Apollo Group, Inc. Reports Fiscal 2006 Third Quarter Results.PHOENIX -- Apollo Group, Inc. (Nasdaq:APOL) today reported fiscal 2006 financial results for the third quarter ended May 31, 2006. Net income attributed to Apollo Education Group common stock for the three months ended May 31, 2006, was $133.3 million, or $.77 per diluted share on 174.2 million weighted average shares outstanding, compared to $141.8 million, or $.77 per diluted share on 184.3 million weighted average shares outstanding reported for the same period last year. Net income attributed to Apollo Education Group common stock for the nine months ended May 31, 2006, was $344.8 million, or $1.95 per diluted share, compared to $338.5 million, or $1.81 per diluted share reported for the same period last year. Total consolidated revenues for Apollo Group, Inc. for the three months ended May 31, 2006, rose 5.6% to $653.6 million, compared with $619.0 million in the third quarter of fiscal 2005. The third quarter of fiscal 2005 contained an extra week at the University of Phoenix Online, thereby increasing revenue in the related period by approximately $20 million. The University of Phoenix accounted for 83.3% of the $600.1 million in net tuition revenues from students enrolled in degree programs for the quarter ended May 31, 2006. Total consolidated revenues for Apollo Group, Inc. for the nine months ended May 31, 2006, rose 11.6% to $1.852 billion, compared with $1.660 billion in the same period last year. The University of Phoenix accounted for 83.3% of the $1.709 billion in net tuition revenues from students enrolled in degree programs for the nine months ended May 31, 2006. Consolidated degree enrollments for University of Phoenix and Western International University's Axia College at May 31, 2006, increased by 10.7% to 295,600 students compared to 267,100 students at May 31, 2005. Consolidated degree enrollments of online students increased 20.6% between periods. Commenting on the quarter, Brian Mueller, President, said, "During the third quarter, we began operations in four new UOP campuses: Merrillville, Indiana; Madison, Wisconsin; Omaha, Nebraska; and Columbia, South Carolina. We continue to stay focused on our growth strategies. Our strategic and accelerated marketing programs are gaining traction and we are confident we are on the right course. We remain committed to the development of instructional delivery models and student administrative support systems that will increase student learning outcomes and retention through graduation." The company will hold a conference call to discuss these earnings results at 11:00 AM Eastern time, 8:00 AM Phoenix time, on Tuesday, June 20, 2006. The call may be accessed by dialing 877-292-6888 (domestic) or 706-634-1393 (internationally). The conference ID number is 9319496. A live webcast of this event may be accessed by visiting the company website at: www.apollogrp.edu. A replay of the call will be available on our website or at 706-645-9291 (conf. ID # 9319496) until June 30, 2006. Apollo Group, Inc. has been providing higher education programs to working adults for almost 30 years. Apollo Group, Inc., operates through its subsidiaries: The University of Phoenix, Inc., Institute for Professional Development, The College for Financial Planning Institutes Corporation, and Western International University, Inc. The consolidated enrollment in its educational programs makes it the largest private institution of higher education in the United States. It offers educational programs and services at 97 campuses and 159 learning centers in 39 states, Puerto Rico, Alberta, British Columbia, Netherlands, and Mexico. For more information about Apollo Group, Inc. and its subsidiaries, call 800-990-APOL or visit Apollo on the company website at: www.apollogrp.edu. -Table to Follow-
APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
Ended Ended
May 31, May 31,
2006 2005 2006 2005
-------- -------- ---------- ----------
(In thousands, except per
share amounts)
Revenues:
Tuition and other, net $653,628 $619,011 $1,852,063 $1,659,630
-------- -------- ---------- ----------
Costs and expenses:
Instructional costs and
