<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 December 31, 1996
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 31, 1997: 33,288,424
Total number of pages: 13
<PAGE>2
DeVRY INC.
FORM 10-Q INDEX
For the period ended December 31, 1996
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
December 31, 1996, June 30, 1996
and December 31, 1995 3-4
Consolidated Statements of Income
for the quarter and six months
ended December 31, 1996 and 1995 5
Consolidated Statements of Cash
Flows for the six months ended
December 31, 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 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
<PAGE>3
PART I - Financial Information
Item 1 - Financial Statements
<TABLE>
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
December 31, June 30, December 31,
1996 1996 1995
(Unaudited) (Unaudited)
----------- -------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 27,543 $ 29,948 $ 22,760
Restricted Cash 28,479 16,590 26,852
Accounts Receivable, Net 28,438 9,684 23,629
Inventories 1,087 3,290 1,155
Prepaid Expenses and Other 2,313 2,055 2,936
------- ------- -------
Total Current Assets 87,860 61,567 77,332
------- ------- -------
Land, Buildings and Equipment
Land 18,722 18,956 18,952
Buildings 50,101 50,570 40,492
Equipment 58,639 51,198 47,109
Construction In Progress 387 6,272
------- ------- -------
127,849 120,724 112,825
Accumulated Depreciation (53,072) (49,283) (45,062)
------- ------- -------
Land, Buildings and Equipment, Net 74,777 71,441 67,763
------- ------- -------
Other Assets
Intangible Assets, Net 37,859 37,709 1,991
Perkins Program Fund, Net 5,885 5,483 4,951
Other Assets 1,764 1,889 1,777
------- ------- -------
Total Other Assets 45,508 45,081 8,719
------- ------- -------
TOTAL ASSETS $208,145 $178,089 $153,814
======= ======= =======
</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>
December 31, June 30, December 31,
1996 1996 1995
(Unaudited) (Unaudited)
----------- -------- -----------
<S> <C> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable $ 16,164 $ 18,859 $ 14,677
Accrued Salaries, Wages & Benefits 15,378 14,735 12,895
Accrued Expenses 6,520 7,640 5,307
Advance Tuition Payments 5,823 7,617 10,607
Deferred Tuition Revenue 44,097 3,609 38,825
------- ------- -------
Total Current Liabilities 87,982 52,460 82,311
------- ------- -------
Other Liabilities
Revolving Loan 44,000 61,500 17,029
Deferred Income Tax Liability 2,142 2,207 2,641
Deferred Rent and Other 4,936 4,635 4,426
------- ------- -------
Total Other Liabilities 51,078 68,342 24,096
------- ------- -------
TOTAL LIABILITIES 139,060 120,802 106,407
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value,
75,000,000 Shares Authorized,
33,265,244, 33,243,704 (16,621,852
Pre-split) and 33,235,304
(16,617,652 Pre-split), Shares Issued
and Outstanding at December 31, 1996,
June 30, 1996 and December 31, 1995,
Respectively. 333 166 166
Additional Paid-in Capital 36,744 36,694 36,638
Retained Earnings 31,561 19,987 10,158
Cumulative Translation Adjustment 447 440 445
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 69,085 57,287 47,407
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $208,145 $178,089 $153,814
======= ======= =======
</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 For The Six Months
Ended December 31, Ended December 31,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Tuition $ 73,030 $ 59,471 $135,508 $113,793
Other Educational 7,999 7,160 14,603 12,364
Interest 233 309 400 622
------- ------- ------- -------
Total Revenues 81,262 66,940 150,511 126,779
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of Educational
Services 46,837 40,353 89,656 76,699
Student Services and
Administrative Expense 22,470 17,251 39,866 33,362
Interest Expense 805 218 1,691 567
------- ------- ------ ------
Total Costs and
Expenses 70,112 57,822 131,213 110,628
------- ------- ------- -------
Income Before Income Taxes 11,150 9,118 19,298 16,151
Income Tax Provision 4,369 3,733 7,557 6,735
------- ------- ------- -------
NET INCOME $ 6,781 $ 5,385 $ 11,741 $ 9,416
======= ======= ======= =======
EARNINGS PER COMMON SHARE $0.20 $0.16 $0.35 $0.28
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>6
<TABLE>
DeVRY INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<CAPTION>
For The Six Months
Ended December 31,
------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $11,741 $ 9,416
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 4,155 3,140
Amortization 788 31
Provision for Refunds and Uncollectible Accounts 9,356 8,186
Deferred Income Taxes 253 876
(Gain) Loss on Disposal and Adjustments to
Land, Buildings and Equipment (145) 21
Changes in Assets and Liabilities:
Restricted Cash (11,889) (6,673)
Accounts Receivable (27,997) (25,498)
Inventories 2,203 2,398
Prepaid Expenses and Other (986) (396)
Perkins Program Fund Contribution and Other (515) (557)
Accounts Payable (2,695) (280)
Accrued Salaries, Wages, Expenses and Benefits (579) 805
Advance Tuition Payments (1,794) (3,375)
