e8vk

0000950153-07-001199.txt : 20070522 0000950153-07-001199.hdr.sgml : 20070522 20070521215633 ACCESSION NUMBER: 0000950153-07-001199 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070521 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070522 DATE AS OF CHANGE: 20070521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APOLLO GROUP INC CENTRAL INDEX KEY: 0000929887 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 860419443 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25232 FILM NUMBER: 07869588 BUSINESS ADDRESS: STREET 1: 4615 EAST ELWOOD ST CITY: PHOENIX STATE: AZ ZIP: 85040 BUSINESS PHONE: 6029665394 MAIL ADDRESS: STREET 1: 4615 E ELWOOD STREET CITY: PHOENIX STATE: AZ ZIP: 85040 8-K 1 p73922e8vk.htm 8-K e8vk

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 21, 2007

APOLLO GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)


Arizona	0-25232	86-0419443

(State or Other Jurisdiction of	(Commission	(IRS Employer
Incorporation)	File Number)	Identification No.)


4615 East Elwood Street, Phoenix, Arizona		85040

(Address of Principal Executive Offices)		(Zip Code)

(480) 966-5394

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS


	Item 2.02. Results of Operations and Financial Condition.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EX-99.1

Item 2.02. Results of Operations and Financial Condition.

On May 21, 2007, Apollo Group, Inc. (the “Company”) issued a press release regarding selected financial results for its second quarter of fiscal 2007, ended February 28, 2007. The Company also announced in the press release that it will hold a conference call (with a web cast at www.apollogrp.edu) at 8:30 AM Eastern Time, 5:30 AM Pacific Time, on May 22, 2007 regarding its second quarter results. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is filed herewith:


Exhibit Number		Description

99.1		Text of press release issued by Apollo Group, Inc. dated May 21, 2007.

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 hereunto duly authorized.


		APOLLO GROUP, INC.

Date:	May 21, 2007	By:	/s/ JOSEPH L. D’AMICO

		Name:	Joseph L. D’Amico
		Title:	Chief Financial Officer

EXHIBIT INDEX


Exhibit Number		Description

99.1		Text of press release issued by Apollo Group, Inc. dated May 21, 2007.

EX-99.1 2 p73922exv99w1.htm EX-99.1 exv99w1

Exhibit 99.1


		Apollo Group, Inc. News Release

APOLLO GROUP, INC. REPORTS FISCAL 2007
SECOND QUARTER FINANCIAL RESULTS AND COMPLETION OF ITS RESTATEMENT
PROCESS

Strengthened Corporate Governance and Expanded Disclosure of Financial and Operating Metrics

Phoenix, Arizona, May 21, 2007 — Apollo Group, Inc. (Nasdaq: APOL) (“Apollo Group” or the “Company”) today reported fiscal 2007 financial results for its second quarter ended February 28, 2007. In addition, the Company announced that it will be filing later today with the Securities and Exchange Commission (“SEC”) its Annual Report on Form 10-K for the year ended August 31, 2006, as well as its Quarterly Reports on Form 10-Q for the quarters ended May 31, 2006, November 30, 2006 and February 28, 2007. With these filings, the Company will be current with the SEC on all required and delinquent periodic filings.

These filings contain financial statements that were restated as a result of Apollo Group’s investigation into its past stock option practices, as well as other items. On June 23, 2006, the Company’s Board of Directors authorized a Special Committee to retain independent legal counsel, who in turn retained forensic accountants, to assist them in conducting an independent review of the Company’s historical practices related to stock option grants. On December 16, 2006, the Special Committee’s final factual findings were announced in a press release. In November 2006, with the assistance of outside legal counsel, the Company began its own in-depth internal review to ascertain the most likely measurement date of every stock option grant since its initial public offering (“IPO”). As a result of the restatement, for the fiscal years 1994 through 2005, the Company has recorded pre-tax non-cash compensation expense of $52.9 million.

