10-Q 1 p65318e10-q.htm 10-Q e10-q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     For the quarterly period ended May 31, 2001

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-25232

APOLLO GROUP, INC.
(Exact name of registrant as specified in its charter)

     
ARIZONA
(State or other jurisdiction of
incorporation or organization)		 86-0419443
(I.R.S. Employer
Identification No.)

4615 EAST ELWOOD STREET, PHOENIX, ARIZONA 85040
(Address of principal executive offices, including zip code)

(480) 966-5394
(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.

[X] Yes    [   ] No

AT JULY 10, 2001, THE FOLLOWING SHARES OF STOCK WERE OUTSTANDING:

         
Apollo Education Group Class A common stock, no par 114,179,000 Shares
Apollo Education Group Class B common stock, no par 484,000 Shares
University of Phoenix Online common stock, no par 6,054,000 Shares

 

APOLLO GROUP, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX

         
PAGE
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
PART II – OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
EXHIBIT 15.1 – Letter on Unaudited Interim Financial Information
EXHIBIT 99 – University of Phoenix Online Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements – Apollo Group, Inc.

APOLLO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

                   
May 31, August 31,
2001 2000
(Unaudited)
(Dollars in thousands)
Assets:
Current assets
Cash and cash equivalents
 $ 135,764 $ 59,912
Restricted cash
 50,566 35,681
Marketable securities
 143,172 58,226
Receivables, net
 85,794 78,933
Deferred tax assets, net
 8,035 8,267
Other current assets
 3,794 5,888
Total current assets
 427,125 246,907
Property and equipment, net
 100,755 87,833
Marketable securities
 18,532 6,020
Investment in IDL
 11,888 11,888
Cost in excess of fair value of assets purchased, net
 37,521 38,548
Deferred tax assets, net
 244
Other assets
 11,341 13,594
Total assets
 $ 607,406 $ 404,790
Liabilities and Shareholders’ Equity:
Current liabilities
Current portion of long-term liabilities
 $ 408 $ 450
Accounts payable
 12,703 12,960
Accrued liabilities
 30,054 22,297
Income taxes payable
 4,597 365
Student deposits and current portion of deferred revenue
 111,760 95,017
Total current liabilities
 159,522 131,089
Deferred tuition revenue, less current portion
 1,512 1,295
Long-term liabilities, less current portion
 11,484 9,973
Deferred tax liabilities, net
 1,225
Total liabilities
 172,518 143,582
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; 114,087,000 and 112,497,000 issued and outstanding at May 31, 2001 and August 31, 2000, respectively
 103 103
Apollo Education Group Class B voting common stock, no par value, 3,000,000 shares authorized; 484,000 and 512,000 issued and outstanding at May 31, 2001 and August 31, 2000, respectively
 1 1
University of Phoenix Online nonvoting common stock, no par value, 400,000,000 shares authorized; 5,866,000 issued and outstanding at May 31, 2001
Additional paid-in capital
 172,058 95,259
Treasury stock, at cost, 4,009,000 and 5,318,000 shares at May 31, 2001 and August 31, 2000, respectively
 (63,134 ) (83,353 )
Retained earnings
 325,785 249,219
Accumulated other comprehensive income (loss)
 75 (21 )
Total shareholders’ equity
 434,888 261,208
Total liabilities and shareholders’ equity
 $ 607,406 $ 404,790

The accompanying notes are an integral part of these consolidated financial statements.

1

APOLLO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS

                                   
For the Three Months Ended For the Nine Months Ended
May 31, May 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
(In thousands, except per share amounts)
Revenues:
Tuition and other, net $ 214,305 $ 167,591 $ 554,358 $ 444,989
Costs and expenses:
Instructional costs and services 107,871 97,499 297,343 262,082
Selling and promotional 40,127 23,695 104,126 68,547
General and administrative 13,600 11,828 37,309 34,152
161,598 133,022 438,778 364,781
Income from operations 52,707 34,569 115,580 80,208
Interest income, net 3,755 1,590 10,584 4,186
Income before income taxes 56,462 36,159 126,164 84,394
Provision for income taxes 21,074 15,016 49,598 34,511
Net income $ 35,388 $ 21,143 $ 76,566 $ 49,883
Net income attributed to:
Apollo Education Group common stock $ 34,224 $ 21,143 $ 74,358 $ 49,883
University of Phoenix Online common stock $ 1,164 $ — $ 2,208 $ —
Earnings per share attributed to:
Apollo Education Group common stock:
Basic net income per share $ 0.30 $ 0.19 $ 0.65 $ 0.44
Diluted net income per share $ 0.29 $ 0.19 $ 0.64 $ 0.43
Basic weighted average shares outstanding 114,505 112,909 114,150 113,906
Diluted weighted average shares outstanding 116,240 114,189 115,819 115,071
University of Phoenix Online common stock:
Basic net income per share $ 0.20 $ 0.38
Diluted net income per share $ 0.17 $ 0.33
Basic weighted average shares outstanding 5,829 5,785
Diluted weighted average shares outstanding 6,773 6,674

The accompanying notes are an integral part of these consolidated financial statements.

2

APOLLO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                   
For the Three Months Ended For the Nine Months Ended
May 31, May 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
(In thousands)
Net income $ 35,388 $ 21,143 $ 76,566 $ 49,883
Other comprehensive income, net of income taxes:
Currency translation gain 10 53 96 14
Unrealized gain on security 8
Reclassification adjustment for gains included in net income (8 ) (8 )
Comprehensive income $ 35,398 $ 21,188 $ 76,662 $ 49,897

The accompanying notes are an integral part of these consolidated financial statements.

