<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 March 31, 1997
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
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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
April 30, 1997: 34,501,814
Total number of pages: 13
<PAGE>2
DeVRY INC.
FORM 10-Q INDEX
For the period ended March 31, 1997
Page No.
-------
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
March 31, 1997, June 30, 1996
and March 31, 1996 3-4
Consolidated Statements of Income
for the quarter and nine months
ended March 31, 1997 and 1996 5
Consolidated Statements of Cash
Flows for the nine months ended
March 31, 1997 and 1996 6
Notes to Consolidated Financial
Statements 7-8
Item 2. Management's Discussion and
Analysis of Results of Operations
and Financial Condition 9-11
Part II. Other Information
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>
March 31, June 30, March 31,
1997 1996 1996
(Unaudited) (Unaudited)
----------- -------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 34,424 $ 29,948 $ 31,360
Restricted Cash 35,295 16,590 27,198
Accounts Receivable, Net 46,638 9,684 37,639
Inventories 1,786 3,290 1,376
Prepaid Expenses and Other 2,161 2,055 2,779
------- ------- -------
Total Current Assets 120,304 61,567 100,352
------- ------- -------
Land, Buildings and Equipment
Land 18,965 18,956 18,952
Buildings 50,536 50,570 40,788
Equipment 60,280 51,198 48,963
Construction In Progress 325 7,613
------- ------- -------
130,106 120,724 116,316
Accumulated Depreciation (56,087) (49,283) (47,120)
------- ------- -------
Land, Buildings and Equipment, Net 74,019 71,441 69,196
------- ------- -------
Other Assets
Intangible Assets, Net 37,912 37,709 1,976
Perkins Program Fund, Net 5,888 5,483 5,025
Other Assets 1,896 1,889 1,745
------- ------- -------
Total Other Assets 45,696 45,081 8,746
------- ------- -------
TOTAL ASSETS $240,019 $178,089 $178,294
======= ======= =======
</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>
March 31, June 30, March 31,
1997 1996 1996
(Unaudited) (Unaudited)
----------- -------- -----------
<S> <C> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable $ 19,858 $ 18,859 $ 21,148
Accrued Salaries, Wages & Benefits 16,018 14,735 13,243
Accrued Expenses 7,091 7,640 6,064
Advance Tuition Payments 6,096 7,617 6,507
Deferred Tuition Revenue 67,136 3,609 56,372
------- ------- -------
Total Current Liabilities 116,199 52,460 103,334
------- ------- -------
Other Liabilities
Revolving Loan 41,000 61,500 15,029
Deferred Income Tax Liability 2,126 2,207 2,856
Deferred Rent and Other 5,028 4,635 4,496
------- ------- -------
Total Other Liabilities 48,154 68,342 22,381
------- ------- -------
TOTAL LIABILITIES 164,353 120,802 125,715
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value,
75,000,000 Shares Authorized,
33,295,094, 33,243,704, and
33,243,304 Shares Issued and
Outstanding at March 31, 1997,
June 30, 1996 and March 31, 1996,
Respectively. 333 333 333
Additional Paid-in Capital 36,870 36,694 36,694
Retained Earnings 38,016 19,820 15,053
Cumulative Translation Adjustment 447 440 499
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 75,666 57,287 52,579
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $240,019 $178,089 $178,294
======= ======= =======
</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 Nine Months
Ended March 31, Ended March 31,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Tuition $ 72,983 $ 61,303 $208,491 $175,096
Other Educational 7,914 6,893 22,517 19,257
Interest 236 216 636 838
------- ------- ------- -------
Total Revenues 81,133 68,412 231,644 195,191
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of Educational
Services 47,035 41,377 136,691 118,076
Student Services and
Administrative Expense 22,788 18,213 62,654 51,575
Interest Expense 732 205 2,423 772
------- ------- ------- -------
Total Costs and
Expenses 70,555 59,795 201,768 170,423
------- ------- ------- -------
Income Before Income Taxes 10,578 8,617 29,876 24,768
Income Tax Provision 4,124 3,555 11,681 10,290
------- ------- ------- -------
NET INCOME $ 6,454 $ 5,062 $ 18,195 $ 14,478
======= ======= ======= =======
EARNINGS PER COMMON SHARE $0.19 $0.15 $0.54 $0.43
</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 Nine Months
Ended March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $18,195 $14,478
