<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, 1999
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
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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 October 29,
1999: 69,441,740
Total number of pages: 12
<PAGE>2
DeVRY INC.
FORM 10-Q INDEX
For the Quarter ended September 30, 1999
Page No.
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets at
September 30, 1999, June 30, 1999,
and September 30, 1998 3-4
Consolidated Statements of Income
for the quarter ended
September 30, 1999, and 1998 5
Consolidated Statements of Cash
Flows for the quarter ended
September 30, 1999, and 1998 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>
September 30, June 30, September 30,
1999 1999 1998
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $34,871 $31,848 $24,331
Restricted Cash 26,193 20,766 24,643
Accounts Receivable, Net 41,324 14,217 29,914
Inventories 4,765 6,592 3,570
Deferred Income Taxes 4,536 4,536 1,550
Prepaid Expenses and Other 2,614 982 1,351
---------- ---------- ----------
Total Current Assets 114,303 78,941 85,359
---------- ---------- ----------
Land, Buildings and Equipment
Land 38,419 37,833 35,297
Buildings 78,595 73,175 64,405
Equipment 99,455 92,304 76,985
Construction In Progress 16,248 12,741 6,614
---------- ---------- ----------
232,717 216,053 183,301
Accumulated Depreciation (85,456) (80,842) (68,003)
---------- ---------- ----------
Land, Buildings and
Equipment, Net 147,261 135,211 115,298
---------- ---------- ----------
Other Assets
Intangible Assets, Net 75,872 37,841 37,500
Perkins Program Fund, Net 7,375 7,375 6,813
Other Assets 1,517 1,323 1,446
---------- ---------- ----------
Total Other Assets 84,764 46,539 45,759
---------- ---------- ----------
TOTAL ASSETS $346,328 $260,691 $246,416
========== ========== ==========
</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,
1999 1999 1998
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
LIABILITIES
Current Liabilities
Accounts Payable $26,033 $29,080 $16,303
Accrued Salaries, Wages &
Benefits 22,677 22,339 18,677
Accrued Expenses 15,398 5,500 12,504
Advance Tuition Payments 8,656 11,979 5,727
Deferred Tuition Revenue 45,233 5,145 36,333
---------- ---------- ----------
Total Current Liabilities 117,997 74,043 89,544
---------- ---------- ----------
Other Liabilities
Revolving Loan 29,000 - -
Deferred Income Tax Liability 2,137 2,137 3,695
Deferred Rent and Other 11,927 9,206 8,867
---------- ---------- ----------
Total Other Liabilities 43,064 11,343 12,562
---------- ---------- ----------
TOTAL LIABILITIES 161,061 85,386 102,106
---------- ---------- ----------
SHAREHOLDERS' EQUITY
Common Stock, $0.01 par value,
200,000,000 Shares Authorized,
69,432,273, 69,414,020 and
69,320,520, Shares Issued and
Outstanding at September 30,
1999, June 30, 1999 and
September 30, 1998,
Respectively 695 694 693
Additional Paid-in Capital 61,015 60,948 60,646
Retained Earnings 123,122 113,215 82,201
Accumulated Other Comprehensive
Income 435 448 770
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 185,267 175,305 144,310
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $346,328 $260,691 $246,416
========== ========== ==========
</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,
1999 1998
-------- --------
<S> <C> <C>
REVENUES:
Tuition $106,863 $ 84,753
Other Educational 11,115 8,868
Interest 304 237
------- -------
Total Revenues 118,282 93,858
------- -------
COSTS AND EXPENSES:
Cost of Educational Services 71,227 56,586
Student Services and
Administrative Expense 30,266 24,307
Interest Expense 574 170
------- -------
Total Costs and Expenses 102,067 81,063
------- -------
Income Before Income Taxes 16,215 12,795
Income Tax Provision 6,308 4,977
------- -------
NET INCOME $ 9,907 $ 7,818
======= =======
EARNINGS PER COMMON SHARE
Basic $0.14 $0.11
======= =======
Diluted $0.14 $0.11
======= =======
</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,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $9,907 $7,818
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 4,608 3,338
Amortization 915 415
Provision for Refunds and
Uncollectible Accounts 6,009 4,897
Deferred Income Taxes - 83
Loss on Disposals and Adjustments to
Land, Buildings and Equipment 32 191
Changes in Assets and Liabilities:
Restricted Cash (5,282) (7,768)
Accounts Receivable (32,691) (22,890)
Inventories 1,910 1,648
Prepaid Expenses And Other (522) 703
Perkins Program Fund Contribution
and Other - (196)
Accounts Payable (5,343) (7,813)
Accrued Salaries, Wages,
Expenses and Benefits 9,614 5,387
Advance Tuition Payments (4,772) (3,475)
Deferred Tuition Revenue 40,088 30,598
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,473 12,936
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (12,319) (10,722)
Payments for Purchases of Businesses, Net
of Cash Acquired (38,186) -
------ ------
NET CASH USED IN INVESTING ACTIVITIES: (50,505) (10,722)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Exercise of Stock Options 68 36
Proceeds From Revolving Credit Facility 40,000 -
Repayments Under Revolving Credit Facility (11,000) (10,000)
------ ------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 29,068 (9,964)
Effects of Exchange Rate Differences (13) 200
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,023 (7,550)
Cash and Cash Equivalents at Beginning
of Period 31,848 31,881
------ ------
Cash and Cash Equivalents at End of Period $34,871 $24,331
====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid During the Period $490 $116
Income Taxes Paid During the Period, Net 286 11
</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, 1999
----------
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, 1999.
