<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, 1998
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
April 30, 1998: 34,647,632
Total number of pages: 12
<PAGE>2
DEVRY INC.
FORM 10-Q INDEX
For the Quarter ended March 31, 1998
Page No.
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
March 31, 1998, June 30, 1997,
and March 31, 1997 3-4
Consolidated Statements of Income
for the quarter and nine months
ended March 31, 1998 and 1997 5
Consolidated Statements of Cash
Flows for the nine months ended
March 31, 1998 and 1997 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 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>3
PART I - Financial Information
Item 1 - Financial Statements
<TABLE>
DEVRY INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
March 31, June 30, March 31,
1998 1997 1997
--------- -------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 45,911 $ 38,865 $ 34,424
Restricted Cash 31,814 12,104 35,295
Accounts Receivable, Net 55,440 12,322 46,638
Inventories 2,754 4,549 1,786
Prepaid Expenses and Other 1,827 2,676 2,161
-------- -------- --------
Total Current Assets 137,746 70,516 120,304
-------- -------- --------
Land, Buildings and Equipment
Land 35,148 34,348 18,965
Buildings 51,638 50,906 50,536
Equipment 71,678 63,609 60,280
Construction In Progress 6,991 91 325
-------- -------- --------
165,455 148,954 130,106
Accumulated Depreciation (66,232) (58,266) (56,087)
-------- -------- --------
Land, Buildings and
Equipment, Net 99,223 90,688 74,019
-------- -------- --------
Other Assets
Intangible Assets, Net 36,604 37,770 37,912
Perkins Program Fund, Net 6,636 6,075 5,888
Other Assets 1,540 1,654 1,896
-------- -------- --------
Total Other Assets 44,780 45,499 45,696
-------- -------- --------
TOTAL ASSETS $281,749 $206,703 $240,019
======== ======== ========
</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,
1998 1997 1997
--------- -------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable $ 23,807 $ 22,301 $ 19,858
Accrued Salaries, Wages &
Benefits 19,263 16,077 16,018
Accrued Expenses 7,685 7,620 7,091
Advance Tuition Payments 7,124 6,594 6,096
Deferred Tuition Revenue 78,926 5,701 67,136
-------- -------- --------
Total Current Liabilities 136,805 58,293 116,199
-------- -------- --------
Other Liabilities
Revolving Loan 6,000 33,000 41,000
Deferred Income Tax Liability 3,049 3,060 2,126
Deferred Rent and Other 7,385 7,080 5,028
-------- -------- --------
Total Other Liabilities 16,434 43,140 48,154
-------- -------- --------
TOTAL LIABILITIES 153,239 101,433 164,353
-------- -------- --------
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value,
75,000,000 Shares Authorized,
34,646,472, 34,504,214 and
33,295,094, Shares Issued and
Outstanding at March 31, 1998,
June 30, 1997 and March 31,
1997, Respectively 347 345 333
Additional Paid-in Capital 60,600 60,482 36,870
Retained Earnings 67,069 44,006 38,016
Cumulative Translation
Adjustment 494 437 447
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 128,510 105,270 75,666
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $281,749 $206,703 $240,019
======== ======== ========
</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,
------------------ --------------------
1998 1997 1998 1997
------------------ --------------------
<S> <C> <C> <C> <C>
REVENUES:
Tuition $83,349 $72,983 $237,019 $208,491
Other Educational 9,135 7,914 25,527 22,517
Interest 370 236 1,071 636
------- ------- -------- --------
Total Revenues 92,854 81,133 263,617 231,644
------- ------- -------- --------
COSTS AND EXPENSES:
Cost of Educational Services 51,310 47,035 149,489 136,691
Student Services and
Administrative Expense 27,455 22,788 75,420 62,654
Interest Expense 156 732 804 2,423
------- ------- -------- --------
Total Costs and Expenses 78,921 70,555 225,713 201,768
------- ------- -------- --------
Income Before Income Taxes 13,933 10,578 37,904 29,876
Income Tax Provision 5,496 4,124 14,841 11,681
------- ------- -------- --------
NET INCOME $ 8,437 $ 6,454 $ 23,063 $ 18,195
======= ======= ======== ========
EARNINGS PER COMMON SHARE
Basic $0.24 $0.19 $0.67 $0.55
Diluted $0.24 $0.19 $0.66 $0.54
</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,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $23,063 $18,195
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 8,644 6,920
Amortization 1,187 1,181
Provision for Refunds and
Uncollectible Accounts 13,020 14,317
Deferred Income Taxes (11) 415
Loss (Gain) on Disposals and Adjustments
to Land, Buildings and Equipment 128 (91)
Changes in Assets and Liabilities:
Restricted Cash (19,710) (18,705)
