| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
| Form 8-K |
| CURRENT REPORT |
| Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| Date of Report (Date of earliest event reported) | March 26, 2003 |
| DeVRY INC. (Exact name of registrant as specified in its charter) |
| DELAWARE | 012751 | 36-3150143 |
| (State or other jurisdiction of incorporation | (Commission File Number) | (IRS Employer Identification No.) |
| ONE TOWER LANE, OAKBROOK TERRACE, IL | 60181 |
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code | (630) 571-7700 |
| Total number of pages: 52 |
| - -1- |
| DEVRY INC. FORM 8-K INDEX |
| Page No. | |||
| Item 9 — Regulation FD Disclosure | 3 | ||
| Signatures | 4 | ||
| Information Presented March 26, 2003 | 5-52 | ||
| - -2- |
| Item 9 — Regulation FD Disclosure |
| On March 26, 2003, DeVry Inc. presented the revised information on pages 5 - 52 with respect to its announced signing of a definitive agreement to acquire Ross University. |
| - -3- |
| Signatures |
| Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. |
| DEVRY INC. | |
(REGISTRANT) |
| Date: March 26, 2003 |
| /s/ Dennis J. Keller | |
Dennis J. Keller Chairman |
| Date: March 26, 2003 |
| /s/ Norman M. Levine | |
Norman M. Levine Senior Vice President and Chief Financial Officer |
| - -4- |
| acquisition of |
| Expanding High-quality, Career-Oriented Higher Education into the Medicine and Health Sciences Sector |
| Forward-Looking Statement |
| Certain information contained in this release may constitute forward-looking statements pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are based upon the Company’s current expectations and beliefs about future events, are inherently uncertain and may involve risks that could cause actual results to differ materially from the forward-looking statements. Potential risks and uncertainties include, but are not limited to, the acquisition of Ross University occurring with minimal disruption to its operations, dependence on student financial aid, state and provincial approval and licensing requirements, and the other factors detailed in the Company’s Securities and Exchange Commission filings, including those discussed under the heading “Risk Factors” in the Company’s Registration Statement on Form S-3 (No. 333-22457) filed with the SEC. |
| | | 1 | |
| Transaction Summary |
| Financial Terms | • | $310 million purchase price |
| • | Positive impact on margins and growth | |
| • | Immediately accretive to earnings | |
| Financing | • | $300 million of committed senior financing |
| • | Utilize some cash on hand | |
| Legal/Accounting | • | All cash acquisition structured as stock purchase |
| • | Subject to economic valuation, estimated intangible assets amortized through the income statement of approximately $7 million annually | |
Closing Conditions | • | Customary regulatory approvals and closing conditions |
| • | Expected closing in fiscal fourth quarter |
| | | 2 | |
| CONFIDENTIAL |
| Company Overview |
| [GRAPHIC OMITTED] |
| 3 |
| DeVry - Snapshot Overview |
| • | Leading provider of undergraduate and graduate education and professional exam review services |
| • | DeVry University/Keller Graduate School of Management | |||
| • | Becker Conviser Professional Review | |||
| • | LTM Revenues and EBITDA of $663 million and $136 million, respectively |
| • | First Six Months: |
| • | Revenues - $335 million | |||
| • | EPS - $0.49 per share | |||
| • | Cash flow - $95 million | |||
| • | 52,000 students enrolled at DeVry/Keller (Fall Term) |
| • | Over 40,000 students utilizing Becker Conviser Services annually |
| | | 4 | |
| DeVry - Snapshot Overview (continued) |
| • | Focused on preparing students for careers in technology, business and management |
| • | DeVry curricula focused on workplace-relevant education | |||
| - Designed to integrate general education, technology and business | |||
| • | Emphasis on high-quality education to a diverse and geographically dispersed student population |
| • | DeVry’s educational approach and structure reaches students who are underserved by other higher educational institutions, minorities and first generation college students in particular | |||
| | | 5 | |
| DeVry - Snapshot Overview (continued) |
| • | Achieves consistent growth through simple strategy |
| • | Revenue growth through increasing enrollment and tuition | |||
| - Leading recruiting/advertising system | |||
| • | Geographic expansion | |||
| • | New programs | |||
| • | Expanding delivery channels (DeVry University Centers and Online) | |||
