-----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, QxO4XX/XQFEIaVMDbSXZ84ePT1DozGcfYETMHAzj8TxBXC4vI2A8FxutkbNCSBN5 XTqv/PlF6im3pkv0W5c9fA== 0000730464-98-000008.txt : 19981113 0000730464-98-000008.hdr.sgml : 19981113 ACCESSION NUMBER: 0000730464-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: 98745197 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 September 30, 1998 Commission file number 0-12751 DeVRY INC. (Exact name of registrant as specified in its charter) DELAWARE 36-315014 (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 Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to 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 30, 1998: 69,325,854 Total number of pages: 12 2 DeVRY INC. FORM 10-Q INDEX For the Quarter ended September 30, 1998 Page No. -------- PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets at September 30, 1998, June 30, 1998, and September 30, 1997 3-4 Consolidated Statements of Income for the quarter ended September 30, 1998 and 1997 5 Consolidated Statements of Cash Flows for the quarter ended September 30, 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)
September 30, June 30, September 30, 1998 1998 1997 ------------ ------------ ------------ (Unaudited) (Unaudited) ASSETS Current Assets Cash and Cash Equivalents $ 24,331 $ 31,881 $ 28,605 Restricted Cash 24,643 16,875 20,332 Accounts Receivable, Net 29,914 11,878 23,279 Inventories 3,570 5,218 2,981 Prepaid Expenses and Other 2,901 3,868 3,210 ---------- ---------- ---------- Total Current Assets 85,359 69,720 78,407 ---------- ---------- ---------- Land, Buildings and Equipment Land 35,297 35,142 35,159 Buildings 64,405 62,371 51,329 Equipment 76,985 73,039 67,080 Construction In Progress 6,614 2,541 541 ---------- ---------- ---------- 183,301 173,093 154,109 Accumulated Depreciation (68,003) (64,988) (60,784) ---------- ---------- ---------- Land, Buildings and Equipment, Net 115,298 108,105 93,325 ---------- ---------- ---------- Other Assets Intangible Assets, Net 37,500 37,908 37,382 Perkins Program Fund, Net 6,813 6,660 6,176 Other Assets 1,446 1,499 1,613 ---------- ---------- ---------- Total Other Assets 45,759 46,067 45,171 ---------- ---------- ---------- TOTAL ASSETS $246,416 $223,892 $216,903 ========== ========== ==========
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, 1998 1998 1997 ------------ ------------ ------------ (Unaudited) (Unaudited) LIABILITIES Current Liabilities Accounts Payable $ 16,303 $ 24,116 $ 15,767 Accrued Salaries, Wages & Benefits 18,677 18,422 15,863 Accrued Expenses 12,504 8,504 9,771 Advance Tuition Payments 5,727 9,202 5,442 Deferred Tuition Revenue 36,333 5,735 32,305 ---------- ---------- ---------- Total Current Liabilities 89,544 65,979 79,148 ---------- ---------- ---------- Other Liabilities Revolving Loan - 10,000 14,000 Deferred Income Tax Liability 3,695 3,612 4,987 Deferred Rent and Other 8,867 8,045 7,172 ---------- ---------- ---------- Total Other Liabilities 12,562 21,657 26,159 ---------- ---------- ---------- TOTAL LIABILITIES 102,106 87,636 105,307 ---------- ---------- ---------- SHAREHOLDERS' EQUITY Common Stock, $0.01 par value, 75,000,000 Shares Authorized, 69,320,520, 69,305,070 and 69,022,428, Shares Issued and Outstanding at September 30, 1998, June 30, 1998 and September 30, 1997, Respectively 693 693 690 Additional Paid-in Capital 60,646 60,608 60,522 Retained Earnings 82,201 74,385 49,940 Cumulative Translation Adjustment 770 570 444 ---------- ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 144,310 136,256 111,596 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $246,416 $223,892 $216,903 ========== ========== ==========
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, --------------------- 1998 1997 -------- -------- REVENUES: Tuition $ 84,753 $ 72,973 Other Educational 8,868 7,102 Interest 237 346 ------- ------- Total Revenues 93,858 80,421 ------- ------- COSTS AND EXPENSES: Cost of Educational Services 56,586 48,710 Student Services and Administrative Expense 24,307 21,015 Interest Expense 170 400 ------- ------- Total Costs and Expenses 81,063 70,125 ------- ------- Income Before Income Taxes 12,795 10,296 Income Tax Provision 4,977 4,017 ------- ------- NET INCOME $ 7,818 $ 6,279 ======= ======= EARNINGS PER COMMON SHARE Basic $0.11 $0.09 ======= ======= Diluted $0.11 $0.09 ======= =======
