DeVry Education Group Inc DV
Q4 2012 Earnings Call Transcript
Transcript Call Date 08/09/2012

Operator: Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 DeVry's Earnings Conference Call. My name is Karris and I will be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this call is being recorded for replay purposes.

I would now like to hand the call over to your host for today, Joan Bates, Senior Director of Investor and Media Relations. Please proceed.

Joan Bates - Senior Director, Investor and Media Relations: Thank you, Karris. With me today from DeVry management are Daniel Hamburger, President and Chief Executive Officer; Tim Wiggins, our new Chief Financial Officer and Pat Unzicker, our Vice President of Finance.

I'll now paraphrase our Safe Harbor language. This call will contain forward-looking statements. Actual results could differ materially from those expressed or implied. We undertake no obligation to publicly update or revise any such forward-looking statements. Please consult our most recent 10-K and 10-Q filings for a more complete description of factors that could affect our financial results.

On today's call, we'll highlight certain non-GAAP financial measures. Further information about these measures, including reconciliation to U.S. GAAP can be found in our results release which is available as an Exhibit to Form 8-K dated August 9, 2012. Telephone and webcast replays of today's call are available until August 29. To access the replay, please refer to today's release for information.

So before Daniel gets his overview, I'd like to quickly walk you through the changes we made to our enrollment reporting and the new schedule of announcements. In recent months, we've spoken with many of the analysts and shareholders that follow DeVry and one of the biggest pieces of feedback we've heard was that people want a better alignment of enrollment reporting with the quarterly financial results. So, as you saw in today's release, in addition to new and total student enrollment we're now reporting student enrollment for each of the six sessions at DeVry University in Chamberlain, we will be reporting enrollment at the end of each quarter for Carrington versus a four-month period.

Also in today's release, we've included the new schedule for each reporting period start with the fiscal first quarter when we report September enrollment results. Since there are six sessions, you will see that we'll report two sessions in two of the quarters and one session in the other two quarters. We've also included historical enrollment figures dating back to fiscal year 2009 so that you can familiarize yourselves with the new format and adjust your models appropriately.

We believe this new enrollment reporting structure provides greater alignment with our quarterly financial results and more information that we hope you will find beneficial in your ongoing coverage of DeVry.

So, with that, I'll turn the call over to Daniel.

Daniel Hamburger - President and CEO: Thanks Joan. Thank you all very much for joining us today. I'll begin with an overview of the quarter forward by Tim and Pat who will walk through the financial results before I wrap it up. Consistent with our announcement a couple of weeks ago, results for both the quarter and year fell short of our expectations, so on this call, we want to answer all your questions, and especially these three; what happened in the fourth quarter, what is it mean in terms of our plan to improve DeVry's performance and what's the long-term outlook for private sector colleges and universities or PSCUs and what's the long-term outlook for DeVry specifically.

Let me breakdown what happened at the high level and then Tim will provide us some more detail. Revenues for the quarter fell short of our expectations. This was due to an enrollment shortfall – actually our enrollment totals in the credit hours at DeVry University for the period were in line with our expectations. The main impact on revenue for the quarter was our decision to invest more heavily in scholarships and grants to help our students achieve their academic goals. This decision was made in order to assist our students in difficult economic times and in reaction to recent changes to the (Program) program that now provide students with funds for two semesters per year rather than three. Since the students weren’t going to be receiving the funds they previously had in the spring semester we made the decision to utilize our financial flexibility to offer scholarships to support those students. We granted about $5 million in additional scholarships this quarter of which $2.4 million went to our students to supplement that loss of cut.

Just to give you a sense of the scholarship trend. In fiscal year 2011 scholarships totaled $29 million, in 2012 that number increased to $42.5 million. So while we saw an increase of $13 million in 2012 we don't expect that in 2013. We anticipate scholarships this year to be in the mid $40 million range. The second factor that negatively impacted our results was cost increases. I'm going to ask Tim to get into much more detail but three categories impacting costs during this quarter were additions to our cost structure from acquisitions in new campuses, higher than expected employee related costs and then one-time items, such as the now resolved issue with Perkins Loan Administration and higher costs in Advanced Academics.

The results for the quarter in the year are clearly unacceptable and while we have made significant progress in identifying and implementing cost savings the fourth quarter didn’t reflect that, partly due to some of these one-time factors. We do expect to make substantial progress in the quarters to come as we work our performance improvement plan. It's a five-point plan but I want to focus on the top three, which in order of priority are; one, aligning our cost structure to our normal levels; two, regaining enrollment growth momentum; and three, making targeted investments to drive growth.

Now, with regard to our first priority of aligning our cost structure, I want to reiterate our commitment to the goal of at least $50 million in cost reductions for 2013. We’ll accomplish this while maintaining and enhancing academic quality for our students. The majority of the reductions will continue to come from DeVry University in Carrington, part of which is the recently announced elimination of 570 physicians, and while the primary objective is about cost production, it’s also about creating value in other ways. One example of this is the increased use of electronic course materials. This adds value for our students in terms of quality and price and at the same time generates additional revenue. Another example is our new HR service center. We are centralizing our human resource and employee recruiting function to both improve service to our employees and to o lower cost. It’s important to note that our management team has a strong sense of urgency and is continuing to look for other ways to improve the efficiency, effectiveness in service, even beyond the $50 million of value creation.

The second priority is regaining enrollment growth through increasing DeVry’s awareness and brand reputation, recruiting effectiveness and persistence. Let me be clear that the most important focus has been and will continue to be the academic quality in providing a strong return on our graduate educational investment. We know that’s the most important thing that we do and in order to grow and to improve our marketing and recruiting results, strong student outcomes must be and are at the center.

We’re continuing to execute on our strategy of shifting mix to higher quality inquiry sources and these efforts have resulted in positive improvements in conversion. They reduced the share of third-party aggregators in our mix by over 20% and we continue to increase organic marketing sources, like those coming from our website and through paid search. Our focus on building brand differentiation and reputation is most recently highlighted by our partnership with the U.S. Olympic Committee and the resulting campaign feature some of our student athletes and how they let nothing stand in their way.

Another brand building effort is that DeVry University during the next quarter will unveil new messaging which reinforces our key differentiator of being the career university. We are also making strides to improve our recruiting efforts. Key actions include increased training for our admissions advisors and managers, making adjustments to the process as we've adapted to new regulations and deploying new technology to enhance recruiting efficiency.

Our efforts are beginning to pay off as conversion rates while still behind prior peak levels are beginning to improve in the three most effective institutions, DeVry University Undergrad, Carrington and RN to BSN program at Chamberlain. I know you're going to ask me, where we are in the process. My sense is that we are about 20% to 30% up from the bottom, and the third part of regaining our enrollment growth is persistence which is everybody is important as new student growth. Examples of the actions we are taking here are improving the quality of our students' academic and service experience, targeted use of scholarships, implementing our enhanced first year retention program and focusing on service excellence. This includes the best of both on-site and online, serving students where they want to be served.