As previously announced, the Company’s continued listing on Nasdaq is subject to review by the Nasdaq Listing and Hearing Review Council. The Company believes, based upon the filings that will be made later today with the SEC and additional information previously submitted to the Listing Council, that it will regain compliance with the requirements for continued listing on Nasdaq.

“From a governance standpoint, Apollo is now a much stronger company, and we are confident in our procedures going forward,” said Brian Mueller, president of Apollo Group, Inc. “We have significantly strengthened the governance and internal controls of the Company, including the implementation of a new process for granting stock options, the addition of two new independent members of the Board of Directors, a new Chairperson of the Audit Committee, and a new Compensation Committee. With the investigation and restatement behind us, our energies are solely focused on creating long-term shareholder value.”

Based on the independent review conducted by the Special Committee as well as Apollo Group’s internal review, the Company determined that 57 of the 100 total grants made during the period from 1994 through September 2006 used incorrect measurement dates for accounting purposes. The Special Committee also found no direct evidence that the grant date for any of the large management grants was selected with the benefit of hindsight.

The Company also identified four material weaknesses in internal controls over financial reporting, which it believes it has made significant progress in remediating as of February 28, 2007. The material weaknesses related to ineffective internal control over financial reporting include:

	1.		The granting of stock options and the related recording and disclosure of share based compensation expense;

	2.		The recording of allowance for doubtful accounts;

	3.		The recording of impairments for goodwill; and

	4.		The deduction of certain compensation expenses under the Internal Revenue Code.

The Company had four primary adjustments to its financial statements:

	1.		A cumulative pre-tax non-cash compensation expense of $52.9 million covering the period of 1994 through 2005;

	2.		An accrual of $42.8 million, as of February 2007, for its best estimate with respect to potential tax liabilities, including interest and penalties, under IRS code 162(m);

	3.		An increase in the allowance for doubtful accounts of $38 million, $24 million of which relates to years prior to fiscal 2006;

	4.		A goodwill impairment charge of $20.2 million (non-cash) related to the Company’s September 1997 acquisition of the College for Financial Planning (“CFP”).

The financial impact of the adjustments for fiscal 2006 and the first quarter of 2007 is summarized in the table below.

Apollo Group, Inc.
Selected Financial Information


	As Previously			Final
	Announced			Results			Variance			% change
	(in millions except per share data)
Fiscal Year 2006:
Revenues	$	2,476.3		$	2,477.5		$	1.2			0.0	%
Income from operations		697.3			650.0			(47.3	)		-6.8	%
Income from operations margin %		28.2	%		26.2	%	(2.0) pts				N/A
Diluted EPS	$	2.49		$	2.35			($0.14	)		-5.6	%

First Quarter of 2007:
Revenues	$	668.2		$	667.8			($0.4	)		-0.1	%
Income from operations		183.7			180.0			(3.7	)		-2.0	%
Income from operations margin %		27.5	%		27.0	%	(0.5) pts				N/A
Diluted EPS	$	0.66		$	0.65			($0.01	)		-1.5	%

Second Quarter Fiscal 2007 Results of Operations

Net income was $60.3 million, or $0.35 per diluted share (174.6 million weighted average diluted shares outstanding), compared to $79.1 million, or $0.45 per diluted share (175.4 million weighted average diluted shares outstanding) for the three months ended February 28, 2007 and 2006, respectively. Before giving effect to share based compensation expense and other unusual pre-tax charges of $5.7 million and $26.0 million in the second quarter of fiscal 2007 and fiscal 2006, respectively, earnings per diluted share were $0.44 in the second quarter of 2007, as compared to $0.57 in the second quarter of 2006. (See the reconciliation of Generally Accepted Accounting Principles (“GAAP”) financial information to non-GAAP financial information in the tables section of this press release.)

Consolidated revenues for the three months ended February 28, 2007, totaled $608.7 million, which represents a 6.7% increase over the second quarter of fiscal 2006. Total degreed enrollments grew by 10.2%. The University of Phoenix, Inc. (“UPX”) accounted for 92.9% of total tuition and other revenues, net.