| | | 6 | |
| DeVry Is a Leader in IT, Business and Professional Certification Exam Prep |
| DeVry University |
| 45,300 students (Fall 2002) |
| Key programs: |
| • | Business Administration with concentrations in: |
| - Accounting |
| - E-Commerce |
| - Business Information Systems |
| - Health Services Management |
| - Human Resource Management |
| - Operations Management |
| - Project Management |
| - Small Business Management and Entrepreneurship |
| • | Computer Engineering Technology |
| • | Computer Information Systems |
| • | Electronics Engineering Technology |
| • | Information Technology |
| • | Technical Management |
| • | Telecommunications Management |
| Keller Graduate School of Management |
| 10,760 coursetakers (Fall 2002) |
| Key programs: |
| • | Business Administration |
| • | Accounting & Financial Management |
| • | Human Resource Management |
| • | Information Systems Management |
| • | Project Management |
| • | Public Administration |
| • | Telecommunications Management |
| • | Business Information Systems |
| • | E-Commerce |
| • | Operations Management |
| • | Project Management |
| • | Health Services Management |
| • | Small Business Management and Entrepreneurship |
| 40,000 students annually |
| Key programs: |
| • | CPA |
| • | CMA |
| • | CFA |
| | | 7 | |
| DeVry Is Proactively Addressing Recent Business Challenges |
| Current Challenges |
| • | Concentration of curriculum |
| • | Significant IT / Technology base | |||
| • | Current lower-growth environment |
| • | Dependency on technology employers | |||
| • | Improve capital efficiency |
| | | 8 | |
| DeVry Is Proactively Addressing Recent Business Challenges |
| Current Challenges | New Initiatives | |||||
| • | Concentration of curriculum |  | • | Diversify curriculum | ||
| • | Significant IT/Technology base | • | New undergraduate programs | |||
| • | Business and management offering growing rapidly | |||||
| • | Becker Conviser Professional Review | |||||
| • | Current lower-growth environment | | • | Access higher-growth markets | ||
| • | Dependency on technology employers | • | Continued commitment to core principles | |||
| • | Increased focus on business and management | |||||
| • | Expanding number of online programs | |||||
| • | Improve capital efficiency | | • | Program length and facilities utilization | ||
| • | DeVry University Centers | |||||
| • | Closer to audience | |||||
| • | Adult focus | |||||
| • | Lower capex | |||||
| | | 9 | |
| Ross University Complements All DeVry Initiatives |
| DeVry Initiatives | Ross University | |||||
| • | Diversify curriculum |  | • | New curricula focus through established market leader | ||
| • | Access higher-growth markets | | • | High-growth medicine and health sciences market | ||
| • | Improve capital efficiency and operating flexibility | | • | High capital efficiency | ||
| • | Extended program length | |||||
| • | Sector maintains high per student pricing | |||||
| | | 10 | |
| DeVry Is Well-Positioned for Future Growth |
| • | Strong industry fundamentals | ||
| • | Technology, Business and Health Sciences markets |
| • | Traditional student and adult learner markets |
| • | Professional certification preparation |
| • | Online delivery currently in strong growth phase |
| • | High-quality, established brand names | ||
| • | Recognized leadership of DeVry University brand |
| • | Recognized leadership by Ross in U.S.-style medical and veterinary education |
| • | Premier professional certification in Becker Conviser brand |
| | | 11 | |
| DeVry Is Well-Positioned for Future Growth |
| • | Efficient business model and strong, proven management team | ||
| • | Focus on career-oriented student profile |
| • | Broad geographic coverage and efficient delivery models |
| • | Compelling financial model | ||
| • | Consistent growth and attractive financial profile |
| • | Significant free cash flow with high capital efficiency |
| • | Enhanced visibility and predictability |
| • | Modest leverage pro forma for acquisition |
| | | 12 | |
| Overview of Ross University |
| [GRAPHIC OMITTED] |
| 13 |
| Key Highlights - Ross University |
| • | Leading player in the proprietary post-secondary education industry | ||
| • | One of the largest medical and veterinary schools in the world |
| • | Founded 1978 - 25th anniversary in 2003 |
| • | Superior education and excellent graduate employment record | ||
| • | Unmatched network of U.S. clinical rotations |
| • | Over 4,500 practicing U.S. alumni |
| | | 14 | |
| Key Highlights - Ross University |