Accounts Receivable (55,969) (51,157)
Inventories 1,795 1,504
Prepaid Expenses And Other 1,247 (1,600)
Perkins Program Fund Contribution
and Other (730) (519)
Accounts Payable 1,506 999
Accrued Salaries, Wages,
Expenses and Benefits 3,251 734
Advance Tuition Payments 530 (1,521)
Deferred Tuition Revenue 73,225 63,527
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 51,176 34,199
------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital Expenditures (17,307) (9,407)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Exercise of Stock Options 120 177
Repayments Under Revolving Credit Facility (27,000) (20,500)
------- -------
NET CASH USED IN FINANCING ACTIVITIES (26,880) (20,323)
Effects of Exchange Rate Differences 57 7
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS 7,046 4,476
Cash and Cash Equivalents at Beginning
of Period 38,865 29,948
------- -------
Cash and Cash Equivalents at End of Period $45,911 $34,424
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Year $843 $2,440
Income Taxes Paid During the Year 12,547 12,861
</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, 1998
----------
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, 1997 and in
conjunction with the Company's Quarterly reports on Form 10-Q
for the quarters ended September 30, 1997 and December 31, 1997,
each as filed with the Securities and Exchange Commission.
The results of operations for the three months and nine months
ended March 31, 1998, are not necessarily indicative of
results to be expected for the entire fiscal year.
2. 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 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. 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 $10.4 million, or 14.2%.
For the first nine months, the increase in tuition revenues was $28.5 million,
or 13.7%. These increases in tuition revenue were produced by several positive
factors. Enrollment at the DeVry Institutes for the fall term, which began
in November increased by 9.0% from last summer. For the spring term at the
DeVry Institutes, which began in March, enrollments increased by 12.0%.
These increases in enrollments represented the twenty-first and twenty-second
consecutive terms of higher total student enrollment as compared to the
corresponding prior year period. Contributing to the increased enrollment at
DeVry was the opening of its fifteenth Institute in Alpharetta, Georgia, for
the summer term. Enrollments at Keller Graduate School for the term which
began in February increased by over 19%. During the first nine months of
fiscal 1998, Keller began offering classes at four new teaching centers,
bringing the total to 24. In addition, tuition increases of approximately
five percent were implemented at DeVry and Keller while 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. Sales of the Becker CPA Review course on
CD-ROM are also included in the other educational revenue category.
Interest income on the Company's short-term investments increased in the third
quarter and first nine months as a strong pace of student receivable
collections provided more cash available for investment than in the previous
year.
Cost of Educational Services increased by $4.3 million, or 9.1% from the third
quarter of last year. For the first nine months, the increase in cost was
$12.8 million, or 9.4%. The increase reflects the cost of additional
facilities, faculty and staff associated with the new DeVry Institute and
Keller Graduate School centers. In addition, there were higher costs
associated with the higher enrollments at the previously existing DeVry,
Keller and Becker operations. The provision for refunds and doubtful accounts
has declined from the level of that expense realized last year.
<PAGE>9
The Company believes that the reduction, which began in the second quarter,
reflects the results from its continuing efforts to raise new student
admission standards and provide expanded academic services to students needing
additional help with their educational program. Depreciation expense increased
by over $1.7 million in the first nine months, reflecting continued investment
for expansion and upgrading of school laboratories and teaching equipment
throughout the Company.
Student Services and Administrative Expense increased by approximately 20%
from the third quarter and first nine months of last year. The increase
primarily reflects the marketing costs associated with student recruitment for
the Company's newly opened operating locations and the costs associated with
generating higher student enrollments at the previously opened locations.