Deferred Tuition Revenue 40,488 35,057
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 22,384 23,151
------ ------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital Expenditures (7,346) (10,666)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Exercise of Stock Options 50 28
Repayments Under Revolving Credit Facility (17,500) (16,000)
------ ------
NET CASH USED IN FINANCING ACTIVITIES (17,450) (15,972)
------ ------
Effects of Exchange Rate Differences 7 (5)
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 2,405) ( 3,492)
Cash and Cash Equivalents at Beginning of Period 29,948 26,252
------ ------
Cash and Cash Equivalents at End of Period $27,543 $22,760
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Period $1,709 $802
Income Taxes Paid During the Period $8,568 $7,183
</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 and Six Months Ended December 31, 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 for the
fiscal year ended June 30, 1996 and in conjunction with the Company's
Quarterly report on Form 10-Q for the quarter ended September 30, 1996,
each as filed with the Securities and Exchange Commission.
The results of operations for the three months and six months ended
December 31, 1996, are not necessarily indicative of results to be
expected for the entire fiscal year.
Certain reclassifications have been made to the December 1995
financial statements to conform with the June 1996 and December 1996
presentation.
2. In July and August 1996, the Company granted options to purchase up
to 142,500 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.
3. On November 19, 1996, the Company's board of directors authorized a
two-for-one spilt of the Company's common shares in the form of a 100
percent stock dividend. The stock split was paid on December 18, 1996,
to shareholders of record on December 2, 1996. 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.
4. During the first six months of fiscal 1997, the Company signed
agreements for the lease of new DeVry Institute facilities in
Alpharetta, Georgia and Calgary, Alberta, Canada. The Alpharetta
facility is expected to be occupied in the fourth quarter of fiscal
1997 and is a new Institute location. The Calgary facility is expected
to be occupied in fourth quarter of fiscal 1998 and will replace the
Company's current leased Institute facility in Calgary. With the
inclusion of these new agreements, commitments under non-cancelable
operating leases at December 31, 1996 are as follows:
Year Ended
June 30,
1997 $12,490,000
1998 12,780,000
1999 12,540,000
2000 11,440,000
2001 11,320,000
Thereafter 81,850,000
<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. All references to per share
amounts have been restated to reflect the December 18, 1996, stock split.
Results of Operations
- ---------------------
Tuition revenues, which increased by 15% in the first quarter from the year
ago period, increased again in the second quarter, growing nearly 23% from the
year ago quarter. 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 and fall semesters increased by 4.6%
and 4.3%, respectively, from last year. This is the seventeenth and eighteenth
consecutive term of increased total student enrollment vs. prior year at the
DeVry Institutes. At KGSM, total enrollment for the term which began in
November increased more than 22% from last November. Tuition revenues also
increased because of tuition rate increases which became effective at the
DeVry Institutes in March 1996 and at the Keller Graduate School in
September 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 and Certified Management Accountant exams also
contributed to the Company's revenue increase in both quarters.
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 throughout the
period.
The cost of educational services for the first half increased by nearly 17%
from last year, rising at approximately the same rate in both the first and
second quarters. This increase reflects the additional facility, faculty and
staff costs associated with the Becker CPA Review and the higher wage, benefit,
supply and service expenses associated with growing student enrollments at the
DeVry and KGSM locations. Depreciation expense increased by more than
$1 million in the six months vs. last year, as a result of extensive capital
improvements and additions in the past year, 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.
After increasing by only 8% in the first quarter, spending on student services
and administrative expenditures, comprised largely of new student recruitment
expenses, increased by 19% from last year for the first two quarters combined.
This increase 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 terms which have already
begun this fiscal year and for the terms which will begin in the coming months.
Included in this increase in student services and administrative expense is
the nearly $788,000 in amortization of goodwill and intangibles, mostly
associated with the Becker CPA acquisition.
