat the forecast by a little bit.

Trace Urdan – Signal Hill

And so would you want to remand your comments in terms of the first half of the year? I mean you expected the second quarter will kind of slow down in some way, I mean you feel some of those positions or you think something will change there?

Rick Gunst

I think looking on what I said last quarter in terms of the first quarter and the second quarter was I would expect operating expenses to grow at a faster rate than revenue and we saw that in the first quarter, I think we are going to see that again in the second quarter.

Trace Urdan – Signal Hill

You saw margin leverage, so actually operating expenses didn’t –

Rick Gunst

Operating expenses, it went faster. Operating expenses increased by –

Trace Urdan – Signal Hill

Talking about gross margin.

Rick Gunst

We got the leverage in our gross margin where I think we’re going to continue to get the leverage. Again for the year, we expect our operating expenses or SS&A, when I say operating expenses, I am talking SS&A, to increase the same, roughly the same rate as revenue, and that the leverage will come from cost of education services, as we leverage our campuses, leverage our fixed cost base.

Trace Urdan – Signal Hill

Okay. And then Dan, you referenced a slowdown in the global financial market as the reason for the professional and training segment coming in light, but you really only had a little bit of that sort of crisis time included in the quarter and a lot more sense. I am wondering how you are thinking about what the outlook is for the professional and training segment going forward from here?

Daniel Hamburger

We continue to – we had bear Stearns back in March, we had – I mean financial firms –

Trace Urdan – Signal Hill

You now about Bear Stearns before everybody else did if you had them in March.

Daniel Hamburger

Well, no. When –

Trace Urdan – Signal Hill

Okay. I get your point. My question is still the same though. Do you think that things could deteriorate from here, or do you think you sort of got a baseline that you can work with now in that segment?

Daniel Hamburger

I don’t know anything any faster than anybody else knows it, but I do know that Bear Stearns collapsed in March. And what I am saying is that maybe some people perceive that this crisis just began a few days ago, but it’s kind of been building from our perspective, and that’s something that we’ve seen over a period of time. In terms of going forward, we continue to see growth opportunities for Becker, has just slowed down a little bit, as I described, and that’s – and the accounting side is a bigger driver.

And I would say that the boom or boomlet that we had with the Sarbanes – in the wake of Sarbanes-Oxley, a lot more demand for accounting hours and accounting professionals, maybe that’s run its course to some extent, and there’s a little bit of softness at some of the accounting firms, but that’s not a forever thing, and we do see another boomlet perhaps coming on the horizon here as International Financial Reporting Standards, IFRS, starts to raise its head, that’s going to – we expect that it is going to increase the demand for accounting professionals and accounting hours, and create by the way tremendous opportunities for just accounting students. So anyone whose kid is going to school and thinking about a business career in general not just accounting I would certainly recommend an accounting degree. It’s a great start to a business career. So those are some of the dynamics that we are seeing kind of looking back and then looking forward.

Trace Urdan – Signal Hill

But the International Financial Reporting Standards, is that something that is coming on gradually, or is there a catalyst there that –

Daniel Hamburger

Yes, that’s gradual. I mean that’s not going to be tomorrow. But I think you are going to start to see that pick up over some period of time, and then probably take off in a bigger way. So, that’s more gradual than a near term catalyst.

Trace Urdan – Signal Hill

Okay, thank you.

Operator

And your next question comes from the line of Gary Bisbee with Barclays Capital.

Gary Bisbee – Barclays Capital

Good afternoon, guys.

Daniel Hamburger

Hey, Gary.

Gary Bisbee – Barclays Capital

I guess a couple questions. First of all, now that you’ve closed the acquisition and the balance sheet is obviously still in real good shape and it seems to me you are going to have a lot of free cash the rest of the year, how do you think about prioritizing, reinvesting that capital? Are you likely to keep this debt outstanding for a while or given the financial and liquidity issues on the marketplace, are you likely to pay some of that down? I guess I am wondering repurchases, raising the dividend, repaying debt or maybe ploughing ahead with other acquisitions?

Rick Gunst

Yes, we are in a fortunate position that we’ve got some good liquidity, we’ve got the debt right now, but the thing I mentioned with the IRS really helps us. In terms of our cash flow, we can tap some of the offshore cash to for domestic purposes on a periodic basis throughout this year and next. So that gives us the wherewithal to do a numbers of things that you mentioned, acquisitions, share repurchase activity. We have a programs that’s been authorized that we haven’t begun to execute because of the acquisitions, but we could do so going forward and we are due to declare a dividend coming up, so that’s all part of the potential uses of cash.

Daniel Hamburger

Yes, I think just continue on that, Gary, it’s I think an excellent question when we look at everyday, and it’s real strategic question of how to strike the right balance, it really is a balance. And so there is going to be some of that cash put toward deleveraging, which creates value toward direct return, and thanking our shareholders through dividends and share repurchase. Investments of a P&L nature, capital expenditures as well to increase capacity, improve academic quality, and then acquisitions as you mentioned. We are still active in the acquisition market particularly internationally to execute this strategy that we’ve been very transparent about over the past couple of years that international is on our radar screen and we think the preferred way of executing international strategy is through acquisitions. So that remains on our to-do list for deployment of our owners capital.

