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 ending: February 28, 1997
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 86-0419443
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4615 EAST ELWOOD STREET, PHOENIX, ARIZONA 85040
(Address of principal executive offices, including zip code)
(602) 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
SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK
AS OF MARCH 14, 1997
Class A Common Stock, no par 49,857,883 Shares
Class B Common Stock, no par 575,769 Shares
1 <PAGE>
APOLLO GROUP, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
PART I -- FINANCIAL INFORMATION ----
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 9
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .15
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . .15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . .15
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . .15
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . .15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . .15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
2 <PAGE>
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements
<TABLE>
Apollo Group, Inc. and Subsidiaries
Consolidated Statement of Operations
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
February 28 & 29, February 28 & 29,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenues $ 61,652 $ 46,358 $128,635 $ 96,085
-------- -------- -------- --------
Costs and expenses:
Instruction costs and services 38,089 29,294 77,697 59,253
Selling and promotional 8,492 6,640 16,971 12,968
General and administrative 6,586 5,705 13,334 11,300
-------- -------- -------- --------
Total costs and expenses 53,167 41,639 108,002 83,521
-------- -------- -------- --------
Income before income taxes 8,485 4,719 20,633 12,564
Less provision for income taxes 3,393 1,833 8,252 5,089
-------- -------- -------- --------
Net income $ 5,092 $ 2,886 $ 12,381 $ 7,475
======== ======== ======== ========
Net income per share $ .10 $ .06 $ .24 $ .15
======== ======== ======== ========
Weighted average shares outstanding 51,806 51,071 51,706 50,852
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
3 <PAGE>
<TABLE>
Apollo Group, Inc. and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
February 28, August 31,
1997 1996
------------ ----------
(Unaudited)
<S> <C> <C>
Assets:
Current assets --
Cash and cash equivalents $ 64,434 $ 51,982
Restricted cash 15,387 11,285
Short-term investments 20,221 13,273
Receivables, net 27,952 25,985
Inventory 3,034 3,112
Deferred tax assets, net 2,828 2,972
Prepaids and other current assets 687 532
-------- --------
Total current assets 134,543 109,141
Property and equipment, net 21,187 18,925
Educational program production costs, net 1,556 1,446
Non-operating property 5,583 4,321
Cost in excess of fair value of assets purchased 2,371 2,459
Deposits and other assets 1,398 1,558
-------- --------
Total assets $166,638 $137,850
======== ========
Liabilities and Shareholders' Equity:
Current liabilities --
Current portion of long-term liabilities $ 281 $ 140
Accounts payable 5,883 7,742
Other accrued liabilities 13,115 10,925
Income taxes payable 450 261
Student deposits and deferred tuition 45,073 35,736
-------- --------
Total current liabilities 64,802 54,804
-------- --------
Long-term liabilities, less current portion 2,509 1,773
-------- --------
Deferred tax liabilities, net 1,035 659
-------- --------
Commitments and contingencies -- --
-------- --------
Shareholders' equity --
Preferred stock, no par value, 1,000,000 shares authorized, none issued -- --
Class A nonvoting common stock, no par value, 400,000,000 shares authorized;
49,858,000 issued and outstanding at February 28, 1997 and 65,000,000 shares
authorized; 49,476,000 issued and outstanding at August 31, 1996 65 65
Class B voting common stock, no par value, 3,000,000 shares authorized;
576,000 issued and outstanding 1 1
Additional paid-in capital 46,476 41,201
Retained earnings 51,750 39,347
-------- --------
Total shareholders' equity 98,292 80,614
-------- --------
Total liabilities and shareholders' equity $166,638 $137,850
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
4 <PAGE>
<TABLE>
Apollo Group, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(In thousands)
<CAPTION>
Six Months Ended
February 28 & 29,
----------------------
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Net cash received from (used for)
operating activities:
Cash received from customers $126,728 $94,211
Cash paid to employees and suppliers (99,803) (80,443)
Interest received 1,793 1,570
Interest paid (39)
Net income taxes paid (7,543) (5,290)
--------- ---------
Net cash received from operating activities 21,175 10,009
--------- ---------
Net cash received from (used for)
investing activities:
Purchase of property and equipment (5,130) (4,817)
Purchase of non-operating property (1,262) (2,880)
Additions to educational program production costs (652) (618)
Proceeds from sale of assets 44
Purchase of short-term investments (12,376)
Proceeds from sale of short-term investments 5,428
Cash paid at acquisition of Western,
net of cash acquired (585)
--------- ---------
Net cash used for investing activities (13,948) (8,900)
--------- ---------
Net cash received from (used for)
financing activities:
Principal payments on long-term debt (50)
Issuance of stock 1,399 587
Tax benefits related to disqualifying dispositions and
exercise of options 3,876 361
-------- ----------
Net cash received from financing activities 5,225 948
--------- ---------
Net increase in cash and cash equivalents 12,452 2,057
Cash and cash equivalents, beginning of period 51,982 50,726
--------- ---------
Cash and cash equivalents, end of period $ 64,434 $52,783
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
5 <PAGE>
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"), the
Institute for Professional Development ("IPD") and Western International
University, Inc. ("WIU"). 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 1997
and 1996 refer to the periods ended February 28, 1997 and February 29, 1996,
respectively.
