SEC Filing Summary: DeVry Inc. (Form 10-K)
Business Context and Reporting Period
Company: DeVry Inc.
Reporting Period: Fiscal Year Ended June 30, 2002
Business Overview: DeVry Inc. operates two primary segments: DeVry University (undergraduate and graduate degree programs in technology and business) and Professional and Training (Becker Conviser Professional Review for CPA, CMA, and CFA exams). In February 2002, DeVry Institutes and Keller Graduate School were merged into a single accredited institution named DeVry University. The company operates campuses across the U.S., Canada, and online.
Key Financial Metrics
| Metric | Fiscal 2002 | Fiscal 2001 | Change |
|---|---|---|---|
| Total Revenues | $648.1 million | $568.2 million | +14.1% |
| Tuition Revenues | $600.4 million | $524.0 million | +14.6% |
| Net Income | $67.1 million | $57.8 million | +16.1% |
| Diluted EPS | $0.95 | $0.82 | +15.9% |
| Operating Income (EBIT) | $111.4 million | $96.3 million | +15.7% |
| Operating Margin | 17.2% | 17.0% | +0.2 pts |
| Cash Flow from Operations | $115.3 million | $87.6 million | +31.6% |
| Capital Expenditures | $85.9 million | $76.9 million | +11.7% |
| Total Assets | $467.6 million | $391.7 million | +19.4% |
| Long-Term Debt | $0 | $0 | - |
| Cash & Equivalents | $59.7 million | $29.2 million | +104.5% |
Note: The company had no outstanding borrowings under its $85 million revolving credit facility at year-end, though approximately $2.7 million in letters of credit were outstanding.
Material Changes vs. Prior Period
- Revenue Growth: Driven by a 13.9% increase in DeVry University segment revenues and a 16.4% increase in the Professional and Training segment. Tuition rate increases of approximately 6% and new campus openings contributed to growth.
- Enrollment Trends: While total enrollment increased, new undergraduate enrollments declined in the final three semesters of the fiscal year (down 6.2%, 7.6%, and 14.2% respectively) due to the downturn in the technology sector. Conversely, graduate school enrollments increased significantly.
- Accounting Changes: Adoption of SFAS No. 142 eliminated the amortization of goodwill and indefinite-lived intangible assets, reducing amortization expense by approximately $3.1 million compared to the prior year.
- Capital Investment: Record capital expenditures of $85.9 million, including the purchase of two campuses (Pomona, CA and Addison, IL) for $37.8 million.
Guidance, Outlook, and Risks
- Outlook: Management expects capital expenditures to decline in fiscal 2003 as new campus openings will utilize leased facilities. The company anticipates continued enrollment growth driven by demographic shifts ("baby boom echo") and the increasing demand for adult education.
- Technology Sector Risk: The company faces headwinds from layoffs and financial difficulties in the technology sector, which has reduced interest in its core undergraduate programs (computer and electronics technology).
- Financial Aid Dependence: Approximately 70% of undergraduate tuition revenue is financed by government-provided financial aid. Changes in federal funding or regulations could adversely affect enrollments.
- Legal Contingencies: The company is involved in several class-action lawsuits regarding advertising practices, employability of graduates, and overtime compensation for recruiters. Approximately $1 million has been recorded for estimated loss contingencies.
- Regulatory Compliance: The company is subject to strict "90/10" rules regarding federal aid revenue and student loan default rate thresholds. A Department of Education program review in 2002 resulted in process improvement recommendations but no monetary liability.
Investor Verification Checklist
- Enrollment Quality: Verify the sustainability of total enrollment growth given the reported decline in new undergraduate enrollments in the technology sector.
- Financial Aid Exposure: Assess the impact of potential changes in federal financial aid policies or funding levels on the 70% of revenue dependent on these programs.
- Legal Exposure: Monitor the status of pending class-action lawsuits regarding program advertising and graduate employability claims.
- Capital Efficiency: Review the return on investment for the record $85.9 million in capital expenditures, particularly the newly purchased campuses.
- Default Rates: Confirm that student loan default rates remain below the 25% threshold for three consecutive years to maintain eligibility for federal aid programs.