Gary Bisbee – Barclays Capital

So is it safe to say that you are likely to – you are likely to reuse some of that in the near term to repay the debt, you aren’t just going to sit on this debt since you’ve got a very attractive rate?

Rick Gunst

And also given this IRS notice, that alone helps us to reduce the debt from what it would be otherwise, because we can take cash that’s offshore and use it to keep our revolver balance during the middle of the quarter down.

Gary Bisbee – Barclays Capital

Okay. And then just two articles come in the last week around healthcare, one of them, I think the first time in years that medical application skipped 67% and the second one was talking about the scarcity of seats in the teaching hospitals for the clinical rotation, any sense how the application drop’s going to impact you guys if at all, and then is the cost for you to get your kids in the clinical rotations growing, is that something you worry about, is that something we should think about as it relates to the margins or is it not in the near term something you view as an issue? Thanks a lot.

Daniel Hamburger

Sure, great question, Gary. And let me take the first one first. Applications were actually down not 6% or 7%, we are done 0.2%. They are down about 85 applications on 42,000, but that’s a change. They had been growing moderate single digits, I just looked at this at our Ross Board meeting today, is I just looked at those figures. And so what we think is going on is a little bit of the frosting not the cake itself, draw that analogy. What I mean by that is, there is a certain sort of core, if you will, students who are applying and then getting and going. And there is another group that tends to maybe apply year after year, and we think that some of those up at that level are perhaps getting a bit discouraged and maybe not applying. And so that might be even primary driver of that slowdown in growth and a little flattening of the applications volume.

In terms of the implication for Ross University School Of Medicine, we don’t think there is a real impact there at all. We are already turning away more application than we can admit and so improving the quality of the incoming classes as I mentioned in my earlier comment. So we don’t see an issue there. Your second question was about clinical rotation, where we do see an issue, and we commented on that on several of these calls over the past quarters. I am just glad you brought it up because it is important, yes, is this an issue to be thinking about or concerned about, and I would say yes. We are certainly thinking about it and concerned about it. There is increasing demand and increasing competition for those clinical spots, and that is also driving up the cost.

So that is one of the element that is increasing some of the operating costs that Rick was commenting on earlier, that was also in there. And so we are taking action in this regard, we’ve added to our team of clinical specialists, we have added to the number of strategic alliances that we have with hospitals, I think we announced a few of those in the last call last quarter with a couple of those in the transcript there. So we are very, very active in insuring that our students at Ross University School Of Medicine have the clinical rotations that they need to pursue their studies on a timely basis and graduate within their four years, and they are. So, at this point, we are keeping our commitment to those students and they are gaining their rotations and that is something that is a differentiator from some of the other international schools that are out there.

Gary Bisbee – Barclays Capital

Okay, thanks.

Joan Bates

We could ask the next few callers to try and limit their questions, we only have a few minutes left and we want to get as many of these questions answered as possible. We appreciate it.

Operator

Our next question will come from the line of Andrew Fones with UBS.

Andrew Fones – UBS

Yes, thank you. I had two questions, two parts, I can ask them together. Just in terms of kind of lead generation, what’s the quality and quantity of leads at the moment given your advertising spend? And then the real IT question was the conversion trend, is there any comments there? Thanks.

Daniel Hamburger

Sure. Thank you, Andrew. And inquiries from prospective students are running at a healthy pace and so we are pleased with that flow of inquiries, not any major news to report, but overall good news. And then in terms of the conversion, as we like to call it from an inquiry to an application and ultimately to starting school, also good steady progress there, and at the same time, we think that there are good opportunities for us to improve that through productivity, through training, and that’s similar to the question I answered earlier with our new head of recruiting at DeVry University being in the charge there. There’s also some synergies by the way that we see with U.S. Education, it will take a little time to execute on those, but that’s one of the potential synergies that we cited as one of the strategic rationales for doing that acquisition, is opportunities to improve conversions and marketing efficiency generally speaking, so thank you for that.

Andrew Fones – UBS

Thanks.

Operator

Your next question will be from the line of Corey Greendale with First Analysis. Go ahead.

Corey Greendale – First Analysis

That’s okay. Good afternoon. First Analysis, let’s get their brand in there.

Daniel Hamburger

Well, thank you, sir. So, I also have two questions, and I will try to put them together, which both relate to the effect of the down economy on your business, on the DeVry University business specifically. The first is obviously, the downturn trick, last time obviously didn’t help or at least enrolment results went down during the downturn. I think a lot of reasons for that, but one of the theories at the time was that students preferred shorter degree programs and you were largely bachelors degrees at the time, so the question is are you seeing a shift towards associate degrees, and if not, how do you feel about your portfolio if associated degree students do start to show that preference? And then just generally what do you think about the effect of the economy on the technology related programs in the business?

