-----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, FUx04vYOa/L1zjTu8A0QbbQXtqMCLObn3Pv50b51b5XPoNy4FZBhKdaUwMKhrLgJ yjR1S/n2c2mMBuz/6T0Jjw== /in/edgar/work/0000730464-00-500003/0000730464-00-500003.txt : 20001109 0000730464-00-500003.hdr.sgml : 20001109 ACCESSION NUMBER: 0000730464-00-500003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVRY INC CENTRAL INDEX KEY: 0000730464 STANDARD INDUSTRIAL CLASSIFICATION: [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: 756138 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 q110q.txt FIRST QTR FY 2001 10Q 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 September 30, 2000 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 October 31, 2000: 69,683,957 Total number of pages: 13 2 DeVRY INC. FORM 10-Q INDEX For the Quarter ended September 30, 2000 Page No. -------- PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets at September 30, 2000, June 30, 2000, and September 30, 1999 3-4 Consolidated Statements of Income for the quarter ended September 30, 2000, and 1999 5 Consolidated Statements of Cash Flows for the quarter ended September 30, 2000, and 1999 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)
September 30, June 30, September 30, 2000 2000 1999 ------------ ------------ ------------ (Unaudited) (Unaudited) ASSETS Current Assets Cash and Cash Equivalents $ 30,635 $ 25,851 $ 34,871 Restricted Cash 22,519 19,395 26,193 Accounts Receivable, Net 66,725 25,362 41,324 Inventories 4,652 6,371 4,765 Deferred Income Taxes 3,526 3,526 4,536 Prepaid Expenses and Other 2,701 1,459 2,614 ------- ------- ------- Total Current Assets 130,758 81,964 114,303 ------- ------- ------- Land, Buildings and Equipment Land 42,062 38,516 38,419 Buildings 113,119 101,689 78,595 Equipment 121,529 113,586 99,455 Construction In Progress 2,347 6,403 16,248 ------- ------- ------- 279,057 260,194 232,717 Accumulated Depreciation (107,324) (101,393) (85,456) ------- ------- ------- Land, Buildings and Equipment, Net 171,733 158,801 147,261 ------- ------- ------- Other Assets Intangible Assets, Net 73,219 74,134 75,872 Deferred Income Taxes 2,035 2,032 - Perkins Program Fund, Net 8,316 8,316 7,375 Other Assets 2,266 1,832 1,517 ------- ------- ------- Total Other Assets 85,836 86,314 84,764 ------- ------- ------- TOTAL ASSETS $388,327 $327,079 $346,328 ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 4 DEVRY INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
September 30, June 30, September 30, 2000 2000 1999 ------------ ------------ ------------ (Unaudited) (Unaudited) LIABILITIES Current Liabilities Accounts Payable $ 27,187 $ 31,827 $ 26,033 Accrued Salaries, Wages & Benefits 28,155 24,715 22,677 Accrued Expenses 15,540 7,041 15,398 Advance Tuition Payments 6,916 15,507 8,656 Deferred Tuition Revenue 59,988 10,095 45,233 ------- ------- ------- Total Current Liabilities 137,786 89,185 117,997 ------- ------- ------- Other Liabilities Revolving Loan - - 29,000 Deferred Income Tax Liability - - 2,137 Deferred Rent and Other 12,765 12,755 11,927 ------- ------- ------- Total Other Liabilities 12,765 12,755 43,064 ------- ------- ------- TOTAL LIABILITIES 150,551 101,940 161,061 ------- ------- ------- SHAREHOLDERS' EQUITY Common Stock, $0.01 par value, 200,000,000 Shares Authorized, 69,679,874, 69,642,087 and 69,432,273, Shares Issued and Outstanding at September 30, 2000, June 30, 2000 and September 30, 1999, Respectively 697 697 695 Additional Paid-in Capital 63,311 63,012 61,015 Retained Earnings 173,162 160,996 123,122 Accumulated Other Comprehensive Income 606 434 435 ------- ------- ------- TOTAL SHAREHOLDERS' EQUITY 237,776 225,139 185,267 ------- ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $388,327 $327,079 $346,328 ======= ======= =======
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 Ended September 30, 2000 1999 -------- -------- REVENUES: Tuition $124,034 $106,863 Other Educational 11,130 11,115 Interest 255 304 ------- ------- Total Revenues 135,419 118,282 ------- ------- COSTS AND EXPENSES: Cost of Educational Services 78,309 71,227 Student Services and Administrative Expense 37,215 30,266 Interest Expense 113 574 ------- ------- Total Costs and Expenses 115,637 102,067 ------- ------- Income Before Income Taxes 19,782 16,215 Income Tax Provision 7,616 6,308 ------- ------- NET INCOME $ 12,166 $ 9,907 ======= ======= EARNINGS PER COMMON SHARE Basic $0.17 $0.14 ======= ======= Diluted $0.17 $0.14 ======= =======