Those were our first two huge priorities. Our third priority is making targeted investments in future growth and diversification. One of our best growth opportunities is DeVry Brasil, where in fiscal 2012 we expanded and also acquired FBV. DeVry Brasil continues to show strong growth and is definitely an area I want to encourage you to keep an eye on as it becomes an increasingly larger part of the DeVry family.

During the fourth quarter, we also acquired Falcon Physician Reviews which prepares candidates for medical exams. For our stated strategy, Falcon further diversifies Becker into the healthcare market. In addition, to pursuing strategic acquisition, we're also selectively investing in new programs in campuses. At Chamberlain, we recently launched the new Master of Science in Nursing Healthcare Policy. Chamberlain also just completed the site visit from our accreditor, The Higher Learning Commission, which support our new Doctor of Nursing Practice degree program. Provided approvals received, we expect to launch this new program early next year. And at Chamberlain's Phoenix campus based on strong academic outcomes, the State Board of Nursing recently raised our enrollment cap. These are great examples of DeVry's operating philosophy of quality leads to growth.

Somebody asked me why DeVry is still investing in growth during this down period? Chamberlain is a great example of why we are, as it grew revenue 26% from fiscal 2012. Looking to fiscal 2013, the majority of Chamberlain's growth will come from new campuses we opened in the last two years.

We've also made significant progress growing clinical capacity for our medical institutions. During the quarter, Ross University School of Medicine signed a 10-year agreement with Kern Medical Center in California to secure clinical rotation spots for Ross medical students. So, you can see how we're focusing on the top three priorities of our performance improvement plans and especially the first two; aligning our cost structure with enrollment and regaining enrollment growth.

Before I turn it over to Tim and Pat, I’d just like to comment on the status of Project DELTA. As you know, Project DELTA was a three-year $100 million investment in upgrading our information systems. During the quarter, we launched a final major module which went very smoothly. This is a terrific accomplishment as we all know the risks of large systems projects. We're so pleased with the results and I want to congratulate and thank the entire Project DELTA team for their hard work and tremendous results, and now we're excited to realize the benefits of this effort, as we increased productivity, improved student service, also better data analytics and reporting capabilities. In fact the more frequent enrollment reporting that Joan just announced was facilitated by the new system.

That's an overview. Now let me turn it over to Tim for further discussion of the financial results. Tim?

Timothy J. Wiggins - CFO and Treasurer: Thanks, Daniel. Good afternoon, everyone. Before I review our results in detail, I'd like to offer some analysis to try and put the quarter and the year in perspective. There are several dynamics at play and several different ways you can look at it, but the three analysis I thought you might find most useful are, mix of institutions, costs for the quarter sequentially and costs for the quarter year-on-year.

Let me start with mix. The rise of diversified organization and institutional mix is important to keep in mind. Our fourth quarter and fiscal year results reflect a mix of institutions that are growing and delivering solid earnings results combined with those that are in transition phase experiencing enrollment declines. Let me give you some perspective on each of these. For institutions that are in transition, DeVry University, Carrington and Advanced Academics revenues were down 12% for the year to $1.47 billion.

This was offset by our other institutions which saw revenues increase 24% year-over-year to $614 million. Operating costs and expenses at our institutions in transition declined by $12 million or 1% to $1.30 billion. This reverses an 11% increase in cost experienced in the prior year. Our team continues to focus on operational excellence initiatives and has identified more than 30 projects where we are addressing costs and value creation. We expect these projects to drive the $50 million savings we have committed to for fiscal '13.

Operating costs and expenses at our growing institution increased year-over-year by $104 million or 27% to $483 million, if you look at this increase, nearly half of it, or $48 million, was related to cost from acquisitions. The four acquisitions driving these costs are, AUC, FBV, ATC and Falcon. About a third, or $38 million, supported the strong revenue growth and expansion at Chamberlain. The balance supported growth at our other institutions, Ross, Becker and DeVry Brasil. I hope this helps clarify that cost increases for fiscal 2012 are tied directly to supporting growth at these institutions.

The second way I want to look at this is to consider costs on a sequential basis. Total cost from the third quarter to the fourth quarter increased $19 million to $464 million. There were several key drivers. First was the impact of acquisitions and new campus openings which added about $6 million of cost in the quarter, second was the one-time impact of $6 million related to the administration of our Perkins Loan Program at DeVry University which I'll explain more fully in a minute.

Third, we experienced higher wage costs in Brazil and higher employee cost related to lower than expected turnover which increased these expenses by about $2 million. And finally, Advanced Academics accelerated its summer marketing campaign into June from July and experienced higher school district startup costs in the quarter totaling about $3 million.

Let me take a minute and explain the Perkins issue in greater detail. There was a problem transmitting the enrollment data for about 10% of our students in this program to our third-party service provider. These students were not being moved into repayment mode when they should've been and the fund was not accruing interest or collecting the principal it should have. As a result, we've incurred a cost of about $6 million for the lost interest and the estimated difference between the value of the loans and the projected recoveries. The underlying issue has been fixed, so we expect this to be a one-time cost.

Cost compared on a year-over-year basis provides a third perspective on the quarter. Cost on this basis increased $27 million. Acquisitions accounted for over half of the increase or about $16 million. Campus expansions at Chamberlain increased expenses by about $7 million and the one-time Perkins adjustment added approximately $6 million to our cost year-over-year. Cost at our other growing institutions like Ross, Becker and DeVry Brasil increased by $4 million versus the prior year. These costs offset the $12 million in year-over-year cost savings realized at DeVry University and Carrington.

Now, let's turn to our reported results. Our fourth quarter and full-year results reflects the continued revenue deceleration at DeVry University and Carrington and the resulting impact on earnings. Fourth quarter revenue of $506 million was down 7.5% versus the prior year and down about 4% year-to-date. The primary contributors for the fourth decline were lower enrollments than the prior year and the use of scholarships to help our students. Reported net income of $8 million in the quarter compared to $75 million last year and earnings-per-share of $0.12 was down versus the dollar rate last year.

The results of the quarter were impacted by two discrete items, a non-cash after-tax impairment charge of approximately $18 million or $0.28 per share for Advanced Academics and an after-tax restructuring charge of approximately $4 million or $0.07 per share related to workforce reductions. During the quarter, revenue in Advanced Academics continued to be below management's expectations and costs were higher. As such, we updated its near-term and long-term projections. This resulted in a lower estimated fair market value for Advanced Academics.

