<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 22, 1996
DeVRY INC.
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-12751 36-3150143
------------- ----------- ------------
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Indentification
incorporation) No.)
One Tower Lane
Oakbrook Terrace, Illinois 60181
-------------------------- --------
(Address of principal (Zip Code)
executive offices)
(630) 571-7700
-------------------
(Registrant's telephone
number, including area
code)
Exhibit Index is on Page 20 Total Number of Pages is 22
<PAGE>2
ITEM 5 - OTHER EVENTS
- -----------------------
The Company's independent accountants have completed an audit of the
Company's consolidated financial statements for the year ended
June 30, 1996 and have issued an unqualified opinion dated August 6, 1996
on the above mentioned financial statements. These consolidated financial
statements are included herein.
ITEM 5 - OTHER EVENTS INDEX
- -----------------------------
The following documents are filed as part of this report:
The following financial statements of DeVry Inc. and
its subsidiaries are included on pages 3 through 18 of
this report:
8K
Report Page
-----------
Report of Independent Accountants 3
Consolidated Balance Sheets at June 30, 1996 and 1995 4 - 5
Consolidated Statements of Income for the years ended
June 30, 1996, 1995 and 1994 6
Consolidated Statements of Cash Flows for the years
ended June 30, 1996, 1995 and 1994 7
Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1996, 1995 and 1994 8
Notes to Consolidated Financial Statements 9 - 18
SIGNATURES 19
EXHIBIT INDEX 20
<PAGE>3
Report of Independent Accountants
---------------------------------
To the Board of Directors
and Shareholders of DeVry Inc.
We have audited the accompanying consolidated balance sheets of DeVry
Inc. and its subsidiaries as of June 30, 1996 and 1995, and the
related consolidated statements of income, of shareholders' equity and
of cash flows for each of the three years in the period ended June 30,
1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements audited by us
present fairly, in all material respects, the financial position of
DeVry Inc. and its subsidiaries at June 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the three
years in the period ended June 30, 1996, in conformity with generally
accepted accounting principles.
Price Waterhouse LLP
Chicago, Illinois
August 6, 1996
<PAGE>4
<TABLE>
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
June 30,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 29,948 $ 26,252
Restricted Cash 16,590 20,179
Accounts Receivable, Net 9,684 6,189
Inventories 3,290 3,553
Prepaid Expenses and Other 2,055 1,846
-------- --------
Total Current Assets 61,567 58,019
-------- --------
Land, Buildings and Equipment
Land 18,956 18,952
Buildings 50,570 39,399
Equipment 51,198 43,390
Construction In Progress - 1,337
-------- --------
120,724 103,078
Accumulated Depreciation (49,283) (42,820)
-------- --------
Land, Buildings and Equipment, Net 71,441 60,258
-------- --------
Other Assets
Intangible Assets, Net 37,709 2,022
Perkins Program Fund, Net 5,483 4,522
Other Assets 1,889 1,850
-------- --------
Total Other Assets 45,081 8,394
-------- --------
TOTAL ASSETS $178,089 $126,671
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>5
<TABLE>
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
June 30,
1996 1995
---- ----
<S> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable $ 18,859 $ 14,957
Accrued Salaries, Wages & Benefits 14,735 12,369
Accrued Expenses 7,640 3,671
Advance Tuition Payments 7,617 13,982
Deferred Tuition Revenue 3,609 3,768
-------- --------
Total Current Liabilities 52,460 48,747
-------- --------
Other Liabilities
Revolving Loan 61,500 33,029
Deferred Income Tax Liability 2,207 2,318
Deferred Rent and Other 4,635 4,609
-------- --------
Total Other Liabilities 68,342 39,956
-------- --------
TOTAL LIABILITIES 120,802 88,703
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value, 20,000,000
Shares Authorized;16,621,852 and
16,613,492 Shares Issued and Outstanding
at June 30, 1996 and 1995, Respectively 166 166
Additional Paid-in Capital 36,694 36,610
Retained Earnings 19,987 742
Foreign Currency Translation Adjustment 440 450
-------- --------
TOTAL SHAREHOLDERS' EQUITY 57,287 37,968