Commenting on the quarter, Mueller said, “We are pleased with the progress we have made in enrollment growth which is driven by productivity improvements in advertising, new enrollment hires, enhanced retention strategies and our branding campaign. New Degreed Enrollments, which we are reporting for the first time, increased 24% year-over-year. The increase in enrollment growth drove revenue growth as well, despite the continued impact of the mix shift to our lower priced Axia program, as well as additional holiday breaks in 2007 versus 2006. In May, we instituted a price increase at Axia which should further benefit revenue growth going forward.”

Mueller continued, “We have refined, with the support of our Board of Directors, a long-term strategic plan to best ensure the effective deployment of our resources and capital. Our goal over time is to generate mid-to-high single-digit annual domestic revenue growth and low double-digit annual operation income and free-cash flow growth.”

Instructional costs and services increased by $33.8 million to $296.4 million, a 12.9% increase, in the three months ended February 28, 2007, as compared to the three months ended February 28, 2006, primarily resulting from increases in employee-related expenses due to the higher enrollment numbers, and wage adjustments instituted in December 2005 that increased pay principally to entry-level employees.

Selling and promotional expenses increased by $42.7 million to $166.9 million, a 34.4% increase, in the three months ended February 28, 2007, from the three months ended February 28, 2006, primarily resulting from increases in the number of enrollment counselors and an increase in advertising expenditures for both the Company’s internet-based advertising campaign as well as the launch of a national televised branding campaign.

General and administrative expenses decreased by $5.4 million to $53.6 million, a 9.2% decline, in the three months ended February 28, 2007, from the three months ended February 28, 2006. Before giving effect to stock option modifications of $12.1 million in the second quarter of fiscal 2007, as well as the unusual charges discussed above of $5.7 million and $26.0 million in the second quarter of fiscal 2007 and fiscal 2006, respectively, general and administrative expenses were $35.8 million and $33.0 million in the three months ended February 28, 2007 and 2006, respectively, which represents approximately 5.9% of revenues in both periods.

Six Months of Fiscal 2007 Results of Operations

Net income attributed to Apollo Group common stock was $174.2 million, or $1.00 per diluted share, (174.5 million weighted average diluted shares outstanding), compared to $207.7 million, or $1.17 per diluted share, (178.1 million weighted average diluted shares outstanding) for the six months ended February 28, 2007 and 2006, respectively.

Total consolidated revenues for Apollo Group for the six months ended February 28, 2007 were $1.3 billion, a 6.4% increase over the six months of fiscal 2006. Average quarterly degree enrollments grew by 9.3%. UPX accounted for 91.9% of total tuition and other revenues, net.

Expanded Disclosure of Financial and Operating Metrics

Apollo Group has expanded the financial data and operating metrics that it will be reporting on a quarterly basis, and has provided this historical information in the table below. The Company has broken out Degree Seeking Revenues, Single Course/Continuing Ed Revenues, and Other Revenues. Furthermore, the Company has provided Revenue by Degree Type, and New Degreed Enrollments.

Selected Financial Data and Operating Metrics


	Q1 2006			Q2 2006			Q3 2006			Q4 2006			Q1 2007			Q2 2007
Revenues (in thousands)
Degree Seeking Gross Revenues ⁽¹⁾	$	620,373		$	559,824		$	634,288		$	613,329		$	655,018		$	602,256
Less: Discounts		(29,409	)		(25,854	)		(22,201	)		(27,917	)		(25,108	)		(28,325	)

Degree Seeking Net Revenues ⁽¹⁾		590,964			533,970			612,087			585,412			629,910			573,931
Single Course/Continuing Ed Revenues ⁽¹⁾		3,684			3,993			6,826			7,660			5,010			5,352
Other ⁽²⁾		34,025			32,587			34,484			31,841			32,866			29,410

	$	628,673		$	570,550		$	653,397		$	624,913		$	667,786		$	608,693


Revenue by Degree Type (in thousands) ⁽¹⁾
Associates	$	73,226		$	84,498		$	99,050		$	108,694		$	124,527		$	130,016
Bachelors		366,926			315,330			357,111			336,720			347,086			311,301
Masters		171,720			151,312			167,675			156,312			171,524			149,139
Doctoral		8,501			8,684			10,452			11,603			11,881			11,800
Less: Discounts		(29,409	)		(25,854	)		(22,201	)		(27,917	)		(25,108	)		(28,325	)

