<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, 1997
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
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Number of shares of Common Stock, $0.01 par value, outstanding at
October 30, 1997: 34,514,382
Total number of pages: 11
<PAGE>2
DEVRY INC.
FORM 10-Q INDEX
For the Quarter ended September 30, 1997
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
September 30, 1997, June 30, 1997,
and September 30, 1996 3-4
Consolidated Statements of Income
for the quarter ended
September 30, 1997 and 1996 5
Consolidated Statements of Cash
Flows for the three months ended
September 30, 1997 and 1996 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and
Analysis of Results of Operations
and Financial Condition 8-9
Part II. Other Information
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
<PAGE>3
PART I - Financial Information
Item 1 - Financial Statements
<TABLE>
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
September 30, June 30, September 30,
1997 1997 1996
------------ -------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 28,605 $ 38,865 $ 18,184
Restricted Cash 20,332 12,104 22,096
Accounts Receivable, Net 23,279 12,322 31,372
Inventories 2,981 4,549 1,757
Prepaid Expenses and Other 1,261 2,676 2,564
-------- -------- --------
Total Current Assets 76,458 70,516 75,973
-------- -------- --------
Land, Buildings and Equipment
Land 35,159 34,348 19,031
Buildings 51,329 50,906 49,859
Equipment 67,080 63,609 56,388
Construction In Progress 541 91 342
-------- -------- --------
154,109 148,954 125,620
Accumulated Depreciation (60,784) (58,266) (51,873)
-------- -------- --------
Land, Buildings and
Equipment, Net 93,325 90,688 73,747
-------- -------- --------
Other Assets
Intangible Assets, Net 37,382 37,770 37,815
Perkins Program Fund, Net 6,176 6,075 5,516
Other Assets 1,613 1,654 1,806
-------- -------- --------
Total Other Assets 45,171 45,499 45,137
-------- -------- --------
TOTAL ASSETS $214,954 $206,703 $194,857
======== ======== ========
</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 30, June 30, September 30,
1997 1997 1996
------------ -------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable $ 15,767 $ 22,301 $ 14,192
Accrued Salaries, Wages &
Benefits 15,863 16,077 13,538
Accrued Expenses 9,771 7,620 9,180
Advance Tuition Payments 5,442 6,594 11,929
Deferred Tuition Revenue 32,305 5,701 29,793
-------- -------- --------
Total Current Liabilities 79,148 58,293 78,632
-------- -------- --------
Other Liabilities
Revolving Loan 14,000 33,000 47,000
Deferred Income Tax Liability 3,038 3,060 2,184
Deferred Rent and Other 7,172 7,080 4,764
-------- -------- --------
Total Other Liabilities 24,210 43,140 53,948
-------- -------- --------
TOTAL LIABILITIES 103,358 101,433 132,580
-------- -------- --------
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value,
75,000,000 Shares Authorized,
34,511,214, 34,504,214 and
33,256,374, Shares Issued and
Outstanding at September 30,
1997, June 30, 1997 and
September 30, 1996,
Respectively 345 345 333
Additional Paid-in Capital 60,522 60,482 36,725
Retained Earnings 50,285 44,006 24,780
Cumulative Translation
Adjustment 444 437 439
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 111,596 105,270 62,277
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $214,954 $206,703 $194,857
======== ======== ========
</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,
---------------------
1997 1996
-------- --------
<S> <C> <C>
REVENUES:
Tuition $72,973 $62,478
Other Educational 7,102 6,604
Interest 346 167
------- -------
Total Revenues 80,421 69,249
------- -------
COSTS AND EXPENSES:
Cost of Educational Services 48,710 42,819
Student Services and
Administrative Expense 21,015 17,396
Interest Expense 400 886
------- -------
Total Costs and Expenses 70,125 61,101
------- -------
Income Before Income Taxes 10,296 8,148
Income Tax Provision 4,017 3,188
------- -------
NET INCOME $ 6,279 $ 4,960
======= =======
EARNINGS PER COMMON SHARE $0.18 $0.15
======= =======
</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 Quarter
Ended September 30,
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 6,279 $ 4,960
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 2,516 1,858
Amortization 395 386
Provision for Refunds and
Uncollectible Accounts 4,582 4,394
Deferred Income Taxes (22) 177
Loss on Disposals and Adjustments to