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $178,089 $126,671
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>6
<TABLE>
DEVRY INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except for Per Share Amounts)
<CAPTION>
For The Year Ended June 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Tuition $236,607 $207,530 $191,205
Other Educational 22,341 19,887 19,681
Interest 1,059 1,176 551
-------- -------- --------
Total Revenues 260,007 228,593 211,437
-------- -------- --------
COSTS AND EXPENSES:
Cost of Educational Services 155,254 136,721 127,673
Student Services and
Administrative Expense 70,992 63,043 58,146
Interest Expense 1,063 3,070 4,615
-------- -------- --------
Total Costs and Expenses 227,309 202,834 190,434
-------- -------- --------
Income Before Income Taxes 32,698 25,759 21,003
Income Tax Provision 13,453 10,863 8,778
-------- -------- --------
NET INCOME $ 19,245 $ 14,896 $ 12,225
======== ======== ========
EARNINGS PER COMMON SHARE $1.14 $0.89 $0.73
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>7
<TABLE>
DEVRY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<CAPTION>
For The Year Ended June 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $19,245 $14,896 $12,225
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 7,516 6,157 6,981
Amortization 63 63 346
Provision for Refunds and
Uncollectible Accounts 16,130 12,810 14,101
Deferred Income Tax (Provision) Benefit (456) 5,480 2,419
Loss (Gain)on Disposals of Land,
Buildings and Equipment 19 (7) 338
Changes in Assets and Liabilities:
Restricted Cash 3,589 (9,130) (1,447)
Accounts Receivable (18,645) (11,746) (14,125)
Inventories 263 (629) 34
Prepaid Expenses And Other (118) (128) 266
Perkins Program Fund Contribution
and Other (1,188) (1,649) 1,717
Accounts Payable 3,210 3,136 1,380
Accrued Salaries, Wages,
Expenses and Benefits 6,239 667 3,601
Advance Tuition Payments (7,340) 7,943 1,010
Deferred Tuition Revenue (159) 337 (441)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 28,368 28,200 28,405
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (18,352) (14,551) (6,288)
Acquisition of Net Assets (Note 2):
Payment for Purchase of Operating
Assets, Net of Cash Acquired (16,930) - -
Payment for Purchase of
Intellectual Property (17,935) - -
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (53,217) (14,551) (6,288)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Exercise of Stock Options 84 47 6
Proceeds From Revolving Credit Facility 46,500 22,000 35,029
Repayments Under Revolving Credit Facility (18,029) (20,000) (4,000)
Repayments of Debt - (12,195) (43,517)
------- ------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 28,555 (10,148) (12,482)
------- ------- -------
Effects of Exchange Rate Differences (10) 47 (275)
------- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,696 3,548 9,360
Cash and Cash Equivalents at Beginning
of Year 26,252 22,704 13,344
------- ------- -------
Cash and Cash Equivalents at End of Year $29,948 $26,252 $22,704
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Year $ 1,429 $3,367 $4,606
Income Taxes Paid During the Year 13,902 7,080 4,607
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>8
<TABLE>
DEVRY INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Thousands)
<CAPTION>
For The Year Ended June 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Common Stock
Beginning of year $ 166 $ 83 $ 83
Two-for-one stock split in the form of a
stock dividend - 83 -
------- ------- -------
End of year 166 83 83
======= ======= =======
Additional Paid-In Capital
Beginning of year 36,610 36,563 36,557
Shares issued for exercise of stock options 84 47 6
------- ------- -------
End of year 36,694 36,610 36,563
======= ======= =======
Retained Earnings (Accumulated Deficit)
Beginning of year 742 (14,071) (26,296)
Net income per accompanying statement 19,245 14,896 12,225
Two-for-one stock split in the form of a
stock dividend - (83) -
------- ------- -------
End of year 19,987 742 (14,071)
======= ======= =======
Foreign Currency Translation Adjustment
Beginning of year 450 403 678
Translation Adjustment (10) 47 (275)
------- ------- -------
End of year 440 450 403
======= ======= =======
TOTAL SHAREHOLDERS' EQUITY, END OF YEAR $57,287 $37,885 $22,978
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>9
DEVRY INC.
