<PAGE>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, 1996
Commission file number 0-12751
DeVRY INC.
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(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
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(Address of principal executive offices) (Zip Code)
(630) 571-7700
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(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
November 1, 1996: 16,628,272
Total number of pages: 12
<PAGE>2
DeVRY INC.
FORM 10-Q INDEX
For the period ended September 30, 1996
Page No.
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PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
September 30, 1996, June 30, 1996
and September 30, 1995 3-4
Consolidated Statements of Income
for the quarters ended
September 30, 1996 and 1995 5
Consolidated Statements of Cash
Flows for the quarters ended
September 30, 1996 and 1995 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 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>3
PART I - Financial Information
Item 1 - Financial Statements
<TABLE>
DeVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
September June 30, September
1996 1996 1995
(Unaudited) (Unaudited)
----------- -------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 18,184 $ 29,948 $ 30,988
Restricted Cash 22,096 16,590 18,519
Accounts Receivable, Net 31,372 9,684 9,028
Inventories 1,757 3,290 2,565
Prepaid Expenses and Other 2,564 2,055 1,219
------- ------- -------
Total Current Assets 75,973 61,567 62,319
------- ------- -------
Land, Buildings and Equipment
Land 19,031 18,956 18,952
Buildings 49,859 50,570 39,893
Equipment 56,388 51,198 45,944
Construction In Progress 342 4,598
------- ------- -------
125,620 120,724 109,387
Accumulated Depreciation (51,873) (49,283) (44,489)
------- ------- -------
Land, Buildings and Equipment, Net 73,747 71,441 64,898
------- ------- -------
Other Assets
Intangible Assets, Net 37,815 37,709 2,007
Perkins Program Fund, Net 5,516 5,483 4,689
Other Assets 1,806 1,889 1,815
------- ------- -------
Total Other Assets 45,137 45,081 8,511
------- ------- -------
TOTAL ASSETS $194,857 $178,089 $135,728
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>4
<TABLE>
DeVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
September June 30, September
1996 1996 1995
(Unaudited) (Unaudited)
----------- -------- -----------
<S> <C> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable $ 14,192 $ 18,859 $ 17,817
Accrued Salaries, Wages & Benefits 13,538 14,735 12,008
Accrued Expenses 9,180 7,640 6,085
Advance Tuition Payments 11,929 7,617 9,411
Deferred Tuition Revenue 29,793 3,609 20,487
------- ------- -------
Total Current Liabilities 78,632 52,460 65,808
------- ------- -------
Other Liabilities
Revolving Loan 47,000 61,500 21,029
Deferred Income Tax Liability 2,184 2,207 2,485
Deferred Rent and Other 4,764 4,635 4,273
------- ------- -------
Total Other Liabilities 53,948 68,342 27,787
------- ------- -------
TOTAL LIABILITIES 132,580 120,802 93,595
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value,
20,000,000 Shares Authorized,
16,628,187, 16,621,852 and
16,614,612, Shares Issued and
Outstanding at September 30, 1996,
June 30, 1996 and September 30, 1995,
Respectively. 166 166 166
Additional Paid-in Capital 36,725 36,694 36,617
Retained Earnings 24,947 19,987 4,773
Cumulative Translation Adjustment 439 440 577
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 62,277 57,287 42,133
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $194,857 $178,089 $135,728
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>5
<TABLE>
DeVRY INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except for Per Share Amounts)
(Unaudited)
<CAPTION>
For The Quarter
Ended September 30,
-------------------
1996 1995
---- ----
<S> <C> <C>
REVENUES:
Tuition $ 62,478 $ 54,322
Other Educational 6,604 5,204
Interest 167 313
------- -------
Total Revenues 69,249 59,839
------- -------
COSTS AND EXPENSES:
Cost of Educational Services 42,819 36,346
Student Services and Administrative Expense 17,396 16,111
Interest Expense 886 349
------- -------
Total Costs and Expenses 61,101 52,806
------- -------
Income Before Income Taxes 8,148 7,033
Income Tax Provision 3,188 3,002
------- -------
NET INCOME $ 4,960 $ 4,031
======= =======
EARNINGS PER COMMON SHARE $0.29 $0.24
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statement.