During the quarter, we initiated the workforce reduction plan that will impact 570 employees. Looking at workforce reduction since the fourth quarter of fiscal 2011, we've reduced just under 10% of the July 1, 2011 workforce. Excluding these two discrete items net income of $31 million in the quarter was down 59% versus prior year and earnings per share $0.47 was down 56%. A reconciliation of these earnings results is included in the financial section of today's release.

Our overall effective tax rate on income from operations was 23.7% in the quarter and 28.1% for the year compared to 33.1% for the full year of fiscal 2011. The tax rate on continuing operation remains lower compared to last year due to the mix of income sources stemming from earnings declines at DeVry University, operating losses at Carrington and Advanced Academics combined with earnings growth at DeVry Brasil and the addition of AUC.

We expect that our effective tax rate and income from operations for fiscal year 2013 will be in the 29% range. The tax benefit associated with the impairment charge at Advanced Academics is not comparable to our effective tax rate and income from continuing operations because of the impact of non-deductible acquisition goodwill. As a result, the tax benefit from the impairment charge carries an effective tax rate of only 4.8%.

Turning to our cost for the quarter and the year, cost of educational services increased 7% versus the prior year in the quarter and about 5% for the year. More than two-thirds of the cost increase for both the quarter and full year was driven by the acquisitions of AUC, FBV, ATC, and Falcon. (Indiscernible) increased 5% versus the prior year and 6% for the full year. About a third of this cost increase in the quarter was driven by acquisitions. The remainder of the increase was for inquiry generation and recruiting, primarily to support new location growth at Chamberlain.

With that overview, let's now shift to our operating segment results starting with Business Technology and Management. Revenue was down about 16% versus the prior year in the quarter and 11% for the year. This revenue decline has been principally driven by declines in total undergraduate enrollments. Enrollments continue to be impacted by weak economic conditions and the resulting hesitation on the part of some students to enroll in college as well as adjustments to the new regulations.

Excluding the restructuring charge, segment earnings of $22.2 million in the quarter were down 71% versus the prior year driven by the enrollment and revenue declines, spending and inquiry generation to support enrollments and resulting margin compression. Earnings for the year were down 43%, excluding the restructuring charge ending the year at 15.4% of revenue.

Within the Medical and Healthcare segment, revenue was up about 10% for both the quarter and year-to-date with varying performance among institutions. Chamberlain College of Nursing delivered revenue growth of 19% in the quarter and about 26% year-to-date. The growth was primarily being driven by new locations that we've opened in the past two years. DeVry Medical International, which includes Ross Medical and Veterinary programs and AUC, delivered solid revenue growth of 31% in fiscal 2012, largely driven by the acquisition of AUC.

Excluding AUC though, Ross revenues grew 7% for the full year. Meanwhile, Carrington results reflect the effects of double-digit enrollment declines reported last period. Carrington revenues declined 21.5% during the quarter and 24% for the full year. As a result, Carrington generated an operating loss of $33 million in fiscal year 2012 as compared to operating income of $9 million in fiscal 2011.

Earnings for the Medical and Healthcare segment in the quarter were down 23% versus the prior year and 19% for the year excluding the fourth quarter restructuring charge and the Carrington impairment charge from the second quarter. Operating income growth at Chamberlain and Ross, along with the addition of AUC earnings were more than offset by the operating loss at Carrington.

Finally, revenue within the International, K-12 and Professional segment was up 3.5% in the quarter and grew 6% for the year. Solid enrollment growth at DeVry Brasil and the addition of FBV contributed to drive segment growth. Becker’s revenue was up 3% during the quarter versus prior year benefiting from the acquisition of Falcon which we purchased in April. This growth was partially offset by revenue declines at Advanced Academics.

Excluding the asset impairment and restructuring charges, segment operating income for the quarter declined to $8.6 million from $16.8 million as a result of revenue declines and increased expenses at Advanced Academics. Excluding the asset impairment and restructuring charges, Advanced Academics generated an operating loss of $14 million as compared to an operating loss of $8.3 million in fiscal 2011. We expect Advanced Academics to significantly narrow these losses in fiscal ‘13 on modest revenue growth and tight expense control.

Looking at the first quarter of fiscal 2013, total operating costs and expenses at our transition institutions are expected to be down on both a year-over-year and sequential basis. For the year, we expect total cost for these institutions to be down reflecting savings from the $50 million cost savings initiative.

Total DeVry-wide operating cost and expenses for the first quarter are expected to be down slightly on a sequential basis, but up slightly year-over-year. For the full year 2013, we expect that DeVry wide total cost and expenses will be up slightly as cost increases at our growth institutions more than offset the savings at our transition institutions.

So to wrap up, this was a difficult quarter and year for DeVry. Accomplishments at our growing institutions have been overshadowed by enrollment declines at DeVry University in Carrington. We will continue to support growing institutions where we see attractive opportunities. However, our main focus is on restarting enrollment growth and delivering significant cost reductions at DeVry University, Carrington and AAI while maintaining the academic quality and successful student outcomes we're known for.

I'll now turn the call over to Pat to talk more about our balance sheet and financial position. Pat?

Patrick J. Unzicker - VP and Controller: All right. Well, thank you, Tim, and good afternoon, everyone. Cash flow from operations for the year was $277 million versus $408 million last year, reflecting our lower earnings. This cash and marketable securities balance was $177 million at the end of the year as compared to $450 million last year, and we continue to remain debt free. We reinvested nearly $384 million for the acquisitions of AUC, FPV and Falcon and for capital expenditures to expand and enhance our existing institutions.

The cash and marketable securities balance was also impacted by our share purchase and dividend programs. During the quarter, we repurchased about 1.13 million shares of our common stock for $33.9 million, and for the full year, we repurchased about 4.26 million shares of our common stock for approximately $158.1 million.

Our net accounts receivable balance was $114 million versus $115 million last year. Our bad debt rates continue to reflect solid focus on the receivable collection process with year-to-date bad debt expense of 2.0% versus 2.1% last year. So, as you can see, DeVry maintains a strong focus and operating discipline around receivables and bad debt management and I believe this bad debt percentage is one of the lowest of any publicly held private sector colleges and universities.

Capital spending was lower than planned at $129 million, a decline compared to $136 million spent last year. Fiscal 2012 spending was focused on expansion at Ross University and AUC, new campus openings at Chamberlain College of Nursing and DeVry Brasil and the final module of Project DELTA which was successfully launched in early July 2012.

For fiscal 2013, we anticipate CapEx to be approximately $150 million. This year-over-year increase will be largely driven by capacity expansion at Ross University School of Medicine and Veterinary Medicine, the American University of the Caribbean, and new campus openings for Chamberlain. In fact, Chamberlain has set a goal of 13 in '13, 13 campuses by the end of fiscal 2013, and we're definitely on track to meet that goal with two new campuses in Cleveland and Tinley Park, Illinois set to open in January of next year, pending all approvals.