Notes to Consolidated Financial Statements
June 30, 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
DeVry Inc. (the Company) is a holding company which, through its
wholly owned subsidiaries, operates a national system of degree-
granting, career-oriented higher-education schools and a leading
international training firm. Keller Graduate School of Management,
Inc. (KGSM), is one of the largest regionally accredited higher-
education systems in North America. Its DeVry Institutes award
associate and bachelor's degrees in electronics, computer information
systems, business operations, accounting, technical management and
telecommunications management. The DeVry Institutes are located on 10
campuses in the United States and four campuses in Canada. Keller
Graduate School (Keller) awards master's degrees in business
administration, human resource management and project management.
Keller classes are offered at 18 locations in Illinois, Wisconsin,
Missouri, Georgia, Arizona, California and Virginia. The Corporate
Educational Services division offers on-site management and
technical training programs for larger employers and government
agencies. Becker CPA Review (Becker CPA), acquired June 19, 1996
(Note 2), is the leading international training firm preparing
students to pass the Certified Public Accountant (CPA) examination .
Currently, the CPA exam review course is offered at approximately 135
locations in the United States and at eight international locations.
Becker CPA also offers a Certified Management Accountant (CMA)
examination review course in the United States.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All intercompany balances
and transactions have been eliminated in consolidation. Becker CPA
accounts are consolidated based upon an April 30 fiscal year end,
which is its natural year end based on its business cycle. There
were no events ocurring during the intervening period before June 30,
that materially effected the financial position or results of
operations of the Company. Unless indicated, or the context requires
otherwise, references to years refer to the Company's fiscal years
then ended.
Cash and Cash Equivalents
Cash and cash equivalents include time deposits, commercial paper,
municipal bonds and bankers acceptances with maturities of three
months or less or that are highly liquid and readily convertible to a
known amount of cash. These investments are stated at cost, which
approximates market, due to their short duration or liquid nature. The
Company limits the amount of credit exposure with any one investment
instrument or with any one financial institution. The Company
evaluates the creditworthiness of the security issuers and financial
institutions with which it invests.
Financial Aid and Restricted Cash
The financial aid and assistance programs, in which most of the
Company's students participate, are subject to political and budgetary
considerations. There is no assurance that such funding will be
maintained at current levels. Extensive and complex regulations in
the U.S. and Canada govern all of the government financial assistance
programs in which the Company's students participate. The Company's
administration of these programs is periodically reviewed by various
regulatory agencies. Any regulatory violation could be the basis for
the initiation of a suspension, limitation or termination proceeding
against the Company.
A significant portion of revenues is provided by students who
participate in government financial aid and assistance programs.
Restricted cash represents amounts received from the U.S. government
under various student aid grant and loan programs. The cash is held
in separate bank accounts and does not become available for general
use by the Company until the financial aid is credited to the accounts
of students and the cash is transferred to an operating cash account.
<PAGE>10
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
Tuition revenue and provisions for refunds and uncollectible accounts
are recognized ratably over each of the academic terms in a fiscal
year. The provisions for refunds and uncollectible accounts are
included in the cost of educational services in the Consolidated
Statements of Income. Related reserves are $6,603,000 and $5,368,000
at June 30, 1996 and 1995, respectively. Textbook sales and other
educational revenues are recognized when they occur. Revenue from
training services is recognized when the training is provided.
Inventories
Inventories consist mainly of textbooks, electronics kits and supplies
held for sale to students enrolled in KGSM's educational programs.
Inventories are valued at the lower of cost (first-in, first-out) or
market.
Land, Buildings and Equipment
Land, buildings and equipment are recorded at cost. Cost includes
additions and those improvements that increase the capacity or
lengthen the useful lives of the assets. Repairs and maintenance
costs are expensed as incurred. Interest is capitalized as a
component of cost on major projects during the construction period.
The amount of interest capitalized for the years ended June 30, 1996
and 1995, was $314,000 and $101,000, respectively. Assets under
construction are reflected in construction in progress until they are
ready for their intended use.
