-----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, KCRyXS/AmhnLT/pcj4Vrl4aJyRvHvTscaeY9CScWHwQmH5Rrl5CEPKwPTQeD9KJL JxukjH5xvykUTKOBL3HACg== 0000730464-99-000002.txt : 19990205 0000730464-99-000002.hdr.sgml : 19990205 ACCESSION NUMBER: 0000730464-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990204 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: 99521115 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 December 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 January 29, 1999: 69,390,691 Total number of pages: 13 2 DeVRY INC. FORM 10-Q INDEX For the Quarter and Six Months ended December 31, 1998 Page No. -------- PART I. Financial Information Item 1. Financial Statements: Consolidated Balance Sheets at December 31, 1998, June 30, 1998, and December 31, 1997 3-4 Consolidated Statements of Income for the quarter and six months ended December 31, 1998 and 1997 5 Consolidated Statements of Cash Flows for the six months ended December 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 4. Submission of Matters to a Vote of Security Holders 11 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)
December 31, June 30, December 31, 1998 1998 1997 ------------ ----------- ------------ (Unaudited) (Unaudited) ASSETS Current Assets Cash and Cash Equivalents $ 29,557 $ 31,881 $ 36,108 Restricted Cash 36,009 16,875 33,466 Accounts Receivable, Net 37,611 11,878 22,816 Inventories 1,924 5,218 1,795 Prepaid Expenses and Other 4,873 3,868 5,288 ------------ ----------- ------------ Total Current Assets 109,974 69,720 99,473 ------------ ----------- ------------ Land, Buildings and Equipment Land 37,809 35,142 35,148 Buildings 71,275 62,371 51,304 Equipment 82,496 73,039 69,023 Construction In Progress 3,347 2,541 3,400 ------------ ----------- ------------ 194,927 173,093 158,875 Accumulated Depreciation (71,841) (64,988) (62,582) ------------ ----------- ------------ Land, Buildings and Equipment, Net 123,086 108,105 96,293 ------------ ----------- ------------ Other Assets Intangible Assets, Net 37,093 37,908 36,992 Perkins Program Fund, Net 6,813 6,660 6,256 Other Assets 1,405 1,499 1,581 ------------ ----------- ------------ Total Other Assets 45,311 46,067 44,829 ------------ ----------- ------------ TOTAL ASSETS $278,371 $223,892 $240,595 ============ =========== ============
The accompanying notes are an integral part of these consolidated financial statements. 4 DEVRY INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
December 31, June 30, December 31, 1998 1998 1997 ------------ ----------- ------------ (Unaudited) (Unaudited) LIABILITIES Current Liabilities Accounts Payable $ 18,693 $ 24,116 $ 19,599 Accrued Salaries, Wages & Benefits 16,944 18,422 15,381 Accrued Expenses 10,876 8,504 7,328 Advance Tuition Payments 5,290 9,202 5,381 Deferred Tuition Revenue 59,416 5,735 50,630 ------------ ----------- ------------ Total Current Liabilities 111,219 65,979 98,319 ------------ ----------- ------------ Other Liabilities Revolving Loan - 10,000 10,000 Deferred Income Tax Liability 3,695 3,612 4,992 Deferred Rent and Other 8,812 8,045 7,276 ------------ ----------- ------------ Total Other Liabilities 12,507 21,657 22,268 ------------ ----------- ------------ TOTAL LIABILITIES 123,726 87,636 120,587 ------------ ----------- ------------ SHAREHOLDERS' EQUITY Common Stock, $0.01 par value, 200,000,000 Shares Authorized, 69,365,741, 69,305,070 and 69,073,254, Shares Issued and Outstanding at December 31, 1998, June 30, 1998 and December 31, 1997, Respectively 694 693 690 Additional Paid-in Capital 60,686 60,608 60,548 Retained Earnings 92,500 74,385 58,287 Cumulative Translation Adjustment 765 570 483 ------------ ----------- ------------ TOTAL SHAREHOLDERS' EQUITY 154,645 136,256 120,008 ------------ ----------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $278,371 $223,892 $240,595 ============ =========== ============
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 Six Months Ended December 31, Ended December 31, ------------------ -------------------- 1998 1997 1998 1997 ------------------ -------------------- REVENUES: Tuition $ 96,479 $80,697 $181,232 $153,670 Other Educational 11,074 9,290 19,942 16,392 Interest 260 355 497 701 -------- ------- -------- -------- Total Revenues 107,813 90,342 201,671 170,763 -------- ------- -------- -------- COSTS AND EXPENSES: Cost of Educational Services 58,372 49,469 114,958 98,179 Student Services and 32,491 26,950 56,798 47,965 Administrative Expense Interest Expense 44 248 214 648 -------- ------- -------- -------- Total Costs and Expenses 90,907 76,667 171,970 146,792 -------- ------- -------- -------- Income Before Income Taxes 16,906 13,675 29,701 23,971 Income Tax Provision 6,607 5,328 11,584 9,345 -------- ------- -------- -------- NET INCOME $ 10,299 $ 8,347 $ 18,117 $ 14,626 ======== ======= ======== ======== EARNINGS PER COMMON SHARE $0.15 $0.12 $0.26 $0.21 (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 Quarter Ended December 31, --------------------- 1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $18,117 $14,626 