3

APOLLO GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS

                       
For the Nine Months Ended
May 31,
2001 2000
(Unaudited)
(In thousands)
Cash flows provided by (used for) operating activities:
Net income $ 76,566 $ 49,883
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,887 19,984
Provision for uncollectible accounts 8,802 6,163
Deferred income taxes (1,237 ) (2,200 )
Tax benefits of stock options exercised 10,489 2,036
Decrease (increase) in assets:
Restricted cash (14,885 ) (11,814 )
Receivables (15,663 ) (4,086 )
Other assets 1,620 4,861
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 11,732 10,882
Student deposits and deferred revenue 16,960 6,881
Other liabilities 1,569 5,692
Net cash provided by operating activities 118,840 88,282
Cash flows provided by (used for) investing activities:
Net additions to property and equipment (31,178 ) (27,296 )
Cost of facility subject to sale-leaseback (3,447 )
Purchase of marketable securities (176,464 ) (31,563 )
Maturities of marketable securities 80,153 19,385
Purchase of other assets (743 ) (1,030 )
Proceeds from sale of land 879 648
Investment in IDL (1,187 )
Net cash used for investing activities (130,800 ) (41,043 )
Cash flows provided by (used for) financing activities:
Purchase of Apollo Education Group Class A common stock (1,593 ) (52,655 )
Issuance of Apollo Education Group Class A common stock 13,165 5,118
Issuance of University of Phoenix Online common stock 76,244
Payments on long-term debt (100 ) (100 )
Net cash provided by (used for) financing activities 87,716 (47,637 )
Currency translation gain 96 14
Net increase (decrease) in cash and cash equivalents 75,852 (384 )
Cash and cash equivalents at beginning of period 59,912 51,534
Cash and cash equivalents at end of period $ 135,764 $ 51,150

The accompanying notes are an integral part of these consolidated financial statements.

4

APOLLO GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)

1.     The interim consolidated financial statements include the accounts of Apollo Group, Inc. (“Apollo” or the “Company”) and its wholly-owned subsidiaries, which include The University of Phoenix, Inc. (“UOP”), Institute for Professional Development (“IPD”), Western International University, Inc. (“WIU”), The College for Financial Planning Institutes Corporation (the “College”), and Apollo Learning Group, Inc. This financial information reflects all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Unless otherwise noted, references to 2001 and 2000 refer to the periods ended May 31, 2001 and 2000, respectively.

On March 24, 2000, the Company’s Board of Directors authorized the issuance of a new class of stock called University of Phoenix Online common stock, that is intended to reflect the separate performance of University of Phoenix Online, a division of UOP. The Company’s other businesses and its retained interest in University of Phoenix Online are referred to as “Apollo Education Group.” On October 3, 2000, an offering of 5,750,000 shares of University of Phoenix Online common stock was completed at a price of $14.00 per share. At the time of the offering this stock represented a 10.8% interest in that business with Apollo Education Group retaining an 89.2% interest in University of Phoenix Online.

2.     The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the fiscal year ended August 31, 2000 included in the Company’s Form 10-K as filed with the Securities and Exchange Commission. The results of operations for the three-month and nine-month periods ended May 31, 2001 are not necessarily indicative of the results to be expected for the entire fiscal year or any future period.

3.     The Company’s operations are aggregated into a single reportable segment based upon their similar economic and operating characteristics. The Company’s educational operations are conducted in similar markets and produce similar economic results. These operations provide higher education programs for working adults. The Company’s operations are also subject to a similar regulatory environment, which include licensing and accreditation.

4.     On January 10, 2001, the Company’s Board of Directors authorized a 3-for-2 stock split of its Apollo Education Group Class A and Class B common stock to be affected in the form of a stock dividend. All Apollo Education Group common stock amounts, Apollo Education Group common stock prices, and earnings per share figures for periods prior to the stock split have been restated to reflect the effect of the stock split.

On June 29, 2001, the Company’s Board of Directors authorized a 3-for-2 stock split of its University of Phoenix Online common stock to be affected in the form of a stock dividend to be distributed on July 20, 2001 to shareholders of record at the close of business on July 10, 2001. Had this stock split been effective prior to May 31, 2001, the number of University of Phoenix Online common stock shares outstanding and earnings per share figures would have been:

                                 
For the Three Months Ended For the Nine Months Ended
May 31, 2001 May 31, 2001
As reported Pro forma As reported Pro forma
(Unaudited) (Unaudited)
Basic net income per share $ 0.20 $ 0.13 $ 0.38 $ 0.25
Diluted net income per share $ 0.17 $ 0.11 $ 0.33 $ 0.22
Basic weighted average shares outstanding 5,829 8,744 5,785 8,678
Diluted weighted average shares outstanding 6,773 10,160 6,674 10,011

5.     Earnings attributable to different classes of the Company’s common stocks are as follows:
                                 
For the Three Months Ended For the Nine Months Ended
May 31, May 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
(In thousands)
Apollo Education Group $ 34,224 $ 21,143 $ 74,358 $ 49,883
University of Phoenix Online 1,164 — 2,208 —
Net income $ 35,388 $ 21,143 $ 76,566 $ 49,883

The earnings attributable to University of Phoenix Online common stock represent the portion of the earnings of University of Phoenix Online attributed to the shares of University of Phoenix Online common stock outstanding excluding Apollo Education

5

Group’s retained interest in the University of Phoenix Online. At the date of the issuance of the University of Phoenix Online common stock, Apollo Education Group retained an 89.2% interest in University of Phoenix Online. This percentage has decreased to 89.0% at May 31, 2001 due to the purchase of shares of University of Phoenix Online common stock as part of the Apollo Group, Inc. Employee Stock Purchase Plan and the exercise of University of Phoenix Online stock options.