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 6,920 5,280
Amortization 1,181 46
Provision for Refunds and Uncollectible Accounts 14,317 12,615
Deferred Income Taxes 415 954
Gain on Disposal and Adjustments to Land,
Buildings and Equipment (91) (2)
Changes in Assets and Liabilities:
Restricted Cash (18,705) (7,019)
Accounts Receivable (51,157) (43,894)
Inventories 1,504 2,177
Prepaid Expenses and Other (1,600) (1,357)
Perkins Program Fund Contribution and Other (519) (674)
Accounts Payable 999 6,191
Accrued Salaries, Wages, Expenses and Benefits 734 3,267
Advance Tuition Payments (1,521) (7,475)
Deferred Tuition Revenue 63,527 52,604
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 34,199 37,191
------ ------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital Expenditures (9,407) (14,216)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Exercise of Stock Options 177 84
Repayments Under Revolving Credit Facility (20,500) (18,000)
------ ------
NET CASH USED IN FINANCING ACTIVITIES (20,323) (17,916)
------ ------
Effects of Exchange Rate Differences 7 49
------ ------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,476 5,108
Cash and Cash Equivalents at Beginning of Period 29,948 26,252
------ ------
Cash and Cash Equivalents at End of Period $34,424 $31,360
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Period $2,440 $1,140
Income Taxes Paid During the Period $12,861 $10,332
</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 Nine Months Ended March 31, 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 for the
fiscal year ended June 30, 1996 and in conjunction with the Company's
Quarterly reports on Form 10-Q for the quarters ended September 30,
1996 and December 31, 1996, each as filed with the Securities and
Exchange Commission.
The results of operations for the three months and nine months ended
March 31, 1997, are not necessarily indicative of results to be
expected for the entire fiscal year.
Certain reclassifications have been made to the March 1996
financial statements to conform with the June 1996 and March 1997
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 split 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 nine 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 operating 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 March 31, 1997 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
5. In April 1997, the Company and certain existing shareholders completed
an offering of the Company's common stock. In this offering, the
Company sold 1,200,000 shares of its common stock. The Company's
proceeds of the offering, net of underwriting discounts and commissions
and other related expenses, were approximately $23,640,000.
Substantially all of the net proceeds were used to repay indebtedness.
The Company did not receive any proceeds from the sale of the shares
by the existing shareholders.
The following presents selected actual consolidated financial
information as of March 31, 1997 and pro-forma financial information
which reflects the application of the net proceeds of the stock
offering as if it were completed as of March 31, 1997:
March 31, 1997
-------------------------
Actual Pro Forma
-------------------------
Cash and Cash Equivalents $34,424,000 $35,064,000
Revolving Loan $41,000,000 $18,000,000
Total Shareholders' Equity $75,666,000 $99,306,000
Common Shares Issued and
Outstanding 33,295,094 34,495,094
6. As of March 31, 1997, the Company had achieved certain financial ratios
included in its revolving loan agreement which will reduce its interest
rate on borrowings under this loan agreement to a Eurodollar rate
plus 0.50%. The new interest rate becomes effective on July 1, 1997.
<PAGE>9
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 Company's enrollments and its
term starting dates, which affect the results of operations and the timing of
cash inflows, the Company believes that comparisons of its results of
operations should be made to the corresponding period in the preceding year.
Comparisons of financial position should be made to both the end of the
previous fiscal year and to the end of the corresponding period in the
preceding year. Typically, due to the seasonality of student enrollments,
the Company's second and third quarters have historically represented the
periods of highest revenues and net income within a fiscal year.