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 7,176 4,999 Amortization 829 792 Provision for Refunds and Uncollectible Accounts 9,460 8,789 Deferred Income Taxes 82 (17) Loss on Disposals and Adjustments to Land, Buildings and Equipment 193 124 Changes in Assets and Liabilities: Restricted Cash (19,134) (21,362) Accounts Receivable (35,150) (19,222) Inventories 3,294 2,754 Prepaid Expenses And Other 967 (183) Perkins Program Fund Contribution and Other (196) (242) Accounts Payable (5,423) (2,702) Accrued Salaries, Wages, Expenses and Benefits (230) (1,213) Advance Tuition Payments (3,912) (1,213) Deferred Tuition Revenue 53,681 44,929 ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES 29,754 30,859 ------ ------ CASH FLOWS USED IN INVESTING ACTIVITIES: Capital Expenditures (22,350) (10,728) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds From Exercise of Stock Options 77 66 Repayments Under Revolving Credit Facility (10,000) (23,000) ------ ------ NET CASH USED IN FINANCING ACTIVITIES (9,923) (22,934) Effects of Exchange Rate Differences 195 46 ------ ------ NET DECREASE IN CASH AND CASH EQUIVALENTS (2,324) (2,757) Cash and Cash Equivalents at Beginning of Period 31,881 38,865 ------ ------ Cash and Cash Equivalents at End of Period $29,557 $36,108 ====== ====== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest Paid During the Year $203 $663 Income Taxes Paid During the Year 12,460 9,129
The accompanying notes are an integral part of these consolidated financial statements. 7 DEVRY INC. Notes to Consolidated Financial Statements For the Quarter and Six Months Ended December 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, 1998 and in conjunction with the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1998, each as filed with the Securities and Exchange Commission. The results of operations for the six months ended December 31, 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 and six months ended December 31, 1998. 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. 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 second quarter increased by nearly $15.8 million, or 19.6%. For the first six months, the increase in tuition revenues was almost $27.6 million, or 17.9%. These increases in tuition revenue were produced by several positive factors. Enrollment at DeVry Institutes for the fall term, which began in November, increased by 13.9% from last fall. This increase included the effect of new Institute openings in Fremont, California, in July and New York in November. The increased enrollment represents the twenty-fifth consecutive term of increased total enrollment compared to the comparable year- ago period. At Keller Graduate School, enrollment for the term which began in November increased by more than 17% from last November. Compared to November of last year, Keller conducted classes in 5 new sites, bringing the total to 29, including the distance education program. In addition, tuition increases of approximately 5% were implemented by both 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 second quarter and six months of last year as available cash resources were used to eliminate all remaining debt and for increased capital spending on new and improved facilities and equipment. Cost of Educational Services increased by $8.9 million, or 18.0% from the second quarter of last year. For the first half, the increase in cost was almost $16.8 million, or 17.1%. These increases reflect the cost of additional facilities, faculty and staff associated with the five new Keller Graduate School sites and the 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 existing DeVry Institutes, Keller Graduate School and Becker CPA Review sites. Depreciation expense increased by approximately $1.4 and $2.2 million for the second quarter and first half, respectively. This increase reflects the record investment during the past year for the expansion and upgrading of school laboratories and teaching equipment throughout the system as well as the depreciation associated with the newly opened facilities. Despite record enrollments, the provision for refunds and doubtful accounts continues to increase at a much lower rate than revenues. The Company believes that this lower rate of increase, which began last year, reflects the benefits of continuing efforts to raise new student admission standards at DeVry Institutes and provide improved educational support throughout all the Company's educational programs. Student Services and Administrative Expense increased by $5.5 million, or 20.6%, from the second quarter of last year. For the first half, these expenses increased by $8.8 million, or 18.4%, from last year. These increases primarily reflect 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 opened locations. Administrative expenses are also increasing to support the Company's expanding operations. Administrative expenses also include efforts on the Y2K 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. Cost associated with the year 2000 project have not been material to the total Company results and are being charged to expense