	$	590,964		$	533,970		$	612,087		$	585,412		$	629,910		$	573,931


Degreed Enrollment ^{(1) (3)}
Associates		49,000			54,900			63,600			74,000			83,000			88,300
Bachelors		149,200			145,500			145,200			140,700			139,900			139,300
Masters		68,000			66,700			64,500			63,400			64,400			66,100
Doctoral		3,200			3,700			3,900			4,200			4,500			4,700

		269,400			270,800			277,200			282,300			291,800			298,400


Degree Seeking Gross Revenues per Degreed Enrollment
Associates	$	1,494		$	1,539		$	1,557		$	1,469		$	1,500		$	1,472
Bachelors		2,459			2,167			2,459			2,393			2,481			2,235
Masters		2,525			2,269			2,600			2,465			2,663			2,256
Doctoral		2,657			2,347			2,680			2,763			2,640			2,511
All degrees (after discounts)		2,194			1,972			2,208			2,074			2,159			1,923

New Degreed Enrollments ⁽¹⁾⁽⁴⁾
Associates		18,000			18,800			21,500			26,800			31,200			28,400
Bachelors		18,700			19,500			20,500			21,700			20,700			20,900
Masters		9,200			8,700			9,000			10,100			9,400			9,000
Doctoral		400			600			500			700			700			600

		46,300			47,600			51,500			59,300			62,000			58,900


⁽¹⁾		Represents information for UPX and Axia College only.

⁽²⁾		Represents revenues from IPD, CFP, WIU (excluding Axia college which is included in ⁽¹⁾), Insight Schools and other.

⁽³⁾		Represents individual students enrolled in our degree seeking programs that attended a course during the quarter and did not graduate as of the end of the quarter (includes Axia students enrolled in WIU or UPX) (rounded to hundreds).

⁽⁴⁾		Represents individual students enrolled in our degree seeking programs that attended a course during the quarter but did not attend a course in the last 12 months (includes Axia students enrolled in WIU or UPX) (rounded to hundreds).

Conference Call Information

The Company will hold a conference call to discuss these earnings results as well as its long-term strategic plan at 8:30 AM Eastern, 5:30 AM Pacific, tomorrow, Tuesday, May 22, 2007. The call may be accessed by dialing (877) 292-6888 (domestic) or (706) 634-1393 (international). The conference ID number is 9860734. 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 # 9860734) until June 5, 2007.

Forward-Looking Safe Harbor

Statements in this press release regarding Apollo Group’s business outlook, future financial and operating results, and overall future prospects, as well as statements regarding the future effect of Apollo Group’s restatement of historical financial statements, the anticipated amount of additional expenses and related matters, are forward-looking statements, and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act 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 Form 10-K, Forms 10-Q, and other filings with the Securities and Exchange Commission.

About Apollo Group, Inc.

Apollo Group, Inc. has been an education provider for more than 30 years, operating the University of Phoenix, the Institute for Professional Development, the College for Financial Planning, Western International University and Insight Schools. The Company offers innovative and distinctive educational programs and services from high school through college level at 263 locations in 39 states, Puerto Rico, Alberta, British Columbia, the Netherlands, and Mexico, as well as online, throughout the world.

For more information about Apollo Group, Inc. and its subsidiaries, call (800) 990-APOL or visit Apollo on the company website at: www.apollogrp.edu.