Results of Operations
- ---------------------
Tuition revenues for the third quarter increased by $11.7 million or 19.1%
compared to the same period in fiscal 1996. For the nine months, tuition
revenues increased by $33.4 million which is also a 19.1% increase from the
nine months of fiscal 1996. The increase in tuition revenues for both periods
was produced by several positive factors, including enrollment increases at the
DeVry Institutes, where total student enrollment for the summer, fall and
spring semesters in fiscal 1997 increased by 4.6%, 4.3% and 4.7%, respectively,
from fiscal 1996. The increased DeVry Institute student enrollment in the
spring term represents the nineteenth consecutive term of increased total
student enrollment as compared to the corresponding prior year period.
Additionally, KGSM total enrollment for the term which began in February
increased by more than 18% from February 1996. Tuition revenues also increased
because of tuition rate increases which became effective at the DeVry
Institutes in March 1997 and at KGSM in September 1996. In June 1996, the
Company acquired Becker CPA which also contributed to the Companys revenue
increase in the quarter and nine months.
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 in the third quarter
increased just slightly compared to the same period in fiscal 1996 but, for the
nine months remains below the level for the nine months in fiscal 1996 because
of lower cash balances available for investment throughout most of the period.
Cost of educational services for the third quarter increased by $5.7 million
or 13.7% from the third quarter in fiscal 1996. For the nine months, cost of
educational services increased by $18.6 million or 15.8% from the same period
in fiscal 1996. The increase in cost of educational services for the quarter
and nine months reflects the additional facility, faculty and staff costs
associated with Becker's operations and the higher wage, benefit, supply and
service expenses associated with the growing student enrollments and additional
operating locations at the DeVry Institutes and KGSM. For the nine months,
depreciation expense has increased by more than $1.6 million from the
comparable period in fiscal 1996, as a result of the Companys extensive capital
<PAGE>10
improvement projects, particularly those related to the opening of the new
DeVry Institute in North Brunswick, New Jersey, and the continuous upgrading
of school laboratories and teaching equipment throughout the system.
Student services and administrative expense increased by $4.6 million or 25.1%
in the third quarter over the comparable period in fiscal 1996. For the nine
months, student services and administrative expense increased by $11.1 million
or 21.5% from the nine months of fiscal 1996. The increase in both the
quarter and nine months reflects the marketing costs associated with Becker's
operations and the marketing costs associated with generating the higher
student enrollments at the DeVry Institutes and KGSM which have already been
achieved in fiscal 1997 and for the terms which will begin in the coming months
and next fiscal year. The increase in expense for the nine months also
includes more than $1.1 million in amortization of intangibles and goodwill,
primarily associated with the Becker acquisition.
The Company's earnings from operations, before interest expense and taxes, were
a record for both the third quarter and nine months. Operating margins, which
have been increasing consistently each quarter year-over-year, increased again
the third quarter of fiscal 1997, climbing to 13.9% from 12.9% in the third
quarter of fiscal 1996. Operating margins were favorably affected by the
inclusion of Becker results, where operating margins have historically been
higher, by higher revenues and by improved facility utilization and other
economies of scale from the increased enrollments at the DeVry Institutes and
KGSM.
Interest expense for the third quarter and nine months increased by
$0.5 million and $1.7 million, respectively, from the third quarter and nine
months of fiscal 1996 because of higher outstanding debt levels during the year
resulting from the acquisition for cash, of Becker in June 1996. At
March 31, 1997, long-term debt increased by $26.0 million from March 31, 1996.
The provision for income taxes for the third quarter and nine months continued
at a lower rate than in the comparable periods in fiscal 1996 because of a
different mix in the earnings from domestic and foreign operations and because
of a lower effective state income tax rate.
Net income of $6.5 million or $0.19 per share for the third quarter of fiscal
1997 is a record for any third quarter, increasing by $1.4 million or $0.04
per share from the third quarter of fiscal 1996. Similarly, for the nine
months, net income of $18.2 million or $0.54 share is also a record for any
comparable previous nine month period.
Liquidity and Capital Resources
- -------------------------------
Cash generated from operations during the first nine months of fiscal 1997
decreased by nearly $3.0 million from the comparable period in fiscal 1996.
