-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FQMWn7u+rV8Ug8+zJwXnx8wCkHBbQnXB+jhzEHrbzoO9fNS+sqByZKbZMHMEgY/x R0o4/bFHwtJSTnGEQ3NDtA== 0000730464-98-000004.txt : 19980511 0000730464-98-000004.hdr.sgml : 19980511 ACCESSION NUMBER: 0000730464-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980508 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVRY INC CENTRAL INDEX KEY: 0000730464 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 363150143 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13988 FILM NUMBER: 98613386 BUSINESS ADDRESS: STREET 1: ONE TOWER LN STREET 2: SUITE 1000 CITY: OAKBROOK TERRACE STATE: IL ZIP: 60181 BUSINESS PHONE: 7085717700 MAIL ADDRESS: STREET 1: ONE TOWER LANE CITY: OAKBROOK STATE: IL ZIP: 60181 10-Q 1 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________________ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 Commission file number 0-12751 DeVRY INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3150143 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Tower Lane, Oakbrook Terrace, Illinois 60181 (Address of principal executive offices) (Zip Code) (630) 571-7700 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X number of shares of Common Stock, $0.01 par value, outstanding at April 30, 1998: 34,647,632 Total number of pages: 12 2 DEVRY INC. FORM 10-Q INDEX For the Quarter ended March 31, 1998 Page No. PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets at March 31, 1998, June 30, 1997, and March 31, 1997 3-4 Consolidated Statements of Income for the quarter and nine months ended March 31, 1998 and 1997 5 Consolidated Statements of Cash Flows for the nine months ended March 31, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8-10 Part II. Other Information Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 3 PART I - Financial Information Item 1 - Financial Statements DEVRY INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
March 31, June 30, March 31, 1998 1997 1997 --------- -------- --------- (Unaudited) (Unaudited) ASSETS Current Assets Cash and Cash Equivalents $ 45,911 $ 38,865 $ 34,424 Restricted Cash 31,814 12,104 35,295 Accounts Receivable, Net 55,440 12,322 46,638 Inventories 2,754 4,549 1,786 Prepaid Expenses and Other 1,827 2,676 2,161 -------- -------- -------- Total Current Assets 137,746 70,516 120,304 -------- -------- -------- Land, Buildings and Equipment Land 35,148 34,348 18,965 Buildings 51,638 50,906 50,536 Equipment 71,678 63,609 60,280 Construction In Progress 6,991 91 325 -------- -------- -------- 165,455 148,954 130,106 Accumulated Depreciation (66,232) (58,266) (56,087) -------- -------- -------- Land, Buildings and Equipment, Net 99,223 90,688 74,019 -------- -------- -------- Other Assets Intangible Assets, Net 36,604 37,770 37,912 Perkins Program Fund, Net 6,636 6,075 5,888 Other Assets 1,540 1,654 1,896 -------- -------- -------- Total Other Assets 44,780 45,499 45,696 -------- -------- -------- TOTAL ASSETS $281,749 $206,703 $240,019 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 DEVRY INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
March 31, June 30, March 31, 1998 1997 1997 --------- -------- --------- (Unaudited) (Unaudited) LIABILITIES Current Liabilities Accounts Payable $ 23,807 $ 22,301 $ 19,858 Accrued Salaries, Wages & Benefits 19,263 16,077 16,018 Accrued Expenses 7,685 7,620 7,091 Advance Tuition Payments 7,124 6,594 6,096 Deferred Tuition Revenue 78,926 5,701 67,136 -------- -------- -------- Total Current Liabilities 136,805 58,293 116,199 -------- -------- -------- Other Liabilities Revolving Loan 6,000 33,000 41,000 Deferred Income Tax Liability 3,049 3,060 2,126 Deferred Rent and Other 7,385 7,080 5,028 -------- -------- -------- Total Other Liabilities 16,434 43,140 48,154 -------- -------- -------- TOTAL LIABILITIES 153,239 101,433 164,353 -------- -------- -------- SHAREHOLDERS' EQUITY Common Stock, $0.01 par value, 75,000,000 Shares Authorized, 34,646,472, 34,504,214 and 33,295,094, Shares Issued and Outstanding at March 31, 1998, June 30, 1997 and March 31, 1997, Respectively 347 345 333 Additional Paid-in Capital 60,600 60,482 36,870 Retained Earnings 67,069 44,006 38,016 Cumulative Translation Adjustment 494 437 447 -------- -------- -------- TOTAL SHAREHOLDERS' EQUITY 128,510 105,270 75,666 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $281,749 $206,703 $240,019 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 5 DEVRY INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except for Per Share Amounts) (Unaudited)
For The Quarter For The Nine Months Ended March 31, Ended March 31, ------------------ -------------------- 1998 1997 1998 1997 ------------------ -------------------- REVENUES: Tuition $83,349 $72,983 $237,019 $208,491 Other Educational 9,135 7,914 25,527 22,517 Interest 370 236 1,071 636 ------- ------- -------- -------- Total Revenues 92,854 81,133 263,617 231,644 ------- ------- -------- -------- COSTS AND EXPENSES: Cost of Educational Services 51,310 47,035 149,489 136,691 Student Services and Administrative Expense 27,455 22,788 75,420 62,654 Interest Expense 156 732 804 2,423 ------- ------- -------- -------- Total Costs and Expenses 78,921 70,555 225,713 201,768 ------- ------- -------- -------- Income Before Income Taxes 13,933 10,578 37,904 29,876 Income Tax Provision 5,496 4,124 14,841 11,681 ------- ------- -------- -------- NET INCOME $ 8,437 $ 6,454 $ 23,063 $ 18,195 ======= ======= ======== ======== EARNINGS PER COMMON SHARE Basic $0.24 $0.19 $0.67 $0.55 Diluted $0.24 $0.19 $0.66 $0.54
The accompanying notes are an integral part of these consolidated financial statements. 6 DEVRY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