<PAGE>6
<TABLE>
DeVRY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CPATION>
For The Quarter
Ended September 30,
------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,960 $ 4,031
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 1,858 1,575
Amortization 386 15
Provision for Refunds and Uncollectible Accounts 4,394 3,937
Deferred Income Tax Benefit 177 858
Loss (Gain) on Disposal and Adjustments to
Land, Buildings and Equipment 13 (58)
Changes in Assets and Liabilities:
Restricted Cash (5,506) 1,660
Accounts Receivable (26,073) (6,722)
Inventories 1,533 988
Prepaid Expenses and Other (989) (619)
Perkins Program Fund Contribution and Other (42) (221)
Accounts Payable (4,667) 2,860
Accrued Salaries, Wages, Expenses and Benefits 343 2,307
Advance Tuition Payments 4,312 (4,571)
Deferred Tuition Revenue 26,184 16,719
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,883 22,759
------ ------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital Expenditures (4,177) (6,157)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Exercise of Stock Options 31 7
Repayments Under Revolving Credit Facility (14,500) (12,000)
------ ------
NET CASH USED IN FINANCING ACTIVITIES (14,469) (11,993)
------ ------
Effects of Exchange Rate Differences (1) 127
------ ------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (11,764) 4,736
Cash and Cash Equivalents at Beginning of Period 29,948 26,252
------ ------
Cash and Cash Equivalents at End of Period $18,184 $30,988
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Period $896 $413
Income Taxes Paid During the Period $1,454 $1,130
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>7
DeVRY INC.
Notes to Consolidated Financial Statements
For the Quarter Ended September 30, 1996
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, 1996
The results of operations for the three months ended
September 30, 1996, are not necessarily indicative of results
to be expected for the entire fiscal year.
Certain reclassifications have been made to the September
1995 financial statements to conform with the June 1996 and
September 1996 presentation.
2. In July and August 1996, the Company granted options to
purchase up to 71,250 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.
<PAGE>8
Item 2 - Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion of the Company's results of operations and financial
condition should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto.
Results of Operations
- ---------------------
Tuition revenues in the first quarter increased by 15% to $62,478,000. The
increase in tuition revenues was produced by several positive factors including
enrollment increases at the DeVry Institutes where total student enrollment for
the summer semester which began in July, increased by 4.6% from last year.
This is the seventeenth consecutive term of increased total student enrollment
vs. prior year at the DeVry Institutes. At KGSM, total enrollment for the term
which began in June increased more than 21% from last June. Tuition revenues
also increased because of tuition rate increases which became effective at the
DeVry Institutes last March and at the Keller Graduate School in September of
1995 and 1996. In June 1996, the Company acquired the Becker CPA Review.
Revenues from Becker courses which prepare students to take the national
Certified Public Accountant exam also contributed to the Company's revenue
increase for the quarter.
Other educational revenues, comprised primarily of sales of books and supplies,
increased because of sales to the increased number of students attending the
Company's educational programs.
Interest income on the Company's short-term investments decreased from last
year because of lower cash balances available for investment.
The cost of educational services increased from last year by $6,473,000 or
17.8% reflecting the additional facility, faculty and staff costs associated
with the Becker CPA Review and the expenses associated with higher student
enrollments at the DeVry and KGSM locations which affected the level of
spending on wages, benefits, supplies and services. Tuition refund and bad
debt expense decreased slightly from the first quarter of last year as a
percentage of the DeVry Institute and KGSM revenues, in part because of the
student service quality initiatives implemented during the past several years
that affect the pattern of student retention, reducing the proportion of refund
expense and uncollectible account costs below those of prior periods.
Depreciation expense increased compared to last year as a result of extensive
capital improvements and additions in 1995 and 1996, particularly those related
to the opening of the new DeVry Institute in North Brunswick, New Jersey, and
the upgrading of school laboratories and teaching equipment throughout the
system.