This decrease is attributable to the rate of financial aid processing during
the first three weeks of the DeVry Institutes spring term which began on
March 10. The transfer of Restricted Cash from these financial aid loan and
grant programs to the Company's unrestricted operating accounts after this aid
has been disbursed to student's accounts is particularly high during the early
weeks of each new term. Normal variances in the rate of reporting and
transferring these funds resulted in some of these transactions being processed
in the early weeks of April, after the end of the quarter. Operating cash
balances, however, remained higher than they were at the same time last year
and were sufficient to meet all of the Company's operating and capital
investment needs.
<PAGE>11
During the third quarter of this fiscal year, the Company repaid $3.0 million
of its revolving loan facility using existing cash balances and cash generated
from operations. This brings to $20.5 million the total repayments made in
this fiscal year, an increase of $2.5 million from the total of repayments
made in the first nine months of fiscal 1996. Future borrowings and/or
repayments will be based upon the Company's seasonal cash flow cycle and
payment requirements for construction of new facilities.
Capital expenditures for the first nine months of this fiscal year declined by
$4.8 million from the comparable period in fiscal 1996, reflecting completion
of construction payments and June 1996 occupancy of the DeVry Institute
New Jersey campus. Capital expenditures for the fourth quarter of fiscal 1997
and for the fiscal year 1998 are expected to increase from the level of prior
comparable periods as the Company undertakes expansion in the number of DeVry
Institute and KGSM operating locations.
In early April, the Company paid $7.5 million to complete the purchase of land
in Fremont, California. In the fourth quarter, the Company expects to pay
$6.2 million to complete the purchase of land in West Hills, California. Both
land purchases are being funded, in part, from existing operating cash balances
resulting from the seasonally heavy cash inflows at the start of the DeVry
Institutes spring term.
In April, the Company received proceeds, net of underwriting discounts,
commissions and other related expenses, of approximately $23.6 million from
its 1.2 million share common stock offering, applying $23.0 million to the
revolving loan facility and reducing total borrowings in early April to
$18.0 million.
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>12
PART II - Other information
- ---------------------------
Item 5 - Other Information
- --------------------------
In April, the Company completed a 1.2 million offering of its common stock.
Substantially all of the net proceeds to the Company from the offering were
used to repay indebtedness. In addition, certain shareholders sold 0.8 million
shares, including the over-allotment option which was exercised by the
underwriters.
In April, the Company completed the purchase of land in Fremont, California.
DeVry expects to construct a 100,000 square-foot building on the site, with
plans to offer classes at this location in 1998.
In April, the Company opened a KGSM center in Irvine, California. This is the
third KGSM center in the Los Angeles area and the 20th center in the KGSM
system.
The Company has also signed a letter of intent and deposited funds into escrow
to purchase property for a new campus in West Hills, California, which would
be the third DeVry Institute in the Los Angeles area. The property purchase
is expected to be completed in the fourth quarter of this fiscal year.
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
March 31, 1997.
<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: MAY 8, 1997 /s/ Ronald L. Taylor
--------------------
Ronald L. Taylor
President and Chief Operating
Officer
Date: MAY 8, 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 69719
<SECURITIES> 0
<RECEIVABLES> 58110
<ALLOWANCES> 11472
<INVENTORY> 1786
<CURRENT-ASSETS> 120304
<PP&E> 130106
<DEPRECIATION> 56087
<TOTAL-ASSETS> 240019
<CURRENT-LIABILITIES> 116199
<BONDS> 41000
0
0
<COMMON> 333
<OTHER-SE> 75333
<TOTAL-LIABILITY-AND-EQUITY> 240019
<SALES> 231644
<TOTAL-REVENUES> 231644
<CGS> 0
<TOTAL-COSTS> 136691
<OTHER-EXPENSES> 62654
<LOSS-PROVISION> 14317
<INTEREST-EXPENSE> 2423
<INCOME-PRETAX> 29876
<INCOME-TAX> 11681
<INCOME-CONTINUING> 18195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18195
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
