Apollo Group, Inc. Reports Fiscal 2008 Third Quarter Financial Results.* Revenue increases approximately 14% year-over-year * Total Degreed de·greed adj. Having or requiring an academic degree: a degreed biologist; a degreed profession. Enrollment increases 11% year-over-year * Bad Debt, as a percentage of net revenue, declines versus a year ago * Board of Directors authorizes share repurchases 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. of up to $500 million 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," "Apollo" or "the Company") today reported unaudited financial results for the three and nine months ended May 31, 2008. Unaudited Third Quarter of Fiscal 2008 Results of Operations Consolidated revenues for the three months ended May 31, 2008, totaled $835.2 million, which represents a 13.9% increase over the third quarter of fiscal 2007. Total Degreed Enrollment grew by 11.0% year-over-year to 345,300. The Company reported net income for the three months ended May 31, 2008, of $139.1 million, or $0.85 per share (163.8 million weighted average diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. shares outstanding), compared to net income of $131.4 million, or $0.75 per share (174.6 million weighted average diluted shares outstanding) for the three months ended May 31, 2007. During the third quarter of fiscal 2008, the Company repurchased approximately 9.8 million shares of its common stock at a weighted average purchase price of approximately $46 for a total expenditure of $454 million. On June 27, 2008, the Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: an increase of the share repurchase program to an aggregate of $500 million. Before giving effect to a special item of $1.6 million due to the securities class action verdict in the third quarter of fiscal 2008, and to special items related to the 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 in the third quarter of fiscal 2007, net income was $140.1 million, or $0.85 per share in the third quarter of fiscal 2008, as compared to net income of $136.0 million, or $0.78 per share in the third quarter of fiscal 2007. Excluding share-based compensation expense of $14.4 million and the special item related to the securities class action verdict of $1.6 million in the third quarter of fiscal 2008, and share-based compensation expense of $8.9 million and stock option investigation and restatement costs of $7.6 million in the third quarter of fiscal 2007, net income would have been $148.8 million, or $0.91 per share in the third quarter of fiscal 2008, as compared to net income of $141.4 million, or $0.81 per share in the third quarter of fiscal 2007. (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.) "We reported another quarter of solid revenue and enrollment growth, and importantly, we experienced improvement in the growth rate of New Degreed Enrollments as compared to last quarter," said Joe D'Amico, President, Chief Financial Officer and Treasurer of Apollo Group. "While the overall cost to acquire a student has increased versus a year ago, we still believe that we are on the right track by bringing our marketing intelligence in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. with Aptimus and that the investments we're making today will lower our student acquisition costs over time and help us to better communicate our brands." Greg Cappelli, Executive Vice President, Global Strategy and Assistant to the Executive Chairman added, "We continue to invest in new and existing areas including retention, new programs, resource centers and marketing, where we can leverage Apollo's infrastructure and experience. We are also pleased to announce that Insight Schools will start the 2008 school year with 11 schools in 10 states. The virtual high school market is strong and we are excited about their prospects. We recently announced the formation of Meritus University, a new Canadian New Canadian Noun Canad a recent immigrant to Canada degree-granting institution which will begin enrolling students this Fall. Lastly, during the quarter we closed Apollo Global's first transaction, the acquisition of Chilean-based UNIACC. Apollo Global has many solid opportunities to pursue abroad and their talented team is working diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d on these efforts." Instructional costs and services increased by $26.6 million, or 8.3% to $347.6 million for the three months ended May 31, 2008, from $321.0 million in the three months ended May 31, 2007. As a percentage of net revenue, instructional costs and services declined to 41.6% versus 43.8% in the prior year quarter, primarily as a result of decreases as a percentage of net revenue, in bad debt expense and classroom lease expenses and depreciation. These decreases were partially offset by an increase, as a percentage of net revenue, in employee compensation and related expenses which is due, in part, to investments in Insight Schools and increases to the Company's compensation rates for academic and