<PAGE>9
The Company's pre-tax earnings from operations before interest expense were a
record for the second quarter and six months. Operating margins, which have
been increasing consistently year over year, increased again in this quarter to
14.7% vs. 13.9% in the prior year period. For the first half, operating
margins climbed to 13.9% from 13.2% last year. 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 and the half increased from last year because
of higher outstanding debt levels resulting from the acquisition, for cash, of
the Becker CPA operations in June. At December 31, 1996, total-funded debt had
increased by nearly $27,000,000 from the same date last year.
The provision for income taxes in the second quarter continued at a lower rate
than last year because of a different mix in the earnings from domestic vs.
foreign operations and because of a lower effective state income tax rate.
Net income of $6,781,000 or $0.20 per share, was a record for the quarter,
increasing by 26% 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. For the first half, net income has increased by
nearly 25%.
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 half was approximately equal to the
amount generated in the first half of last year, marking a sharp improvement
from the first quarter. Higher earnings, plus the increased non-cash charges
for depreciation and amortization, contributed to a higher operating cash flow
but were offset by increases in restricted cash and decreases in accounts
payable and accrued expenses that exceeded the related benefits from changes in
deferred tuition revenue and advance tuition payments.
Accounts receivable, net of the related increase in deferred tuition revenue
generated by higher enrollment and revenue levels, are approximately equal to
the level achieved last year, reflecting a continuation of the good collection
performance on balances owed by students similar to the collection experience
in the past several years.
Included in the 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.
Capital expenditures for the half decreased by $3.3 million from last year,
reflecting completion of construction payments and June 1996 occupancy of the
DeVry Institute New Jersey campus.
<PAGE>10
During the second quarter, the Company repaid $3 million of its revolving loan
facility using existing cash balances and cash generated from operations. For
the half, debt repayments totaled $17.5 million, an increase of $1.5 million
from repayments during the first half of last year. 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 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The Company's regular annual meeting of stockholders was held in Chicago,
Illinois, on Tuesday, November 19, 1996. Proxies for the meeting were
solicited in accordance with the Securities Exchange Act 1934 and there was no
solicitation in oppositon to those of management.
At the meeting, four Directors of the Company were elected to serve as Class II
Directors to hold office until 1999 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 Against Withheld
---------- ------- --------
Class II:
David S. Brown 14,415,375 - 95,615
Dennis J. Keller 14,415,772 - 95,218
Robert E. King 14,416,248 - 94,742
Frederick A. Krehbiel 14,415,351 - 95,639
The terms of office of the following directors continued after the meeting:
Ann I. Gannon, Thurston E. Manning, Robert C. McCormack, Julie A. McGee,
Hugo J. Melvoin, and Ronald L. Taylor.
Also submitted to a vote of the stockholders was a proposal to amend the
Companys Restated Certificate of Incorporation to increase the authorized
number of shares of Common Stock ($0.01 par value) from 20,000,000 to
75,000,000. The following table presents the results of the stockholders vote
on this matter:
For Against Withheld
---------- --------- --------
11,161,532 3,332,852 16,606
The final matter submitted to a vote of the stockholders at this meeting was a
proposal for the ratification of the appointment of Price Waterhouse 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
---------- -------- --------
14,497,551 8,179 5,260
<PAGE>12
Item 5 - Other Information
- --------------------------
On November 19, 1996 the Companys Board of Directors authorized a two-for-one
stock split in the form of a 100% stock dividend payable on December 18,
1996, to shareholders of record on December 2, 1996.
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, 1996.
<PAGE>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 6, 1997 /s/ Ronald L. Taylor
--------------------
Ronald L. Taylor
President and Chief Operating
Officer
Date: FEBRUARY 6, 1997 /s/Norman M. Levine
-------------------
Norman M. Levine
Vice President Finance, Controller,
Chief Financial and Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 56022
<SECURITIES> 0
<RECEIVABLES> 37494
<ALLOWANCES> 9056
<INVENTORY> 1087
<CURRENT-ASSETS> 87860
<PP&E> 127849
<DEPRECIATION> 53072
<TOTAL-ASSETS> 208145
<CURRENT-LIABILITIES> 87982
<BONDS> 44000
0
0
<COMMON> 333
<OTHER-SE> 68752
<TOTAL-LIABILITY-AND-EQUITY> 208145
<SALES> 150111
<TOTAL-REVENUES> 150511
<CGS> 0
<TOTAL-COSTS> 89656
<OTHER-EXPENSES> 39866
<LOSS-PROVISION> 9356
<INTEREST-EXPENSE> 1691
<INCOME-PRETAX> 19298
<INCOME-TAX> 7557
<INCOME-CONTINUING> 11741
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11741
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