A reconciliation of the basic and diluted earnings per share computations for Apollo Education Group Class A and Class B common stock is as follows:

                                                   
For the Three Months Ended May 31,
2001 2000
Weighted Weighted
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
(Unaudited) (Unaudited)
(In thousands, except per share amounts)
Basic net income per share $ 34,224 114,505 $ 0.30 $ 21,143 112,909 $ 0.19
Effect of dilutive securities:
Stock options 1,735 1,280
Diluted net income per share $ 34,224 116,240 $ 0.29 $ 21,143 114,189 $ 0.19
                                                   
For the Nine Months Ended May 31,
2001 2000
Weighted Weighted
Average Per Share Average Per Share
Income Shares Amount Income Shares Amount
(Unaudited) (Unaudited)
(In thousands, except per share amounts)
Basic net income per share $ 74,358 114,150 $ 0.65 $ 49,883 113,906 $ 0.44
Effect of dilutive securities:
Stock options 1,669 1,165
Diluted net income per share $ 74,358 115,819 $ 0.64 $ 49,883 115,071 $ 0.43

Basic earnings per share for Apollo Education Group common stock for the three and nine months ended May 31, 2001 were computed by dividing Apollo Education Group earnings (including its retained interest in University of Phoenix Online earnings) by the weighted average number of Apollo Education Group common stock shares outstanding during the respective periods. Diluted earnings per share was calculated similarly, except that it included the dilutive effect of the assumed exercise of options, including the effects of shares issuable under Apollo Group, Inc. incentive plans, exclusive of options granted and shares issued with respect to University of Phoenix Online common stock.

A reconciliation of the basic and diluted earnings per share computations for University of Phoenix Online common stock is as follows:
                           
For the Three Months Ended May 31, 2001
Weighted Per Share
Income Average Shares Amount
(Unaudited)
(In thousands, except per share amounts)
Basic net income per share $ 1,164 5,829 $ 0.20
Effect of dilutive securities:
Stock options 944
Diluted net income per share $ 1,164 6,773 $ 0.17

6

                           
For the Period From the Date of the Offering Through
May 31, 2001
Weighted Per Share
Income Average Shares Amount
(Unaudited)
(In thousands, except per share amounts)
Basic net income per share $ 2,208 5,785 $ 0.38
Effect of dilutive securities:
Stock options 889
Diluted net income per share $ 2,208 6,674 $ 0.33

Basic earnings per share of University of Phoenix Online common stock for the three months ended May 31, 2001 and for the period from the date of the offering through May 31, 2001, were computed by dividing University of Phoenix Online earnings (excluding Apollo Education Group’s retained interest in University of Phoenix Online earnings) by the number of shares of University of Phoenix Online common stock outstanding during the respective periods. Diluted earnings per share was calculated similarly, except that it included the dilutive effect of the assumed exercise of options with respect to University of Phoenix Online common stock.

6.     Certain amounts reported for the three months and nine months ended May 31, 2000 have been reclassified to conform to the May 31, 2001 presentation, having no effect on net income.

7.     The following schedules present statement of operations data of Apollo Education Group, University of Phoenix Online, and Apollo Group, Inc. We have presented this information to illustrate the respective operating results of Apollo Education Group and University of Phoenix Online, including the impact of the inter-group license fee and inter-group allocated expenses, and how the operating results of those groups relate to the consolidated operating results of Apollo Group, Inc. The information below for Apollo Education Group excludes its retained interest in University of Phoenix Online.

Since its inception, the Company has financed University of Phoenix Online’s operations internally and has not incurred any related third-party debt. All of its cash receipts and disbursements are processed by the Company on University of Phoenix Online’s behalf. Prior to the offering, all amounts were settled through the funds allocated to/from Apollo Education Group component of University of Phoenix Online’s divisional net worth. Whenever University of Phoenix Online generated cash from operations, that cash was deemed to be transferred to Apollo Education Group and was accounted for as a return of capital. Whenever University of Phoenix Online had a cash need, that cash was deemed to be transferred from Apollo Education Group and was accounted for as a capital contribution. As a result of this policy, no inter-group interest income or expense was reflected in the consolidating statement of operations for the periods prior to the offering.

Upon the completion of the offering, the net proceeds of the offering of $74.1 million were transferred to University of Phoenix Online and accounted for as a capital contribution. Subsequently, the difference between cash receipts and cash outlays attributable to University of Phoenix Online have been accounted for as a revolving credit advance from University of Phoenix Online to Apollo Education Group, to the extent this difference was not transferred to University of Phoenix Online, requiring the reflection of interest expense by Apollo Education Group and interest income by the University of Phoenix Online at the rate of interest determined by the Board of Directors. Accordingly, operating results for Apollo Education Group and University of Phoenix Online for periods subsequent to the offering will not be comparable to such operating results prior to the offering.

7

                                                                   
Three Months Ended May 31, 2001 Three Months Ended May 31, 2000
Apollo University of Apollo University of
Education Phoenix Apollo Education Phoenix Apollo
Group Online Eliminations Group, Inc. Group Online Eliminations Group, Inc.
(Unaudited) (Unaudited)
(In thousands)
Revenues:
Tuition and other, net(1) $ 160,234 $ 54,071 $ — $ 214,305 $ 139,224 $ 28,367 $ — $ 167,591
Inter-group license fee revenue(2) 2,163 (2,163 ) — 1,135 (1,135 ) —
162,397 54,071 (2,163 ) 214,305 140,359 28,367 (1,135 ) 167,591
Costs and expenses:
Instructional costs and services
External expenses(3) 92,753 15,118 107,871 87,453 10,046 97,499
Inter-group allocated expenses(4) (3,502 ) 3,502 — (3,297 ) 3,297 —
Inter-group license fee expense(2) 2,163 (2,163 ) — 1,135 (1,135 ) —
Selling and promotional
External expenses(3) 27,015 13,112 40,127 19,718 3,977 23,695
Inter-group allocated expenses(4) (337 ) 337 — (231 ) 231 —
General and administrative
External expenses(3) 13,600 13,600 11,828 11,828
Inter-group allocated expenses(4) (3,200 ) 3,200 — (1,873 ) 1,873 —
126,329 37,432 (2,163 ) 161,598 113,598 20,559 (1,135 ) 133,022
Income from operations 36,068 16,639 — 52,707 26,761 7,808 — 34,569
Interest income, net 2,747 1,008 3,755 1,590 1,590
Income before income taxes 38,815 17,647 — 56,462 28,351 7,808 — 36,159
Provision for income taxes(5) 14,075 6,999 21,074 11,884 3,132 15,016
Net income $ 24,740 $ 10,648 $ — $ 35,388 $ 16,467 $ 4,676 $ — $ 21,143
                                                                   