The results of operations for the three months ended September 30,
1999, are not necessarily indicative of results to be expected for the
entire fiscal year.
2. Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" established standards for reporting and display
of comprehensive income and its components in the financial
statements. The Company's only item that meets the definition for
adjustment to arrive at comprehensive income is the change in
cumulative translation adjustment. This amount was immaterial for the
quarter ended September 30, 1999.
3. On July 1, 1999, the Company acquired substantially all of the
tangible operating assets, trademarks and trade names and assumed
certain liabilities of the Denver Technical College ("DTC"). These
assets were purchased, for cash, from Educational Development
Corporation and its stockholders. On this same date, the Company
acquired certain land and buildings used by DTC from Niagara Limited
Partnership for cash. DTC is one of the largest technical colleges in
Colorado. The college offers undergraduate and post-graduate degree
programs in electronics, computer technology, business and medical
technology at campuses in Denver and Colorado Springs.
On July 2, 1999, Becker CPA acquired certain tangible operating
assets, trademarks and trade names of Conviser Duffy CPA Review Course
("Conviser Duffy"). These assets were purchased, for cash, from a unit
of Harcourt General, Inc. Conviser Duffy is a nationally known
training firm preparing students to pass the CPA exam.
Funding for the above acquisitions was obtained through borrowings
under the Company's revolving credit facility.
The acquisitions are accounted for under the purchase method of
accounting. Accordingly, the purchase prices have been allocated to
the tangible and identifiable intangible assets acquired and
liabilities assumed based on their estimated fair values. The amounts
recorded relating to the acquisitions are currently subject to
adjustment as the Company has not yet completed the final allocation
of the purchase prices. The intangible assets, consisting primarily
of goodwill, are being amortized using the straight line method over a
25-year period for financial reporting purposes and will be deducted
for tax reporting purposes over shorter statutory lives.
4. In July and August 1999, the Company granted options to purchase up to
232,000 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
Certain information contained in this quarterly report may constitute
forward looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such statements may
involve risks and uncertainty that could cause actual results to differ
materially from the forward-looking statements. Potential risks and
uncertainties include, but are not limited to, dependence on student
financial aid, state and provincial approval and licensing requirements, and
the other factors detailed in the Company's SEC filings, including those
discussed under the heading entitled "Risk Factors" in the Company's
Registration Statement on Form S-3 (No. 333-22457) filed with the
Securities and Exchange Commission
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 as included in the
Company's annual report on Form 10-K for the fiscal year ended June 30,
1999, as filed with the Securities and Exchange Commission. All
references to per share amounts have been restated to reflect the June 19,
1998, 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's management 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. Because of 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 first quarter increased by $22.1 million, or 26.1%,
compared to the first quarter of last year. The increase in tuition revenue
was produced by several positive factors. Enrollments at the Company's
undergraduate schools increased by 15.9% from last summer. This was the
26th consecutive term that exceeds prior-year results in total student
enrollment. The total student enrollment includes DeVry Institutes and the
newly acquired Denver Technical College. Also contributing to the
enrollment and revenue growth was the opening of a DeVry Institute
campus in New York last November for which there was no enrollment or
revenue in the summer quarter a year ago. At Keller Graduate School,
enrollment for the term which began in June increased by 19.9% from last
June. Compared to June of last year, Keller conducted classes in five new
sites, bringing the total to 31, including the distance education program.
Tuition increases approximating 5-6% were implemented by both DeVry
Institutes and Keller during the past year, contributing further to the tuition
revenue growth. Another contribution to the revenue growth came from
increased enrollments in the Becker CPA review course and the July
acquisition of the Conviser Duffy CPA Review course, bringing to
approximately 30,000 the number of students enrolling annually.
<PAGE>9
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, which are included in this revenue category,
continued their increase from the prior year.
Interest income on the Company's short-term investments increased slightly
from the first quarter of last year, reflecting higher cash balances which
were held through most of the quarter as a result of higher cash flow from
operations this year than last.
Cost of Educational Services increased by $14.6 million, or 25.9%, from
the first quarter of last year. The increase reflects the instructional costs
associated with the acquisitions of Denver Technical College and Conviser
Duffy as well as the cost of additional facilities, faculty, staff, service and
supply costs associated with the new DeVry Institute and Keller Graduate
School sites. Increased enrollments at the previously existing sites also
caused spending at these locations to increase.