financial counselors. As previously reported, during the first quarter of fiscal 2008, the Company reviewed the components of bad debt expense and identified certain items that should have been classified as discounts or refunds (reduction of tuition For tuition fees in the United Kingdom, see . Tuition means instruction, teaching or a fee charged for educational instruction especially at a formal institution of learning or by a private tutor usually in the form of one-to-one tuition. revenue) rather than bad debt expense. No reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. was made for prior periods as the amounts were not material to prior period financial statements and had no effect on reported net income. Had the Company reclassified these items in the third quarter of fiscal 2007, the amounts reported for net revenue and bad debt expense would have been $5.0 million lower. On a comparable basis, bad debt expense, as a percentage of net revenue, decreased approximately 160 basis points from 4.0% in the third quarter of fiscal 2007 to 2.4% in the third quarter of fiscal 2008. This decrease is primarily due to the continued focus on front-end collections as well as improvements in student retention rates. Retention and bad debt expense can vary seasonally, and as a result, bad debt expense as a percentage of net revenue may fluctuate from quarter-to-quarter. 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 $40.7 million, or 25.0%, to $203.6 million for the three months ended May 31, 2008, from $162.9 million in the three months ended May 31, 2007. As a percentage of net revenue, selling and promotional expenses increased to 24.4%, from 22.2% in the prior year's third quarter. This was a result of an increase, as a percentage of net revenue, in enrollment counselors' compensation and related expenses, advertising and other selling and promotional expenses. Included in other selling and promotional costs are expenses related to Aptimus which the Company acquired in the first quarter of 2008. The increase represents investments made to drive and support future growth of New Degreed Enrollments. Selling and promotional expenses per New Degreed Enrollment increased versus a year ago, and this trend may continue into the near future; however, the Company believes its efforts and investments will help it reduce these costs over the long-term. General and administrative ("G&A") expenses for the three months ended May 31, 2008, increased by $14.8 million, or 32.1%, to $60.9 million, from $46.1 million in the three months ended May 31, 2007. As reported, G&A, as a percentage of net revenue, increased to 7.3% in the third quarter of 2008, versus 6.3% in the comparable period a year ago. Excluding special items in the third quarter of fiscal 2007, primarily related to the stock option investigation and restatement costs of $7.6 million, G&A expenses were $38.5 million, or 5.2% of net revenue, for the three months ended May 31, 2007. The increase to 7.3%, as a percentage of net revenue, in the third quarter of 2008, is mainly attributable to increases, as a percentage of net revenue, in salary and related payroll costs due to higher employee headcount, increased share-based compensation expense and higher legal fees. Financial and Operating Metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. Below are Apollo Group's unaudited financial data and operating metrics for fiscal 2008. [TABLE OMITTED] Unaudited First Nine Months of Fiscal 2008 Results of Operations Consolidated revenues for the nine months ended May 31, 2008, were $2.3 billion, a 14.9% increase over the first nine months of fiscal 2007. Average Degreed Enrollment grew by 11.0% for the nine months ended May 31, 2008 as compared to the nine months ended May 31, 2007. The Company reported net income of $246.9 million, or $1.47 per share (167.7 million weighted average diluted shares outstanding), and $305.7 million, or $1.75 per share (174.6 million weighted average diluted shares outstanding), for the nine months ended May 31, 2008, and May 31, 2007, respectively. Before giving effect to the securities class action litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. charge and interest of $170.0 million in the nine months ended May 31, 2008, and to special items related to the stock option investigation and restatement costs of $27.8 million in the nine months ended May 31, 2007, net income was $350.2 million, or $2.09 per share in the first nine months of fiscal 2008, as compared to net income of $322.5 million, or $1.85 per share in the first nine months of fiscal 2007. Excluding total share-based compensation of $49.5 million as well as the securities litigation charges in the first nine months of fiscal 2008, and share-based compensation expense of $40.8 million and stock option investigation and restatement costs of $15.7 million (net of the $12.1 million stock option modification included in share-based compensation) in the first nine months of fiscal 2007, net income would have