Apollo Group, Inc. Reports Fiscal 2007 Third Quarter Financial Results.* Revenue increases 12.2% year-over-year * Degreed de·greed adj. Having or requiring an academic degree: a degreed biologist; a degreed profession. enrollments increase 12.2% year-over-year * Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 27.7% * Board of directors approves up to $500 million in share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. PHOENIX -- Apollo Group Apollo Group, Inc. NASDAQ: APOL is an S&P 500 corporation based in Phoenix, Arizona. Apollo Group, Inc., through its subsidiaries, provides higher education to working adults. , Inc. (Nasdaq: APOL APOL Asia Pacific Online APOL Alternate Person on Line ) ("Apollo Group" or the "Company") today reported fiscal 2007 financial results for the third quarter ended May 31, 2007. The Company also announced that its Board of Directors ("Board") authorized the repurchase of up to $500 million of Apollo Group Class A common stock. Under the program the Company may repurchase shares from time to time on the open market or in privately negotiated transactions. Apollo Group management will determine the timing and number of shares repurchased. Third Quarter Fiscal 2007 Results of Operations Net income was $131.4 million, or $0.75 per diluted share (174.6 million weighted average shares outstanding), compared to $131.5 million, or $0.75 per diluted share (174.5 million weighted average shares outstanding) for three months ended May 31, 2007 and 2006, respectively. Before giving effect to share based compensation expense and special items of $16.5 million in the third quarter of 2007 and $6.8 million in the third quarter of 2006, earnings per fully diluted share were $0.81 in the third quarter of 2007, as compared to $0.78 in the third quarter 2006. (See the reconciliation of Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") financial information to non-GAAP financial information in the tables section of this press release.) Consolidated revenues for the three months ended May 31, 2007, totaled $733.4 million, which represents a 12.2% increase over the third quarter of fiscal 2006. Total degreed enrollments grew by 12.2% year-over-year to 311,100. Commenting on the quarter, Brian Mueller, president of Apollo Group, Inc., said, "Our fiscal third quarter is showing promising signs that the investments we made over the last 18 months are paying off. We are very pleased with the improvement we are seeing in enrollment and revenue growth, as well as in our operating margin. The continued progress is driven by further productivity improvements from new enrollment hires, enhanced retention strategies, efficiencies in our advertising spend and our branding campaign. New Degreed Enrollments increased 21.2% year-over-year. We are proud to have achieved double-digit revenue growth due to our strong enrollments and continued improvement in retention. As a reminder, over the long-term, we remain committed to our goal of mid-to-high single-digit revenue growth and low double-digit annual operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and free cash flow growth." Mueller continued, "Our liquidity and cash flow for the quarter were strong. As a result of this and other value considerations, we have increased the size of our existing share repurchase program to up to $500 million." Instructional costs and services increased 13.1% or $37.3 million to $321.0 million, in the three months ended May 31, 2007, as compared to the three months ended May 31, 2006, primarily resulting from increases in employee-related expenses due to the higher enrollment numbers as well as an increase in bad debt expense which, as discussed last quarter, is primarily the result of a shift in the Company's student mix. As a percentage of revenue instructional costs and services were 43.8% versus 43.4% a year ago. Selling and promotional expenses Noun 1. promotional expense - the cost of promoting a product business expense, trade expense - ordinary and necessary expenses incurred in a taxpayer's business or trade increased by $24.7 million to $162.9 million, a 17.9% increase, in the three months ended May 31, 2007, from the three months ended May 31, 2006, primarily resulting from increases in the number of enrollment counselors and an increase in advertising expenditures for both the Company's internet-based advertising campaign as well as the launch of a national televised branding campaign. As a percentage of revenue, selling and promotional expenses were 22.2% versus 21.1% a year ago. General and administrative ("G&A") expenses increased by $15.7 million to $46.1 million, a 51.6% increase, in the three months ended May 31, 2007, from the three months ended May 31, 2006. As a percentage of revenues, G&A was 6.3% as compared to 4.7% in the prior year quarter. Before giving effect to