Depreciation is computed using the straight line method over
estimated service lives ranging from three to 31 years.
Intangible Assets
Intangible assets relate to the acquired business operations of the
DeVry Institutes and Becker CPA (Note 2). These assets consist of
the purchase prices allocated to the estimated fair value of certain
assets acquired (Note 3). Accumulated amortization is computed using
the straight line method over the assets' estimated useful lives of 25
to 40 years.
The Company expenses all marketing and new school opening costs as
incurred.
Perkins Program Fund
The Company makes contributions to the Perkins Student Loan Fund at a
rate equal to 33% of that contributed by the federal government. As
previous borrowers repay their Perkins loans, their payments are used
to fund new loans thus creating a permanent revolving loan fund. The
Company carries its investment in such contributions at original
values net of allowances for losses on loan collections of $1,547,000
and $1,275,000 at June 30, 1996 and 1995, respectively.
Fair Value of Financial Instruments
The carrying amount reported in the Consolidated Balance Sheets for
cash and cash equivalents, restricted cash, accounts receivable,
accounts payable, accrued expenses and advanced and deferred tuition
payments approximate fair value because of the immediate or short-term
maturity of these financial instruments. The carrying amount reported
for borrowings under the revolving loan agreement approximates fair
value because the underlying instruments are variable-rate notes.
<PAGE>11
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation
The financial position and results of operations of KGSM's Canadian
subsidiary are measured using the local currency as the functional
currency. Assets and liabilities of the foreign subsidiary are
translated to U.S. dollars using exchange rates in effect at the
balance sheet dates. Income and expense items are translated at
monthly average rates of exchange prevailing during the year. The
resultant translation adjustments are included in the component of
shareholders' equity designated as Foreign Currency Translation
Adjustment. Transaction gains or losses during the years ended June
30, 1996, 1995 and 1994, were insignificant.
Income Taxes
Income taxes are provided by applying statutory rates to income
recognized for financial statement purposes. Deferred income taxes are
provided for revenue and expense items that are recognized in
different accounting periods for financial reporting purposes than for
income tax purposes. Effects of statutory rate changes are recognized
for financial reporting purposes in the year in which enacted by law.
Stock Split
On May 17, 1995, the Company's board of directors authorized a
two-for-one stock split in the form of a 100% stock dividend payable
on June 21, 1995, to shareholders of record on June 1, 1995. The par
value of the additional shares arising from the split has been
reclassified from retained earnings to common stock. In addition, all
references in the financial statements to the number of shares
outstanding, per share amounts, stock option data and market prices of
the Company's common stock have been restated to reflect the stock
split.
Earnings Per Common Share
Earnings per common share are determined by dividing net earnings by
the weighted average number of common and common share equivalents
outstanding during the year after giving retroactive effect to the
stock split. Incentive stock options are included as common stock
equivalents using the treasury stock method. The number of shares
used in computing the net earnings per share was 16,830,000,
16,727,000 and 16,694,000 in 1996, 1995 and 1994, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the amounts of revenues
and expenses during the reported period. Actual results could differ
from those estimates.
<PAGE>12
NOTE 2: ACQUISITION
On June 19, 1996, a newly formed, wholly owned subsidiary of the
Company acquired substantially all of the tangible operating assets
and trademarks and assumed certain liabilities of Becker CPA for
$18,458,000 in cash. On this same date, another newly formed, wholly
owned subsidiary of the Company acquired certain copyrights, other
intellectual property and publicity rights of Becker CPA for
$17,935,000 in cash. Becker CPA is the leading international
training firm preparing students to pass the nationally administered
and centrally graded CPA exam, and it also offers a CMA exam review
course. Funding for the acquisitions was obtained through borrowings
under the Company's revolving credit facility (Note 5).
The acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the purchase prices were allocated to the
tangible and identifiable intangible assets acquired and liabilities
assumed based on their estimated fair values. The intangible assets
are being amortized using the straight line method over a 25-year
period for financial reporting purposes and are being deducted for tax
reporting purposes over shorter statutory lives.