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, 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 7,818 $ 6,279 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 3,338 2,516 Amortization 415 395 Provision for Refunds and Uncollectible Accounts 4,897 4,582 Deferred Income Taxes 83 (22) Loss on Disposals and Adjustments to Land, Buildings and Equipment 191 1 Changes in Assets and Liabilities: Restricted Cash (7,768) (8,228) Accounts Receivable (22,890) (15,500) Inventories 1,648 1,568 Prepaid Expenses And Other 703 (125) Perkins Program Fund Contribution and Other (196) (140) Accounts Payable (7,813) (6,534) Accrued Salaries, Wages, Expenses and Benefits 5,387 3,603 Advance Tuition Payments (3,475) (1,152) Deferred Tuition Revenue 30,598 26,604 ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 12,936 13,847 ------ ------ CASH FLOWS USED IN INVESTING ACTIVITIES: Capital Expenditures (10,722) (5,154) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Exercise of Stock Options 36 40 Repayments Under Revolving Credit Facility (10,000) (19,000) ------ ------ NET CASH USED IN FINANCING ACTIVITIES (9,964) (18,960) Effects of Exchange Rate Differences 200 7 ------ ------ NET DECREASE IN CASH AND CASH EQUIVALENTS (7,550) (10,260) Cash and Cash Equivalents at Beginning of Period 31,881 38,865 ------ ------ Cash and Cash Equivalents at End of Period $24,331 $28,605 ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid During the Period $116 $413 Income Taxes Paid During the Period, Net 11 51
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, 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 as filed with the Securities and Exchange Commission for the fiscal year ended June 30, 1998. The results of operations for the three months ended September 30, 1998, 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 ended September 30, 1998. 3. In July and August 1998, the Company granted options to purchase up to 603,500 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 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 first quarter increased by $11.8 million, or 16.1%, compared to the first quarter of last year. The increase in tuition revenue was produced by several positive factors. Enrollment at DeVry Institutes for the summer term, which began in July, increased by 12.1% from last summer. This increase represents the twenty-fourth consecutive term of increased total student enrollment as compared to the corresponding year-ago period. Contributing to the enrollment increase at DeVry Institutes was the opening of a new campus in Fremont, California, the twelfth campus in the United States. At Keller Graduate School, enrollment for the term which began in June increased by more than 23% from last June. Compared to June of last year, Keller conducted classes in 5 new sites, bringing the total to 28, including the distance education program. Tuition increases of approximately 5% were also implemented by DeVry Institutes and Keller Graduate School during the past year and a smaller 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 other educational revenues, continued to increase from the prior year. 9 Interest income on the Company's short-term investments decreased from the first quarter of last year as available cash resources were used to eliminate all remaining debt and for capital spending on new and improved facilities and equipment. Cost of Educational Services increased by $7.9 million, or 16.2% from the first quarter of last year. The increase reflects the cost of additional facilities, faculty and staff associated with the 5 new Keller sites and the DeVry Institute in Fremont, California. In addition, there were higher wage, benefit, supply and service expenses associated with the higher student enrollments at the previously existing DeVry Institutes, Keller Graduate School and Becker CPA Review sites. Depreciation expense increased by more than $0.8 million from last year, reflecting the record investment in the past year for the expansion and upgrading of school laboratories and teaching equipment throughout the Company. Despite record enrollment levels, the provision for refunds and doubtful accounts increased at a much lower rate than revenues. The Company believes that this lower rate of increase, which began last year, reflects 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 $3.3 million, or 15.7%, from the first quarter of last year. The increase primarily reflects the marketing costs associated with student recruitment for the Company's newly opened operating locations and the marketing costs associated with recruiting increased numbers of students at the previously existing locations. Student recruiting expenses were also being incurred for the November 1998 opening of the new DeVry Institute in New York. Administrative expenses have also increased to support the Company's expanding operations. Spending continued through most of the first quarter on post-implementation tasks for the Company's new financial and reporting system. Spending also continues on the year 2000 