Now with that, let me turn the call back to Daniel.

Daniel Hamburger - President and CEO: Thanks. We think that we're at the trough of the cycle that we've been expecting here in fiscal '12 and '13 and the Q4 results obviously reflect that. We continue to believe that fiscal '14 to '16 will be the recovery and growth phase and we have a solid plan in place to accomplish and in this phase we expect to benefit from operating leverage in the investments that we made in quality and growth.

This outlook assumes return to modest new student enrollment growth at DeVry University in the second half of fiscal 2013, a return to growth in total enrollment and revenue growth at Carrington in fiscal 2013, and a gradual recovery of enrollments to 2011 levels and lastly it assumes that our other institutions maintain their growth momentum. I have been with DeVry long enough to remember another down period that we went through. In the early 2000s we went through a period that was actually much worse than what we are going through now. I don't anticipate we are going to experience anything as bad as that.

I find it interesting that the market is gathering to drive at the same level it was back in 2006. At that time we had just over $800 million in revenue, today we are over $2 billion. We had 53,000 students then, today it's over 100,000. Chamberlain only had one campus and it was in Brasil. Today our institutions are much more diversified and able to serve the needs of a broader student population. So while it's not acceptable to have our earnings down year-over-year, it's important to keep things in perspective.

DeVry's after tax is 10.4%, is (not probably) their long term average and better than the majority of other S&P 500 firms. Most importantly we provide a strong value proposition that meets a fundamental need for our student. We are proud of our students' academic results across our institutions. In fiscal 2012 our institutions graduated nearly 30,000 students into high demand fields. Including for example, we helped nearly 4,000 students realize their dream of becoming a nurse, and more than 1,300 medical students pursue their goal of becoming a physician. In addition we helped 50,000 accounting graduates move towards their goal of becoming a CPA.

So while our financial outcomes this year were now where we want it, many of our student outcomes were, they – DeVry to (thrive) over the long term. So, let me talk about the long-term.

Overall we’re very bullish on the mid to long-term outlook for career oriented education and for DeVry for many reasons but let me state three; first, there is a huge need for skilled employees in the United States and globally; second, there’s a strong return on investment for students who graduate from college, 23% to 29% ROI according to the new Goldman Sachs study; and third, (serving) that need for career-oriented education is where DeVry excels.

So within this large global opportunity, what’s the particular thesis on DeVry? The answer is that quality plus diversification equals growth. DeVry’s reputation for quality is a differentiator among students, regulators and accreditors who know our value proposition for high-quality career oriented education, for excellence in student services and for innovative educational technology. In a time when PSCUs have been under scrutiny, DeVry stands apart.

Even the most vocal critics of PSCUs, such as Senator Hunkin in his most recent report had said and I quote, ‘DeVry has demonstrated a commitment from vesting in student services and in engaging in a dialog to improve steps which distinguish DeVry from others in this sector.’

DeVry’s diversified family of institutions is an in advantage with our Healthcare, Professional Education and International operation helping to mitigate the current domestic underperformance, and DeVry is positioned to transition to recovery and growth, growth in enrollments, revenues and margin expansion as well.

DeVry has certainly the fastest growing segments in education and the only one with medical schools, the only with veterinary school, one of the largest nursing school in the United States, and a growing international presence, DeVry programs present strong value propositions for our students. In fact, in pay scale rankings they measured 30-year ROIs, DeVry University outperformed nine of the top 50 U.S. (News World reported) universities.

So as we enter fiscal 2013, we are intently focused on driving objectives of our performance improvement plan. First, aligning our cost structure to our enrollment levels, second, regaining enrollment growth momentum and third, making targeted investments to drive mid and long-term growth.

Let me conclude with a thank you to all the members of the DeVry family for their hard work in fiscal '12 and my thanks in advance for all the hard work that's yet to come up in helping us meet our objectives and our goals in 2013. So now we'd be happy to take your questions.

Joan Bates - Senior Director, Investor and Media Relations: Thanks, Daniel. I understand we have a number of people in the queue. So we are going to ask that you hold your number of questions to one and maybe one follow-up. That will be greatly appreciated. Karris, would you like to give our participants the instructions for the Q&A.

Transcript Call Date 08/09/2012

Operator: Sara Gubins, Bank of America Merrill Lynch.

Sara Gubins - Bank of America Merrill Lynch: I wanted to start off by asking about scholarships and the increased level on the fourth quarter. Could you just talk about what drove that decision? Then, you mentioned that it's not going to be higher next year. But I'm wondering if it might not be more helpful to ramp scholarships to try to drive new student growth?

Daniel Hamburger - President and CEO: Well, thanks Sara, and well, we do intend to stand behind our students. I mean, I think over the mid to long-term, we continue to see the opportunity for tuition increases, but in the near-term given this economy we are going to stand behind our students both to protect persistence and to protect their share. I think it's interesting that a recent Wall Street Journal article talked about how many schools are decreasing use of the scholarships because of their budget constraints. So, we are prepared to use our financial flexibility to do that. We took a pretty sizable increase in this past year and we think that a more modest increase in this new fiscal '13 is going to do it. We are running a number of pilot programs to assess the impact. So we're not going to roll that out in a broad-base way until we've assessed those pilots. That's a very important part of how we operate, is to do the test and control and then roll it out in a bigger way. So, that's our outlook, it's a relatively modest increase from '12 to '13, but I wanted to add that because I know the sizable increase in the quarter, perhaps we could have done a better job of communicating that, took people by surprise and we acknowledge that, so we don't view that as setting the trends or setting the pace for next year.

Sara Gubins - Bank of America Merrill Lynch: Then hopefully this is quick, but would it be possible with the new reporting structure to just help us map the six periods that you're going to be reporting into the quarters?

Patrick J. Unzicker - VP and Controller: This is Pat. So, of the first two sessions of the year, July and September, you'll have obviously both months July, July and August, that session, and then half of September in the first quarter, then you'd pick up the second half and the second quarter of September in the November session, and then for our third quarter, you would have all the January session and one month of March, then of course at the fourth quarter, you'd have the second half of March and both the months in the May session. So, we feel that this will give us the real perspective as an analyst or as an institutional investor, a much better alignment of our enrollments with how we report the quarterly revenue.

Operator: James Samford, Citigroup.

James Samford - Citigroup: Thank you for the new enrollment detail and I guess my associate thanks you for all the modeling she is going to do this evening. But I wonder if I could stretch a little bit and see if you could provide us may be with a little bit more on sort of the direction of when – the direction of enrollment now to look for maybe next quarter, will the trends get worse before they get better or we have to trough at this point on to the new enrollment declines?