The following unaudited pro forma financial information presents the
results of operations of the Company and the acquired Becker CPA
business as if the acquisitions had ocurred at the beginning of
each fiscal year. The pro forma information is based on historical
results of operations and does not necessarily reflect the actual
results that would have ocurred, nor is it necessarily indicitive of
future results of operations of the combined enterprises (dollars in
thousands except for per share amounts):
1996 1995
(Unaudited) (Unaudited)
----------- -----------
Net Sales $279,938 $248,386
Net Income 19,375 15,035
Earnings Per Common Share $1.15 $0.90
NOTE 3: INTANGIBLE ASSETS
Intangible assets that were not fully amortized at June 30 consist of
the following:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Trademarks $ 2,521,000 $2,521,000
Tradenames 17,465,000 -
Intellectual Property 17,425,000 -
Other 860,000 -
----------- ----------
38,271,000 2,521,000
Accumulated Amortization (562,000) (499,000)
----------- ----------
$37,709,000 $2,022,000
=========== ==========
</TABLE>
<PAGE>13
NOTE 4: INCOME TAXES
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
For the Year Ended June 30,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
U.S. $35,645,000 $23,323,000 $18,220,000
Foreign (2,947,000) 2,436,000 2,783,000
----------- ----------- -----------
Total $32,698,000 $25,759,000 $21,003,000
=========== =========== ===========
</TABLE>
The net income tax provisions (benefits) related to the above results
are as follows:
<TABLE>
<CAPTION>
For the Year Ended June 30,
1996 1995 1994
----------- ------------ ----------
<S> <C> <C> <C>
Current Tax Provision:
U.S. Federal $11,373,000 $ 3,141,000 $4,237,000
State and Local 2,400,000 897,000 596,000
Foreign (776,000) 1,345,000 1,526,000
----------- ----------- ----------
Total Current 12,997,000 5,383,000 6,359,000
Deferred Tax Provision:
U.S. Federal 381,000 4,578,000 2,039,000
State and Local 273,000 838,000 268,000
Foreign (198,000) 64,000 112,000
----------- ----------- ----------
Total Deferred 456,000 5,480,000 2,419,000
----------- ----------- ----------
Net Income Tax
Provision $13,453,000 $10,863,000 $8,778,000
=========== =========== ==========
</TABLE>
The income tax provisions differ from those computed using the
statutory rate as a result of the following items:
<TABLE>
<CAPTION>
For the Year Ended June 30,
1996 1995 1994
----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Expected Provision $11,444,000 35.0% $ 9,016,000 35.0% $7,351,000 35.0%
Higher Rates on (312,000)(1.0%) 323,000 1.3% 308,000 1.5%
Foreign Operations
State Income Taxes 1,767,000 5.4% 1,123,000 4.4% 875,000 4.1%
Other 554,000 1.7% 401,000 1.5% 244,000 1.2%
----------- ----------- ----------
Income Tax
Provision $13,453,000 41.1% $10,863,000 42.2% $8,778,000 41.8%
=========== =========== ==========
</TABLE>
<PAGE>14
NOTE 4: INCOME TAXES (continued)
Deferred income tax assets (liabilities) result primarily from the
recognition of the tax benefits of net operating loss carryforwards
and from temporary differences in the recognition of various expenses
for tax and financial statement purposes. These assets and
liabilities are composed of the following:
<TABLE>
<CAPTION>
For the Year Ended June 30,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Loss Carryforwards $ - $ 829,000 $5,038,000
Employee Benefits 1,207,000 1,187,000 1,027,000
Tax Credits - 47,000 92,000
Rental and
Occupancy 762,000 787,000 609,000
Receivable Reserves
and Other 2,953,000 1,608,000 1,943,000
---------- ---------- ----------
Gross Deferred
Tax Assets 4,922,000 4,458,000 8,709,000
Depreciation and
Other (4,837,000) (5,014,000) (3,970,000)
Amortization (1,176,000) (991,000) (806,000)
---------- ---------- ----------
Gross Deferred Tax
Liabilities (6,013,000) (6,005,000) (4,776,000)
---------- ---------- ----------
Net Deferred Taxes ($1,091,000) ($1,547,000) $3,933,000
========== ========== ==========
</TABLE>
Based on the Company's history of operating earnings and its
expectations for the future, management believes that operating income
will more than likely be sufficient to recognize fully all deferred
tax assets.