For The Nine Months Ended March 31, 1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $23,063 $18,195 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 8,644 6,920 Amortization 1,187 1,181 Provision for Refunds and Uncollectible Accounts 13,020 14,317 Deferred Income Taxes (11) 415 Loss (Gain) on Disposals and Adjustments to Land, Buildings and Equipment 128 (91) Changes in Assets and Liabilities: Restricted Cash (19,710) (18,705) Accounts Receivable (55,969) (51,157) Inventories 1,795 1,504 Prepaid Expenses And Other 1,247 (1,600) Perkins Program Fund Contribution and Other (730) (519) Accounts Payable 1,506 999 Accrued Salaries, Wages, Expenses and Benefits 3,251 734 Advance Tuition Payments 530 (1,521) Deferred Tuition Revenue 73,225 63,527 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 51,176 34,199 ------- ------- CASH FLOWS USED IN INVESTING ACTIVITIES: Capital Expenditures (17,307) (9,407) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Exercise of Stock Options 120 177 Repayments Under Revolving Credit Facility (27,000) (20,500) ------- ------- NET CASH USED IN FINANCING ACTIVITIES (26,880) (20,323) Effects of Exchange Rate Differences 57 7 ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS 7,046 4,476 Cash and Cash Equivalents at Beginning of Period 38,865 29,948 ------- ------- Cash and Cash Equivalents at End of Period $45,911 $34,424 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid During the Year $843 $2,440 Income Taxes Paid During the Year 12,547 12,861
The accompanying notes are an integral part of these consolidated financial statements. 7 DEVRY INC. Notes to Consolidated Financial Statements For the Quarter and Nine Months Ended March 31, 1998 ---------- 1. The interim consolidated financial statements include the accounts of DeVry Inc. (the Company) and its wholly-owned subsidiaries. These financial statements are unaudited but, in the opinion of management, contain all adjustments, consisting only of normal, recurring adjustments, necessary to present fairly the financial condition and results of operations of the Company. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997 and in conjunction with the Company's Quarterly reports on Form 10-Q for the quarters ended September 30, 1997 and December 31, 1997, each as filed with the Securities and Exchange Commission. The results of operations for the three months and nine months ended March 31, 1998, are not necessarily indicative of results to be expected for the entire fiscal year. 2. In July and August 1997, the Company granted options to purchase up to 129,800 shares of the Company's common stock under the Amended and Restated Stock Incentive Plan, the 1991 Stock Incentive Plan and the 1994 Stock Incentive Plan. 8 Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition The following discussion of the Company's results of operations and financial condition should be read in conjunction with the consolidated financial statements of the Company and the notes thereto. All references to per share amounts have been restated to reflect the December 18, 1996, two-for-one stock split. Because of the somewhat seasonal pattern of the Company's enrollments and its term starting dates, which affect the results of operations and the timing of cash inflows, the Company believes that comparisons of its results of operations should be made to the corresponding period in the preceding year. Comparisons of financial position should be made to both the end of the previous fiscal year and to the end of the corresponding period in the preceding year. Due to the seasonality of student enrollments, the Company's second and third quarters have historically represented the periods of highest revenues and net income within a fiscal year. Results of Operations - --------------------- Tuition revenues for the third quarter increased by $10.4 million, or 14.2%. For the first nine months, the increase in tuition revenues was $28.5 million, or 13.7%. These increases in tuition revenue were produced by several positive factors. Enrollment at the DeVry Institutes for the fall term, which began in November increased by 9.0% from last summer. For the spring term at the DeVry Institutes, which began in March, enrollments increased by 12.0%. These increases in enrollments represented the twenty-first and twenty-second consecutive terms of higher total student enrollment as compared to the corresponding prior year period. Contributing to the increased enrollment at DeVry was the opening of its fifteenth Institute in Alpharetta, Georgia, for the summer term. Enrollments at Keller Graduate School for the term which began in February increased by over 19%. During the first nine months of fiscal 1998, Keller began offering classes at four new teaching centers, bringing the total to 24. In addition, tuition increases of approximately five percent were implemented at DeVry and Keller while a somewhat smaller increase was implemented at Becker CPA. Other educational revenues, composed primarily of sales of books and supplies, increased because of sales to the increased number of students attending the Company's educational programs. Sales of the Becker CPA Review course on CD-ROM are also included in the other educational revenue category. Interest income on the Company's short-term investments increased in the third quarter and first nine months as a strong pace of student receivable collections provided more cash available for investment than in the previous year. Cost of Educational Services increased by $4.3 million, or 9.1% from the third quarter of last year. For the first nine months, the increase in cost was $12.8 million, or 9.4%. The increase reflects the cost of additional facilities, faculty and staff associated with the new DeVry Institute and Keller Graduate School centers. In addition, there were higher costs associated with the higher enrollments at the previously existing DeVry, Keller and Becker operations. The provision for refunds and doubtful accounts has declined from the level of that expense realized last year. 9 The Company believes that the reduction, which began in the second quarter, reflects the results from its continuing efforts to raise new student admission standards and provide expanded academic services