EX-99.1 2 p72059exv99w1.htm EX-99.1 exv99w1
 

Exhibit 99.1
     
(LOGO)
  Apollo Group, Inc.
News Release
APOLLO GROUP, INC. REPORTS FISCAL 2006
SECOND QUARTER RESULTS
     Phoenix, Arizona, March 23, 2006 — Apollo Group, Inc. (Nasdaq:APOL) today reported fiscal 2006 financial results for the second quarter ended February 28, 2006.
     Net income attributed to Apollo Education Group common stock for the three months ended February 28, 2006, was $80.6 million, or $.46 per diluted share, compared to $87.1 million, or $.47 per diluted share reported for the same period last year. The expense related to the amounts paid to our former CEO under the terms of the Separation Agreement reduced diluted earnings per share by $.09. $6.2 million related to the Separation Agreement was recorded directly through shareholders’ equity.
     Net income attributed to Apollo Education Group common stock for the six months ended February 28, 2006, was $211.4 million, or $1.19 per diluted share, compared to $196.6 million, or $1.04 per diluted share reported for the same period last year.
     Total consolidated revenues for Apollo Group, Inc. for the three months ended February 28, 2006, rose 12.6% to $569.6 million, compared with $505.7 million in the second quarter of fiscal 2005. The University of Phoenix accounted for 81.7% of the $526.7 million in net tuition revenues from students enrolled in degree programs for the quarter ended February 28, 2006.
     Total consolidated revenues for Apollo Group, Inc. for the six months ended February 28, 2006, rose 15.2% to $1.198 billion, compared with $1.041 billion in the same period last year. The University of Phoenix accounted for 83.3% of the $1.109 billion in net tuition revenues from students enrolled in degree programs for the six months ended February 28, 2006.
     Commenting on the quarter, Brian Mueller, President, said, “Our revenue was in line with the revised guidance we gave at the end of February. As we discussed then, we have undertaken a variety of focused initiatives to increase top-line growth for the second half of the year and beyond. These three primary strategies include investing aggressively in our core business of working adults, further developing the echo boomer business and leveraging our strategic relationship with advertising.com. We have already seen progress in these key initiatives and are excited by the many growth opportunities that lie ahead.”
     Consolidated degree enrollments for University of Phoenix and Western International University’s Axia College at February 28, 2006, increased by 10.5% to 281,400 students compared to 254,600 students at February 28, 2005. Consolidated degree enrollments of online students increased 20.5%.
~continued~

 

 

     The company will hold a conference call to discuss these earnings results at 11:00 AM Eastern time, 9:00 AM Phoenix time, on Thursday, March 23, 2006. The call may be accessed by dialing (877) 292-6888 (domestic) or (706) 634-1393 (internationally). The conference ID number is 6340488. A live webcast of this event may be accessed by visiting the company website at: www.apollogrp.edu. A replay of the call will be available on our website or at (706) 645-9291 (conf. ID # 6340488) until April 7, 2006.
     Apollo Group, Inc. has been providing higher education programs to working adults for almost 30 years. Apollo Group, Inc., operates through its subsidiaries: The University of Phoenix, Inc., Institute for Professional Development, The College for Financial Planning Institutes Corporation, and Western International University, Inc. The consolidated enrollment in its educational programs makes it the largest private institution of higher education in the United States. It offers educational programs and services at 95 campuses and 159 learning centers in 39 states, Puerto Rico, Alberta, British Columbia, Netherlands, and Mexico.
     For more information about Apollo Group, Inc. and its subsidiaries, call (800) 990-APOL or visit Apollo on the company website at: www.apollogrp.edu.
-Table to Follow-

 

 

APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                 
    For the Three Months Ended     For the Six Months Ended  
    February 28,     February 28,  
    2006     2005     2006     2005  
(In thousands, except per share amounts)
                        
Revenues:
                                
Tuition and other, net
   $ 569,551     $ 505,693     $ 1,198,435     $ 1,040,619  
 
                        
Costs and expenses:
                                
Instructional costs and services
     258,447       221,635       518,332       439,052  
Selling and promotional
     124,426       121,016       252,546       241,601  
General and administrative
     57,205       23,499       87,285       44,687  
 
                        
 
     440,078       366,150       858,163       725,340  
 
                        
Income from operations
     129,473       139,543       340,272       315,279  
Interest income and other, net
     3,567       3,855       8,070       8,417  
 