Deferred income tax provisions (benefits) result primarily from
temporary differences in the recognition of various expenses for tax
and financial statement purposes. The sources and tax effects of
these differences are as follows:
<TABLE>
<CAPTION>
For the Year Ended June 30,
1996 1995 1994
-------- ---------- ----------
<S> <C> <C> <C>
Realization of Operating Loss
Carryforwards $829,000 $4,220,000 $4,497,000
Excess (Tax) Book Depreciation
and Amortization (266,000) 87,000 (339,000)
Excess of Amounts Expensed for
(Book) Tax Purposes Over
Amounts Deductible for Book
(Tax) Purposes (159,000) 973,000 (1,739,000)
Other, Net 52,000 200,000 -
-------- ---------- ----------
Deferred Tax Provision $456,000 $5,480,000 $2,419,000
======== ========== ==========
</TABLE>
<PAGE>15
NOTE 5: REVOLVING LOAN AGREEMENT
All of the Company's borrowings and letters of credit under its
revolving loan agreement are through its operating subsidiary, KGSM.
This agreement consists of a revolving credit and letter of credit
facility, which is available to KGSM in an aggregate amount not to
exceed $85,000,000. This agreement was amended in June 1996 to permit
the acquisition of Becker CPA (Note 2), increase the borrowing limits,
extend its term and provide for reduced interest rates upon the
achievement of certain financial ratios. All borrowings and letters of
credit under the revolving loan agreement now mature in August 1999,
and there are no required installment payments. Outstanding borrowings
under the revolving loan agreeement are $61,500,000 and $33,029,000 at
June 30, 1996 and 1995, respectively. There is also a $1,460,000
letter of credit outstanding under this agreement at June 30, 1996.
Outstanding borrowings under the revolving loan agreement bear
interest, payable quarterly, at either the prime rate or a Eurodollar
rate plus 0.75%, at the option of KGSM. Upon achieving certain
financial ratios included in the June 1996 amendment, the interest
rate can be reduced to a Eurodollar rate plus 0.35%. The effective
interest rate on outstanding borrowings at June 30, 1996, was 6.84%.
Outstanding letters of credit under the revolving loan agreement are
charged an annual fee equal to 0.75% of the undrawn face amount of the
letter of credit , payable quarterly.
The bank financing agreement contains certain covenants that, among
other things, limit capital expenditure to $25,000,000 annually and
require maintenance of certain financial ratios as defined in the
agreement. None of these covenants negatively impacts the Company's
liquidity or capital resources.
In June 1995, the Company voluntarily prepaid the entire $7,870,000
remaining balance of its senior subordinated notes. On December 1,
1994 , in conjuntion with the scheduled principal payment on this
date, the Company made a voluntary prepayment of $775,000 These
senior subordinated notes bore interest at a rate of 13% per annum and
were subordinate to the revolving credit facility.
NOTE 6: EMPLOYEE BENEFIT PLANS
Profit Sharing Retirement Plan
All employees who meet certain eligibility requirements can
participate in KGSM's 401(k) Profit Sharing Retirement Plan. KGSM
contributes to the plan an amount equal to 1.5% of the total eligible
compensation of employees who make contributions under the plan.
KGSM's matching contributions under the plan were approximately
$765,000, $636,000 and $608,000 in 1996, 1995 and 1994, respectively.
In addition, the Company's board of directors may also make
discretionary contributions for the benefit of all eligible employees.
Provisions for discretionary contributions under the plan were
approximately $1,924,000, $1,566,000 and $1,413,000 in 1996, 1995 and
1994, respectively.
Employee Stock Purchase Plan
Effective August 1, 1993, the Company established the DeVry Inc.
Employee Stock Purchase Plan. The Plan stipulates that any eligible
employee may authorize the Company to withhold up to $25,000 of annual
earnings to purchase common stock of the Company on the open market at
100% of the prevailing market price. The Company pays all brokerage
commissions and administrative fees associated with the Plan. These
expenses were insignificant for the years ended June 30, 1996, 1995
and 1994.