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 Quarter Ended September 30, 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $12,166 $ 9,907 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 6,105 4,608 Amortization 933 915 Provision for Refunds and Uncollectible Accounts 7,249 6,009 Deferred Income Taxes (3) - Loss on Disposals and Adjustments to Land, Buildings and Equipment (35) 32 Changes in Assets and Liabilities, Net of Effects from Acquisitions of Businesses: Restricted Cash (3,124) (5,282) Accounts Receivable (48,612) (32,691) Inventories 1,719 1,910 Prepaid Expenses And Other (1,684) (522) Accounts Payable (4,640) (5,343) Accrued Salaries, Wages, Expenses and Benefits 11,939 9,614 Advance Tuition Payments (8,591) (4,772) Deferred Tuition Revenue 49,893 40,088 ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 23,315 24,473 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures (19,002) (12,319) Payments for Purchases of Businesses, Net of Cash Acquired - (38,186) ------ ------ NET CASH USED IN INVESTING ACTIVITIES: (19,002) (50,505) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Exercise of Stock Options 299 68 Proceeds From Revolving Credit Facility 6,000 40,000 Repayments Under Revolving Credit Facility (6,000) (11,000) ------ ------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 299 29,068 Effects of Exchange Rate Differences 172 (13) ------ ------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,784 3,023 Cash and Cash Equivalents at Beginning of Period 25,851 31,848 ------ ------ Cash and Cash Equivalents at End of Period $30,635 $34,871 ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid During the Period $83 $490 Income Tax (Refunds)Payments During the Period, Net (170) 286
The accompanying notes are an integral part of these consolidated financial statements. 7 DEVRY INC. Notes to Consolidated Financial Statements For the Quarter Ended September 30, 2000 ---------- 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 as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2000. The results of operations for the three months ended September 30, 2000, are not necessarily indicative of results to be expected for the entire fiscal year. 2. Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Shares used in this computation were 69,660,000 and 69,421,000 for the first quarters ended September, 2000 and 1999, respectively. Diluted earnings per share is computed by dividing net income by the weighted average number of shares assuming dilution. Dilutive shares reflect the additional shares that would be outstanding if dilutive stock options were exercised during the period. Shares used in this computation were 70,820,000 and 70,363,000 for the first quarters ended September 30, 2000 and 1999, respectively. 3. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin 101 ("SAB 101"). SAB 101 requires deferral of certain revenue items over the period that the related service is provided. Adoption of SAB 101 is required by the Company's fourth quarter of fiscal 2001. The SEC has recently issued interpretive guidance on the implementation of this bulletin, and the Company is completing an evaluation of its effects. SAB 101 requires the deferral of certain fees and other charges over the period of service (student enrollment); however, based on preliminary analysis, the Company does not expect SAB 101 to have a significant effect on its consolidated results of operations, financial position and cash flows. 4. In October, the Company and its banks renegotiated the revolving loan agreement; extending the term of the agreement, increasing the permissible level of capital spending and adjusting one of the financial covenants. 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 uncertainties 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, 2000, as filed with the Securities and Exchange Commission. All references to per share amounts have been restated to reflect the June 19, 1998, 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's management 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 first quarter increased by $17.2 million, or 16.1%, compared to the first quarter of last year. The increase in these revenues was produced by several positive factors. First, enrollments at the Company's undergraduate campuses increased by 13.1% from last summer. This is the 29th consecutive term that exceeds the prior-year results for total student enrollment. Contributing to the revenue and enrollment growth from the prior year was the opening, last fall, of a new DeVry Institute in West Hills (Los Angeles), California, and a new DeVry Institute opening at the start of this year's summer term (July) in Tinley Park (Chicago), Illinois. Second, for Keller Graduate School, enrollment for the term which began in late June increased by 15.2% from last June. Contributing to Keller's enrollment increase was the opening of 5 new teaching centers since last year, bringing the total for the June term this year to 36. Third, the DeVry Institutes implemented an approximately 6% tuition rate increase effective with the start of the summer term. A somewhat smaller price increase was implemented by Keller Graduate School effective with their term that began at the start of September. 