-----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, Iwahe/fsKRAE5pi59dZJXarXpEoFoOC5/V9i7Q6GWxBMxOlgSukX2wKX+L6tNlOM +eUTMa9KyPhcKouzV5riiw== 0000730464-99-000008.txt : 19990511 0000730464-99-000008.hdr.sgml : 19990511 ACCESSION NUMBER: 0000730464-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990510 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: 99616123 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, 1999 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, 1999: 69,405,310 Total number of pages: 13 2 DeVRY INC. FORM 10-Q INDEX For the Quarter and Nine Months ended March 31, 1999 Page No. -------- PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets at March 31, 1999, June 30, 1998, and March 31, 1998 3-4 Consolidated Statements of Income for the quarter and nine months ended March 31, 1999 and 1998 5 Consolidated Statements of Cash Flows for the nine months ended March 31, 1999 and 1998 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8-11 Part II. Other Information Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 3 PART I - Financial Information Item 1 - Financial Statements DEVRY INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
March 31, June 30, March 31, 1999 1998 1998 ----------- ----------- ----------- (Unaudited) (Unaudited) ASSETS Current Assets Cash and Cash Equivalents $57,465 $31,881 $45,911 Restricted Cash 30,442 16,875 31,814 Accounts Receivable, Net 62,816 11,878 55,440 Inventories 3,821 5,218 2,754 Prepaid Expenses and Other 3,338 3,868 3,776 -------- -------- -------- Total Current Assets 157,882 69,720 139,695 -------- -------- -------- Land, Buildings and Equipment Land 37,821 35,142 35,148 Buildings 72,668 62,371 51,638 Equipment 86,850 73,039 71,678 Construction In Progress 4,871 2,541 6,991 -------- -------- -------- 202,210 173,093 165,455 Accumulated Depreciation (76,245) (64,988) (66,232) -------- -------- -------- Land, Buildings and Equipment, Net 125,965 108,105 99,223 -------- -------- -------- Other Assets Intangible Assets, Net 38,181 37,908 36,604 Perkins Program Fund, Net 7,131 6,660 6,636 Other Assets 3,909 1,499 1,540 -------- -------- -------- Total Other Assets 49,221 46,067 44,780 -------- -------- -------- TOTAL ASSETS $333,068 $223,892 $283,698 ======== ======== ========
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, 1999 1998 1998 ----------- ----------- ----------- (Unaudited) (Unaudited) LIABILITIES Current Liabilities Accounts Payable $25,455 $24,116 $23,807 Accrued Salaries, Wages & Benefits 22,593 18,422 19,263 Accrued Expenses 5,831 8,504 7,685 Advance Tuition Payments 6,500 9,202 7,124 Deferred Tuition Revenue 94,564 5,735 78,926 -------- -------- -------- Total Current Liabilities 154,943 65,979 136,805 -------- -------- -------- Other Liabilities Revolving Loan 0 10,000 6,000 Deferred Income Tax Liability 3,660 3,612 4,998 Deferred Rent and Other 9,087 8,045 7,385 -------- -------- -------- Total Other Liabilities 12,747 21,657 18,383 -------- -------- -------- TOTAL LIABILITIES 167,690 87,636 155,188 -------- -------- -------- SHAREHOLDERS' EQUITY Common Stock, $0.01 par value, 200,000,000 Shares Authorized, 69,399,630, 69,305,070 and 69,292,944, Shares Issued and Outstanding at March 31, 1999, June 30, 1998 and March 31, 1998, Respectively 694 693 693 Additional Paid-in Capital 60,885 60,608 60,600 Retained Earnings 103,125 74,385 66,723 Accumulated Other Comprehensive Income 674 570 494 -------- -------- -------- TOTAL SHAREHOLDERS' EQUITY 165,378 136,256 128,510 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $333,068 $223,892 $283,698 ======== ======== ========
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, ------------------- -------------------- 1999 1998 1999 1998 ------------------- -------------------- REVENUES: Tuition $ 98,669 $83,349 $279,901 $237,019 Other Educational 11,347 9,135 31,289 25,527 Interest 218 370 715 1,071 -------- -------- -------- -------- Total Revenues 110,234 92,854 311,905 263,617 -------- -------- -------- -------- COSTS AND EXPENSES: Cost of Educational Services 63,932 51,310 178,890 149,489 Student Services and Administrative Expense 29,124 27,455 85,922 75,420 Interest Expense 43 156 257 804 -------- ------- -------- -------- Total Costs and Expenses 93,099 78,921 265,069 225,713 -------- ------- -------- -------- Income Before Income Taxes 17,135 13,933 46,836 37,904 Income Tax Provision 6,512 5,496 18,096 14,841 -------- ------- -------- -------- NET INCOME $ 10,623 $ 8,437 $ 28,740 $ 23,063 ======== ======= ======== ======== EARNINGS PER COMMON SHARE $0.15 $0.12 $0.41 $0.33 (Basic and Diluted) ===== ===== ===== =====
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, 1999 1998 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $28,740 $23,063 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 11,457 8,644 Amortization 1,248 1,187 Provision for Refunds and Uncollectible Accounts 15,094 13,020 Deferred Income Taxes (45) (11) Loss on Disposals and Adjustments to Land, Buildings and Equipment 139 128 Changes in Assets and Liabilities: Restricted Cash (13,567) (19,710) Accounts Receivable (65,988) (55,969) Inventories 1,397 1,795 Prepaid Expenses And Other (2,266) 1,247 Perkins Program Fund Contribution and Other (515) (730) Accounts Payable 1,339 1,506 Accrued Salaries, Wages, Expenses and Benefits 1,498 3,251 Advance Tuition Payments (2,702) 530 Deferred Tuition Revenue 88,829 73,225 ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 64,658 51,176 ------ ------ CASH FLOWS USED IN INVESTING ACTIVITIES: Capital Expenditures (29,456) (17,307) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Exercise of Stock Options 278 120 Repayments Under Revolving Credit Facility (10,000) (27,000) ------ ------ NET CASH USED IN FINANCING ACTIVITIES (9,722) (26,880) Effects of Exchange Rate Differences 104 57 ------ ------ NET INCREASE IN CASH AND CASH EQUIVALENTS 25,584 7,046 Cash and Cash Equivalents at Beginning of Period 31,881 38,865 ------ ------ Cash and Cash Equivalents at End of Period $57,465 $45,911 ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid During the Period $247 $843 Income Taxes Paid During the Period 19,789 12,547
