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Six analysts and top management from twelve sector firms examine the education sector in this special 85-page Education Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info465.htm.

TWST: Let’s talk about that higher ed space. Jerry, do enrollments generally increase as the economy declines and people realize that they need further education and/or training in order to feel more secure in their jobs or to become more valuable as employees?

Mr. Odening: The fact is investing in an education pays a good dividend, in good times or bad. But we haven’t yet seen a lasting impact from the recession and the September 11th attacks. Since August and September, we’ve seen hundreds of thousands of people who have been laid off work, and there had been a period of indecision as to where they are going to go. As unemployment rates start to head up to 5.5%-6%, I think we’re actually going to see first-time job seekers, or those who are in marginal jobs in the hotel industry, airline industry or manufacturing sector, heading back to get career education or reeducation. First-time career job seekers are attracted to allied health, engineering and areas that would involve entertainment (film and electronic games). It’s not yet proven that the industry is countercyclical. However, I’m optimistic that in the coming six to nine months, many of the postsecondary companies that cater to first-time job seekers will start to see better performance than we’re currently expecting. Working adults are the other major trend in post-secondary. And as far as we can see from the companies that have most recently talked about their September enrollments, the results have been terrific. One company in particular has had the best enrollments that it has registered in several years. I still think that the for-profit schools, which offer convenience and a combination of both on-the-ground and online classroom experience, will continue to gain market share from the non-profits that are capacity constrained by technology and their own academic model. I see that trend continuing five years out or more without any effect from the economy. There has been no difficulty for working adults to continue with employer reimbursements. And, in fact, those who actually have been laid off have been able to negotiate, as part of their separation package, for some amount of money for their continuing education in either graduate or undergraduate degree programs. So the outlook for postsecondary is excellent. Enrollments have been solid. The one diverging case is DeVry (NYSE:DV). I think that they simply had one program that was reaching its cycle. It takes two years or more to bring up new programs to replace aging programs. It’s an execution issue, but I think they’ll get through it and I think they’ll be back on track with more normal new enrollment growth. Total enrollment is what I focus on. And total enrollments in general are up anywhere from a low of about 8% at some of the schools on a same-school basis to as much as 19%.

TWST: Jerry, where do you stand on DeVry?

Mr. Odening: I think DeVry is going to surprise us all with the consistency of the earnings that they will produce. I think there has been too much focus on new student enrollment growth, because management of DeVry has a number of levers at its disposal to continue to keep earnings growing at 18%. That growth is down from its average 23% in the past 10 years, but the stock is off over 30% in the past month. By June 2002, in my opinion, the stock will be back back to its more normal level of 35 times earnings versus 24 times forward earnings today. There is a great deal of fear right now that, because the new enrollments and the programs were weak in this past enrollment period, they will have an earnings growth rate that is closer to 5%. I believe that is unlikely. So we would be buyers of DeVry at this level, knowing full well that we’re really not going to get confirmation of all that until some time in the summer of 2002.

1) Education Industry - In an in-depth (11,600 words) Analyst Roundtable, Peter L. Martin, Senior Vice President at Jefferies & Company, Inc., Gerald R. Odening, Managing Director at J.P. Morgan H&Q and Jeffrey M. Silber, Senior Vice President at Gerard Klauer Mattison & Company, Inc. examine the outlook for the sector including enrollments in higher education, regulatory issues and share specific stock recommendations.

2) Educational Publishing & Service Companies - In an in-depth (4,700 words) Analyst Interview, Peter Appert, Managing Director at Deutsche Banc Alex. Brown, Inc., examines the outlook for the sector and shares specific stock recommendations.

3) Outlook for Education Stocks - In an in-depth (4,000 words) Analyst Interview, Greg W. Cappelli, Managing Director at Credit Suisse First Boston, examines the outlook for the sector and shares specific stock recommendations.

4) Knowledge Technologies - In an in-depth (4,700 words) Analyst Interview, George Sutton, Managing Director at RBC Capital Markets, examines the outlook for the sector and shares specific stock recommendations.

5) The TWST confidential Off-The-Record survey of management performance at eighteen sector firms asked market insiders about the ability of management teams to create shareholder value.

6) CEO interviews (average 2,500 words). Top management of twelve sector firms examine the outlook for their firm and the sector.