                        
Income before income taxes
     133,040       143,398       348,342       323,696  
Provision for income taxes
     52,405       56,284       136,933       127,051  
 
                        
Net income
   $ 80,635     $ 87,114     $ 211,409     $ 196,645  
 
                        
 
                                
Earnings per share attributed to Apollo Education Group common stock:
                                
 
                                
Diluted net income per share
   $ 0.46     $ 0.47     $ 1.19     $ 1.04  
 
                        
Diluted weighted average shares outstanding
     175,235       187,007       177,783       188,419  
 
                        
The company adopted SFAS 123(R) during the first quarter of 2006 resulting in $12.7 million and $18.5 million of stock-based compensation expense for the three and six months ended February 28, 2006, respectively. There was no stock-based compensation expense related to employee stock options and employee stock purchases under SFAS 123 in the same periods of fiscal 2005 because the Company did not adopt the recognition provisions of SFAS 123. Net income, including pro forma stock-based compensation expense, as previously disclosed in the notes to the Condensed Consolidated Financial Statements for the three and six months ended February 28, 2005, was $82.9 million or $0.44 per diluted share, and $188.2 million or $1.00 per diluted share, respectively.
~continued~

 

 

APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    February 28,     August 31,  
    2006     2005  
(Dollars in thousands)
            
Assets:
                
Current assets
                
Cash and cash equivalents
   $ 20,539     $ 145,607  
Restricted cash
     238,351       225,706  
Marketable securities
     97,801       224,112  
Receivables, net
     200,719       201,615  
Deferred tax assets, net
     17,565       14,991  
Other current assets
     19,738       23,058  
 
            
Total current assets
     594,713       835,089  
Property and equipment, net
     287,068       268,661  
Marketable securities
     76,079       97,350  
Cost in excess of fair value of assets purchased, net
     37,096       37,096  
Deferred tax assets, net
     32,193       35,756  
Other assets
     28,003       28,993  
 
            
Total assets
   $ 1,055,152     $ 1,302,945  
 
            
Liabilities and Shareholders’ Equity:
                
Current liabilities
                
Current portion of long-term liabilities
   $ 20,432     $ 18,878  
Accounts payable
     44,879       40,129  
Accrued liabilities
     62,428       61,315  
Income taxes payable
     9,185       9,740  
Student deposits and current portion of deferred revenue
     391,914       387,910  
 
            
Total current liabilities
     528,838       517,972  
Deferred tuition revenue, less current portion
     359       351  
Long-term liabilities, less current portion
     84,537       77,748  
 
            
Total liabilities
     613,734       596,071  
 
            
Commitments and contingencies
                
Shareholders’ equity
                
Preferred stock, no par value, 1,000,000 shares authorized; none issued
                
Apollo Education Group Class A nonvoting common stock, no par value, 400,000,000 shares authorized; 188,002,000 issued at February 28, 2006 and August 31, 2005, and 172,205,000 and 179,184,000 outstanding at February 28, 2006 and August 31, 2005, respectively
     103       103  
Apollo Education Group Class B voting common stock, no par value, 3,000,000 shares authorized; 477,000 issued and outstanding at February 28, 2006 and August 31, 2005
     1       1  
Additional paid-in capital
                
Apollo Education Group Class A treasury stock, at cost, 15,797,000 and 8,818,000 shares at February 28, 2006 and August 31, 2005, respectively
     (1,079,274 )     (645,742 )
Retained earnings
     1,522,022       1,353,650  
Accumulated other comprehensive loss
     (1,434 )     (1,138 )
 
            
Total shareholders’ equity
     441,418       706,874  
 
            
Total liabilities and shareholders’ equity
   $ 1,055,152     $ 1,302,945  
 
            
~continued~

 

 

APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    For the Six Months Ended  
    February 28,  
    2006     2005  
(In thousands)
            
Cash flows provided by (used for) operating activities:
                
Net income
   $ 211,409     $ 196,645  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Stock-based compensation expense
     10,983          
Depreciation and amortization
     32,100       25,093  
Amortization of investment premiums
     673       2,196  
Provision for uncollectible accounts
     39,883       18,919  
Deferred income taxes
     989       17,046  
Tax benefits of stock options exercised
             24,430  
Excess tax benefits from stock-based compensation
     (9,533 )        
Cash received for tenant improvements
     1,594       1,263  
Changes in assets and liabilities
                