Daniel Hamburger - President and CEO: Yes. Overall I think it's just too early to call the churn here for DeVry undergrad, Carrington, which is really where the focus is. This is not applying to the medical schools and DeVry Brasil and so forth. So I think we are probably going to see a similar kind of pattern something along the bottom, I don’t think it's worse before it gets better but I think we are still going to be unhappy here in the fall. One thing I will remind us is that there is a bit of a lag effect that we saw in July and we will see it again in September. Those are our bigger high school, we recruit directly from high schools the traditional college aimed student and the seeds were sown for that back three quarters ago, when we were at pretty much the depth of the distractions and disruption from the adjustments to the new regulations. So there is a lag effect that we are feeling now on those periods. On the positive side we are seeing conversion rates improving which I think that really reflects well – that part of the stream of activity reflects well on the value proposition that students are seeing in our institutions so that they are inquiring and then they are converting to an application. But then the start rates, or the yield rate as some colleges might call it, that’s down, which I think is more a reflection of the consumer sentiment and the economy. So overall, similar patterns but we like what we’re seeing in terms of improving quality of inclusion and quality of conversion.

James Samford - Citigroup: Maybe a quick follow-up on Chamberlain, obviously you’ve invested a lot and growing that part of the business and yet sort of new students and I think that’s an aggregate, including all the new campuses is down year-over-year. How should we think about that direction? I would've thought that that would be the high demand segment and we’d see new student growth there.

Daniel Hamburger - President and CEO: We did see new student growth in the July session of 14.7%, and you’re pointing to the May, a slight decline of less than 1%. Just remember that May basically is not the campuses, it’s basically just the online. So we are growing to Chamberlain in total student from the 15% range. I do want to bridge there, it gives me the opportunity to just mention that Chamberlain is going to be transitioning its academic calendar and we’ll talk more about this in the first quarter, it’s nothing that’s going to impact, but we'll sort of talk about it then but it’s going to go more towards the January, May and September timeframe for starts. So it won't impact growth, it won't impact anything other than a little bit of timing on a one-time basis.

Operator: Gary Bisbee, Barclays.

Gary Bisbee - Barclays Capital: I guess my first question, just given that the struggles at Advanced Academics and at Carrington, what would lead you to take more decisive action? It seems to me you’re sort of sub scale in Advanced Academics, it’s not going to move the numbers one way or another, so I would wonder if you’d consider exiting that asset, to focus on your other assets and how bad would it get to lead you to decide to close campuses in your more vocational brands?

Daniel Hamburger - President and CEO: That's hardly the decision we are taking in Advanced Academics. What we have done, the decisions we have taken are to change the leadership there, focusing on improving course completion rates and really focusing on growth in our existing states versus penetrating new states, which really brings down the cost structure quite a bit. So we do expect a very significant improvement in the bottom line of Advanced Academics and fairly modest revenue growth in this New Year. In terms of Carrington, we are very focused on reducing our cost structure and we have taken tough decisions there, on improving the marketing and improving the recruiting. At Carrington, remember that there we are focusing on certificates and associate degrees, which is actually the largest segment of (total) secondary education, so it's big. It's growing, that segment, over the long-term but we are in a bit of a dip right now because of the economy and it's actually expected to have the fastest job growth. Jobs requiring an associate degree or certificate are expected to grow faster than jobs requiring bachelor's degrees. Also it leads to the lateral learning as the graduates of those associate and certificate programs have the opportunity to move to a bachelor's degree level at a Chamberlain, DeVry University, for example, bachelor's degree program and we are starting to see more of that. So, we expect to see improved results at Carrington this year in '13 and then get back to growth and profitability in the '14 to '16 period.

Gary Bisbee - Barclays Capital: Then the quick follow-up. It looks like trends at DeVry University and also at Carrington got – or I guess DeVry University got worse in July from May. The comparison there looks like it's beginning to get easier, so should we read into that, that things continue to get quite a bit worse? Now I know you commented you think you're near the trough, but I guess I'm looking for some evidence to support that statement.

Daniel Hamburger - President and CEO: No. Actually, I think the batter way to look at it is, I know we've just now changed the reporting to give you more granularity and give you the succession, but if you go back to the traditional way that we looked at it, spring to summer, sequentially as we said there would be – there was a sequential improvement from about negative 20 to negative 15.6. So, I don't want to belabor that because less negative is hardly the kind of thing I want to be talking about, but it was an improvement from that sequential perspective.

Operator: Paul Ginocchio, Deutsche Bank.

Paul Ginocchio - Deutsche Bank: Daniel, let me go back to the question on scholarships. Just wondered what percentage of DeVry undergrad new enrollment in this maybe the last couple periods got scholarships, what percent of your enrollment was driven by the scholarships and what is the level of that scholarship, then maybe the split between scholarships, between existing students and new students?

Daniel Hamburger - President and CEO: Let me give that a shot and then jump in Pat or Tim if I miss a piece of that. About 25% of students at DeVry University got a scholarship. Just to give you a comparison, about 35% of students in college and universities in the United States get scholarship, which is down from 45% about a decade ago. So, while others are pulling back, we are proud to be stepping up and support our students. In terms of the average award amounts, about in the $1,000 range, so it gives you a flavor for that, it's helpful, it's not sort of a giant trend here.

Paul Ginocchio - Deutsche Bank: How about for the new enrollment, is it mainly for existing students or is it for new students?

Daniel Hamburger - President and CEO: This would be fourth quarter that addition that we talked about was all attributed to continuing students and in (indiscernible) some over it. Yes. The overage that we talked about was all for the continuing students.

Paul Ginocchio - Deutsche Bank: So basically the improvement from spring into summer the last declines was in – you didn’t get to offer any more scholarships to new students?

Daniel Hamburger - President and CEO: No I wouldn’t say that was a driver on that.

Paul Ginocchio - Deutsche Bank: I think also ad growth was up or maybe I missed that in your earlier comments, but can you talk about where you are spending or how you are spending that additional money in advertising and what was ad spend growth in the fourth quarter?

Daniel Hamburger - President and CEO: Yes. Ad spending was pretty flat in the quarter. Mind if you take that, Pat.

Patrick J. Unzicker - VP and Controller: Sure. Ad spending sequentially third quarter to fourth quarter was pretty flat.

Timothy J. Wiggins - CFO and Treasurer: But year-on-year was up, Pat.

Patrick J. Unzicker - VP and Controller: Year-on-year was up in the fourth quarter about 9%. The majority of that driving and supporting Chamberlain in their continued growth in new campus openings, along with the advertising shift at Advanced Academics that would normally occur in July, August, we accelerated that to better fit with the decision making timeframe of prospective students for that institution as well as some increases in DeVry University.

Paul Ginocchio - Deutsche Bank: So again it didn’t sound like you had to spend more on DeVry undergrad to get that lesser decline in the summer term?