| • | Favorable market dynamics | ||
| • | U.S. medical schools fill only 2/3 of available residencies |
| • | 5% - - 10% annual tuition increases at U.S. medical schools |
| • | Long track record of consistent growth | ||
| • | Capacity to increase enrollments significantly |
| • | Excellent free cash flow and strong margins | ||
| • | 2002 EBITDA margin exceeded 40% |
| | | 15 | |
| Ross University: A Leader in Medical and Health Sciences Education |
| Ross offers medical and veterinary education comparable to U.S. institutions |
| Key Facts | ||
| Student Population | +/- 95% from U.S. | |
| Admissions | Faculty assessment of multiple factors | |
| Facilities | Classrooms and laboratories | |
| Curriculum | U.S.-Model | |
| Faculty | U.S.-Trained PhD, MD and DVM | |
| Student Financing | Title IV eligible | |
| Accreditation | Recognized by DOE | |
| Clinical Rotations | U.S. teaching hospitals and universities | |
| Outcomes | Comparable USMLEpass rates andresidency placement rates to U.S. medicalschools | |
| [GRAPHIC OMITTED] |
| | | 16 | |
| Ross Is Uniquely Positioned for Continued Leadership |
| Ross enjoys significant competitive advantages in medical and veterinary education market opportunities |
| Unique Ross Advantages | ||
| Location | Caribbean basic science campuses | |
| Culture | Uniquely diverse cultural experience | |
| Organization | For-profit business | |
| Mission | Teaching only (no research mission) | |
| Entering Classes | Three per year (Jan, May, September) | |
| Faculty | Full-time faculty | |
| Curriculum | Hands-on training | |
| Matriculation | Accelerated and flexible | |
| Clinical Rotations | Extensive network of outstanding teaching hospitals and veterinary schools | |
| [GRAPHIC OMITTED] |
| | | 17 | |
| Ross’ Key Competitive Advantages |
| Business Model |
| • | Established leadership position |
| • | Proven U.S.-model curriculum |
| • | Full-time faculty and support organization |
| • | Extensive clinical rotation network |
| • | Large, successful alumni network |
| • | Capital efficient business model |
| • | Negative working capital | |||
| • | Moderate capex requirements | |||
| | | 18 | |
| Ross’ Key Competitive Advantages |
| Legal / Regulatory Environment | |||||||
| • | Title IV eligibility | ||||||
| • | One of three U.S.-model offshore schools with eligibility | ||||||
| • | DOE approval since 1983 | ||||||
| • | Individual state licensing requirements fulfilled | ||||||
| • | Significant demand for clinical residencies | ||||||
| | | 19 | |
| Medical and Veterinary Market Overview |
| [GRAPHIC OMITTED] |
| 20 |
| Medical Education Opportunities in the U.S. Are Constrained |
| Recurring Supply / Demand Imbalances |
| • | Recurring and serious deficiency in the supply of U.S. medical graduates | ||
| • | Increasing demand in U.S. for physicians |
| • | Virtually no growth in graduates from U.S. medical schools over last 20 years |
| • | - 32% of residencies filled by non-U.S. educated medical students |
| | | 21 | |
| Medical Education Opportunities in the U.S. Are Constrained (continued) |
| U.S. Institutions Do Not Meet All Needs |
| • | Conflicting missions | ||
| • | Within universities (medical schools vs. other professional schools) |
| • | Within medical schools (research vs. clinical vs. teaching) |
| • | Resource constrained | ||
| • | State and institutional budget cuts; challenged endowment environment |
| • | Medical hospitals / research centers are often “cash drains” for universities |
| • | Institutional barriers | ||
| • | Zero enrollment growth policies |
| • | U.S. institution “price umbrella” | ||
| • | Similar to DeVry undergraduate price umbrella |
| | | 22 | |
| Projected Physician Supply Shortfall |
| The U.S. has an increasing need for M.D.s |
| • | Growing, Aging Population | ||
| • | Population estimates have exceeded Graduate Medical Education National Advisory Committee estimates by 6% since 1981 |
| • | Advent of New Illnesses | ||
| • | Accelerating M.D. Retirements | ||
| • | Increasing Number of Female M.D.s | ||
| • | Female physicians average 20% less work hours than male counterparts |
| • | Inadequate Supply of M.D.s to Serve Inner City Urban and Rural Areas | ||
| Source: Health Affairs, January/February 2002. |
| | | 23 | |
| Medical School Admissions Have Remained Flat |
| Medical School Admissions 1981 - 2002 Applicantsversus Acceptance |
| Source: Association of American Medical Colleges Data Warehouse. |
| | | 24 | |
��
| U.S.-Model Medical Education - Market Dynamics |
| What Happens to U.S. Medical School Applicants? |