services 273,073 243,232 791,405 682,284
Selling and promotional 137,873 118,153 390,419 359,754
General and
administrative 30,977 29,323 118,262 74,010
-------- -------- ---------- ----------
441,923 390,708 1,300,086 1,116,048
-------- -------- ---------- ----------
Income from operations 211,705 228,303 551,977 543,582
Interest income and other,
net 4,476 3,984 12,546 12,401
-------- -------- ---------- ----------
Income before income taxes 216,181 232,287 564,523 555,983
Provision for income taxes 82,840 90,449 219,773 217,500
-------- -------- ---------- ----------
Net income $133,341 $141,838 $ 344,750 $ 338,483
======== ======== ========== ==========
Earnings per share attributed to
Apollo Education Group common
stock:
Diluted net income per
share $ 0.77 $ 0.77 $ 1.95 $ 1.81
======== ======== ========== ==========
Diluted weighted average
shares outstanding 174,239 184,322 176,602 187,053
======== ======== ========== ==========
The company adopted SFAS 123(R) during the first quarter of 2006 resulting in $3.5 million and $22.0 million of stock-based compensation expense for the three and nine months ended May 31, 2006, respectively. There was no stock-based compensation expense related to employee stock options and employee stock purchases under SFAS 123 in the same periods of fiscal 2005 because the Company did not adopt the recognition provisions of SFAS 123. Net income, including pro forma stock-based compensation expense, as previously disclosed in the notes to the Condensed Consolidated Financial Statements for the three and nine months ended May 31, 2005, was $138.3 million or $0.75 per diluted share, and $326.5 million or $1.74 per diluted share, respectively.
APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 31, August 31,
2006 2005
----------- ----------
(Dollars in thousands)
Assets:
Current assets
Cash and cash equivalents $ 201,463 $ 145,607
Restricted cash 245,108 225,706
Marketable securities 72,190 224,112
Receivables, net 190,143 201,615
Deferred tax assets, net 16,851 14,991
Other current assets 20,124 23,058
----------- ----------
Total current assets 745,879 835,089
Property and equipment, net 297,119 268,661
Marketable securities 62,928 97,350
Cost in excess of fair value of assets
purchased, net 37,096 37,096
Deferred tax assets, net 32,266 35,756
Other assets 28,248 28,993
----------- ----------
Total assets $ 1,203,536 $1,302,945
=========== ==========
Liabilities and Shareholders' Equity:
Current liabilities
Current portion of long-term liabilities $ 22,063 $ 18,878
Accounts payable 38,401 40,129
Accrued liabilities 66,017 61,315
Income taxes payable 14,622 9,740
Student deposits and current portion of
deferred revenue 399,381 387,910
----------- ----------
Total current liabilities 540,484 517,972
Deferred tuition revenue, less current portion 441 351
Long-term liabilities, less current portion 79,961 77,748
----------- ----------
Total liabilities 620,886 596,071
----------- ----------
Commitments and contingencies
Shareholders' equity
Preferred stock, no par value, 1,000,000
shares authorized; none issued
Apollo Education Group Class A nonvoting
common stock, no par value, 400,000,000
shares authorized; 188,002,000 issued at
May 31, 2006 and August 31, 2005, and
172,448,000 and 179,184,000 outstanding at
May 31, 2006 and August 31, 2005,
respectively 103 103
Apollo Education Group Class B voting common
stock, no par value, 3,000,000 shares
authorized; 477,000 issued and outstanding at
May 31, 2006 and August 31, 2005 1 1
Additional paid-in capital
Apollo Education Group Class A treasury stock,
at cost, 15,554,000 and 8,818,000 shares at
May 31, 2006 and August 31, 2005,
respectively (1,061,172) (645,742)
Retained earnings 1,645,381 1,353,650
Accumulated other comprehensive loss (1,663) (1,138)
----------- ----------
Total shareholders' equity 582,650 706,874
----------- ----------
Total liabilities and shareholders' equity $ 1,203,536 $1,302,945
=========== ==========
APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
Ended
May 31,
2006 2005
--------- ---------
(In thousands)
Cash flows provided by (used for) operating
activities:
Net income $ 344,750 $ 338,483
Adjustments to reconcile net income to net cash