project as hardware is being tested and software is being rewritten and tested. The Company believes that it is on schedule for completion of the project during 1999. Costs associated with these efforts have not had 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 and taxes, were a record for any first quarter. Operating margins, which have been steadily increasing over the corresponding year-ago periods, increased again to 13.8% from 13.3% in the first quarter of last year. This increase was achieved by higher operating leverage on the Company's previously existing locations and continued cost controls, offsetting the effect of the new location startups at DeVry Institutes and Keller Graduate School. Interest expense decreased from the previous year as cash flow from operations permitted the Company to completely eliminate, by quarter-end, all its borrowings. Net income of $7.8 million, or $0.11 per share, increased by more than 20% from last year, continuing the pattern of year-over-year increases of 20% or more. 10 Liquidity and Capital Resources Cash generated from operations totaled $12.9 million in the quarter, declining somewhat from $13.8 million last year. Offsetting higher net income and non- cash sources of depreciation, amortization and deferred tuition revenue, was an increase in the level of accounts receivable. The increase in accounts receivable results primarily from the higher level of student enrollment and tuition revenue as well an approximately $1.1 million increase in funds owed DeVry Institutes by the Department of Education under various federal loan and grant programs. Receivable levels, which had been declining during the past several years because of improved timeliness of collection efforts and student aid disbursements, even as student enrollments and revenues increased, are expected to continue to increase somewhat from year-ago levels as new student enrollments continue to increase. Capital spending was more than $10.7 million in the first quarter, more than double the level of last year as equipment continued to be received at the newly opened DeVry Institute in Fremont, California, and construction of classrooms and offices neared completion for the DeVry Institute in New York. During the 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 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 funding was 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. 11 PART II - Other information Item 5 - Other Information Norman C. Metz, senior vice president at DeVry Inc., died Sunday, October 25th, after a long illness. Mr. Metz was 50 years old. He joined DeVry Institutes in 1983 as vice president of marketing and sales and subsequently assumed the responsibilities of the management of all U.S. and Canadian DeVry Institutes. Mr. Metz's responsibilities are currently being filled by other senior staff members. In fiscal 1996, the Ontario Ministry of Education and Training temporarily suspended and later conditionally reinstated the Ontario Student Assistance Program ("OSAP") designation of the Company's Toronto-area schools as an OSAP- eligible institution, affecting the processing of student's financial aid applications. Full reinstatement is contingent upon, among other conditions, the outcome of an audit of the Company's files to assess compliance with the Ministry's guidelines. In mid-October, the Company received from the Ontario Ministry of Education and Training (the "Ministry") a copy of the forensic audit reports prepared by its auditors, Lindquist Avey, to quantify the costs "incurred by or associated with inappropriately released loans." The Company has acknowledged receipt of the report to the Ministry and delivered a copy of these reports to Canadian legal counsel and audit counsel for review and advice. A meeting has been scheduled for November 13th with the Ministry, Lindquist Avey, the Company and its Canadian legal and audit counsel to review and discuss the report prepared by Lindquist Avey. The DeVry Institute in Phoenix is leasing approximately 3,400 square feet of additional classroom and office space in a nearby building to provide for increasing student enrollments while changes to the DeVry facility are being completed to meet the longer-term classroom 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, 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: NOVEMBER 11, 1998 /s/ Ronald L. Taylor ----------------------------- Ronald L. Taylor President and Chief Operating Officer Date: NOVEMBER 11, 1998 /s/Norman M. Levine ---------------------------------- Norman M. Levine Vice President Finance, Controller, Chief Financial and Accounting Officer EX-27 2
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