<PAGE>16
NOTE 7: STOCK OPTION PLANS
The Company maintains three stock option plans: the Amended and
Restated Stock Incentive Plan, established in 1988, the 1991 Stock
Incentive Plan and the 1994 Stock Incentive Plan. Under these Plans,
directors, key executives and managerial employees are eligible to
receive incentive stock or nonqualified options to purchase shares of
the Company's common stock. The Amended and Restated Stock Incentive
Plan and the 1994 Stock Incentive Plan are administered by a Plan
Committee of the board of directors. Plan Committee members will be
granted automatic, nondiscretionary annual options. The 1991 Stock
Incentive Plan is administered by the board of directors. Options
under all three Plans are granted for terms of up to ten years and
vest over periods of one to five years. The option price under the
Plans is the fair market value of the shares on the date of the grant.
Share status of each of these plans at June 30, 1996, was as follows:
<TABLE>
<CAPTION>
Reserved for Available for
Authorized Issuance Future Grant
---------- ---------- -----------
<S> <C> <C> <C>
Stock Incentive Plan 200,000 184,600 3,400
1991 Stock Incentive Plan 200,000 199,040 61,100
1994 Stock Incentive Plan 400,000 398,000 358,000
</TABLE>
Activity during the three years ended June 30, 1996, with respect to
options under these plans, was as follows:
<TABLE>
<CAPTION>
Shares Option Prices
------- -------------
<S> <C> <C>
Under Option at June 30, 1993 122,000 $1.57 - 10.18
Options Exercised (1,800) 3.50
Options Canceled (2,000) 13.13
Options Granted 65,400 13.13 - 13.88
------- -------------
Under Option at June 30, 1994 183,600 1.57 - 13.88
Options Exercised (7,000) 3.50 - 13.13
Options Canceled (7,600) 3.50 - 13.13
Options Granted 142,500 12.94 - 14.75
------- -------------
Under Option at June 30, 1995 311,500 1.57 - 14.75
Options Exercised (8,360) 3.50 - 14.75
Options Canceled (10,550) 12.94 - 21.75
Options Granted 66,550 21.75 - 25.13
------- -------------
Under Option at June 30, 1996 359,140 1.57 - 25.13
------- -------------
Exercisable at June 30, 1996 151,040 $1.57 - 14.75
------- -------------
</TABLE>
<PAGE>17
NOTE 8: COMMITTMENTS AND CONTINGENCIES
KGSM and Becker CPA lease certain equipment and facilities under
non-cancelable operating leases, some of which contain renewal
options, escalation clauses and requirements to pay taxes,
insurance and maintenance costs. Future minimum rental commitments
for all non-cancelable operating leases having a remaining term in
excess of one year at June 30, 1996, are as follows:
Year Ended June 30, Amount
------------------ -----------
1997 $12,410,000
1998 11,740,000
1999 10,580,000
2000 9,480,000
2001 9,360,000
Thereafter $56,170,000
The Company recognizes rent expense on a straight-line basis over the
term of the lease, although the lease may include escalation clauses
that provide for lower rent payments at the start of the lease term
and higher lease payments at the end of the lease term.
Rent expenses for the years ended June 30, 1996, 1995 and 1994, were
$13,879,000, $12,553,000 and $9,611,000, respectively.
The Company is subject to occasional lawsuits, investigations and
claims arising out of the normal conduct of its business. Neither
the Company nor any of its subsidiaries is currently a party to any
material legal action except those described below.
In July 1996, the Company entered into an out-of-court settlement
agreement with the Internal Revenue Service (IRS) relative to the
Statutory Notice of Deficiency issued by the IRS against the Company
for tax years 1988 through 1991. The claimed deficiencies related to
the amortization of intangible assets purchased during the acquisition
of the DeVry Institutes in 1987 (Notes 1 and 3). All of these issues
have been resolved as a result of the settlement. The settlement
amount is immaterial to the Company's financial position, results of
operations and liquidity.