been $380.3 million, or $2.27 per share in the first nine months of fiscal 2008, as compared to net income of $339.8 million, or $1.95 per share in the first nine months of fiscal 2007. (See the reconciliation of GAAP financial information to non-GAAP financial information in the tables section of this press release.) Unaudited Balance Sheet As of May 31, 2008, the Company's cash, cash equivalents, 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, totaled $302.5 million as compared to $392.7 million as of August 31, 2007. Also excluded from this balance at May 31, 2008, is $95.0 million of cash pledged as collateral for a bond posted by the Company in connection with the securities class action verdict announced during the fiscal second quarter. Restricted cash and student deposits increased approximately $64.5 million and $58.7 million since August 31, 2008, respectively. These increases were primarily due to increased student enrollment. At May 31, 2008, accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying declined to $184.2 million from $190.9 million at August 31, 2007, resulting in 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). ("DSO See CSO. ") declining to 26 days for the third quarter as compared to 36 days in the third quarter of 2007, and from 38 days at August 31, 2007. The decrease in DSO is primarily due to improvements in processing time for the receipt of student financial aid, the write-off of approximately $28.4 million in previously reserved uncollectible accounts Uncollectible account An account which cannot be collected by a company because the customer is not able to pay or is unwilling to pay. receivable during the quarter and seasonality. As a result of seasonality, DSO may fluctuate from quarter-to-quarter. Goodwill increased by $36.4 million to $66.0 million at May 31, 2008, from $29.6 million at August 31, 2007, primarily due to the acquisition of Aptimus, Inc. in the first quarter of 2008. Intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , net, increased by $19.5 million to $21.7 million at May 31, 2008, from $2.2 million at August 31, 2007, primarily due to the acquisition of Aptimus, Inc. in the first quarter of fiscal 2008 and Apollo Global's acquisition of UNIACC in the third quarter of fiscal 2008. Deferred tax assets increased by $77.4 million to $208.4 million at May 31, 2008, from $131.0 million at August 31, 2007, mainly due to the accounting for the tax effects of the securities litigation charge. Long-term liabilities Long-Term Liabilities Recorded on the balance sheet, a company's liabilities for leases, bond repayments and other items due in more than one year. Notes: A company's long-term liabilities are accounted for by its debt obligations to other parties which last longer than (including current portion) increased by $240.8 million to $333.8 million at May 31, 2008, from $93.0 million at August 31, 2007, primarily due to the securities litigation charge and the reclassification from income taxes payable of approximately $53.0 million related to the adoption of FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 48, Accounting for Uncertain Tax Positions. Deferred revenue at May 31, 2008, increased to $206.0 million from $167.3 million at August 31, 2007, and increased from $150.0 million at May 31, 2007. The increase from the prior year quarter is principally due to increased student enrollment. Conference Call Information The Company will hold a conference call to discuss these earnings results at 5:00 PM Eastern, 2:00 PM Phoenix time, today, Tuesday, July 1, 2008. The call may be accessed by dialing (877) 292-6888 (domestic) or (706) 634-1393 (international). The conference ID number is 46892453. 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 # 46892453) until July 11, 2008. About Apollo Group, Inc. Apollo Group, Inc. has been an education provider for more than 30 years, providing academic access and opportunity to students through its subsidiaries, University of Phoenix, Institute for Professional Development, 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, Meritus University, Insight Schools and Apollo Global. It also owns Aptimus, a provider of innovative digital media solutions. The Company's distinctive educational programs and services are provided at the high school, college and graduate levels in 40 states (as of May 31, 2008) and the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United 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 and 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 , Canada; Mexico; Chile; and the Netherlands, as well as online, throughout the world. For more information about Apollo Group, Inc. and its subsidiaries, call (800) 990-APOL or visit the Company's website at www.apollogrp.edu. 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, Degreed Enrollment and New Degreed Enrollments, and overall future prospects, 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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