Daniel Hamburger - President and CEO: No. Not really. It's not – I know some people are worried about, oh my gosh, our advertising cost is going to skyrocket or something, we don’t see that being the case either in total and aggregate or (joint look) at sort of cost per inquiry, pretty fine within the range that we have seen. Even though, we are in an election year and Olympics year and all of that. So we are – and that's probably by tighter management within the marketing function and managing of vendors. So we feel pretty comfortable there.

Operator: Peter Appert, Piper Jaffray.

Peter Appert - Piper Jaffray: Tim or Pat, I was hoping you might be able to help us understand the phasing of earnings in fiscal ’13. I ask this in the context of trying to think about in the early part of the year profitability I assume will be pretty significantly depressed given just the enrollment pattern and cost pattern. Do I have that right?

Patrick J. Unzicker - VP and Controller: As we move into the first quarter, as Tim said, while expenses will be down sequentially, but will be up slightly on a year-over-year basis in total but we’ll still continue to see the flow-through or the deceleration of revenue at DeVry University and Carrington, which will have more of a depressing impact on earnings during the first quarter and then a lessening impact as we move through the balance of Q2 through Q4.

Timothy J. Wiggins - CFO and Treasurer: So we hope to see some improvement in enrollments. Daniel mentioned DeVry University second half, seeing some improvements at Carrington, and also the $50 million of cost reductions will begin to pick up momentum as we move through the year. So hopefully we’ll see some operating leverage on tight expense control and see some improvement as the year progresses.

Peter Appert - Piper Jaffray: Should we be thinking maybe low single digit operating margins in the first quarter?

Timothy J. Wiggins - CFO and Treasurer: Yes.

Peter Appert - Piper Jaffray: Then my follow-up sort of related to that is, Daniel, I'm really more interested I guess in terms of your thinking about appropriate levels of profitability or achievable levels of profitability in the business mix as it currently exists over the next several years when you get to the growth phase again. Is it a mid-teens margin business?

Daniel Hamburger - President and CEO: I don't think that structurally there’s any reason we can’t return to where we were to the range, so even high-teens, 20% plus.

Patrick J. Unzicker - VP and Controller: I think we are in potential benefits of the work that we are doing and the operational excellence and these cost reductions, if the pattern holes that you are seeing in some other industrial companies that – these down periods force a lot of redesign and when you come back out, you are more productive and so the costs don't come on. So we think when you look at kind of where we are trading from an EBITDA basis and you think about some of the work we are doing and the leverage that exits and I'm convinced that we'll be more productive on the backside. I think we can get the kind of leverage that Daniel is talking about even on growth rates that maybe not as robust as we saw going back a couple of years.

Operator: Bob Craig, Stifel Nicolaus.

Robert Craig - Stifel Nicolaus: Tim, I just want to clarify a statement you made earlier indicated that the total operating expenses and I take it you are talking to $1.78 billion in total op expenses for the year excluding charges would be up slightly year-to-year, is that what you indicated?

Timothy J. Wiggins - CFO and Treasurer: That's right. We are looking for – if you think – when we try to put them in these two categories of institutions in transition and institutions that are growing and so as we look at that, the institutions that are in transition are where we are focusing the operational excellence and the $50 million program. Most of it will be there. So, we talked about expenses in those institutions, total costs and expenses of $1.30 billion, and so you should look to see those costs down by the $50 million give or take next year. Having said that, we also expect to see – continue to see significant growth in these other institutions that are growing and those costs are going to grow at a rate faster than the savings that we are targeting in these transition institutions. So we've talked about total cost and expenses for '13 being up slightly on a full year basis.

Robert Craig - Stifel Nicolaus: The $25 million in cost savings that you folks achieved from prior workforce reductions in '12, does that factor in here anywhere?

Timothy J. Wiggins - CFO and Treasurer: It does, good question. If you think about what we're trying to accomplish in fiscal '13, there are a couple of things going on. One is that we do have some residual savings that are rolling over from the $25 million program that we started last year. So, if you think about it, think about $50 million of savings. We know that the Perkins matter was a one-time, so now you should be thinking about $56 million, and there is probably $4 million or $5 million of additional savings that's rolling over from the programs we started last year, so think about $60 million. But we know also next year that there are a couple of things that are going to drive costs up. For example, we do have some increase in wages for the people in those transition institutions, I think about $10 million, and then we do anticipate increasing some of our full-time faculty and that's kind of $6 million, $7 million number. So, if you think about the $60 million that we're targeting as impacted by these $15 million adjustments kind of get us back to this $50 million give or take target that we're shooting to save in next year in these transition institutions. I hope that's helpful.

Robert Craig - Stifel Nicolaus: Very helpful, thank you. Just one follow-up, could you give us some guidance on RPS for the year, revenue per student?

Timothy J. Wiggins - CFO and Treasurer: Well, I wish I knew, I think this goes to the question earlier about what's the impact of some of the factors for example the scholarship. As Daniel said, we anticipate some up scholarships there, that gets into course loads and I think that's a little bit beyond our visibility at this point. If you think about it in Q1 though, we think we'll see some improvement there, particularly at DeVry University where we had the Pell situation which will not repeat itself. Our scholarships, hope you're running at about the same level and then we have some tuition increase. So I think we know that we should see modest improvement in revenue per student in Q1 at DeVry University.

Timothy J. Wiggins - CFO and Treasurer: Before you turn it over, I just want to clarify Peter's question, the prior one, talking about low single digit margin for the full year next year and then we said mid double digit not single digit.

Patrick J. Unzicker - VP and Controller: Yes. This is for the first quarter.

Daniel Hamburger - President and CEO: First quarter, yes.

Timothy J. Wiggins - CFO and Treasurer: Yes. First quarter only.

Operator: Kelly Flynn, Credit Suisse.

Kelly Flynn - Credit Suisse: Hopefully you won't count this as a question but I'm just confused by what you just said Daniel about the Q1 margin. I thought you said mid single digits.

Daniel Hamburger - President and CEO: Yes. For Q1.

Kelly Flynn - Credit Suisse: Mid single digit for Q1.

Daniel Hamburger - President and CEO: Yes. I got confused I thought that was asked for the year as a whole and it's going to than that for a year as a whole.

Kelly Flynn - Credit Suisse: I guess my first question is can you talk about PLUS loans? As you may have heard another company today talked about students who are dependent on their parents reporting that the PLUS loan credit standards have changed and it's making it harder for parents to get PLUS loans which is hurting demand and causing them to fund students more directly. Are you seeing that at all and if so is there any implication kind of for the fall enrollment related to high school students?

Daniel Hamburger - President and CEO: No we are not seeing it and no we don’t think there is an implication. We sure don’t have any data that this is an implication for the fall.

Kelly Flynn - Credit Suisse: Last quick question, all that color you gave on Carrington operating losses is really good to help us figure out sort of what's really going on Ross and Chamberlain. Can you tell us what Carrington's revenue was for the year?