Nine Months Ended May 31, 2001 Nine Months Ended May 31, 2000
Apollo University of Apollo University of
Education Phoenix Apollo Education Phoenix Apollo
Group Online Eliminations Group, Inc. Group Online Eliminations Group, Inc.
(Unaudited) (Unaudited)
(In thousands)
Revenues:
Tuition and other, net(1) $ 430,075 $ 124,283 $ — $ 554,358 $ 374,037 $ 70,952 $ — $ 444,989
Inter-group license fee revenue(2) 4,971 (4,971 ) — 2,838 (2,838 ) —
435,046 124,283 (4,971 ) 554,358 376,875 70,952 (2,838 ) 444,989
Costs and expenses:
Instructional costs and services
External expenses(3) 258,800 38,543 297,343 235,682 26,400 262,082
Inter-group allocated expenses(4) (8,602 ) 8,602 — (7,051 ) 7,051 —
Inter-group license fee expense(2) 4,971 (4,971 ) — 2,838 (2,838 ) —
Selling and promotional
External expenses(3) 75,108 29,018 104,126 58,506 10,041 68,547
Inter-group allocated expenses(4) (752 ) 752 — (473 ) 473 —
General and administrative
External expenses(3) 37,309 37,309 34,152 34,152
Inter-group allocated expenses(4) (7,873 ) 7,873 — (4,961 ) 4,961 —
353,990 89,759 (4,971 ) 438,778 315,855 51,764 (2,838 ) 364,781
Income from operations 81,056 34,524 — 115,580 61,020 19,188 — 80,208
Interest income, net 7,872 2,712 10,584 4,186 4,186
Income before income taxes 88,928 37,236 — 126,164 65,206 19,188 — 84,394
Provision for income taxes(5) 34,626 14,972 49,598 26,769 7,742 34,511
Net income $ 54,302 $ 22,264 $ — $ 76,566 $ 38,437 $ 11,446 $ — $ 49,883

(1)   Tuition and other revenues are shown net of discounts from a variety of promotional programs and represent amounts earned from students of Apollo Education Group and University of Phoenix Online, respectively. There are no tuition or other revenues that have been allocated between Apollo Education Group and University of Phoenix Online.

(2)   Apollo Group, Inc. charges University of Phoenix Online a license fee equal to 4% of University of Phoenix Online’s net revenues for the use of curriculum, trademarks, and copyrights owned by Apollo Group, Inc. and its subsidiaries. The license fee, which is included in University of Phoenix Online’s instructional costs and services, totaled $2.2 million and $1.1 million for the three

8

    months ended May 31, 2001 and 2000, respectively and $5.0 million and $2.8 million for the nine months ended May 31, 2001 and 2000, respectively. The inter-group license fee revenue of Apollo Education Group eliminates against the inter-group license fee expense of University of Phoenix Online in consolidation at the Apollo Group, Inc. level.

    The related license policy was not in place prior to March 24, 2000; however, in order to prepare financial statements that include the charges and benefits of the types provided for under this policy, the accompanying consolidating statement of operations data reflect charges and benefits that would have applied if this policy had been in effect during the periods presented. Although it has no present intention to do so, Apollo Group, Inc.’s Board of Directors may at any time in its sole discretion modify, rescind, or supplement this policy.

(3)   External expenses represent costs incurred directly by Apollo Education Group and University of Phoenix Online and do not include any inter-group allocations.

(4)   Certain costs incurred by Apollo Group, Inc. and The University of Phoenix, Inc. including legal, accounting, corporate office, and centralized student services costs, have been allocated to University of Phoenix Online on the basis of its revenues in relation to those of Apollo Group, Inc. and The University of Phoenix, Inc. The allocation of such expenses to University of Phoenix Online was as follows:

                                 
Three Months Ended Nine Months Ended
May 31, May 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
(In thousands)
Instructional costs and services $ 3,502 $ 3,297 $ 8,602 $ 7,051
Selling and promotional 337 231 752 473
General and administrative 3,200 1,873 7,873 4,961
$ 7,039 $ 5,401 $ 17,227 $ 12,485
    The related corporate expense allocation policy was not in place prior to March 24, 2000; however, in order to prepare financial statements that include the charges and benefits of the types provided for under this policy, the accompanying consolidating statement of operations data reflect charges and benefits that would have applied if this policy had been in effect during the periods presented. Although it has no present intention to do so, Apollo Group, Inc.’s Board of Directors may at any time in its sole discretion modify, rescind, or supplement this policy.

(5)   University of Phoenix Online’s results, along with other divisions of The University of Phoenix, Inc., are included in the Apollo Group, Inc. consolidated federal income tax return. State taxes are paid based upon apportioned taxable income or loss of Apollo Group, Inc., with the exception of certain state taxes that are based upon an apportionment of The University of Phoenix, Inc. taxable income or loss. The provision for income taxes included in the accompanying consolidating statement of operations data has been calculated on a separate company basis.

