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)
Reporting Period: Quarter and six months ended December 31, 1998
Business Overview: DeVry Inc. operates educational programs including DeVry Institutes, Keller Graduate School, and Becker CPA Review. The company reported record earnings for the period, driven by enrollment growth and new facility openings.
Key Financial Metrics
| Metric (Dollars in Thousands) | Q2 1998 | Q2 1997 | 6 Months 1998 | 6 Months 1997 |
|---|---|---|---|---|
| Total Revenues | $107,813 | $90,342 | $201,671 | $170,763 |
| Net Income | $10,299 | $8,347 | $18,117 | $14,626 |
| Earnings Per Share (Basic/Diluted) | $0.15 | $0.12 | $0.26 | $0.21 |
| Operating Cash Flow (6 Months) | $29,754 | |||
| Cash and Cash Equivalents (End of Period) | $29,557 | |||
| Debt (Revolving Loan) | $0 (Fully repaid in Q1 1998) |
Material Changes vs. Prior Period
- Revenue Growth: Tuition revenues increased 19.6% for the quarter and 17.9% for the six months ended Dec 31, 1998, compared to the prior year. This was driven by a 13.9% enrollment increase at DeVry Institutes and over 17% growth at Keller Graduate School.
- Profitability: Net income increased by more than 20% year-over-year for both the quarter and the six-month period.
- Expense Increases: Cost of Educational Services rose 18.0% (quarter) and 17.1% (six months) due to new facilities and staff. Student Services and Administrative expenses increased 20.6% (quarter) primarily due to marketing for new locations and Y2K project costs.
- Capital Expenditures: Capital spending reached $22.3 million for the six months, more than double the prior year level, funding new campuses in Fremont, New York, and Chicago.
- Debt Elimination: The company repaid its entire $10 million revolving loan facility in the first quarter of 1998, eliminating interest expense.
Guidance, Outlook, and Risks
- Outlook: Management expects operating margins to grow, though the rate of increase may slow due to pre-opening losses at new sites. The company believes current cash and operating cash flow are sufficient to fund operations and capital plans.
- Y2K Contingency: The company is on schedule to complete Year 2000 compliance by 1999. Costs are being expensed as incurred and are not currently material. However, delays in federal/state financial aid disbursements due to Y2K issues could temporarily impact liquidity.
- Regulatory Risk (Canada): The Ontario Ministry of Education conditionally reinstated the OSAP designation for Toronto-area schools. A forensic audit regarding inappropriately released loans is ongoing, with final resolution expected in the coming months.
- Seasonality: The second and third quarters historically represent the highest revenue and net income periods due to enrollment patterns.
Investor Verification Checklist
- Enrollment Sustainability: Verify if the 25th consecutive term of enrollment growth can be maintained given the saturation of new markets.
- Accounts Receivable: Monitor the $37.6 million receivable balance, which increased significantly due to interim financing programs and federal aid timing.
- Canadian Audit Resolution: Track the outcome of the Ontario forensic audit to assess potential financial liabilities or restrictions on student aid eligibility.
- Capital Spending ROI: Assess the timeline for new facilities (Fremont, New York, Chicago) to reach profitability and offset initial operating losses.
- Y2K Impact on Cash Flow: Confirm that federal financial aid disbursements remain uninterrupted during the transition to the year 2000.