Timothy J. Wiggins - CFO and Treasurer: Well Kelly, I think you can get pretty close. If you think about the transition institutions and subtract out the Business, Technology and Management, which is DeVry, the only thing that’s going to be left in there would be Carrington and AAI, so you should be able to get pretty close.

Operator: Corey Greendale, First Analysis.

Corey Greendale - First Analysis: You’ve given a lot of helpful information on the cost side. I just wanted to focus specifically on the International, K-12, Professional segment for a second, and Tim, I know you outlined a couple of things that drove it out, like the acceleration of the Advanced Academics marketing, but at least in my model, I hadn’t anticipated $10 million increase in their cost structure both sequentially and year-over-year. So, I was just hopeful you could give us a sense of what the go-forward cost structure is there and kind of what the long-term margins are in that segment?

Timothy J. Wiggins - CFO and Treasurer: Let me work on the cost structure and maybe pun a little on the second one, while I think about it, but a couple of things happened in one of my sequential analysis. We did see higher sequential costs at AAI. They moved some advertising cost into June from July. It works better in terms of how they run and attracts students. The second thing is that, there were some development costs related to starting up new operations, those landed in. So the sum of those was $3 million. So those, we wouldn’t expect a reoccurrence of those as we go forward. Then the other thing we said in there was that we saw some higher cost at Brazil for some wages that was in one of the sequential amounts. So Pat, can you add some additional color there?

Patrick J. Unzicker - VP and Controller: Then in addition to that, we would have had the acquisition of FBV. That occurred on – we closed the deal February the 29, so we would have only had one month reflected in our trend rate during the third quarter but of course then a full quarter of expenses in 4Q. Then we acquired Falcon on the first day of the month of the fourth quarter, and Falcon's business just given the nature of the USMLE, our test proposal pretty lumpy as well as its costs, so there is a significant amount of, course delivery and students taking the USMLE in the fiscal fourth quarter of our year. So we've had the double impact of the acquisitions of FBV and Falcon and then Falcon being heavier than it normally is during that time of the year.

Daniel Hamburger - President and CEO: I'm glad this came up because it just feels like that we didn't – it's probably our fault we didn't communicated well enough, but it feels like the community – just FBV and Falcon seemed to have slipped by some peoples' models.

Patrick J. Unzicker - VP and Controller: I think we described that impact was around $4 million sequentially.

Corey Greendale - First Analysis: Just quickly, Daniel. I really appreciate the comment about – or of the communication to expectation that new students go positive in the back half of the fiscal year at DeVry University. Can you just give us a little bit on what you are seeing in terms of real-time trends that lead you to that conclusion and what – if you just kind of have total inertia and the current trends stay where they are at, do you get to positive (or is it something) you have to continue improving?

Daniel Hamburger - President and CEO: Well, we think we need to continue to improve in the marketing awareness building efforts that we are doing to improve the mix of high quality inquiries. We are having some good success there. We also need to improve the – also the cost position there and so we are being much more draconian with the vendors. I can think of one vendor recently who just said, you are gone, and interestingly, it came back with a much lower price, so that allows us to improve our stance in that way. Then, in terms of the recruiting effectiveness, it's been a lot of training, reassuring our recruiting advisors that, hey, you were compliant before and you're compliant now, you really don't need to change what you're doing, what you're saying to our students. We tried some new metrics. They didn't work. It led to over focus on the metric when you just need to focus on serving the student right in front of you. And our managers sort of throws up in many cases, not quite sure how to culture, what to say in this new environment. Just people saw so much of this negative publicity out there and which is very protective of DeVry, want to do the right thing for DeVry, want to make sure we don't make a mistake. So all of that frozenness is starting to thaw out and we’re seeing improved conversion rates. So, looking to continue that trend, also as you pointed out, at some point, you get to easier comparables on a lower base and so there is no guarantees in life but that's our plan and that's what we're looking for is to start to see modest, but start to see positive in the second half of the year.

Operator: Jeff Silber, BMO Capital Markets.

Jeffrey Silber - BMO Capital Markets: I'm not sure if you talked about placement rates at all in your comments. I was wondering if you could specifically address what's going on at DeVry University, Carrington and Chamberlain.

Daniel Hamburger - President and CEO: Yes, we will be coming out with that in our Annual Report of employment statistics. We don't see placement statics, we see employment statistics in October. So, we didn't have an update, and you’re right, we didn't comment on it. Just in terms of color from what I've been seeing, I'm encouraged, it's interesting. As much as prospective student seem to be discouraged, which are a concern about for our country let alone DeVry, and few are going to college, those were coming in and doing their homework and graduating are actually finding there is a lot of open jobs out there and that's sort of the skills gap that many people have talked about and reported on that the employers are looking for skilled employees in nursing, in engineering and in accounting for sure. So our career services offices are very busy helping our students and graduates and we are – that we are very confident about that and reflects well on the fundamental of the value proposition. So thanks for that question.

Jeffrey Silber - BMO Capital Markets: Just a follow-up. In terms of the cost reductions that you put in place at DeVry and at Carrington were any of those in the career services area or is that an area where we are actually investing more?

Daniel Hamburger - President and CEO: No. Really not in that, we have already invested quite a bit more over the last couple of years. So we feel pretty – there are some investments and I'm thinking of interesting partnership with CareerBuilder, you will hear some more about, but fairly steady in terms of the cost structure in the career services office.

Operator: Suzie Stein, Morgan Stanley.

Keith Paxton - Morgan Stanley: This is Keith Paxton on for Suzie. Just wondering if you guys have done any thinking about the impact from Cal grants being cut off next year for I guess Carrington and DeVry that might be relevant?

Daniel Hamburger - President and CEO: Yes. It's a concern for our students because it means that they will have relatively more loans as a percentage of their total financial package they put together to finance your education. Carrington already took the brunt of that impact in the prior year, so if you will you have sort of anniversary that impact to large extent. It will be hitting DeVry University in a bigger way for new students, for current students there is more of a transition period. So it is a factor, hard to say what the impact would be but I don’t anticipate that that would be something that would show up in your model.

Timothy J. Wiggins - CFO and Treasurer: I would add, Daniel that we do have in our scholarship budget of the mid-40s. We have money specifically set aside for kind of replacement of that. I think we call it DeVry cares.

Daniel Hamburger - President and CEO: Yeah, that’s a good thinking, the care grant in a way so we put the care grant in place.

Keith Paxton - Morgan Stanley: Then I wanted to just confirm something you said earlier. I think you said you’ve reduced the share of reads you’re getting from aggregators by 20%, and I just wanted to make sure that’s correct, and then C., is that system-wide and if you could maybe like give a little bit of color where you were before, where you are now, are you going to keep reducing that, the use of aggregators?