8.     The U.S. Department of Education Office of the Inspector General (“OIG”) is currently auditing the administration of the federal student financial assistance programs in connection with educational programs provided pursuant to contractual arrangements between IPD and certain of its client institutions. In audit reports issued to two client institutions, the OIG asserted that the client institutions violated the statutory prohibition on the use of incentive payments for recruiting by paying IPD a percentage of tuition revenue. The reports further suggest that IPD paid its employees in a manner that included incentive-based compensation even though IPD based its compensation plans for recruiters on factors or qualities that were not solely related to the success in securing enrollments. Although both IPD and the client institutions believe that the matters in question do not relate to student program, or institutional eligibility and therefore believe a repayment of federal funds is not appropriate, the OIG has recommended to the U.S. Department of Education that the client institutions be required to return to lenders all loan funds disbursed. The institutions, with IPD assistance, will work with the U.S. Department of Education to eliminate or settle the issues raised in the audit reports.

During the first and third quarters of 2001, IPD recorded charges of $1.4 million and $2.7 million, respectively, to provide for its share of the estimated settlement obligation relating to all of its client institutions under audit. Our calculation of the estimated settlement obligation, which is reflected in instructional costs and services in the accompanying consolidated statement of operations, was based on information available to us and our previous experience with respect to such settlements.

Although we believe that the OIG’s audits of IPD’s client institutions will be resolved without any material effect on our financial position, results of operations, or cash flows, and without any material change in IPD’s business strategy, as with any program review or audit, no assurance can be given as to the final outcome as the matters are not yet resolved.

9

In January 1998, the OIG began performing an audit of UOP’s administration of the Title IV Programs. The team previously presented questions regarding UOP’s interpretation of the “12-hour rule,” distance education programs, and institutional refund obligations. UOP reached an agreement with the U.S. Department of Education which acknowledges no admission that there were any issues of non-compliance or errors by UOP. To bring this audit to closure and settle all outstanding issues prior to the final OIG report, which was issued on March 31, 2000, UOP agreed to modify its physical campus learning team attendance log to track the sites of learning team meetings and record the hours attended. This modification has not had a negative impact on either UOP or its students. This modification does not require any change to University of Phoenix Online’s learning team attendance log. Part of the agreement, dated March 27, 2000, reached with the U.S. Department of Education requires UOP to pay the U.S. Department of Education $6.0 million as a negotiated settlement in full satisfaction of all monetary findings arising under the final OIG audit report. This amount was reflected in instructional costs and services in our third quarter 2000 results.

9.     During December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No.101, “Revenue Recognition in Financial Statements” (“SAB No. 101”), which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the Securities and Exchange Commission. The Company implemented the related guidelines effective June 1, 2001, with effect from September 1, 2000, without material effect on its results of operations.

10.     Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”) establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that an enterprise recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and resulting designation. The Company adopted SFAS No. 133 effective September 1, 2000, with no impact to the Company’s results of operations as the Company has no derivative financial instruments.

11.     The Financial Accounting Standards Board recently approved Statement of Financial Accounting Standards No. 141, Business Combinations (“SFAS No. 141”), and No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). Although the new standards have not yet been published, SFAS No. 141 will eliminate the use of the pooling-of-interests method of accounting for business combinations and will require all acquisitions to be accounted for using the purchase method. SFAS No. 142 will, among other things, discontinue the current requirement that goodwill resulting from purchase business combinations be amortized to expense over the related estimated useful life. Under the new guidance, goodwill balances will be subject to impairment analysis whenever events or circumstances indicate that the estimated fair value is less than the related carrying value. As of May 31, 2001, the Company had approximately $37.5 million in unamortized cost in excess of fair value of assets purchased resulting from its acquisitions of WIU and the College. The Company will determine the impact of the SFAS No. 141 and No. 142 guidance on its financial statements upon their issuance.

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Review by Independent Accountants

     The financial information as of May 31, 2001, and for the three-month and nine-month periods then ended, included in Part I pursuant to Rule 10-01 of Regulation S-X, has been reviewed by PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”), our independent accountants, in accordance with standards established by the American Institute of Certified Public Accountants. PricewaterhouseCoopers’ report is included in this quarterly report.

     PricewaterhouseCoopers does not carry out any significant or additional audit tests beyond those that would have been necessary if its report had not been included in this quarterly report. Accordingly, such report is not a “report” or “part of a registration statement” within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of Section 11 of such Act do not apply.

11

Report of Independent Accountants

The Board of Directors and
Shareholders of Apollo Group, Inc.:

We have reviewed the accompanying consolidated balance sheet of Apollo Group, Inc. and its subsidiaries as of May 31, 2001, and the related consolidated statements of operations and of comprehensive income for each of the three-month and nine-month periods ended May 31, 2001 and May 31, 2000 and the consolidated statement of cash flows for the nine-month periods ended May 31, 2001 and May 31, 2000. These financial statements are the responsibility of Apollo Group, Inc.’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of August 31, 2000, and the related consolidated statements of operations, of comprehensive income, of changes in shareholders’ equity and of cash flows for the year then ended (not presented herein), and in our report dated September 29, 2000 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of August 31, 2000, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
June 22, 2001

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PART I – FINANCIAL INFORMATION

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of Apollo Group, Inc.

     The following information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations of Apollo Group, Inc. and the consolidated financial statements and related notes of Apollo Group, Inc. for the fiscal year ended August 31, 2000 included in our Form 10-K as filed with the Securities and Exchange Commission, as well as in conjunction with the consolidated financial statements and related notes of Apollo Group, Inc. for the three-month and nine-month periods ended May 31, 2001 included in Item 1.

     This Form 10-Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Apollo Group, Inc.” contains forward-looking statements. Forward-looking statements are inherently uncertain and subject to risks. Such statements should be viewed with caution. Forward-looking statements in this Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Apollo Group, Inc.” include, but are not limited to, statements such as: 1) total purchases of property and equipment for us for the year ended August 31, 2001, are expected to range from $38.0 to $42.0 million; 2) we anticipate the seasonal trends in the second and fourth quarters will continue in the future; and 3) although we believe the OIG’s audits of IPD’s client institutions will be resolved without any material effect on our financial position, results of operations, or cash flows, and without any material change in IPD’s business strategy, as with any program review or audit, no assurance can be given as to the final outcome as the matters are not yet resolved.