9 In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101 entitled "Revenue Recognition in Financial Statements" ("SAB 101"). This bulletin provides the SEC staff's views on applying generally accepted accounting principles to selected revenue recognition issues, including the recognition of fee income. The SEC has recently issued interpretive guidance on SAB 101 which must be implemented by the fourth quarter of the Company's current fiscal year. The Company is continuing its evaluation of the effects of SAB 101, including the possible requirement for the deferral and subsequent amortization of revenue and related expenses for its application fee and other fee income. Such fees provide only a relatively small portion of the Company's revenues each period. The Company does not expect the adoption of SAB 101 to have a significant effect on its consolidated results of operations, financial position and cash flows. Other Educational Revenues is composed primarily of sales of books and supplies to students enrolled in the Company's undergraduate, graduate and Becker review programs. This category of revenue did not increase from last year as it has historically. Last year, the DeVry Institutes entered into an agreement with Follett Higher Education Group ("Follett") to outsource the management of several of the on-campus DeVry Institute bookstores. At year-end fiscal 2000, Follett had taken over the management of 4 stores. During the first quarter, several other DeVry Institute bookstores were transitioned to Follett management. The wider range of ancillary merchandise and improved retail store management, plus an online ordering capability, should provide an improved level of service to DeVry students. Bookstore sales revenue and cost of sales expense are no longer reported by DeVry for those stores under Follett management. In its place, DeVry receives a commission from Follett based upon the level of sales at the stores they operate. Responsibility for the management of additional DeVry Institute bookstores may be transferred to Follett in future quarters, further reducing this category of reported revenues but with no significant effect on income. Interest income on the Company's short term investments decreased slightly from the first quarter of last year. Cash balances available for investment were generally lower during this year's first quarter because of record capital spending on improvements and growth. Cost of Educational Services increased by $7.1 million, or 9.9%, from the first quarter of last year. The increase reflects the cost of additional facilities, faculty, staff, student service efforts, supplies, tuition refunds and uncollectible account costs relating to higher enrollments and new operating locations opened since last year. Partly offsetting these cost increases was the reduction in bookstore cost of sales at those bookstores now under Follett management as discussed above. Excluding all of the DeVry Institute bookstore cost of sales from both the first quarter of this year and the first quarter of last year, the Cost of Educational Services expense would have increased by approximately 11.5%. Contributing to the lower rate of increase in this cost category vs. the rate of increase in tuition revenue, were continued cost controls and operating efficiencies from higher enrollments, particularly at the locations opened in FY 2000 and 1999 where fixed cost infrastructure is in place and enrollment increases do not require commensurate cost increases. Also contributing to the lower rate of cost increase is the consolidation of additional Conviser Duffy CPA Review sites into the Becker system. The Conviser sites were acquired at the start of last fiscal year and many of them were run independently for the November 1999 CPA Review exam cycle because classes had already begun. By the start of this year, the remaining duplicate operating locations and costs had been eliminated. 10 Depreciation expense, most of which is included in Cost of Educational Services, increased by $1.5 million from last year. The increased cost reflects the Company's continued capital spending for improvement and expansion of its educational operations. Student Services and Administrative Expense increased by $6.9 million, or 23.0%, from last year. The increase reflects the marketing, administrative and curriculum development costs associated with the Company's expanding operations. Marketing efforts for the DeVry Institute campus opening in Orlando this November and the planned opening in Seattle for next July are already underway, contributing to the cost increase in advance of any tuition revenues from these sites. Both Orlando and Seattle are new locations for DeVry and initial marketing expenses are higher than they would be in an existing DeVry Institute market such as the recent opening in West Hills (Los Angeles), California. In addition, marketing was initiated for