SEC Filing Summary: DeVry Inc. (10-Q)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended December 31, 2009, and the six months ended on that date for DeVry Inc. (Note: The input metadata referenced "Covista Inc.", but the filing text explicitly identifies the registrant as DeVry Inc.). DeVry operates four reportable segments: Business, Technology and Management; Medical and Healthcare; Professional Education; and Other Educational Services. The company reported record quarterly revenues and significant growth in student enrollments across its primary segments.
Key Financial Metrics
| Metric (in thousands) | Q2 2009 | Q2 2008 | 6 Months 2009 | 6 Months 2008 |
|---|---|---|---|---|
| Total Revenues | $473,012 | $369,615 | $904,122 | $673,332 |
| Operating Income | $108,929 | $62,540 | $188,314 | $109,352 |
| Net Income (Attributable to DeVry) | $72,454 | $42,865 | $127,181 | $77,695 |
| Diluted EPS | $1.00 | $0.59 | $1.76 | $1.07 |
| Operating Margin | 23.0% | 16.9% | 20.8% | 16.2% |
| Cash & Equivalents | $272,550 | $203,326 | $272,550 | $203,326 |
| Total Debt (Outstanding) | $44,732 | $155,124 | $44,732 | $155,124 |
| Operating Cash Flow (6 Mo) | $267,264 (2009) vs $138,773 (2008) |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 28.0% in Q2 and 34.3% for the six-month period compared to the prior year. Growth was driven by strong enrollments at DeVry University, Ross University, Chamberlain College of Nursing, and U.S. Education, as well as the acquisition of Fanor (DeVry Brasil).
- Profitability: Net income increased 69.0% in Q2 and 63.7% for the six-month period. Operating margins expanded significantly due to operating leverage and revenue growth outpacing cost increases.
- Debt Reduction: Total outstanding debt decreased significantly from $155.1 million in Dec 2008 to $44.7 million in Dec 2009. The company repaid $150 million under its revolving credit facility during the six-month period, leaving no outstanding balance on that facility as of Dec 31, 2009.
- Segment Performance: The Business, Technology and Management segment operating income grew 121.2% in Q2. The Medical and Healthcare segment grew 16.8%. Conversely, the Professional Education segment saw a 28.2% decline in operating income due to the economic downturn affecting the accounting and finance professions.
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management anticipates full-year fiscal 2010 capital spending in excess of $100 million. They expect softness in the Professional Education segment to persist through calendar year 2010.
- Dividends and Buybacks: The Board approved a 25% dividend increase to $0.20 annually ($0.10 per semi-annual payment). A third share repurchase program of up to $50 million was authorized in November 2009; no shares had been repurchased under this new program as of Dec 31, 2009.
- Auction Rate Securities (ARS): DeVry holds approximately $59.5 million in ARS which remain illiquid due to market disruptions. The company has "Put Rights" to sell these back to UBS at par value starting June 30, 2010. While management believes current liquidity is sufficient, future impairment could occur if UBS cannot meet its obligations.
- Legal Proceedings: A False Claims Act case regarding recruiter compensation was settled in principle for $4.9 million, pending Department of Justice approval. DeVry denies wrongdoing.
- Prepaid Clinical Fees: A reserve of $1.5 million was established against $6.4 million in prepaid clinical rotation fees due to the closure of two hospitals by a contract partner.
Investor Verification Checklist
- Enrollment Trends: Verify the sustainability of the 22.7% increase in DeVry University undergraduate enrollment and the 67.2% increase at Chamberlain College of Nursing.
- ARS Liquidity Risk: Monitor the status of the $59.5 million Auction Rate Securities portfolio and the enforceability of the Put Rights with UBS, given the lack of market liquidity.
- Professional Education Segment: Assess the duration of the revenue decline in the Becker/Stalla segment due to the economic downturn in finance and accounting.
- Capital Expenditures: Track the execution of the projected >$100 million capital spend, specifically regarding the new student information system (Project DELTA) and facility expansions.
- Regulatory Compliance: Review the finalization of the $4.9 million False Claims Act settlement and any potential impact on future Title IV funding or operations.