Business Context and Reporting Period
Company: DeVry Inc. (Note: Metadata listed "Covista Inc." but filing text confirms DeVry Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 1999
Business Overview: DeVry Inc. operates educational institutions including DeVry Institutes, Keller Graduate School, and Becker CPA Review. The quarter included the acquisition of Denver Technical College (DTC) and Conviser Duffy CPA Review Course.
Key Financial Metrics
| Metric | Q1 1999 | Q1 1998 |
|---|---|---|
| Total Revenues | $118,282,000 | $93,858,000 |
| Tuition Revenues | $106,863,000 | $84,753,000 |
| Net Income | $9,907,000 | $7,818,000 |
| Earnings Per Share (Diluted) | $0.14 | $0.11 |
| Operating Margin | 14.2% | 13.8% |
| Cash from Operating Activities | $24,473,000 | $12,936,000 |
| Cash and Cash Equivalents (End of Period) | $34,871,000 | $24,331,000 |
| Revolving Loan Balance | $29,000,000 | $0 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 26.1% to $118.3 million, driven by a 15.9% increase in undergraduate enrollments, new campus openings (New York, West Hills), and tuition increases of 5-6%.
- Acquisitions: The company acquired Denver Technical College and Conviser Duffy CPA Review in July 1999. These acquisitions contributed to revenue growth and increased intangible assets (goodwill) from $37.8 million to $75.9 million.
- Expense Increases: Cost of Educational Services rose 25.9% and Student Services/Administrative expenses rose 24.5%, reflecting costs associated with new acquisitions, new sites, and higher enrollment volumes.
- Debt Utilization: The company borrowed $40 million under its revolving credit facility to fund acquisitions, repaying $11 million during the quarter, leaving a balance of $29 million.
- Cash Flow: Operating cash flow nearly doubled to $24.5 million, offset by significant investing outflows of $50.5 million due to capital expenditures ($12.3 million) and acquisition costs ($38.2 million).
Guidance, Outlook, and Risks
- Outlook: Management expects continued year-over-year earnings increases. Operating margins are rising due to operating leverage and cost controls.
- Liquidity: Management believes current cash balances, operating cash flow, and the revolving credit facility are sufficient to fund operations for the foreseeable future.
- Risks:
- Financial Aid Dependence: The company is highly dependent on the timely receipt of student financial aid funds. Delays (potentially due to Y2K processing issues) could impact cash flow.
- Regulatory: Operations depend on state and provincial approval and licensing requirements.
- Y2K Contingency: While remediation is nearly complete, the company maintains contingency planning for potential supplier or internal processing difficulties.
- Unusual Items: The filing notes that the results for the three months ended September 30, 1999, are not necessarily indicative of results for the entire fiscal year due to seasonality.
Investor Verification Checklist
- Verify the final allocation of purchase prices for the Denver Technical College and Conviser Duffy acquisitions, as amounts are currently subject to adjustment.
- Monitor the timing of student financial aid disbursements to ensure no Y2K-related delays impact cash flow.
- Track enrollment trends at new campuses (New York, West Hills) to confirm they meet projected revenue contributions.
- Review the amortization schedule for the newly acquired intangible assets (goodwill) over the 25-year period.
- Confirm the status of the revolving credit facility utilization and repayment schedule.