Land, Buildings and Equipment 1 13
Changes in Assets and Liabilities:
Restricted Cash (8,228) (5,506)
Accounts Receivable (15,500) (26,073)
Inventories 1,568 1,533
Prepaid Expenses And Other (125) (989)
Perkins Program Fund Contribution
and Other (140) (42)
Accounts Payable (6,534) (4,667)
Accrued Salaries, Wages,
Expenses and Benefits 3,603 343
Advance Tuition Payments (1,152) 4,312
Deferred Tuition Revenue 26,604 26,184
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,847 6,883
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital Expenditures (5,154) (4,177)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Exercise of Stock Options 40 31
Repayments Under Revolving Credit Facility (19,000) (14,500)
------- -------
NET CASH USED IN FINANCING ACTIVITIES (18,960) (14,469)
Effects of Exchange Rate Differences 7 (1)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,260) (11,764)
Cash and Cash Equivalents at Beginning
of Period 38,865 29,948
------- -------
Cash and Cash Equivalents at End of Period $28,605 $18,184
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Year $413 $896
Income Taxes Paid During the Year 51 1,454
</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, 1997
----------
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, 1997.
The results of operations for the three months ended
September 30, 1997, are not necessarily indicative of results
to be expected for the entire fiscal year.
2. In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." This new statement, which will be
adopted during the second quarter of the Company's 1998 fiscal
year, redefines earnings per share under generally accepted
accounting principles. Under the new standard, primary
earnings per share is replaced by basic earnings per share and
fully diluted earnings per share is replaced by diluted
earnings per share. For the three months ended September 30,
1997, unaudited pro forma basic and diluted earnings per share
do not differ from earnings per share as reported.
3. In July and August 1997, the Company granted options to
purchase up to 129,800 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. All references to per share
amounts have been restated to reflect the December 18, 1996, two-for-one stock
split.
Because of the somewhat seasonal pattern of the Companys 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. Typically, due to the seasonality of student enrollments, the
Companys second and third quarters have historically represented the periods of
highest revenues and net income within a fiscal year.
Results of Operations
- ---------------------
Tuition revenue for the first quarter increased by $10.5 million, or 16.8%,
compared to the first quarter of last year. The increase in tuition revenues
was produced by several positive factors. Enrollment at the DeVry Institutes
for the summer term, which began in July, increased by 6.9% from last summer.
The increased DeVry Institute student enrollment in the summer term represented
the twentieth consecutive term of increased total student enrollment as
compared to the corresponding prior year period. Enrollment at Keller Graduate
School for the term which began in June increased by over 20%. In addition,
tuition increases of approximating 5% were implemented at DeVry and KGSM and a
somewhat smaller increase was implemented at Becker CPA.
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.
Interest income on the Company's short-term investments doubled from last year
as an increased pace of student receivable collections provided more investible
cash earlier in the quarter.
Cost of educational services increased by nearly $5.9 million, or 13.8%, from
the first quarter of last year. The increase in cost of educational services
reflects the additional facility, faculty and staff associated with new DeVry
Institute, KGSM and Becker operating locations. Compared to the first quarter
of last year, the DeVry Institutes are now conducting classes in a new facility
in Alpharetta, Georgia, and Keller Graduate School has opened three additional
teaching centers. In addition, there were higher wage, benefit, supply and
service expenses associated with the growing student enrollments at the DeVry
Institutes and Keller Graduate School. Depreciation expense in the quarter
increased by over $600,000 as a result of the Company's record capital spending
last year for expansion and improvement.