| Applications to U.S. Medical Schools | Unaccepted Pool | Do Not Attend or Foreign Medical School | |||
| Typically 35,000-45,000 20-year average: 39,455 | 23,000 57.5% | 18,500 46.2% | |||
| Seek Alternative Education | |||||
| Acceptance to U.S. Medical Schools | Osteopathic |  | Total 4,500 11.3% | ||
| ~ 17,000 42.5% | 2,500 6.3% U.S.-Modeled Offshore 2,000 5.0% | ||||
| | | 25 | |
| U.S. Medical Schools Fill Only 2/3 of Residencies |
| Residency Gap 1994 - 2002 Total Available Residencies versus U.S. Medical Education Filled Spots |
| 2002 Residency Gap: 6,515 Physicians |
| Source: National Resident Matching Program. |
| Note: Does not include residents who (i) took a year off immediately after graduation or (ii) took a year of specialty training before beginning their residency. |
| | | 26 | |
| U.S.-Model Schools Fill Only 15% of Residency Gap |
| 2002 - Available U.S. Residencies |
| 2002 - Unfilled U.S. Residency Spots |
| Source: The Journal of the American Medical Association. |
| | | 27 | |
| Veterinary Education Dynamics Are Similarly Robust |
| Institutionally Controlled Supply of New Veterinarians |
| • | Access to veterinary education has become more difficult | ||
| • | From 1991 through 1999, the number of veterinary school applicants increased over 55% |
| - Relatively little expansion in veterinary school seats |
| - Acceptance rate has dropped from 51% to 32% |
| U.S. Institutions Do Not Meet All Needs |
| • | Conflicting missions | ||
| • | Within universities (veterinary schools vs. other schools) |
| • | Within veterinary schools (research vs. clinical vs. teaching) |
| • | Resource constrained | ||
| • | State and institutional budget cuts; challenged endowment environment |
| • | Veterinary clinics are “cash drains” for universities |
| • | Institutional barriers | ||
| • | Zero enrollment growth policies |
| | | 28 | |
| Veterinary Education Dynamics are Similarly Robust |
| Veterinary School Admissions 1991 - 1999 Applicantsversus Acceptance |
| Source: AAVMC U.S. Applicant Data. |
| | | 29 | |
| Strategic Rationale |
| [GRAPHIC OMITTED] |
| 30 |
| Strategic Rationale |
| Diversification of revenue base to high-growth medical sciences sector |
| • | Medical sciences education represents attractive long-term market for DeVry |
| Enhanced revenue visibility |
| • | 4+ year programs |
| Increased capital efficiency |
| • | Impressive per student tuition with competitive pricing |
| Expansion of leadership in career-oriented education |
| • | Strong brand and market leader in attractive career sector |
| | | 31 | |
| Strategic Rationale (continued) |
| Growth platform |
| • | Related medical programs and degrees |
| • | Related medical technology programs and degrees |
| • | Test prep |
| • | Online |
| • | Continuing education for medical professionals |
| Strong management team |
| • | Limited integration risk |
| | | 32 | |
| Diversification into High-Growth Medicine and Health Sciences Sector |
| LTM (12/31/02) Actual | Estimated Pro Forma |
| (1) | Net income allocation assumes all write-up amortization and interest expense allocated to Ross. |
| | | 33 | |
| Enhanced Revenue Visibility |
| • | 4+ year comprehensive programs |
| • | Length of programs leads to strong revenue visibility | |||
| • | Reduced student acquisition costs | |||
| • | Measured tuition increases |
| • | Annual increases at U.S. institutions estimated at 5% - 10% | |||
| • | 2003 Ross increase of 5% - 11%, depending on program | |||
| | | 34 | |
| Increased Capital Efficiency |
| • | Significant capacity in place | ||
| • | Recent expansion to accommodate increasing enrollment |
| • | Negative working capital model self-funds growth | ||
| • | Collect tuition at beginning of semester |
| • | Positive impact on cash flow returns |
| • | Modest capital requirements | ||
| • | Favorable land/lease terms |
| • | Modest maintenance capex |
| • | Multinational characteristics of Ross University result in favorable tax rates | ||
| • | -16% effective tax rate |
| | | 35 | |
| Expands Leadership in Career-Oriented Education |
 |  | | ||||||
| Market Position and Focus | DeVry | Keller | Becker | Ross | ||||
| • | Leader in undergraduate business and technology degrees | • | Largest for-profit provider of graduate management degrees | • | Leading provider of CPA, CMA and CFA preparatory programs | • | Largest provider of U.S.-style medical and veterinary education | |
| • | ||||||||
| Students(1) | • | 45,300 | • | 10,760 | • | 40,000+ | 2,558 | |
| Revenues | $622.5 million | • | $40.1 million | • | $62.1 million | |||