During 1996, the Ontario Ministry of Education and Training
temporarily suspended and conditionally reinstated the processing of
financial aid applications for students attending the Company's
Toronto-area schools. Full unconditional reinstatement is subject to
the Ministry's completion of certain procedures regarding verification
of the Company's compliance with financial aid processing regulations.
In July 1996, the Company was served with a class action lawsuit in
Canada alleging misrepresentation about the quality of the DeVry
Institutes' educational programs. The Company believes that the claims
in the lawsuit are frivolous and without merit. In response to the
lawsuit, the Company has filed a Statement of Defense and intends to
vigorously contest the allegations. Although the outcome cannot be
predicted with certainty, the Company believes the resolution of this
matter will not have material effect on the Company's financial position,
results of operations or liquidity.
<PAGE>18
NOTE 9: OPERATIONS BY GEOGRAPHIC AREA
The Company operates in a single industry segment as a provider of
educational services. The Company conducts its educational operations
in the United States and Canada. Revenues, income before interest and
taxes, and identifiable assets by geographic area are as follows:
<TABLE>
<CAPTION>
For the Year Ended June 30,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
U.S. $234,180,000 $205,424,000 $192,842,000
Foreign 25,827,000 23,169,000 18,595,000
Income Before Interest
and Taxes:
U.S. 36,708,000 26,393,000 22,835,000
Foreign (2,947,000) 2,436,000 2,783,000
Identifiable Assets:
U.S. 170,828,000 119,160,000 100,080,000
Foreign 7,261,000 7,511,000 6,718,000
</TABLE>
NOTE 10: QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized unaudited quarterly data for the years ended June 30, 1996
and 1995, are as follows (dollars in thousands, except for per share
amounts):
<TABLE>
<CAPTION>
1996 Quarter
-------------------------------------------------------- Total
First Second Third Fourth Year
--------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $59,839 $66,940 $68,412 $64,816 $260,007
Income Before
Interest and Taxes 7,382 9,336 8,822 8,221 33,761
Net Income 4,031 5,385 5,062 4,767 19,245
Earnings Per Common
Share 0.24 0.32 0.30 0.28 1.14
</TABLE>
<TABLE>
<CAPTION>
1995 Quarter
------------------------------------------------------- Total
First Second Third Fourth Year
--------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $51,955 $59,299 $59,739 $57,600 $228,593
Income Before
Interest and Taxes 5,770 8,198 7,652 7,209 28,829
Net Income 2,932 4,343 4,098 3,523 14,896
Earnings Per Common
Share 0.18 0.26 0.24 0.21 0.89
</TABLE>
<PAGE>19
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DeVRY INC.
-----------
(Registrant)
Date: August 22, 1996 By: /s/Norman M. Levine
-------------------
Norman M. Levine
Vice President and
Chief Operating Officer
Date: August 22, 1996 By: /s/Ronald L. Taylor
-------------------
Ronald L. Taylor
Chief Operating Officer
<PAGE>20
EXHIBIT INDEX
Sequentially
Exhibit # Item Numbered Page
--------- -------------------------------- --------------
23 Consent of Price Waterhouse, LLP, 21
independent accountants
27 Financial Data Schedule 22
<PAGE>21
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-44563) of DeVry Inc. of our report dated
August 6, 1996 appearing on page 3 of this Form 8-K.
Price Waterhouse LLP
Chicago, Illinois
August 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 29948
<SECURITIES> 0
<RECEIVABLES> 16287
<ALLOWANCES> 6603
<INVENTORY> 3290
<CURRENT-ASSETS> 61567
<PP&E> 120724
<DEPRECIATION> 49283
<TOTAL-ASSETS> 178089
<CURRENT-LIABILITIES> 52460
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 57121
<TOTAL-LIABILITY-AND-EQUITY> 178089
<SALES> 258948
<TOTAL-REVENUES> 260007
<CGS> 155254
<TOTAL-COSTS> 227309
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 16130
<INTEREST-EXPENSE> 1063
<INCOME-PRETAX> 32698
<INCOME-TAX> 13453
<INCOME-CONTINUING> 19245
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19245
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
</TABLE>