as incurred. Post-implementation tasks and related spending for the Company's new financial and reporting system have now been largely completed. The Company's earnings from operations, before interest and taxes, were a record for any second quarter and first half period. The growth in operating margins is beginning to slow from its rate of increase in previous years as new school locations, with their typical pattern of pre-opening and first year operating losses, are partially offsetting the margin increases from expanding enrollments and cost efficiencies in existing sites. Interest expense has been almost completely eliminated as cash flow from operations was used to pay off all remaining borrowing by the end of the first quarter. Net income of $10.3 million, or $0.15 per share, increased by more than 20% from last year. Similarly, net income of $18.1 million, or $0.26 per share, reflects increases that continue the pattern of 20+% year-over increases. 10 Liquidity and Capital Resources - ------------------------------- Cash generated from operations totaled nearly $29.8 million in the first half, declining slightly from $30.9 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 partly from an increase in the average receivable owed by students under DeVry Institutes and Keller Graduate School interim financing programs until financial aid and employer tuition reimbursement are applied, the higher level of student enrollment and tuition revenue and an approximately $5.4 million increase in funds owed 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, with their typically higher average level of receivables, continue to increase. Capital spending was more than $22.3 million in the first half, more than double the level of last year as equipment continued to be received at the newly opened DeVry Institute in Fremont, California, construction of classrooms and offices was completed for the DeVry Institute in New York and land was acquired for a third Chicago area campus. In addition, construction is under way on a new DeVry Institute in West Hills, California and on the expansion to the Chicago, Illinois, urban 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 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. 11 PART II - Other Information Item 4 - Submission of Matters of Vote of Security Holders The Company's regular annual meeting of stockholders was held in Chicago, Illinois, on Tuesday, November 17, 1998. Proxies for the meeting were solicited in accordance with the Securities Exchange Act of 1934 and there was no solicitation in opposition to those of management. At the meeting, three Directors of the Company were elected to serve as Class I Directors to hold office until 2001 or until their respective successors are elected and qualified. The results of the voting for Directors, whether in person or by proxy, were as follows: For Withheld Class I: Ewen M. Akin 60,401,223 23,605 Thurston E. Manning 60,401,623 23,205 Hugo J. Melvoin 60,401,623 23,205 The terms of office of the following Directors continued after the meeting: Charles A. Bowsher, David S. Brown, Dennis J. Keller, Robert E. King, Frederick A. Krehbiel, Robert C. McCormack, Julie A. McGee and Ronald L. Taylor. Ann I. Gannon, whose term of office expired, did not seek re-election. At this meeting, shareholders were asked to approve an Amendment of Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock, $0.01 par value, from 75,000,000 to 200,000,000 shares. The following table presents the stockholders' vote on the matter: For Against Withheld 50,458,944 9,907,986 57,898 Also submitted to a vote of the stockholders at this meeting was a proposal for the ratification of the appointment of PricewaterhouseCoopers as independent public accountants for the Company for the current fiscal year. The following table presents the results of the stockholders' vote on this matter: For Against Withheld 60,396,567 17,695 10,566 12 PART II - Other information Item 5 - Other Information 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. Several meetings have been held 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 Company believes that final resolution of this matter will be completed in the coming months. The Company completed the acquisition of a parcel of land in Tinley Park, Illinois, for construction of its third DeVry Institute campus in the Chicago area. Start of construction has not yet been scheduled. 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 December 31, 1998. 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: FEBRUARY 3, 1999 /s/ Ronald L. Taylor ----------------------------- Ronald L. Taylor President and Chief Operating Officer Date:FEBRUARY 3, 1999 /s/Norman M. Levine ------------------------------ Norman M. Levine Vice President Finance, Controller, Chief Financial and Accounting Officer EX-27 2
5 1000 6-MOS JUN-30-1999 DEC-31-1998 65566 0 45418 7807 1924 109974 194927 71841 278371 111219 0 0 0 694 153951 278371 0 201671 0 114958 56798 9460 214 29701 11584 18117 0 0 0 18117 .26 .26
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