     Future events and actual results could differ materially from those set forth in the forward-looking statements as a result of many factors. Statements in this Form 10-Q, including “Notes to Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Apollo Group, Inc.,” describe factors, among others, that could contribute to or cause such differences. Additional factors that could cause actual results to differ materially from those expressed in such forward-looking statements include, without limitation: 1) new or revised interpretations of regulatory requirements; 2) changes in or new interpretations of other applicable laws, rules, and regulations; 3) failure to maintain or renew required regulatory approvals, accreditation, or state authorizations by UOP or certain IPD client institutions; 4) failure to obtain authorizations from states in which UOP does not currently provide degree programs; 5) failure to obtain approval from the Higher Learning Commission, a member of the North Central Association of Colleges and Schools, for UOP to operate in new states; 6) changes in student enrollment; and 7) other factors set forth in this Form 10-Q. These forward-looking statements are based on estimates, projections, beliefs, and assumptions of us and our management and speak only as of the date made and are not guarantees of future performance. We undertake no obligation to publicly update or revise any forward-looking statements, or any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. You are advised, however, to consult any further disclosures we make in our reports filed with the Securities and Exchange Commission.

RESULTS OF OPERATIONS

     The following table sets forth our consolidated statement of operations data expressed as a percentage of net revenues for the periods indicated:

                                   
Three Months Ended Nine Months Ended
May 31, May 31,
2001 2000 2001 2000
(Unaudited) (Unaudited)
Revenues:
Tuition and other, net 100.0 % 100.0 % 100.0 % 100.0 %
Costs and expenses:
Instructional costs and services 50.3 58.2 53.7 58.9
Selling and promotional 18.7 14.1 18.8 15.4
General and administrative 6.4 7.1 6.7 7.7
75.4 79.4 79.2 82.0
Income from operations 24.6 20.6 20.8 18.0
Interest income, net 1.7 0.9 2.0 1.0
Income before income taxes 26.3 21.5 22.8 19.0
Less provision for income taxes 9.8 8.9 9.0 7.8
Net income 16.5 % 12.6 % 13.8 % 11.2 %

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THREE MONTHS ENDED MAY 31, 2001 COMPARED WITH THREE MONTHS ENDED MAY 31, 2000

     Tuition and other net revenues increased by 27.9% to $214.3 million in the three months ended May 31, 2001 from $167.6 million in the three months ended May 31, 2000 due primarily to a 20.6% increase in average full-time equivalent degree student enrollments and tuition price increases averaging four to six percent (depending on the geographic area and program) at UOP. Most of our UOP campuses, which include their respective learning centers, had increases in net revenues and average full-time equivalent degree student enrollments from the three months ended May 31, 2000 to the three months ended May 31, 2001.

     Tuition and other net revenues for the three months ended May 31, 2001 and 2000 consists primarily of $198.4 million and $150.5 million, respectively, of net tuition revenues from students enrolled in degree programs and $3.6 million and $6.8 million, respectively, of net tuition revenues from students enrolled in non-degree programs.

     Instructional costs and services increased by 10.6% to $107.9 million in the three months ended May 31, 2001 from $97.5 million in the three months ended May 31, 2000 due primarily to the direct costs necessary to support the increase in degree student enrollments and the $2.7 million reserve taken in the third quarter of fiscal 2001 related to the IPD client institutions’ audit by the OIG partially offset by the $6.0 million charge recorded in the third quarter of fiscal 2000 related to the Department of Education agreement. Direct costs consist primarily of faculty compensation, related staff salaries at each respective location, classroom lease expenses, and financial aid processing costs. These costs as a percentage of tuition and other net revenues decreased to 50.3% in the three months ended May 31, 2001 from 58.2% in the three months ended May 31, 2000 due primarily to greater tuition and other net revenues being spread over the fixed costs related to centralized student services and the $6.0 million charge recorded in the third quarter of fiscal 2000 related to the Department of Education agreement offset in part by the $2.7 million reserve taken in the third quarter of fiscal 2001 related to the IPD client institutions’ audit by the OIG. We may not be able to leverage our recurring costs to the same extent as we face increased costs related to the expansion into new geographic markets.

     Selling and promotional expenses increased by 69.3% to $40.1 million in the three months ended May 31, 2001 from $23.7 million in the three months ended May 31, 2000 due primarily to additional advertising and marketing. These expenses as a percentage of tuition and other net revenues increased to 18.7% in the three months ended May 31, 2001 from 14.1% in the three months ended May 31, 2000 due to increased advertising primarily related to University of Phoenix Online and six new campuses opened in the previous four quarters.

     General and administrative expenses increased by 15.0% to $13.6 million in the three months ended May 31, 2001 from $11.8 million in the three months ended May 31, 2000 due primarily to increased employee expenses related primarily to information services and depreciation related to the implementation of information support systems. General and administrative expenses as a percentage of tuition and other net revenues decreased to 6.4% in the three months ended May 31, 2001 from 7.1% in the three months ended May 31, 2000 due primarily to greater tuition and other net revenues being spread over the fixed costs related to various centralized functions such as information services, corporate accounting, and human resources.

     Net interest income was $3.8 million and $1.6 million in the three months ended May 31, 2001 and 2000, respectively. This increase was attributable to the increase in cash equivalents and marketable securities between periods primarily as a result of the reinvestment of cash flows from operations and the University of Phoenix Online offering. Interest expense was $113,000 and $88,000 for the three months ended May 31, 2001 and 2000, respectively.

     Our effective tax rate decreased to 37.3% in the three months ended May 31, 2001 from 41.5% in the three months ended May 31, 2000. This change is primarily the result of the impact of tax-exempt interest income.

