Filing Summary
Entity and period: The supplied filing is DeVry Inc.’s unaudited Form 10-Q for the three months ended September 30, 2013, its first quarter of fiscal 2014—not a filing identifying Covista Inc. The filing’s issuer and reporting period therefore differ from the request metadata.
Financial Results and Liquidity
Unless otherwise noted, amounts are in U.S. dollars. Income and cash-flow figures compare the three months ended September 30, 2013 and 2012; balance-sheet figures are as of September 30, 2013.
| Metric | Current period | Prior period / comparison |
|---|---|---|
| Revenue | $450.9 million | $479.9 million; down 6.0% |
| Operating income from continuing operations | $10.3 million; 2.3% of revenue | $49.4 million; 10.3% of revenue |
| Income from continuing operations | $8.2 million | $34.0 million |
| Net income attributable to DeVry | Loss of $7.1 million; diluted EPS loss of $0.11 | Income of $32.0 million; diluted EPS of $0.49 |
| Operating cash flow | $141.2 million total; $142.5 million from continuing operations | $164.1 million total; $165.2 million from continuing operations |
| Cash and cash equivalents | $308.5 million | $247.6 million a year earlier |
| Cash, marketable securities and investments | $311.6 million | — |
| Total assets / liabilities | $2,026.8 million / $631.8 million | — |
| Debt and credit availability | No credit-facility borrowings; $13.2 million of letters of credit outstanding | $400 million revolving facility, with potential increase to $550 million |
Net loss included a $15.3 million after-tax loss from discontinued operations, including a $13.5 million pre-tax impairment charge and $2.8 million of AAI operating losses. Continuing-operations earnings also included $11.7 million of pre-tax restructuring expense and a $1.9 million pre-tax gain on sale of a former campus. Management’s non-GAAP reconciliation reported $14.2 million of continuing-operations income, or $0.22 per diluted share, excluding restructuring and the asset-sale gain.
Current assets were $592.5 million and current liabilities $479.7 million. Cash from operations was partly supported by seasonal tuition collections and a $144.8 million increase in deferred and advance tuition. Capital expenditures were $22.2 million. Approximately $169.3 million of cash was held by international operations and management said it was intended for reinvestment abroad, not general domestic use. The company reported compliance with credit-facility covenants.
Material Changes and Business Drivers
- Business, Technology and Management (DeVry University) revenue fell 18.4% to $232.3 million; segment operating results shifted from $25.6 million income to an $11.1 million loss. September undergraduate total enrollment fell 16.3% year over year, while new undergraduate enrollment was essentially flat. September graduate coursetakers declined 18.8%.
- Medical and Healthcare revenue rose 11.1% to $175.9 million and segment operating income increased 1.3% to $25.5 million. Chamberlain September total enrollment rose 30.2%; Carrington enrollment rose 1.0%; and DeVry Medical International enrollment rose 4.0%.
- International and Professional Education revenue increased 18.3% to $43.7 million, largely reflecting Brazil acquisitions. Segment operating income declined to $1.1 million from $3.3 million, with management citing investment in expansion and growth.
- Tuition revenue declined to $419.3 million from $448.7 million. Cost of educational services increased 1.0% despite lower revenue; student services and administrative expense declined 1.0%. Both expense categories increased as a share of revenue, reflecting weaker operating leverage.
- DeVry acquired Brazilian institution Facid for approximately $16.1 million in cash, with approximately $9.0 million of additional payments due over four years. It also recorded $8.2 million of acquisition goodwill.
Outlook, Risks and Unusual Items
- Management expected fiscal 2014 revenue to decline versus fiscal 2013, principally because of DeVry University enrollment weakness, partly offset by growth at other institutions. Management expected $60 million of fiscal 2014 expense savings and capital spending of $115–$125 million.
- DeVry University’s turnaround measures include cost alignment, campus closures or consolidations, academic-quality initiatives and enrollment investments. Tuition was held unchanged for fiscal 2014; the Career Catalyst Scholarship program was committed to more than $15 million over three years.
- AAI was classified as held for sale and discontinued operations after management decided it did not fit the company’s strategy. A $13.5 million impairment was based on purchase offers and estimated disposal costs.
- Management reported prior-year impairment of $57.0 million related to Carrington and warned that further impairment could occur if operating results fail to improve. It also identified possible future impairment exposure at DeVry University, where goodwill was $22.2 million.
- Key risks include dependence on federal Title IV aid, regulatory and accreditation requirements, enrollment competition and student demand, student-loan credit losses, and foreign-exchange movements. AAI-related False Claims Act litigation, an appeal in a dismissed shareholder case, and Illinois and Massachusetts investigations were disclosed; management said it did not then expect the described litigation to materially affect financial position, results or cash flows, while noting outcomes were uncertain.
- The filing states results for this quarter are not necessarily indicative of the full fiscal year. It provides no clear full-year earnings guidance.
Investor Verification Priorities
- Confirm the issuer and period: the supplied document is DeVry Inc.’s fiscal Q1 2014 filing, not a Covista Inc. filing.
- Track DeVry University enrollment, revenue and turnaround progress, including whether cost savings offset continued enrollment pressure.
- Monitor AAI’s sale process, final proceeds and any additional impairment or disposal costs.
- Assess Carrington and DeVry University impairment assumptions and the performance thresholds that could trigger further write-downs.
- Review Title IV eligibility and regulatory developments, including the disclosed investigations and litigation, and any effect on student funding or operations.
- Check cash availability by geography, deferred tuition’s contribution to operating cash flow, acquisition-related payments and execution against the capital-spending outlook.