provided by operating activities:
Stock-based compensation expense 14,475
Depreciation and amortization 49,291 39,157
Amortization of investment premiums 841 3,023
Provision for uncollectible accounts 57,275 30,180
Deferred income taxes 1,630 17,099
Tax benefits of stock options exercised 28,266
Excess tax benefits from stock-based
compensation (9,590)
Cash received for tenant improvements 1,594 1,263
Non-cash early occupancy expense 2,877
Changes in assets and liabilities
Receivables (45,803) (64,599)
Other assets 2,431 (3,181)
Accounts payable and accrued liabilities (2,366) (26,023)
Income taxes 17,438 29,946
Student deposits and deferred revenue 11,860 42,247
Other liabilities 3,499 3,879
--------- ---------
Net cash provided by operating activities 447,325 442,617
--------- ---------
Cash flows provided by (used for) investing
activities:
Net additions to property and equipment (34,203) (80,755)
Development of land and buildings related to
future Online expansion (35,266)
Purchase of marketable securities (259,805) (39,211)
Maturities of marketable securities 445,308 303,130
Purchase of restricted securities (662,146) (308,464)
Maturities of restricted securities 642,744 252,444
Purchase of other assets (1,686) (1,710)
--------- ---------
Net cash provided by investing activities 94,946 125,434
--------- ---------
Cash flows provided by (used for) financing
activities:
Purchase of Apollo Education Group Class A
common stock (514,931) (698,851)
Issuance of Apollo Education Group Class A
common stock 25,691 43,170
Cash paid for cancellation of vested options (6,240)
Excess tax benefits from stock-based
compensation 9,590
--------- ---------
Net cash used for financing activities (485,890) (655,681)
--------- ---------
Currency translation loss (525) (264)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 55,856 (87,894)
Cash and cash equivalents at beginning of period 145,607 156,669
--------- ---------
Cash and cash equivalents at end of period $ 201,463 $ 68,775
========= =========
Supplemental disclosure of non-cash investing
activities
Tenant improvement allowances $ 11,639 $ 12,576
Purchases of property and equipment included in
accounts payable $ 5,340 $ 11,998
APOLLO GROUP, INC. AND SUBSIDIARIES
DEGREE ENROLLMENTS
(Unaudited)
May 31,
2006 2005
--------------------
The University of Phoenix, Inc. and Axia
College
Associates 66,100 34,000
Bachelors 156,400 164,500
Masters 69,300 66,000
Doctoral 3,800 2,600
--------------------
295,600 267,100
====================
Apollo Group, Inc. Consolidated
Associates 73,400 41,200
Bachelors 168,600 177,400
Masters 77,300 74,300
Doctoral 3,800 2,600
--------------------
323,100 295,500
====================
APOLLO GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA -- THREE MONTHS ENDED MAY 31, 2006
(Unaudited)
Instructional costs and services increased by $29.9 million in the three months ended May 31, 2006, from the three months ended May 31, 2005. The following table sets forth the changes in significant components of instructional costs and services, in millions:
Percent of Revenues
---------------------
For the Three Months For the Three Months
Ended Ended
May 31, May 31,
2006 2005 2006 2005
---------------------- ---------------------
Employee compensation and
related expenses $97.0 $88.6 14.8% 14.3%
Stock-based compensation 2.4 0.3%
Faculty compensation 54.9 52.8 8.4% 8.6%
Classroom lease expenses
and depreciation 48.3 44.2 7.4% 7.1%
Financial aid processing
costs 13.5 10.6 2.1% 1.7%
Bad debt expense 17.4 11.3 2.7% 1.8%
Other instructional costs
and services 39.6 35.7 6.1% 5.8%
---------------------- ---------------------
Instructional costs and
services $273.1 $243.2 41.8% 39.3%
====================== =====================
Selling and promotional expenses increased by $19.7 million in the three months ended May 31, 2006, from the three months ended May 31, 2005. The following table sets forth the changes in significant components of selling and promotional expenses, in millions:
Percent of Revenues
--------------------
For the Three Months For the Three Months
Ended Ended
May 31, May 31,
2006 2005 2006 2005
-------------------- --------------------
Enrollment advisors'