Daniel Hamburger

Okay. Artfully done, Corey, and here’s what I would say. First and foremost, our downturn, our swoon a few years ago was and I’ve said this many times, we’ve said this many times, was more look in the mirror, than look out the window. It was our own internal performance that was the bigger driver of our poor enrolment performance during that time than it was blaming on the market, okay. And so that’s important to remember.

In terms of a shift to shorter programs in associate degrees, it could be, and we feel that we are better positioned today than we were back five, six, seven years ago, and our strategy of diversification reduces risk and enhances value. So that’s why we’ve added associate degrees at DeVry University, at Chamberlain College of Nursing and at U.S. Education, Apollo College and Western Career College. So we think we are better positioned today to take advantage of any shift that may materialize towards shorter programs than we’ve ever been positioned before. And we do think there’s a little bit of that. We are seeing at Apollo and Western in particular, a little bit of a pick up that I mentioned earlier. And then finally in terms of technology, haven’t seen a major trend there, it’s been trending up in the past few reporting periods, and we’ll report further on that when we report enrolment next time.

Corey Greendale – First Analysis

And artfully answered. Thanks, Dan.

Daniel Hamburger

Thank you.

Operator

And your final question will be from the line of Jennifer Childe with Credit Suisse. You may proceed.

Jennifer Childe – Credit Suisse

Thank you. Your Ross new enrolment growth came in a little lighter than what we saw during the summer term. It sounds like it wasn’t a demand issue, just the overall dip in applications, so was it due more to capacity constraints, either physical or clinical rotation limitations and what (inaudible) might have caused you to limit new enrolment growth? And then do you expect –

Daniel Hamburger

Ross, as we know, September is the tightest capacity constraint at Ross. That’s the typical time that veterinary students and medical students want to go to school. So, it’s not surprising, and it was totally expected that the growth in new students wouldn’t be as robust as in some other seasonal periods in the year.

Jennifer Childe – Credit Suisse

How much additional capacity does the temporary facility give you?

Daniel Hamburger

It gives us some additional capacity and over a period of years and it will take some capital expenditure to get there. We think we’ll have quite a bit of incremental capacity in combination with our campus in Dominica together with the clinical center, which is the proper name for it by the way, it’s a clinical center in Grand Bahama, taken together will give us quite a bit of incremental capacity.

Jennifer Childe – Credit Suisse

Can you give us a little color on what you think the sustainable growth rate of this business is, enrolment growth rate?

Daniel Hamburger

Enrolment growth rate in the single digits, mid to high single digits is probably a good way to think about it from a long-term perspective. Again, there’s always choppiness in any given quarter, there’s always movement, we’ve seen that. But over a long term perspective, that’s probably a pretty good comfortable rate at which we can grow and continue to power that growth by improvements in quality. That’s what leads to growth, particular medical school is the best example where our investments in improving the quality of the academic programs at Ross a few years ago are what led to, directly led to the surge in application that we saw, so quality begets growth.

Jennifer Childe – Credit Suisse

Okay, thank you.

Joan Bates

Do you want to take one more?

Daniel Hamburger

Yes, I think we can go ahead.

Operator

Your next final question will be from the line of Brandon Dobell with William Blair.

Brandon Dobell – William Blair

Wow, snuck right in there; appreciate your extending the timeframe for me.

Daniel Hamburger

Go ahead, absolutely.

Brandon Dobell – William Blair

I guess I will do full circle here and go back to lending for one quick second. The last couple of months, couple of quarters, Danny, you mentioned I think it’s been a little bit worse from a macro perspective, have you seen or in your conversations heard from the private lenders any change in how their thinking about credit standards for your students (inaudible) provide access, but is it different types of access or are they starting to funnel different students to different places, just trying to get a sense of kind of directional change there or tenure changes?

Daniel Hamburger

Yes, sure. The overall, Brandon, is – thank you for that question, the overall trend is we’ve seen some lenders pull out of the private lending market, and a few others have pulled out of the Pell market. So it is not sort of one trend. And then the other trend is there is a little bit less dry powder to lend, well then they might raise their credit standards, and I spoke to that a little bit earlier. There’s an expectation that that’s not a forever thing, that that will come back as the situation improves. And then in the meantime, we are standing by ready if need be to use our EDUCARD program. And that’s sort of the overall situation that we see.

Brandon Dobell – William Blair

Is the expectation on your part or their part? Have they communicated to you if things were better, we’d be behaving differently?

Daniel Hamburger

Yes, they have communicated to us that they expect that while credit standards may have tightened in the short term, they expect that that will come back, and possibly even as soon as by the end of this calendar year. So that’s something that we’ve that they’ve been communicating to us.

So thank you very much for that question and thank you all for your questions. I just want to give a reminder that we’ll report DeVry University fall 2008 undergraduate enrolment in the November session, graduate enrolment on December 4, and that our next conference call will be held in late January when we announce the second quarter results. So, thanks everybody and we’ll talk to you then.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude and you may now disconnect. Have yourselves a great day.

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Source: DeVry Inc. F1Q09 (Qtr End 09/30/08) Earnings Call Transcript
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