-Tables to Follow-

APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)


	For the Three Months				For the Six Months
	Ended February 28,				Ended February 28,
	2007		2006		2007		2006
(in thousands, except per share amounts)			Restated				Restated
Revenues:
Tuition and other, net	$	608,693	$	570,550	$	1,276,479	$	1,199,223

Costs and expenses:
Instructional costs and services		296,360		262,634		592,334		527,742
Selling and promotional		166,940		124,246		322,375		252,218
General and administrative		53,593		58,967		89,989		86,296

Total costs and expenses		516,893		445,847		1,004,698		866,256

Income from operations		91,800		124,703		271,781		332,967
Interest income and other, net		6,978		3,526		13,410		7,984

Income before income taxes		98,778		128,229		285,191		340,951
Provision for income taxes		38,440		49,140		110,979		133,282

Net income	$	60,338	$	79,089	$	174,212	$	207,669

Earnings per share attributed to Apollo Group Class A common stock:

Basic income per share	$	0.35	$	0.46	$	1.01	$	1.18

Diluted income per share	$	0.35	$	0.45	$	1.00	$	1.17

Basic weighted average shares outstanding		173,185		173,496		173,153		175,800

Diluted weighted average shares outstanding		174,624		175,435		174,543		178,094

APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)


	As of
(in thousands)	February 28, 2007			August 31, 2006

Assets:
Current assets
Cash and cash equivalents	$	424,088		$	309,058
Restricted cash		281,838			238,267
Marketable securities, current portion		30,138			45,978
Accounts receivable, net		195,795			160,583
Deferred tax assets, net, current portion		42,316			32,622
Other current assets		18,500			16,424

Total current assets		992,675			802,932
Property and equipment, net		343,579			328,440
Marketable securities, less current portion		45,053			53,692
Goodwill, net		31,029			16,891
Deferred tax assets, net, less current portion		66,014			53,131
Other assets (includes receivable from related party of $16,237 and $15,758 as of 2007 and 2006, respectively)		27,502			27,919

Total assets	$	1,505,852		$	1,283,005


Liabilities and Shareholders’ Equity:
Current liabilities
Accounts payable	$	39,147		$	61,289
Accrued liabilities		105,746			73,513
Current portion of long-term liabilities		21,290			23,101
Income taxes payable		33,637			47,812
Student deposits		278,959			254,130
Current portion of deferred revenue		146,201			135,911

Total current liabilities		624,980			595,756
Deferred revenue, less current portion		588			384
Long-term liabilities, less current portion		76,630			82,492

Total liabilities		702,198			678,632

Commitments and contingencies

Shareholders’ equity
Preferred stock, no par value, 1,000,000 shares authorized; none issued		—			—
Apollo Group Class A nonvoting common stock, no par value, 400,000,000 shares authorized; 188,004,000 issued at February 28, 2007 and August 31, 2006, and 172,707,000 and 172,555,000 outstanding at February 28, 2007 and August 31, 2006, respectively		103			103
Apollo Group Class B voting common stock, no par value, 3,000,000 shares authorized; 475,000 issued and outstanding at February 28, 2007 and August 31, 2006		1			1
Additional paid-in capital		—			—
Apollo Group Class A treasury stock, at cost, 15,297,000 and 15,449,000 shares at February 28, 2007 and August 31, 2006, respectively		(1,043,682	)		(1,054,046	)
Retained earnings		1,848,008			1,659,349
Accumulated other comprehensive loss		(776	)		(1,034	)

Total shareholders’ equity		803,654			604,373

Total liabilities and shareholders’ equity	$	1,505,852		$	1,283,005

APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)


	For the Six Months Ended Feb 28,
	2007			2006
(in thousands)				Restated
Cash flows provided by operating activities:
Net income	$	174,212		$	207,669
Adjustments to reconcile net income to net cash provided by operating activities:
Share based compensation		31,879			11,267
Excess tax benefits from share based compensation		(1,064	)		(12,853	)
Depreciation and amortization		34,789			32,506
Amortization of marketable securities discounts and premium, net		109			673
Provision for uncollectible accounts receivable		52,635			47,751
Deferred income taxes		(22,577	)		(6,614	)
Changes in assets and liabilities:
Accounts receivable, net		(87,847	)		(38,517	)
Other assets		(2,275	)		3,406
Accounts payable and accrued liabilities		(5,312	)		(11,847	)
Income taxes payable		(13,898	)		13,848
Student deposits		24,829			9,067
Deferred revenue		10,494			(8,685	)
Other liabilities		(2,227	)		4,748