compensation and related
expenses $63.6 $51.3 9.7% 8.3%
Stock-based compensation 0.4 0.1%
Advertising 56.9 50.6 8.7% 8.2%
Other selling and promotional
expenses 17.0 16.3 2.6% 2.6%
-------------------- --------------------
Selling and promotional
expenses $137.9 $118.2 21.1% 19.1%
==================== ====================
General and administrative expenses increased by $1.7 million in the three months ended May 31, 2006, from the three months ended May 31, 2005. The following table sets forth the changes in significant components of general and administrative expenses, in millions:
Percent of Revenues
---------------------
For the Three Months For the Three Months
Ended Ended
May 31, May 31,
2006 2005 2006 2005
-------------------- ---------------------
Employee compensation and
related expenses $12.7 $12.7 1.9% 2.0%
Stock-based compensation 0.7 0.1%
Legal, audit, and corporate
insurance 4.4 2.5 0.7% 0.4%
Administrative space and
depreciation 6.1 7.3 0.9% 1.2%
Other general and
administrative expenses 7.1 6.8 1.1% 1.1%
-------------------- ---------------------
General and administrative
expenses $31.0 $29.3 4.7% 4.7%
==================== =====================
APOLLO GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA -- NINE MONTHS ENDED MAY 31, 2006
(Unaudited)
Instructional costs and services increased by $109.1 million in the nine months ended May 31, 2006, from the nine months ended May 31, 2005. The following table sets forth the changes in significant components of instructional costs and services, in millions:
Percent of Revenues
-------------------
For the Nine Months For the Nine Months
Ended Ended
May 31, May 31,
2006 2005 2006 2005
--------------------- -------------------
Employee compensation and
related expenses $275.3 $250.4 14.9% 15.1%
Stock-based compensation 8.7 0.4%
Faculty compensation 157.3 140.7 8.5% 8.5%
Classroom lease expenses
and depreciation 141.0 126.2 7.6% 7.6%
Financial aid processing
costs 39.0 31.3 2.1% 1.9%
Bad debt expense 57.3 30.3 3.1% 1.8%
Other instructional costs
and services 112.8 103.4 6.1% 6.2%
--------------------- -------------------
Instructional costs and
services $791.4 $682.3 42.7% 41.1%
===================== ===================
Selling and promotional expenses increased by $30.6 million in the nine months ended May 31, 2006, from the nine months ended May 31, 2005. The following table sets forth the changes in significant components of selling and promotional expenses, in millions:
Percent of Revenues
-------------------
For the Nine Months For the Nine Months
Ended Ended
May 31, May 31,
2006 2005 2006 2005
------------------- -------------------
Enrollment advisors'
compensation and related
expenses $183.1 $151.2 9.9% 9.1%
Stock-based compensation 1.3 0.1%
Advertising 162.8 166.5 8.8% 10.0%
Other selling and promotional
expenses 43.2 42.1 2.3% 2.6%
------------------- -------------------
Selling and promotional
expenses $390.4 $359.8 21.1% 21.7%
=================== ===================
General and administrative expenses increased by $44.3 million in the nine months ended May 31, 2006, from the nine months ended May 31, 2005. The following table sets forth the changes in significant components of general and administrative expenses, in millions:
Percent of Revenues
-------------------
For the Nine Months For the Nine Months
Ended Ended
May 31, May 31,
2006 2005 2006 2005
--------------------- -------------------
Employee compensation and
related expenses $57.6 $34.6 3.1% 2.1%
Stock-based compensation 12.0 0.7%
Legal, audit, and corporate
insurance 10.0 6.2 0.5% 0.4%
Administrative space and
depreciation 17.7 15.1 1.0% 0.9%
Other general and
administrative expenses 21.0 18.1 1.1% 1.0%
--------------------- -------------------
General and administrative
expenses $118.3 $74.0 6.4% 4.4%
===================== ===================
Included in the above general and administrative employee compensation and related expenses is $19.0 million related to our former CEO's Separation Agreement. Included in the above general and administrative stock-based compensation is $7.5 million related to our former CEO's Separation Agreement. |
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