special items primarily related to stock option investigation and restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. costs of $7.6 million, G&A expenses were $38.5 million in the three months ended May 31, 2007, or 5.2% of revenues. Financial and Operating Metrics Apollo Group reported the following financial data and operating metrics for the three months ended May 31, 2007 and 2006. [TABLE OMITTED] Nine months of Fiscal 2007 Results of Operations Net income attributed to Apollo Group common stock was $305.7 million, or $1.75 per diluted share, (174.6 million weighted average shares outstanding), compared to $339.1 million, or $1.92 per diluted share, (176.8 million weighted average shares outstanding) for the nine months ended May 31, 2007 and 2006, respectively. Total consolidated revenues for Apollo Group for the nine months ended May 31, 2007 were $2.0 billion, an 8.5% increase over the nine months of fiscal 2006. Average quarterly degree enrollments grew by 10.3%. Balance Sheet As of May 31, 2007, the Company's cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has , excluding restricted cash, was $690.1 million as compared to $408.7 million as of August 31, 2006. Days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). ("DSOs") decreased from 37 days last quarter to 36 days as of May 31, 2007, yet increased from 32 days at August 31, 2006. Deferred tuition revenue increased 10.1% to $150.0 million between May 31, 2007, and August 31, 2006. Stock Option Grants On June 27, 2007, the Company's Compensation Committee of the Board of Directors approved a grant of options to purchase approximately 4.1 million shares of the Company's Class A common stock and approximately 0.3 million restricted stock units Restricted stock units Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested. to be granted three business days after the release of the Company's third quarter 2007 financial results. This excludes any option grants made during the third quarter of 2007. Conference Call Information The Company will hold a conference call to discuss these earnings results at 5:00 PM Eastern, 2:00 PM Pacific, today, Thursday, June 28, 2007. The call may be accessed by dialing (877) 292-6888 (domestic) or (706) 634-1393 (international). The conference ID number is 4135730. A live webcast of this event may be accessed by visiting the Company's website at: www.apollogrp.edu. A replay of the call will be available on the website or at (706) 645-9291 (conf. ID # 4135730) until July 6, 2007. 2007 Annual Shareholder Meeting Apollo Group, Inc. will hold its 2007 Annual Meeting of the holders of Class A Common Stock on August 16, 2007. The meeting will take place from 9:00 AM to 10:00 AM, Arizona time, in the Shaffer Conference Center on the Second Floor of the Company's principal executive offices located at 4605 East Elwood Street, Phoenix, Arizona Phoenix /ˈfiːˌnɪks/ (English: Phoenix, Navajo: Hoozdo, lit. "the place is hot", Western Apache: Fiinigis) is the capital and the most populous city of the U.S. . Class A shareholders of record as of the close of business on June 22, 2007 are entitled to receive notice of the Annual Meeting. Forward-Looking Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statements in this press release regarding Apollo Group's business outlook, future financial and operating results, and overall future prospects, as well as statements regarding the future effect of Apollo Group's restatement of historical financial statements, the anticipated amount of additional expenses and related matters, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors. For a discussion of the various factors that may cause actual results to differ materially from those projected, please refer to the risk factors and other disclosures contained in Apollo Group's previously filed Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , Forms 10-Q, and other filings with the Securities and Exchange Commission. About Apollo Group, Inc. Apollo Group, Inc. has been an education provider for more than 30 years, operating the University of Phoenix, the Institute for Professional Development, the College for Financial Planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against , Western International University and Insight Schools. The Company offers innovative and distinctive educational programs and services from high school through college level at 260 locations in 40 states, Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. , Alberta, British Columbia British Columbia, province (2001 pop. 3,907,738), 366,255 sq mi (948,600 sq km), including 6,976 sq mi (18,068 sq km) of water surface, W Canada. Geography , the Netherlands, and Mexico, as well as online, throughout the world. 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. 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