| Degrees | • | BS | • | MBA | • | CFA, CPA, CMA preparation | • | M.D. |
| • | BBA | • | Various Master’s degrees | • | D.V.M. | |||
| • | BPS | |||||||
| • | AAS | |||||||
| (1) | Students/coursetakers as of Fall 2002. |
| | | 36 | |
| Multiple Opportunities for Growth |
| | | ||||||
| Market Position and Focus | DeVry University | Keller | Becker | Ross | ||||
| • | Leader in undergraduate business and technology degrees | • | Largest for-profit provider of graduate management degrees | • | Leading provider of CPA, CMA and CFA preparatory programs | • | Largest provider of U.S.-style medical and veterinary education | |
| Degrees | • | BS, BBA, BPS, AAS | • | MBA and other Master’s degrees | • | CFA, CPA, CMA preparation | >M.D. >D.V.M | |
| Growth Opportunities | >Biomedical Engineering Technology >Bio-informatics >Health Information Systems | Online
| ||||||
>Bolster existing Medical/hospital administration offering | ||||||||
>USMLE test prep >MCAT reviews | ||||||||
>Undergraduate medical >CME | ||||||||
| | | 37 | |
| International Platform for Growth |
| | | 38 | |
| Strong Management Team to Lead Integration |
| Name | Title | Experience | |
| Dennis Keller | Chairman and Co-Chief Executive Officer | | 30 years |
| Ronald Taylor | President and Co-Chief Executive Officer | | 30 years |
| O. John Skubiak | Executive Vice President – DeVry University | | 25 years |
| Daniel Hamburger | Executive Vice President – DeVry University Online and Becker Conviser | | 1 year |
| Norman Levine | SVP and Chief Financial Officer | | 21 years |
| Marilynn Cason | SVP and General Counsel | | 14 years |
| Tim Foster | President and CEO, Ross University | | 2+ years |
| Nancy Perri, M.D. | Dean, Clinical Sciences | | 13 years |
| John St. James | Chief Financial Officer, Ross University | | 5 years |
| | | 39 | |
| Strong Business Model and Focused Integration Plan |
| Stable Business | Focused Integration Initiatives | ||||||||
| • | Strong stand-alone business | • | Integration team leaders identified | ||||||
| • | Proven track record of success | • | Functional integration plans articulated | ||||||
| • | Complementary strategic fit | • | Plan for marketing integration | ||||||
| • | Experienced management team | • | Focus on execution and accountability | ||||||
| | | 40 | |
| Financial Summary |
| [GRAPHIC OMITTED] |
| 41 |
| Financial Combination Highlights |
| • | Accretive to DeVry EPS immediately | ||
| • | Fiscal 2004 expected impact of approximately $0.10 |
| • | Improved growth profile and margins | ||
| • | Strong cash flow and rapid deleveraging | ||
| • | Significant upside potential through related growth opportunities | ||
| | | 42 | |
| Ross Financial Highlights |
| Key Highlights 12/31/02 | ||
| Students | 2,500+ | |
| Revenue | $62 million | |
| EBITDA | $25 million | |
| Net Income | $18 million | |
| Target Cost Structure | ||
| Revenue | 100% | |
| Gross Margin | 53% - 56% | |
| EBITDA Margin | 36% - 39% | |
| Net Income Margin | 20% - 23% | |
| | | 43 | |
| Pro Forma Capitalization Remains Conservative |
| ($ in millions) | |||||
| Actual 12/31/02 | Pro Forma 12/31/02 | ||||
| Net Debt / (Cash) | ($134.6 | ) | $175.4 | ||
| Shareholder’s Equity | $387.7 | $387.7 | |||
| LTM EBITDA | $136.2 | $161.2 | |||
| Net Debt/EBITDA | — | 1.1 | x | ||
| Net Debt/Capitalization | — | 26.7 | % | ||
| Substantial DeVry and Ross Free Cash Flow Will Be Utilized to Reduce Debt in the Near-Term |
| | | 44 | |
| DeVry Is Well-Positioned for Future Growth |
| • | Strong industry fundamentals | ||
| • | Technology, Business and Health Sciences markets |
| • | Traditional student and adult learner markets |
| • | Professional certification preparation |
| • | Online delivery currently in strong growth phase |
| • | High-quality, established brand names | ||
| • | Recognized leadership of DeVry University brand |
| • | Recognized leadership by Ross in U.S.-style medical and veterinary education |
| • | Premier professional certification in Becker Conviser brand |
| | | 45 | |
| DeVry Is Well-Positioned for Future Growth |
| • | Efficient business model and strong, proven management team | ||
| • | Focus on career-oriented student profile |
| • | Broad geographic coverage and efficient campus model |
| • | Compelling financial model | ||
| • | Consistent growth and attractive financial profile |
| • | Significant free cash flow with high capital efficiency |
| • | Enhanced visibility and predictability |
| • | Modest leverage pro forma for acquisition |
| | | 46 | |