Net cash provided by operating activities		193,747			252,419

Cash flows (used in) provided by investing activities:
Additions to property and equipment		(26,828	)		(15,308	)
Purchase of land and buildings related to new headquarters building		(23,385	)		(14,761	)
Purchase of Insight Schools, net of cash		(15,079	)		—
Purchase of marketable securities including auction rate securities		(545,475	)		(647,820	)
Maturities of marketable securities including auction rate securities		571,816			782,084
(Decrease) increase in restricted cash		(45,542	)		4,957
Purchase of other assets		—			(721	)

Net cash (used in) provided by investing activities		(84,493	)		108,431

Cash flows provided by (used in) financing activities:
Repurchase of Apollo Group Class A common stock		—			(510,882	)
Issuance of Apollo Group Class A common stock		4,454			19,119
Cash paid for cancellation of vested options		—			(6,330	)
Excess tax benefits from share based compensation		1,064			12,853

Net cash provided by (used in) used in financing activities		5,518			(485,240	)

Currency translation gain (loss)		258			(296	)

Net increase (decrease) in cash and cash equivalents		115,030			(124,686	)
Cash and cash equivalents, beginning of period		309,058			137,184

Cash and cash equivalents, end of period	$	424,088		$	12,498

Supplemental disclosure of non-cash investing activities
Credits received for tenant improvements	$	2,368		$	10,777
Purchases of property and equipment included in accounts payable	$	3,168		$	15,510

APOLLO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED SUPPLEMENTAL OPERATING EXPENSE DETAIL
(unaudited)


*Instructional Costs and Services Detail*					% of Revenues
	For the Three Months				For the Three Months
	Ended February 28,				Ended February 28,						% Change
	2007		2006		2007			2006			2007 vs. 2006
(in millions)			Restated					Restated
Employee compensation and related expenses	$	108.4	$	91.4		17.8	%		16.0	%		18.6	%
Faculty compensation		53.5		49.1		8.8	%		8.6	%		9.0	%
Classroom lease expenses and depreciation		49.6		46.7		8.1	%		8.2	%		6.2	%
Other instructional costs and services		40.3		37.2		6.6	%		6.5	%		8.3	%
Bad debt expense		26.2		23.7		4.3	%		4.2	%		10.5	%
Financial aid processing costs		14.4		12.6		2.4	%		2.2	%		14.3	%
Share based compensation		4.0		1.9		0.7	%		0.3	%		110.5	%

Instructional costs and services	$	296.4	$	262.6		48.7	%		46.0	%		12.9	%


*Selling and Promotional Expense Detail*					% of Revenues
	For the Three Months				For the Three Months
	Ended February 28,				Ended February 28,						% Change
	2007		2006		2007			2006			2007 vs. 2006
(in millions)			Restated					Restated
Enrollment advisors’ compensation and related expenses	$	79.2	$	62.7		13.0	%		11.0	%		26.3	%
Advertising		72.2		49.4		11.9	%		8.7	%		46.2	%
Other selling and promotional expenses		14.5		11.9		2.4	%		2.1	%		21.8	%
Share based compensation		1.0		0.2		0.1	%		0.0	%		400.0	%

Selling and promotional expenses	$	166.9	$	124.2		27.4	%		21.8	%		34.4	%


*General and Administrative Expense Detail*					% of Revenues
	For the Three Months				For the Three Months
	Ended February 28,				Ended February 28,						% Change
	2007		2006		2007			2006			2007 vs. 2006
(in millions)			Restated					Restated
Employee compensation and related expenses	$	13.3	$	38.8		2.2	%		6.8	%		-65.7	%
Share based compensation		16.8		5.0		2.8	%		0.9	%		236.0	%
Legal, audit, and corporate insurance		4.6		3.2		0.7	%		0.5	%		43.8	%
Administrative space and depreciation		6.6		5.3		1.1	%		0.9	%		24.5	%
Other general and administrative expenses		12.3		6.7		2.0	%		1.2	%		83.6	%