     Net income increased to $35.4 million in the three months ended May 31, 2001 from $21.1 million in the three months ended May 31, 2000 due primarily to increased enrollments, increased tuition rates, improved utilization of instructional costs and services and general and administrative costs, and a reduction in our effective tax rate.

NINE MONTHS ENDED MAY 31, 2001 COMPARED WITH NINE MONTHS ENDED MAY 31, 2000

     Tuition and other net revenues increased by 24.6% to $554.4 million in the nine months ended May 31, 2001 from $445.0 million in the nine months ended May 31, 2000 due primarily to a 16.8% increase in average full-time equivalent degree student enrollments and tuition price increases averaging four to six percent (depending on the geographic area and program) at UOP. Most of our UOP campuses, which include their respective learning centers, had increases in net revenues and average full-time equivalent degree student enrollments from the nine months ended May 31, 2000 to the nine months ended May 31, 2001.

     Tuition and other net revenues for the nine months ended May 31, 2001 and 2000 consists primarily of $509.4 million and $397.1 million, respectively, of net tuition revenues from students enrolled in degree programs and $11.0 million and $18.3 million, respectively, of net tuition revenues from students enrolled in non-degree programs.

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     Instructional costs and services increased by 13.5% to $297.3 million in the nine months ended May 31, 2001 from $262.1 million in the nine months ended May 31, 2000 due primarily to the direct costs necessary to support the increase in degree student enrollments and the $4.1 million reserve taken in the first nine months of fiscal 2001 related to the IPD client institutions’ audit by the OIG partially offset by the $6.0 million charge recorded in the third quarter of fiscal 2000 related to the Department of Education agreement. Direct costs consist primarily of faculty compensation, related staff salaries at each respective location, classroom lease expenses, and financial aid processing costs. These costs as a percentage of tuition and other net revenues decreased to 53.7% in the nine months ended May 31, 2001 from 58.9% in the nine months ended May 31, 2000 due primarily to greater tuition and other net revenues being spread over the fixed costs related to centralized student services and the $6.0 million charge recorded in the third quarter of fiscal 2000 related to the Department of Education agreement offset in part by the $4.1 million reserve taken in the first nine months of fiscal 2001 related to the IPD client institutions’ audit by the OIG. We may not be able to leverage our recurring costs to the same extent as we face increased costs related to the expansion into new geographic markets.

     Selling and promotional expenses increased by 51.9% to $104.1 million in the nine months ended May 31, 2001 from $68.5 million in the nine months ended May 31, 2000 due primarily to additional advertising and marketing. These expenses as a percentage of tuition and other net revenues increased to 18.8% in the nine months ended May 31, 2001 from 15.4% in the nine months ended May 31, 2000 due to increased advertising primarily related to University of Phoenix Online and six new campuses opened in the previous four quarters.

     General and administrative expenses increased by 9.2% to $37.3 million in the nine months ended May 31, 2001 from $34.2 million in the nine months ended May 31, 2000 due primarily to increased employee expenses related primarily to information services and depreciation related to the implementation of information support systems. General and administrative expenses as a percentage of tuition and other net revenues decreased to 6.7% in the nine months ended May 31, 2001 from 7.7% in the nine months ended May 31, 2000 due primarily to greater tuition and other net revenues being spread over the fixed costs related to various centralized functions such as information services, corporate accounting, and human resources.

     Net interest income was $10.6 million and $4.2 million in the nine months ended May 31, 2001 and 2000, respectively. This increase was attributable to the increase in cash equivalents and marketable securities between periods primarily as a result of the reinvestment of cash flows from operations and the University of Phoenix Online offering. Interest expense was $335,000 and $158,000 for the nine months ended May 31, 2001 and 2000, respectively.

     Our effective tax rate decreased to 39.3% in the nine months ended May 31, 2001 from 40.9% in the nine months ended May 31, 2000. This change is primarily the result of tax-exempt interest income.

     Net income increased to $76.6 million in the nine months ended May 31, 2001 from $49.9 million in the nine months ended May 31, 2000 due primarily to increased enrollments, increased tuition rates, improved utilization of instructional costs and services and general and administrative costs, and a reduction in our effective tax rate.

SEASONALITY IN RESULTS OF OPERATATIONS

     We experience seasonality in our results of operations primarily as a result of changes in the level of student enrollments. While we enroll students throughout the year, second quarter (December through February) average enrollments and related revenues generally are lower than other quarters due to seasonal breaks in December and January. Second quarter costs and expenses historically increase as a percentage of tuition and other net revenues as a result of certain fixed costs not significantly affected by the seasonal second quarter declines in net revenues.

     We experience a seasonal increase in new enrollments in August of each year when most other colleges and universities begin their fall semesters. As a result, instructional costs and services and selling and promotional expenses historically increase as a percentage of tuition and other net revenues in the fourth quarter due to increased costs in preparation for the August peak enrollments.

     We anticipate that these seasonal trends in the second and fourth quarters will continue in the future.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating activities increased to $118.8 million in the nine months ended May 31, 2001 from $88.3 million in the nine months ended May 31, 2000. The increase resulted primarily from increased net income, increased tax benefits of stock options exercised and a larger increase in student deposits and deferred revenue partially offset by a larger increase in receivables.

     Capital expenditures increased to $31.2 million during the nine months ended May 31, 2001 compared to $27.3 million in the nine months ended May 31, 2000. Total purchases of property and equipment for the year ended August 31, 2001 are expected to

15

range from $38.0 to $42.0 million. These expenditures will primarily be related to new campuses and learning centers, the continued expansion of computer labs designed to support the information technology programs, and increases in normal recurring capital expenditures due to the overall increase in student and employee levels resulting from the growth in the business.

     At May 31, 2001, we had no outstanding borrowings on our $10.0 million line of credit. Borrowings under the line of credit bear interest at LIBOR plus .75% or prime at our election. The line of credit is renewable annually, and any amounts borrowed under the line are payable upon its termination in February 2003.