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, 1999 ---------- 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, 1998 and in conjunction with the Company's quarterly reports on Form 10-Q for the quarters ended September 30, 1998 and December 31, 1998, each as filed with the Securities and Exchange Commission. The results of operations for the nine months ended March 31, 1999, are not necessarily indicative of results to be expected for the entire fiscal year. Certain previously reported amounts have been reclassified to conform to the current presentation format. 2. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and display of comprehensive income and its components in the financial statements. The components of comprehensive income, other than those included in net income, were immaterial for the quarter and nine months ended March 31, 1999. 3. In July and August 1998, the Company granted options to purchase up to 597,000 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. 4 In April 1999, the Company signed a letter of intent to acquire for stock Educational Development Corporation which does business as the Denver Technical College. The acquisition is contingent upon satisfactory completion of due diligence. 8 Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition Certain information contained in this quarterly report may constitute forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may involve risks and uncertainty that could cause actual results to differ materially from the forward-looking statements. Potential risks and uncertainties include, but are not limited to, dependence on student financial aid, state and provincial approval and licensing requirements, and the other factors detailed in the Company's SEC filings, including those discussed under the heading entitled "Risk Factors" in the Company's Registration Statement on Form S-3 (No. 333-22457) filed with the Securities and Exchange Commission. 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 as included in the Company's annual report on Form 10-K for the fiscal year ended June 30, 1998, as filed with the Securities and Exchange Commission. All references to per share amounts have been restated to reflect the December 18, 1996, and June 19, 1998, two-for-one stock splits. 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. Because of 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 $15.3 million, or nearly 18.4%. For the first nine months, the increase in tuition revenues was nearly $42.9 million, or 18.1%. These increases in tuition revenue were produced by several positive factors. Enrollment for the DeVry Institutes for the spring term, which began in March, increased by 12.2% from last spring. This increase included the enrollments of new Institute openings in Fremont, California, in July and New York in November. The increased enrollment represents the twenty-sixth consecutive term of increased total student enrollment compared to the comparable year-ago period. At Keller Graduate School, enrollment for the term which began in February increased by more than 14.7% from last February. Compared to February of last year, Keller conducted classes in 6 new sites, bringing the total to 31, including the distance education program. In addition, tuition increases of approximately 5-6% were implemented by both DeVry Institutes and Keller Graduate School during the past year. A somewhat smaller tuition increase was implemented at Becker CPA Review. 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, which are included in this revenue category, continued to increase from the prior year. 9 Interest income on the Company's short-term investments decreased from the third quarter and year-to-date level of the prior year. During most of these periods, cash balances were lower than they were last year as cash was used early in the fiscal year to eliminate all remaining debt and throughout the year-to-date for increased capital spending on new and improved facilities and equipment. Cost of Educational Services increased by $12.6 million, or 24.6% from the third quarter of last year. For the first nine months, the increase in these costs was $29.4 million, or nearly 19.7%. The rate of increase, which accelerated in the third quarter, reflects the cost of additional facilities, faculty and staff associated with the six new Keller Graduate School sites and the new DeVry Institutes in Fremont, California, and New York, all of which have been opened in the past year. In addition, there were higher wage, benefit, supply and service expenses associated with the higher student enrollments at the previously opened DeVry Institutes, Keller Graduate School and Becker CPA Review sites. Depreciation expense, included in the Cost of Educational Services, continues to increase as capital spending on new and improved facilities has accelerated. For the first nine months, depreciation expense has increased by $2.8 million, or 32.5% from last year. The provision for tuition refunds and doubtful accounts continues to increase at a lower rate than tuition revenue. For the nine months, this expense has increased by 15.9%. The Company believes that this rate of increase, below the rate at which tuition revenue is growing, reflects the benefits of improved student retention from continuing efforts to raise new student admission standards at DeVry Institutes and provide improved educational support throughout all of the Company's educational programs. Student Services and Administrative Expense increased by only $1.7 million, or 6.1% from last year. For the first nine months , however, these expenses increased by $10.5 million, or 13.9%. The increased expense primarily reflects the marketing costs associated with student recruitment for both the Company's newly opened operating locations and the marketing costs associated with