The increase of $1,285,000 or 8% in student services and administrative
expenditures, comprised largely of new student recruitment expenses, reflects
the marketing costs associated with the Becker CPA Review operations and the
marketing costs associated with generating the higher new student enrollments
at DeVry and KGSM for the summer and future terms.
<PAGE>9
The Company's earnings from operations before interest expense were a record
for this quarter. Operating margins, which have been increasing consistently
year over year, increased again in this quarter to 13.0% vs. 12.3% in the
prior year period. Operating margins were favorably affected by the inclusion
of Becker CPA results, where operating margins have historically been high,
by the higher revenues and improved facility utilization from the increased
enrollments at the DeVry Institutes and KGSM and by continued cost containment
measures.
Interest expense in the quarter increased by $537,000 from last year because of
higher outstanding debt levels resulting from the acquisition, for cash, of the
Becker CPA operations in June. At September 30, 1996, total funded debt had
increased by nearly $26,000,000 from the same date last year.
Net income of $4,960,000, or $0.29 per share, was a record for the quarter,
increasing by 23% from the same quarter of last year. This continues the
unbroken pattern of year-over-year quarterly earnings increases since the first
quarter of fiscal 1992.
Liquidity and Capital Resources
- -------------------------------
Because of the somewhat seasonal pattern of the Company's enrollments and its
term starting dates which affect the timing of cash inflows, comparisons of
financial position should be made to both the end of the previous fiscal year
and to the corresponding period of a year ago.
Cash generated from operations in the first quarter decreased by approximately
$16 million from the first quarter of last year. Higher earnings, depreciation
and amortization each contributed to a higher operating cash flow but were
offset by increases in accounts receivable and restricted cash that exceeded
the related increases in deferred tuition revenue and advance tuition payments.
Accounts receivable, net of the related increase in deferred tuition revenue
reflecting higher enrollment and revenue levels, results primarily from the
later opening of the Atlanta Institute to avoid conflict with Olympic Games
activity and a summer term start at the other DeVry Institutes that was 5 days
later than last year. Accordingly, some collections included in the first
quarter of prior years will be included in the Company's second quarter
results. The increase in receivables is also attributable, in part, to the
tuition financing offered by DeVry Canada to those students at the Toronto area
campuses who were affected by last year's temporary suspension of financial
aid. Also, included in the increased accounts receivable were the receivable
balances from students attending the Becker CPA classes which were not included
in the Company's reported balances last year.
The increase in Restricted Cash from last year reflects, in part, the later
DeVry Institute summer term starts as more federal aid remains to be disbursed
in the final weeks of the term. Similarly the increase in Advance Tuition
Payments, which includes he liability for the increase in undisbursed
Restricted Cash, also reflects the effects of these later term starts.
Capital expenditures decreased by almost $2 million from last year, reflecting
completion of construction payments on the DeVry Institute New Jersey campus.
<PAGE>10
During the first quarter, the Company repaid $14,500,000 of its revolving loan
facility using existing cash balances and cash generated from operations.
Taking advantage of the financing flexibility from this unsecured revolving
line of credit, future borrowings and/or repayments will be based upon the
Company's seasonal cash flow cycle and payment requirements for capital
spending.
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 for the foreseeable future.
<PAGE>11
PART II - Other information
Item 6 - Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
On July 3, 1996, the Company filed a Form 8-K containing the
description of its acquisition of substantially all of the assets
of the Becker CPA Review Business.
On August 23, 1996, the Company filed a Form 8-K containing the
audited financial statements of the Company's financial results
for the fiscal year ended June 30, 1996.
On August 30, 1996, the Company filed a Form 8-K/A including the
required audited financial statements of the recently acquired
Becker CPA Review and pro forma financial information.
<PAGE>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 7, 1996 /s/ Ronald L. Taylor
--------------------
Ronald L. Taylor
President and Chief Operating
Officer
Date: NOVEMBER 7, 1996 /s/Norman M. Levine
-------------------
Norman M. Levine
Vice President Finance, Controller,
Chief Financial and Accounting
Officer
<TABLE> <S> <C>
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<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
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<ALLOWANCES> 7718
<INVENTORY> 1757
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<PP&E> 125620
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0
0
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</TABLE>