Daniel Hamburger - President and CEO: Yes, we’re going to continue on that strategy, so I think there’s more to come there, and just to confirm, yeah, we’ve reduced the share of that in our mix by a little over 20% at DeVry University for sure and also with Carrington and the Chamberlain, I just don’t know if that number is the same, that of the DeVry University number.

Operator: Trace Urdan, Wells Fargo.

Trace Urdan - Wells Fargo: I hate to take this back here but I just wanted to be sure that I understood exactly what you said with respect to the year around Pell falling out and replacing that with a scholarship. So are we to understand then that the scholarship grant is then seasonal to when that third Pell Grant hole exists for the student and is there any expectation on the part of the students then that that whole would continue to be filled in future years that they are in older DeVry?

Daniel Hamburger - President and CEO: I think generally, yes. I mean there’s always exceptions but that’s why it’s more in the spring because it’s going back to more of the traditional academic calendar, because we got this trimester system which provides that wonderful value proposition to get a four year degree in three years. It's that third tranche that seems to hit this time of the year. So, yeah, I think that trend would probably continue next year. It's relatively new for us. So, I don't have as much grist under my fingernails as I'd like on that, but we'll keep you posted on that.

Trace Urdan - Wells Fargo: This is the reason why sequentially you had expected that that those scholarships would then not be as significant in the next quarter, is that right?

Daniel Hamburger - President and CEO: Yeah, I think so, and sequentially why it did hit us there in the fourth quarter and surprised everybody with that.

Operator: Peter Wahlstrom, Morningstar Investment Research.

Peter Wahlstrom - Morningstar: So given your increase in exposure to the Brazilian market, could you talk just for a minute about your expectations for that economy given some of the recent trends whether it's short-term interest rates cuts or still an inflationary environment there. Just how concerned are you about potential slowdown in Brazil?

Daniel Hamburger - President and CEO: Excellent question and we look at that and run that through our enterprise risk management function with our Board as well. So we have yet to see the impact of that. We worry about it, but we haven't seen it yet, and in fact, DeVry Brasil has been to grow faster than the higher education market in Brazil organically, and then adding the acquisition impact on top of that. So I think we feel pretty comfortable that the value proposition that we are offering there, that the improvements that we are making to our operations by sharing best practices globally from – our operations in North America, for example, are helping to perhaps offset maybe any drag that's coming from the market.

Peter Wahlstrom - Morningstar: As a quick follow-up, how are you thinking about tuition trends in Brazil?

Timothy J. Wiggins - CFO and Treasurer: We're thinking about it in the mid single-digit range.

Operator: Brandon Dobell, William Blair.

Brandon Dobell - William Blair: I was wondering if you could give a little bit color on what might change you or what might cause you to change your outlook or perspective on scholarships. So, are we thinking that this quarter is kind of already in the bag in terms of what you expect to offer, but looking out to Q2, Q3, Q4, what are some of the milestones that we should think about that may change your guys’ behavior I guess?

Daniel Hamburger - President and CEO: It would be the economy. Again, we think – we don't view it at this stage as sort of a permanent downdraft in net effective pricing. We believe that we can continue to have tuition increases which generally have been more modest than that from the public sector colleges and universities, so more at the lower end of the 2% to 5% range that we have traditionally talked about. So, I'm not talking to medical schools, they are certainly higher than that, Brazil is a little bit different. But if the economy got worst, God forbid, then it makes sense to protect and support your student and to protect your economics as well. So, that might be what would change, but we're giving you the best guess that we have on our expectations.

Brandon Dobell - William Blair: Then I just want to make sure I understand, as we looked at, let's call it comparing Q4 with Q3 and the trends within DeVry undergrad in terms of conversion rates and show rates, did you see improvement as you work through those four intake periods in those two quarters?

Daniel Hamburger - President and CEO: We've seen the improvement in the conversion rates which is the part of the process that we think best reflects the students' perception of the value proposition. In other words, it's a top of the funnel I guess, if you recall, the beginning of the process, that's an inquiry, okay, I'm interested. So that seems to reflect a lot of things, my (very elected) school, my consumer confidence, all of that. Then you get into, okay, as soon as you've and now I've made application, that's really very more – much more directly tied to I like what I see. I like what I see at this institution, the value proposition. Then the backend, the show rate that you mentioned, again kind of comes back to the economy sort of in the same way that I want to buy a house, I need to buy a house. The mortgage rates are at 30-year lows, but I can't quite sign at the dotted line, so that final process kind of slips back to a little bit more of a function of the economy and consumer confidence. So we've seen an improvement in the conversion rate, very encouraging, but we have not seen an improvement at the show rate (Indiscernible).

Operator: Jeffrey Volshteyn, JPMorgan.

Jeffrey Volshteyn - JPMorgan: How should we think about the conversion and retention rate within your online and on-ground programs?

Daniel Hamburger - President and CEO: Online and on-ground programs, I think that the conversion rate has improved a little bit better in the online programs in the recent period. That's recovered a little bit more quickly. I don't know if we can extrapolate that to the broader world. It's a little bit easier to manage a group that's more centralized, and so I think that's some of the training and some of the improvements that we've made. I may come a little bit quicker, might not be unexpected to see that happen there in the online environment.

Jeffrey Volshteyn - JPMorgan: Retention rates?

Daniel Hamburger - President and CEO: In terms of retention rates, we've seen that come off of the prior peak that we saw in let's say a year ago. Over this past year, it has slipped down a little bit at DeVry University undergrad, a little bit better at the graduate school level, very strong at Chamberlain College of Nursing. We think some of the same factors that impact new students and their propensity to sign up to go to college also impacting current students. With the economy being so bad that has impacted some students who just say, boy, I don't want to continue right now just because of the way I'm feeling about the economy.

Jeffrey Volshteyn - JPMorgan: As a follow-up, given all these moving parts, what is your appetite for additional acquisitions at this point?

Daniel Hamburger - President and CEO: Well, our appetite for additional acquisitions continues particularly in our international professional education in those areas. Those continue to be areas of focus for us as we – for example we just did the FBV acquisition in Brazil. Looking at more acquisitions like that, it's very attractive. We've become pretty much the acquirer of choice. In Northeast Brazil we feel like we're seeing pretty much everything that's anybody is thinking about maybe making a transition and I would love to inherit their institution. In some cases even outside an auction which was the case with FBV. So, that's really very much a value additive process, so still active. With that, thank you, Jeff and thanks everyone for all your questions, but I do know we have some appointments to get to, so we are going to cut it off. But we did try to go over to get in as many as we could. Our next quarterly results call is scheduled for October 25th and then we'll be announcing our first quarter 2013 results as well. So thank you all for your continued support of DeVry. Good afternoon everybody.

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