recruiting increased numbers of students at the previously opened locations. The third quarter of last year included pre-opening marketing expenses for both of the DeVry Institute campuses opened this fiscal year, and so the comparative increase in spending from last year's third quarter is not as large as it might have otherwise been. Administrative expenses are also increasing to support the Company's expanding operations. These administrative expenses include efforts related to what is commonly referred to as the Y2K problem. In mid-1997, the Company initiated a project to determine the magnitude of our exposure from our own systems and from those of our significant business partners. Through our audit, testing and remediation project, we have identified and evaluated the readiness of our IT systems and non-IT systems, which, if not Y2K compliant, could have a material effect on the Company. The review and testing of all internal IT systems has been completed and those systems have been made Y2K compliant through change or replacement. An inventory of PC hardware/software has been completed and a plan has been developed to replace any non-compliant hardware prior to the end of this calendar year. Software vendors have been contacted and are being tracked for follow-up. An upgrade or replacement plan is being developed for this software. 10 Non-IT vendors have also been identified and contacted for upgrade or replacement as necessary, with particular emphasis on Mission Critical vendors. In addition, the Company is developing contingency plans in the event that we experience any Y2K difficulty at our various operating locations. While our efforts in the Y2K endeavor have been extensive, incremental spending on these efforts, which is being charged to expense as incurred, has not been material relative to the overall level of expense or revenues in any period. The Company's earnings from operations, before interest and taxes, were a record for any third quarter and nine month period. Interest expense has been almost completely eliminated as all remaining debt was repaid during the first quarter of the current fiscal year. Continuing interest expense reflects the commitment and administrative fees associated with the Company's revolving line of credit. Net income of $10.6 million, or $0.15 per share for the third quarter, increased by more than 25% from last year. Similarly, for the nine months, net income and earnings per share reflect the Company's continuing year over year growth. Liquidity and Capital Resources - ------------------------------- Cash generated from operations totaled nearly $64.7 million in the first nine months, an increase of nearly $13.5 million from last year. Higher net income plus the increase in non-cash charges included in income for depreciation, amortization and deferred tuition revenue all contributed to the increased cash flow. Although accounts receivable increased, the percent increase from last year was less than the rate of increase in revenues. This lesser rate of growth in student receivables occurred even as new student enrollment, with their typically higher average level of receivables, continues to increase. Capital spending was more than $29.4 million in the first nine months, an increase of more than $12.1 million from last year. Completion of the Fremont, California, and New York DeVry Institutes, construction of the third Los Angeles area DeVry campus plus the purchase of land for the third Chicago- area campus all contributed to the increased spending. In addition, construction continues on the expansion of the urban Chicago DeVry campus and on the renovation and expansion of the Columbus DeVry campus. During the first quarter, the Company completely repaid all of its outstanding revolving loan facility using existing cash balances and cash generated from operations. Future borrowings, if any, will be based upon the Company's seasonal cash flow cycle and payment requirements for capital spending and other needs. The Company is substantially dependent, as is most of the higher education community, upon the timely delivery of federal and state financial aid for its students. Most financial aid application and disbursement activity is processed electronically. If the disbursement system of federal and/or state governmental agencies and the 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 liquidity and 11 financial position. The Company could use its available cash resources and borrowings under its revolving term loan agreement to temporarily fund its operations until such student financial aid disbursements were restored. 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. 12 PART II - Other Information Item 5 - Other Information - -------------------------- During the third quarter, the Company successfully concluded the resolution of all outstanding issues with the Ontario Ministry of Education and Training. DeVry's Toronto-area campuses have now been unconditionally reinstated as participants in the province's student financial aid programs. Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- (b) Reports on Form 8-K On February 12th, the Company filed an 8K announcing that its DeVry Institutes' Toronto-area campuses have been fully reinstated as an eligible institution under the Ontario Student Assistance Program. On April 19th, the Company filed an 8K announcing that it had signed a letter of intent to acquire the Denver Technical College. 13 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 10, 1999 /s/ Ronald L. Taylor -------------------- Ronald L. Taylor President and Chief Operating Officer Date: MAY 10, 1999 /s/Norman M. Levine ------------------- Norman M. Levine Vice President Finance, Controller, Chief Financial and Accounting Officer EX-27 2
5 1000 9-MOS JUN-30-1999 MAR-31-1999 87907 0 72997 10181 3821 157882 202210 76245 333068 154943 0 0 0 694 164684 333068 0 311905 0 178890 85922 15094 257 46836 18096 28740 0 0 0 28740 .41 .41
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