several Keller centers that are planned to open in November, again in advance of tuition revenues from these sites. In response to the growing size and complexity of its operations, the Company has begun design and development efforts on a new student information system to serve the needs of the educational programs and supporting activities at all of its divisions. Information system department and operations area support spending on these early development efforts are included in the Student Services and Administrative Expense category, contributing to the increase in cost. The Company's earnings from operations, before interest expense and taxes, ("EBIT") were a record for any first quarter period. The EBIT margin, which has increased steadily in each of the past years, increased again. This increase in EBIT margin reflects both the economies of scale as the Company continues to grow and the effect of the reduced level of bookstore sales, with their historically low margin, as discussed above. The reduction in interest expense reflects the Company's repayment of borrowings for the two acquisitions, for cash, made last year and funded by the using the revolving line of credit agreement. All borrowings had been fully repaid by the end of last fiscal year. During the first quarter there was a temporary borrowing to fund operations during the cyclically low cash flow period at the beginning of the new fiscal year. These temporary borrowings were fully repaid before the end of the quarter. Net income of $12.2 million, or $0.17 per share, increased by approximately 23% from last year. This continues the pattern of year-over- year earnings growth at a rate of 20+%. Liquidity and Capital Resources - ------------------------------- Cash generated from operations was $23.3 million for the first quarter of the year, slightly lower than the $24.5 million in the first quarter of last year. Higher net income, including higher non-cash charges for depreciation, and higher accrued wages and expenses all represented an increased source of cash flow from operations. However, offsetting these increases was a higher level of accounts receivable. The increased receivable level reflects the higher level of student enrollments and revenues realized this year and an increase of nearly $8 million in the receivable owed to the Company under various federal financial aid programs. 11 This increase in the amount owed under financial aid programs, which funds represent over 60% of the collections for U.S. Institute revenue, will be collected in the coming months as the Company completes the detailed administrative processes established by the Department of Education related to collection. Similar receivable levels have occurred in the past and may occur again. Capital spending for the quarter was $19.0 million, an increase of $6.7 million from last year. Capital spending is aimed at improvement and expansion of the Company's educational operations. Included in the spending for the first quarter was the completion of the land purchase in Seattle for the planned opening of a DeVry Institute campus next July. The Company expects that its capital spending in the coming quarters will remain at a high level as expansion and improvement efforts continue throughout the system. During the first quarter, the Company borrowed $6.0 million under its revolving line of credit agreement to meet cyclical operating needs prior to the cash inflows from the start of DeVry Institutes' summer term. This temporary borrowing was fully repaid by the end of the quarter. Similarly, at the start of November the Company borrowed under its revolving line of credit to meet cyclical operating needs prior to the cash inflows from the start of DeVry Institutes' fall term. The Company believes that the current balances of unrestricted cash, cash generated from operations and, if needed, its revolving loan facility will be sufficient to fund its operations for the foreseeable future. 12 PART II - Other information - --------------------------- Item 5 - Other Information - -------------------------- In October, the Company and its banks renegotiated the revolving loan agreement, extending the term of the agreement, increasing the permissible level of capital spending and adjusting one of the financial convenants. Future changes and adjustments to this agreement may be required in the future to meet the Company's expanding operating needs. 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 September 30, 2000. 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: NOVEMBER 8, 2000 /s/ Ronald L. Taylor ----------------------------- Ronald L. Taylor President and Chief Operating Officer Date: NOVEMBER 8, 2000 /s/Norman M. Levine ----------------------------------- Norman M. Levine Vice President Finance, Controller, Chief Financial and Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----