General and administrative expenses	$	53.6	$	59.0		8.8	%		10.3	%		-9.2	%


*Instructional Costs and Services Detail*					% of Revenues
	For the Six Months				For the Six Months
	Ended February 28,				Ended February 28,						% Change
	2007		2006		2007			2006			2007 vs. 2006
(in millions)			Restated					Restated
Employee compensation and related expenses	$	214.9	$	180.9		16.8	%		15.1	%		18.8	%
Faculty compensation		111.0		102.4		8.7	%		8.5	%		8.4	%
Classroom lease expenses and depreciation		99.3		93.5		7.8	%		7.8	%		6.2	%
Other instructional costs and services		80.7		73.7		6.3	%		6.1	%		9.5	%
Bad debt expense		49.3		47.8		3.9	%		4.0	%		3.1	%
Financial aid processing costs		29.2		25.5		2.3	%		2.1	%		14.5	%
Share based compensation		7.9		3.9		0.6	%		0.3	%		102.6	%

Instructional costs and services	$	592.3	$	527.7		46.4	%		44.0	%		12.2	%


*Selling and Promotional Expense Detail*					% of Revenues
	For the Six Months				For the Six Months
	Ended February 28,				Ended February 28,						% Change
	2007		2006		2007			2006			2007 vs. 2006
(in millions)			Restated					Restated
Enrollment advisors’ compensation and related expenses	$	154.9	$	119.5		12.1	%		10.0	%		29.6	%
Advertising		137.5		105.9		10.8	%		8.8	%		29.8	%
Other selling and promotional expenses		27.9		26.2		2.2	%		2.2	%		6.5	%
Share based compensation		2.1		0.6		0.1	%		0.0	%		250.0	%

Selling and promotional expenses	$	322.4	$	252.2		25.2	%		21.0	%		27.8	%


*General and Administrative Expense Detail*					% of Revenues
	For the Six Months				For the Six Months
	Ended February 28,				Ended February 28,						% Change
	2007		2006		2007			2006			2007 vs. 2006
(in millions)			Restated					Restated
Employee compensation and related expenses	$	26.0	$	49.8		2.0	%		4.1	%		-47.8	%
Share based compensation		22.0		6.7		1.7	%		0.6	%		228.4	%
Legal, audit, and corporate insurance		9.0		5.6		0.7	%		0.5	%		60.7	%
Administrative space and depreciation		13.0		10.9		1.0	%		0.9	%		19.3	%
Other general and administrative expenses		20.0		13.3		1.6	%		1.1	%		50.4	%

General and administrative expenses	$	90.0	$	86.3		7.1	%		7.2	%		4.3	%

Reconciliation of GAAP financial information to non-GAAP financial information


	For the Three Months
	Ended February 28,
	2007			2006
(in millions, except per share amounts)				Restated
Net income as reported	$	60.3		$	79.1


Reconciling items:
Share based compensation expense		21.7			7.1
Unusual charges (1)		5.7			26.0

		27.4			33.1
Less tax effects		(10.7	)		(12.7	)

		16.7			20.4


Net income adjusted to exclude share based compensation expense and unusual charges	$	77.0		$	99.5


Diluted weighted average shares outstanding		174.6			175.4


Diluted income per share adjusted to exclude share based compensation expense and unusual charges	$	0.44		$	0.57


(1)		The $5.7 million charge in fiscal 2007 represents professional fees related to the stock option investigation and restatement, as well as a non-cash fair value adjustment for stock options modified for former employees. The $26.0 million in 2006 represents severance charged in connection with the resignation of the Company’s former CEO.

Investor Relations Contact: Allyson Pooley ~ ICR ~ 310-954-1100 ~ apooley@icrinc.com
Company Contact: Janess Pasinski ~ Apollo Group, Inc. ~ (480) 557-1719 ~ janess@apollogrp.edu
Press Contact: Sara Jones for Apollo Group, Inc. ~ (818) 326-1871 ~ sara@singersocal.com

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Table of Contents

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