     Our Board of Directors authorized a program allocating up to $150 million of our funds to repurchase shares of Apollo Education Group Class A common stock. As of May 31, 2001, we had repurchased approximately 6,635,000 shares at a total cost of approximately $104.8 million.

     On March 24, 2000, our Board of Directors authorized the issuance of a new class of stock called University of Phoenix Online common stock, that is intended to reflect the separate performance of University of Phoenix Online, a division of UOP. Our other businesses and our retained interest in University of Phoenix Online are referred to as “Apollo Education Group.” On October 3, 2000, an offering of 5,750,000 shares of University of Phoenix Online common stock was completed at a price of $14.00 per share. At the time of the offering this stock represented a 10.8% interest in that business with Apollo Education Group retaining 89.2% interest in University of Phoenix Online.

     The U.S. Department of Education requires that Title IV Program funds collected in advance of student billings be kept in a separate cash or cash equivalent account until the students are billed for that portion of their program. In addition, all Title IV Program funds received by us through electronic funds transfer are subject to certain holding period restrictions. These funds generally remain in these separate accounts for an average of 60 to 75 days from receipt. As of May 31, 2001, we had approximately $50.6 million in these separate accounts, which are reflected in the Consolidated Balance Sheet as restricted cash, to comply with these requirements. These restrictions on cash have not affected our ability to fund daily operations.

     In January 1998, the U.S. Department of Education Office of the Inspector General (“OIG”) began performing an audit of UOP’s administration of the Title IV Programs. The team previously presented questions regarding UOP’s interpretation of the “12-hour rule,” distance education programs, and institutional refund obligations. UOP reached an agreement with the U.S. Department of Education which acknowledges no admission that there were any issues of non-compliance or errors by UOP. To bring this audit to closure and settle all outstanding issues prior to the final OIG report, which was issued on March 31, 2000, UOP agreed to modify its physical campus learning team attendance log to track the sites of learning team meetings and record the hours attended. This modification has not had a negative impact on either UOP or its students. This modification does not require any change to University of Phoenix Online’s learning team attendance log. Part of the agreement, dated March 27, 2000, reached with the U.S. Department of Education requires UOP to pay the U.S. Department of Education $6.0 million as a negotiated settlement in full satisfaction of all monetary findings arising under the final OIG audit report. This amount was reflected in instructional costs and services in our third quarter 2000 results. $1.5 million of this amount was paid in 2000 with the remaining $4.5 million due in 2003.

     The OIG is currently auditing the administration of the federal student financial assistance programs in connection with educational programs provided pursuant to contractual arrangements between IPD and certain of its client institutions. In audit reports issued to two client institutions, the OIG asserted that the client institutions violated the statutory prohibition on the use of incentive payments for recruiting by paying IPD a percentage of tuition revenue. The reports further suggest that IPD paid its employees in a manner that included incentive-based compensation even though IPD based its compensation plans for recruiters on factors or qualities that were not solely related to the success in securing enrollments. Although both IPD and the client institutions believe that the matters in question do not relate to student program, or institutional eligibility and therefore believe a repayment of federal funds is not appropriate, the OIG has recommended to the U.S. Department of Education that the client institutions be required to return to lenders all loan funds disbursed. The institutions, with IPD assistance, will work with the U.S. Department of Education to eliminate or settle the issues raised in the audit reports.

     During the first and third quarters of 2001, IPD recorded charges of $1.4 million and $2.7 million, respectively, to provide for its share of the estimated settlement obligation relating to all of its client institutions under audit. Our calculation of the estimated settlement obligation, which is reflected in instructional costs and services in the accompanying consolidated statement of operations, was based on information available to us and our previous experience with respect to such settlements.

     Although we believe that the OIG’s audits of IPD’s client institutions will be resolved without any material effect on our financial position, results of operations, or cash flows, and without any material change in IPD’s business strategy, as with any program review or audit, no assurance can be given as to the final outcome as the matters are not yet resolved.

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IMPACT OF INFLATION

     Inflation has not had a significant impact on our historical operations.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

     Our portfolio of marketable securities includes numerous issuers, varying types of securities and maturities. We intend to hold these securities to maturity. The fair value of our portfolio of marketable securities would not be significantly impacted by either a 100 basis point increase or decrease in interest rates due primarily to the short-term nature of the portfolio. We do not hold or issue derivative financial instruments.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

     Not Applicable

Item 2. Changes in Securities and Use of Proceeds

     Not Applicable

Item 3. Defaults Upon Senior Securities

     Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

     Not Applicable

Item 5. Other Information

    On May 24, 2001, Jerry Noble converted all of his 27,950 shares of Apollo Education Group Class B common stock into 27,950 shares of Apollo Education Group Class A common stock. The conversion resulted from Mr. Noble’s resignation from his position as an executive officer and director of Apollo, and subsequent termination of his rights as an Apollo Education Group Class B shareholder pursuant to the Apollo Education Group Class B shareholders agreement.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

     
Exhibit 15.1 Letter on Unaudited Interim Financial Information
Exhibit 99 University of Phoenix Online Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the three months ended May 31, 2001.

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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.

     
APOLLO GROUP, INC.
(Registrant)
Date: July 13, 2001
By: /s/ Kenda B. Gonzales
Kenda B. Gonzales
Chief Financial Officer
 
By: /s/ Daniel E. Bachus
Daniel E. Bachus
Chief Accounting Officer and Controller
 
By: /s/ Todd S. Nelson
Todd S. Nelson
President

19

APOLLO GROUP, INC. AND SUBSIDIARIES
EXHIBIT INDEX

         
PAGE
15.1 Letter on Unaudited Interim Financial Information Filed herewith
99 University of Phoenix Online Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations Filed herewith

20