CVSA

SEC Filing Summary: DeVry Inc. (10-Q)

Business Context and Reporting Period

This filing is a Quarterly Report on Form 10-Q for DeVry Inc. (Note: The request metadata listed "Covista Inc.", but the source text is explicitly for DeVry Inc.) for the quarterly period ended March 31, 2010. DeVry operates in four reportable segments: Business, Technology and Management; Medical and Healthcare; Professional Education; and Other Educational Services. The company provides secondary and post-secondary education globally, with significant operations in the U.S., Caribbean, and Brazil.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 28.7% in Q3 and 32.2% for the nine-month period, driven by higher enrollments, improved retention, and tuition price increases across the Business, Technology and Management and Medical and Healthcare segments.
• Profitability: Net income rose 59.5% in Q3 and 61.9% for the nine-month period. Operating margins expanded significantly due to operating leverage and the absence of prior-year real estate transaction losses.
• Segment Performance: The Business, Technology and Management segment operating income grew 115.9% in Q3. The Medical and Healthcare segment grew 18.5%. Conversely, the Professional Education segment declined 14.5% due to the economic downturn affecting the accounting and finance professions.
• Acquisitions: The acquisition of DeVry Brasil (April 2009) and U.S. Education (September 2008) contributed significantly to revenue and operating income growth.

Guidance, Outlook, Risks, and Unusual Items

• Capital Expenditures: Management anticipates full-year fiscal 2010 capital spending in the range of $130 million to $140 million, up from $101.6 million in the first nine months.
• Share Repurchases: DeVry is actively repurchasing shares under a third program authorized in November 2009. As of March 31, 2010, $43.6 million of the $50 million authorization remains available.
• 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 liquidity is sufficient to fund operations, a failure of UBS to meet obligations could result in a material charge to net income.
• Legal Proceedings: A False Claims Act lawsuit regarding recruiter compensation was settled in March 2010 for $4.9 million. DeVry denied wrongdoing but settled to avoid protracted appeals.
• Outlook: Management expects softness in the Professional Education segment to persist through calendar year 2010. Enrollment growth at Ross University may slow temporarily due to regulatory delays regarding a new clinical site in Freeport, Grand Bahama.

Investor Verification Checklist

• ARS Liquidity Risk: Verify the status of the UBS Put Rights agreement and the company's contingency plans should UBS fail to honor the buyback of $59.5 million in auction-rate securities.
• Enrollment Trends: Confirm continued enrollment growth in the Medical and Healthcare segment, specifically regarding the resolution of the Ross University Freeport clinical site regulatory issues.
• Professional Education Segment: Monitor the duration of the revenue decline in the Professional Education segment as the broader economy recovers.
• Capital Allocation: Track the execution of the $130-$140 million capital expenditure plan, particularly regarding the new student information system (Project DELTA) and facility expansions.
• Debt Covenants: Ensure continued compliance with financial covenants under the $175 million revolving credit facility, although no borrowings were outstanding as of March 31, 2010.