Receivables
     (38,987 )     (43,660 )
Other assets
     3,408       (4,132 )
Accounts payable and accrued liabilities
     (9,647 )     (30,112 )
Income taxes
     9,896       (26,076 )
Student deposits and deferred revenue
     4,440       46,640  
Other liabilities
     3,058       1,689  
 
            
Net cash provided by operating activities
     260,266       229,941  
 
            
Cash flows provided by (used for) investing activities:
                
Net additions to property and equipment
     (15,350 )     (43,897 )
Development of land and buildings related to future Online expansion
     (14,761 )        
Purchase of marketable securities
     (187,156 )     (18,961 )
Maturities of marketable securities
     334,065       238,094  
Purchase of restricted securities
     (460,664 )     (173,731 )
Maturities of restricted securities
     448,019       130,495  
Purchase of other assets
     (721 )     (1,253 )
 
            
Net cash provided by investing activities
     103,432       130,747  
 
            
Cash flows provided by (used for) financing activities:
                
Purchase of Apollo Education Group Class A common stock
     (510,882 )     (542,988 )
Issuance of Apollo Education Group Class A common stock
     19,119       33,865  
Cash paid for cancellation of vested options
     (6,240 )        
Excess tax benefits from stock-based compensation
     9,533          
 
            
Net cash used for financing activities
     (488,470 )     (509,123 )
 
            
Currency translation loss
     (296 )     (356 )
 
            
Net decrease in cash and cash equivalents
     (125,068 )     (148,791 )
Cash and cash equivalents at beginning of period
     145,607       156,669  
 
            
Cash and cash equivalents at end of period
   $ 20,539     $ 7,878  
 
            
 
                
Supplemental disclosure of non-cash investing activities
                
Tenant improvement allowances
   $ 10,777     $ 7,795  
Purchases of property and equipment included in accounts payable
   $ 15,510     $ 4,960  
~continued~

 

 

APOLLO GROUP, INC. AND SUBSIDIARIES
DEGREE ENROLLMENTS
(Unaudited)
                 
    February 28,
    2006   2005
     
The University of Phoenix, Inc. and Axia College
                
Associates
     53,500       22,800  
Bachelors
     155,700       159,100  
Masters
     68,700       70,200  
Doctoral
     3,500       2,500  
     
 
     281,400       254,600  
     
 
                
Apollo Group, Inc. Consolidated
                
Associates
     61,200       30,200  
Bachelors
     168,800       172,800  
Masters
     77,300       78,300  
Doctoral
     3,500       2,500  
     
 
     310,800       283,800  
     
~continued~

 

 

APOLLO GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA—THREE MONTHS ENDED FEBRUARY 28, 2006
(Unaudited)
     Instructional costs and services increased by $36.8 million in the three months ended February 28, 2006, from the three months ended February 28, 2005. The following table sets forth the changes in significant components of instructional costs and services, in millions:
                                 
                    Percent of Revenues
    For the Three Months Ended   For the Three Months Ended
    February 28,   February 28,
    2006   2005   2006   2005
         
Employee compensation and related expenses
   $ 90.1     $ 81.3       15.9 %     16.1 %
Stock-based compensation
     3.5               0.6 %        
Faculty compensation
     49.1       43.4       8.6 %     8.6 %
Classroom lease expenses and depreciation
     46.3       41.7       8.1 %     8.2 %
Financial aid processing costs
     12.7       10.4       2.2 %     2.1 %
Bad debt expense
     19.8       9.9       3.5 %     1.9 %
Other instructional costs and services
     36.9       34.9       6.5 %     6.9 %
         
Instructional costs and services
   $ 258.4     $ 221.6       45.4 %     43.8 %
         
     Selling and promotional expenses increased by $3.4 million in the three months ended February 28, 2006, from the three months ended February 28, 2005. The following table sets forth the changes in significant components of selling and promotional expenses, in millions:
                                 
                    Percent of Revenues
    For the Three Months Ended   For the Three Months Ended
    February 28,   February 28,
    2006   2005   2006   2005
         
Enrollment advisors’ compensation and related expenses
   $ 62.7     $ 51.7       11.0 %     10.2 %
Stock-based compensation
     0.4               0.0 %        
Advertising
     49.4       56.1       8.7 %     11.1 %
Other selling and promotional expenses
     11.9       13.2       2.1 %     2.6 %
         