Depreciation expense, included in the Cost of Educational Services,
increased by nearly $1.3 million from last year. This increase reflects the
record investment last year, continuing into the first quarter, for the
expansion and upgrading of facilities and teaching equipment throughout
the system.
Student Services and Administrative Expense increased by almost $6.0
million, or 24.5%, from the first quarter of last year. This increase reflects
the marketing and administrative costs associated with the acquired
operations and the marketing costs associated with student recruitment for
the Company's new teaching sites, including the West Hills, California,
DeVry Institute campus which opens in November.
Amortization expense of intangible assets, which is included in the Student
Services and Administrative Expense category, increased by $0.5 million,
reflecting the amortization of goodwill from the two acquisitions which
were completed at the beginning of the quarter.
Administrative efforts and all required remediation activities associated with
correcting Y2K computer processing deficiencies are nearly complete. The
Company is also nearing completion of its contingency planning for
unexpected difficulties that it or its suppliers may encounter. All
incremental spending on these efforts has been charged to expense as
incurred and is not material relative to the overall level of revenues or
expenses in the period. Compared to last year, these costs were not an
increased element of spending in the quarter.
The Company's earnings from operations, before interest and taxes, were a
record for any first quarter period. Operating margins, which have been
steadily rising over the corresponding year-ago periods, increased again
from 13.8% to 14.2%. This increase was achieved by higher operating
leverage on continued growth at the Company's previously existing
locations and cost controls over all areas of spending, offsetting the effect
of the new location startups at DeVry Institutes and Keller Graduate
School.
<PAGE>10
Interest expense increased by $0.4 million from last year because of
borrowings under the Company's revolving term loan agreement used to
complete the acquisitions of Denver Technical College and Conviser Duffy
CPA Review.
Net income of $9.9 million, or $0.14 per share, increased by more than
26% from last year, continuing the pattern of year-over-year earnings
increases in excess of 20%.
Liquidity and Capital Resources
- -------------------------------
Cash generated from operations reached $24.3 million, substantially more
than the $12.9 million generated in the first quarter of last year. Higher net
income, increased non-cash charges for depreciation and amortization,
higher accrued wages and expenses and increased accounts payable were the
primary contributors to the increased cash flow. Although accounts
receivable increased from last year because of somewhat slower processing
of student financial aid under federal loan programs, this was offset by
higher deferred tuition revenues, reflecting the increase in student
enrollments and revenues that also contributed to the increased receivables.
Capital spending was more than $12.3 million in the quarter, reflecting
such major projects as completion of construction at the DeVry Institute
campus in West Hills, California, and the addition at the urban Chicago
DeVry campus, plus renovation and expansion at the Columbus DeVry
campus.
During the first quarter, the Company borrowed $40 million under its
revolving term loan to complete the acquisitions of Denver Technical
college and Conviser Duffy CPA review. Subsequent to this borrowing,
the Company repaid $11 million of borrowings from cash on hand and cash
generated from operations.
The Company remains highly dependent upon the timely receipt of financial
aid funds. If funds flow is temporarily delayed because of Y2K processing
difficulties, the Company could use its available cash resources and its
revolving term loan agreement until such time as funds flow was restored.
The U.S. Department of Education and most aid processing agencies report
that they are Y2K compliant.
The Company believes that current balances of unrestricted cash, cash
generated from operations and its revolving term loan agreement will be
sufficient to fund its operations for the foreseeable future.
<PAGE>11
PART II - Other Information
Item 5 - Other Information
- --------------------------
During the first quarter, the Company completed the acquisitions, for cash,
of the Denver Technical College and Conviser Duffy CPA Review.
Denver Technical College operates two campuses in the Denver, Colorado,
area offering programs in electronics, computer technology, business and
medical technology.
Conviser Duffy CPA Review is a nationally known training firm preparing
students to pass the CPA exam.
Funding for both of these acquisitions was obtained through borrowings
under the Company's revolving term loan. Both acquisitions were
accounted for under the purchase method of accounting.
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, 1999.
<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: NOVEMBER 5, 1999 /s/ Ronald L. Taylor
--------------------
Ronald L. Taylor
President and Chief
Operating Officer
Date: NOVEMBER 5, 1999 /s/Norman M. Levine
-------------------
Norman M. Levine
Vice President Finance,
Controller, Chief Financial and
Accounting Officer
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<PERIOD-END> SEP-30-1999
<CASH> 61064
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<RECEIVABLES> 49654
<ALLOWANCES> 8330
<INVENTORY> 4765
<CURRENT-ASSETS> 114303
<PP&E> 232717
<DEPRECIATION> 85456
<TOTAL-ASSETS> 346328
<CURRENT-LIABILITIES> 117997
<BONDS> 29000
0
0
<COMMON> 695
<OTHER-SE> 184572
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<TOTAL-COSTS> 71227
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<LOSS-PROVISION> 6009
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