to students needing additional help with their educational program. Depreciation expense increased by over $1.7 million in the first nine months, reflecting continued investment for expansion and upgrading of school laboratories and teaching equipment throughout the Company. Student Services and Administrative Expense increased by approximately 20% from the third quarter and first nine months of last year. The increase primarily reflects the marketing costs associated with student recruitment for the Company's newly opened operating locations and the costs associated with generating higher student enrollments at the previously opened locations. Student recruiting expenses are also being incurred for the planned July 1998 opening of the new DeVry Institute in Fremont, California, and the planned November 1998 opening of the DeVry Institute in New York City. Administrative expenses have also increased from the prior year to support the Company's expanding operations. In addition, implementation efforts and spending are continuing for the Company's new financial systems. This new system will enhance financial controls, reporting and analysis and overcome year 2000 deficiencies in the current system. Additionally, efforts are underway to address the year 2000 processing requirements for all of the Company's hardware and software, whether internally developed or purchased. Costs associated with this effort are not expected to have a material effect on the Company's results of operations and are being charged to expense as incurred. The Company's earnings from operations, before interest expense and taxes, were a record for the third quarter and nine months. Operating margins, which have been increasing consistently each quarter over the comparable year-ago period, increased again in the third quarter to 15.2% from 13.9% last year. For the nine months, operating margins reached 14.7% compared to 13.9% for the same period last year. The improved operating margins reflect favorable leverage on the expanded student enrollments and continued cost control. Interest expense, for both the quarter and nine months, has decreased substantially from the previous year. The lower interest expense results from the application of the net proceeds from the April 1997 stock offering to debt reduction and from the continued strong cash flow from operations, in excess of needs for expansion and other investment, which is also being applied to debt reduction. Compared to March 31st of last year, debt has been reduced by $35 million. Net income of $8.4 million for the quarter and $23.1 million for the nine months has increased by more than 25% from the same periods last year. Diluted earnings per share for both periods has increased by more than by 20%, including the effect of the higher number of shares outstanding after the April 1997 stock offering. Liquidity and Capital Resources - ------------------------------- Cash generated from operations in the first nine months increased by nearly $17 million, or 50%, from the first nine months of last year. The higher level of cash generated reflects the higher net income, higher non-cash charges for depreciation and the increased accounts payable and accrued expenses associated with increased operating levels. 10 For the nine months, total reductions in the Company's long-term debt equaled $27 million, up $6.5 million from last year. Future borrowings and/or repayments will be based upon the Company's seasonal cash flow cycle and payment requirements for construction of new facilities and other capital spending. Capital spending remains high with construction of the Fremont, California, campus nearing completion and continued investments in technology and other improvements throughout all the Company's operations. For the first nine months, total capital expenditures were $17.3 million, up $7.9 million from last year. The level of capital spending is expected to remain high. As construction of the Fremont campus winds down, furniture and laboratory equipment are being received. Also, work is beginning on the improvements to the leased New York City campus. The Company is substantially dependent, as is most of the higher education community, upon the continued delivery of federal and state financial aid for its students. Most financial aid application and disbursement is processed electronically. If the disbursement systems of federal and/or state government units and commercial banks that participate in student loan programs are not prepared for the year 2000, there could be interruptions or delays in the receipt of these aid funds, which could have at least a temporary adverse effect upon the Company's financial position. The Company believes that current balances of unrestricted cash, cash generated from operations and, if needed, its revolving loan facility will be sufficient to fund its operating needs and capital spending plans for the foreseeable future. 11 PART II - Other information Item 5 - Other Information On March 23rd, the Company and its lenders completed an amendment to the revolving loan facility, extending the maturity date by one year and making other minor changes and corrections. On May 6th, the Company announced a 2-for-1 stock split by means of a 100 percent stock dividend to be effective as of the end of trading on June 19, 1998, to shareholders of record on June 1, 1998. This will be the Company's third stock split since its initial public offering in June 1991. Item 6 - Exhibits and Reports on Form 8-K (b) Reports on Form 8-K There were no reports on Form 8-K filed by the Company during the quarter ended March 31, 1998. 12 Signatures - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: MAY 7, 1998 /s/ Ronald L. Taylor Ronald L. Taylor President and Chief Operating Officer Date: MAY 7, 1998 /s/Norman M. Levine Norman M. Levine Vice President Finance, Controller, Chief Financial and Accounting Officer EX-27 2
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