Selling and promotional expenses
   $ 124.4     $ 121.0       21.8 %     23.9 %
         
     General and administrative expenses increased by $33.7 million in the three months ended February 28, 2006, from the three months ended February 28, 2005. The following table sets forth the changes in significant components of general and administrative expenses, in millions:
                                 
                    Percent of Revenues
    For the Three Months Ended   For the Three Months Ended
    February 28,   February 28,
    2006   2005   2006   2005
         
Employee compensation and related expenses
   $ 32.7     $ 11.9       5.7 %     2.4 %
Stock-based compensation
     8.8               1.5 %        
Administrative space and depreciation
     5.7       4.0       1.0 %     0.8 %
Other general and administrative expenses
     10.0       7.6       1.8 %     1.5 %
         
General and administrative expenses
   $ 57.2     $ 23.5       10.1 %     4.7 %
         
     Included in the above general and administrative employee compensation and related expenses is $19.0 million related to our former CEO’s Separation Agreement. Included in the above general and administrative stock-based compensation is $7.5 million related to our former CEO’s Separation Agreement.
~continued~

 

 

APOLLO GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA—SIX MONTHS ENDED FEBRUARY 28, 2006
(Unaudited)
     Instructional costs and services increased by $79.3 million in the six months ended February 28, 2006, from the six months ended February 28, 2005. The following table sets forth the changes in significant components of instructional costs and services, in millions:
                                 
                    Percent of Revenues
    For the Six Months Ended   For the Six Months Ended
    February 28,   February 28,
    2006   2005   2006   2005
         
Employee compensation and related expenses
   $ 178.3     $ 161.8       14.9 %     15.6 %
Stock-based compensation
     6.3               0.6 %        
Faculty compensation
     102.4       87.9       8.6 %     8.4 %
Classroom lease expenses and depreciation
     92.7       82.0       7.7 %     7.9 %
Financial aid processing costs
     25.5       20.7       2.1 %     2.0 %
Bad debt expense
     39.9       19.0       3.3 %     1.8 %
Other instructional costs and services
     73.2       67.7       6.1 %     6.5 %
         
Instructional costs and services
   $ 518.3     $ 439.1       43.3 %     42.2 %
         
     Selling and promotional expenses increased by $10.9 million in the six months ended February 28, 2006, from the six months ended February 28, 2005. The following table sets forth the changes in significant components of selling and promotional expenses, in millions:
                                 
                    Percent of Revenues
    For the Six Months Ended   For the Six Months Ended
    February 28,   February 28,
    2006   2005   2006   2005
         
Enrollment advisors’ compensation and related expenses
   $ 119.5     $ 99.9       10.0 %     9.6 %
Stock-based compensation
     0.9               0.1 %        
Advertising
     105.9       115.9       8.8 %     11.1 %
Other selling and promotional expenses
     26.2       25.8       2.2 %     2.5 %
         
Selling and promotional expenses
   $ 252.5     $ 241.6       21.1 %     23.2 %
         
     General and administrative expenses increased by $42.6 million in the six months ended February 28, 2006, from the six months ended February 28, 2005. The following table sets forth the changes in significant components of general and administrative expenses, in millions:
                                 
                    Percent of Revenues
    For the Six Months Ended   For the Six Months Ended
    February 28,   February 28,
    2006   2005   2006   2005
         
Employee compensation and related expenses
   $ 44.9     $ 21.9       3.7 %     2.1 %
Stock-based compensation
     11.3               0.9 %        
Administrative space and depreciation
     11.6       7.8       1.0 %     0.8 %
Other general and administrative expenses
     19.5       15.0       1.6 %     1.4 %
         
General and administrative expenses
   $ 87.3     $ 44.7       7.3 %     4.3 %
         
     Included in the above general and administrative employee compensation and related expenses is $19.0 million related to our former CEO’s Separation Agreement. Included in the above general and administrative stock-based compensation is $7.5 million related to our former CEO’s Separation Agreement.
Company Contact: Kenda B. Gonzales, CFO ~ (800) 990-APOL ~ kenda.gonzales@apollogrp.edu
Investor Relations Contact: Janess Pasinski ~ Apollo Group, Inc. ~ (800) 990-APOL, option 6 ~ janess@apollogrp.edu
Press Contact: Ayla Dickey ~ Apollo Group, Inc. ~ (480) 557-2952 ~ ayla.dickey@apollogrp.edu