Student services and administrative expense increased by $3.6 million, or
20.8%, from last year. The increase reflects the marketing costs associated
with generating higher student enrollments for the coming terms, particularly
at the newly opened facilities. Administrative expenses also increased in
support of the larger scope of the Company's operations.
<PAGE>9
The Company's earnings from operations, before interest expense and taxes, were
a record for the quarter. Operating margins, which have been increasing
consistently each quarter over the comparable year-ago period, increased again
to 13.3%, reflecting cost controls and operating leverage from expanding
enrollments.
Interest expense decreased by nearly $500,000, or 55%, as the net proceeds of
a stock offering completed in the fourth quarter of last fiscal year and
continued strong cash flow generation from operations provided cash for debt
reduction. Compared to September 30th of last year, debt has been reduced by
$33 million.
Net income of $6.3 million was a record for any first quarter, increasing by
26.6% from the first quarter of fiscal 1997. Earnings per share, including
the effect of a higher number of shares outstanding from the April 1997 stock
offering, increased to $0.18 per share.
Liquidity and Capital Resources
- -------------------------------
Cash generated from operations in the first quarter more than doubled from last
year to $13.8 million. The increase in cash generation results from higher net
income, higher non-cash charges for depreciation included in net income and a
quicker pace of accounts receivable collection. Operating cash balances during
the quarter were higher than during the corresponding period a year ago and
were sufficient to meet all of the Company's operating and capital investment
needs while reducing debt.
During the first quarter, the Company repaid $19 million of its revolving loan
facility using existing cash balances and cash generated from operations,
taking advantage of the seasonally strong cash flow in the quarter. Future
borrowings and/or repayments will be based upon the Companys seasonal cash flow
cycle and payment requirements for construction of new facilities and other
capital spending.
Capital expenditures of $5.2 million in the quarter increased by $1.0 million
from the same quarter last year, reflecting the Companys continued investment
in technology, productivity improvement and growth. Capital expenditures for
fiscal 1998 are expected to equal or exceed the record level of fiscal 1997.
Construction of a new DeVry Institute in Fremont, California, planned to open
in July, 1998, and improvements to a facility expected to be leased in New York
and planned to open in November, 1998, will both contribute to the continued
high spending levels.
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.
<PAGE>10
PART II - Other information
- ---------------------------
Item 5 - Other Information
- --------------------------
Effective October 1, 1997, the Companys bank borrowings were set at a floating
rate of LIBOR plus 0.35% in accordance with the achievement of certain
performance standards contained in the revolving loan facility agreement.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(b) Reports on Form 8-K
- -----------------------
There were no reports on Form 8-K filed by the Company during the quarter ended
September 30, 1997.
<PAGE>11
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 6, 1997 /s/ Ronald L. Taylor
--------------------
Ronald L. Taylor
President and Chief Operating
Officer
Date: NOVEMBER 6, 1997 /s/Norman M. Levine
-------------------
Norman M. Levine
Vice President Finance, Controller,
Chief Financial and Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 48937
<SECURITIES> 0
<RECEIVABLES> 29576
<ALLOWANCES> 6297
<INVENTORY> 2981
<CURRENT-ASSETS> 76458
<PP&E> 154109
<DEPRECIATION> 60784
<TOTAL-ASSETS> 214954
<CURRENT-LIABILITIES> 79148
<BONDS> 14000
0
0
<COMMON> 345
<OTHER-SE> 111251
<TOTAL-LIABILITY-AND-EQUITY> 214954
<SALES> 0
<TOTAL-REVENUES> 80421
<CGS> 0
<TOTAL-COSTS> 48710
<OTHER-EXPENSES> 21015
<LOSS-PROVISION> 4582
<INTEREST-EXPENSE> 400
<INCOME-PRETAX> 10296
<INCOME-TAX> 4017
<INCOME-CONTINUING> 6279
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<CHANGES> 0
<NET-INCOME> 6279
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