Student recruiting expenses are also being incurred for the planned July 1998
opening of the new DeVry Institute in Fremont, California, and the planned
November 1998 opening of the DeVry Institute in New York City. Administrative
expenses have also increased from the prior year to support the Company's
expanding operations. In addition, implementation efforts and spending
are continuing for the Company's new financial systems. This new system will
enhance financial controls, reporting and analysis and overcome year 2000
deficiencies in the current system. Additionally, efforts are underway to
address the year 2000 processing requirements for all of the Company's
hardware and software, whether internally developed or purchased. Costs
associated with this effort are not expected to have a material effect on the
Company's results of operations and are being charged to expense as incurred.
The Company's earnings from operations, before interest expense and taxes,
were a record for the third quarter and nine months. Operating margins, which
have been increasing consistently each quarter over the comparable year-ago
period, increased again in the third quarter to 15.2% from 13.9% last year.
For the nine months, operating margins reached 14.7% compared to 13.9% for
the same period last year. The improved operating margins reflect favorable
leverage on the expanded student enrollments and continued cost control.
Interest expense, for both the quarter and nine months, has decreased
substantially from the previous year. The lower interest expense results from
the application of the net proceeds from the April 1997 stock offering to debt
reduction and from the continued strong cash flow from operations, in excess
of needs for expansion and other investment, which is also being applied to
debt reduction. Compared to March 31st of last year, debt has been reduced by
$35 million.
Net income of $8.4 million for the quarter and $23.1 million for the nine
months has increased by more than 25% from the same periods last year.
Diluted earnings per share for both periods has increased by more than by 20%,
including the effect of the higher number of shares outstanding after the
April 1997 stock offering.
Liquidity and Capital Resources
- -------------------------------
Cash generated from operations in the first nine months increased by nearly
$17 million, or 50%, from the first nine months of last year. The higher
level of cash generated reflects the higher net income, higher non-cash charges
for depreciation and the increased accounts payable and accrued expenses
associated with increased operating levels.
<PAGE>10
For the nine months, total reductions in the Company's long-term debt equaled
$27 million, up $6.5 million from last year. Future borrowings and/or
repayments will be based upon the Company's seasonal cash flow cycle and
payment requirements for construction of new facilities and other capital
spending.
Capital spending remains high with construction of the Fremont, California,
campus nearing completion and continued investments in technology and other
improvements throughout all the Company's operations. For the first nine
months, total capital expenditures were $17.3 million, up $7.9 million from
last year. The level of capital spending is expected to remain high. As
construction of the Fremont campus winds down, furniture and laboratory
equipment are being received. Also, work is beginning on the improvements
to the leased New York City campus.
The Company is substantially dependent, as is most of the higher education
community, upon the continued delivery of federal and state financial aid
for its students. Most financial aid application and disbursement is
processed electronically. If the disbursement systems of federal and/or
state government units and commercial banks that participate in student
loan programs are not prepared for the year 2000, there could be interruptions
or delays in the receipt of these aid funds, which could have at least a
temporary adverse effect upon the Company's financial position.
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>11
PART II - Other information
Item 5 - Other Information
On March 23rd, the Company and its lenders completed an amendment to the
revolving loan facility, extending the maturity date by one year and making
other minor changes and corrections.
On May 6th, the Company announced a 2-for-1 stock split by means of a
100 percent stock dividend to be effective as of the end of trading on
June 19, 1998, to shareholders of record on June 1, 1998. This will be the
Company's third stock split since its initial public offering in June 1991.
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, 1998.
<PAGE>12
Signatures
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: MAY 7, 1998 /s/ Ronald L. Taylor
Ronald L. Taylor
President and Chief Operating
Officer
Date: MAY 7, 1998 /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-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 77725
<SECURITIES> 0
<RECEIVABLES> 64515
<ALLOWANCES> 9075
<INVENTORY> 2754
<CURRENT-ASSETS> 137746
<PP&E> 165455
<DEPRECIATION> 66232
<TOTAL-ASSETS> 281749
<CURRENT-LIABILITIES> 136805
<BONDS> 6000
0
0
<COMMON> 347
<OTHER-SE> 128163
<TOTAL-LIABILITY-AND-EQUITY> 281749
<SALES> 237019
<TOTAL-REVENUES> 263617
<CGS> 0
<TOTAL-COSTS> 149489
<OTHER-EXPENSES> 75420
<LOSS-PROVISION> 3289
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<INCOME-PRETAX> 37904
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<EPS-PRIMARY> .67
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</TABLE>