2. The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for
the fiscal year ended August 31, 1996 included in the Company's Form 10-K as
filed with the Securities and Exchange Commission. The 1997 and 1996 interim
financial information was reviewed by Price Waterhouse LLP (see "Review by
Independent Accountants").
3. The results of operations for the three-month and six-month periods
ended February 28, 1997 are not necessarily indicative of the results to be
expected for the entire fiscal year or any future period.
4. Effective September 1, 1995, the Company, through its newly formed WIU
subsidiary, completed the acquisition of Western International University
("Western"). As previously disclosed, the Company assumed the Title IV
liabilities of Western and those liabilities were subject to change based on
the results of the U.S. Department of Education (the "DOE") audit of
Western's Title IV programs. Although much of the fieldwork was completed in
early 1996, the final audit results and amount that the Company is
responsible for have not been determined by the DOE at the current time. The
original acquisition price of $2.1 million was adjusted to $3.0 million at
August 31, 1996 to reflect an increase in the estimated liability to the DOE
related to Western's processing of Title IV financial aid and other related
liabilities. Depending on the interpretation of the various regulatory
requirements, the final audit results and the Company's liability may differ
materially from the estimates recorded at August 31, 1996. Any difference
between the final amount and the estimates currently recorded will be
recorded as an increase or decrease, respectively, to expense.
6 <PAGE>
Review by Independent Accountants
The financial information as of February 28, 1997, and for the three-month
and six-month periods then ended, included in Part I pursuant to Rule
10-01 of Regulation S-X, has been reviewed by Price Waterhouse LLP ("Price
Waterhouse"), the Company's independent accountants, in accordance with
standards established by the American Institute of Certified Public
Accountants. Price Waterhouse's report is included in this quarterly report.
Price Waterhouse 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.
7 <PAGE>
Report of Independent Accountants
To 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 February 28, 1997, and the related
consolidated statement of operations for the three-month and six-month
periods ended February 28, 1997 and February 29, 1996 and the consolidated
statement of cash flows for the six-month period ended February 28, 1997 and
February 29, 1996. 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 consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of August 31, 1996, and the
related consolidated statements of operations, of changes in shareholders'
equity and of cash flows for the year then ended (not presented herein), and
in our report dated October 14, 1996 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, 1996, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
/s/ PRICE WATERHOUSE LLP
Phoenix, Arizona
March 18, 1997
8 <PAGE>
PART I -- FINANCIAL INFORMATION
Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto for
the fiscal year ended August 31, 1996 included in the Company's Form 10-K as
filed with the Securities and Exchange Commission, as well as in conjunction
with the consolidated financial statements and notes thereto for the three-month
and six-month periods ended February 28, 1997 included in Item 1.
This quarterly report on Form 10-Q contains forward-looking statements.
Additional written or oral forward-looking statements may be made by the
Company from time to time in filings with the Securities and Exchange
Commission or otherwise. The words "believe," "plan," "expect,"
"anticipate," and "project," and similar expressions identify forward-looking
statements, which speak only as of the date the statement was made. Such
forward-looking statements are within the meaning of that term in Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements may include, but not be
limited to, projections of revenues, income, or loss, expenses, capital
expenditures, plans for future operations, financing needs or plans, the
impact of inflation and plans relating to products or services of the
Company, as well as assumptions relating to the foregoing. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
Forward looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements. Statements in
this quarterly report, including the Notes to the Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," 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, new or revised
interpretations of regulatory requirements, changes in or new interpretations
of other applicable laws, rules and regulations, failure to maintain or renew
required regulatory approvals, accreditation or state authorizations by UOP
or certain IPD institutions, failure to obtain authorizations from states in
which UOP does not currently provide degree programs, failure to obtain NCA's
approval for UOP to operate in new states, changes in student enrollment, and
other factors set forth in "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K for the year ended August 31, 1996.
9 <PAGE>
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth consolidated statement of operations data
of the Company expressed as a percentage of net revenues for the periods
indicated:
<CAPTION>
Three Months Six Months
Ended February Ended February
February 28 & 29, February 28 & 29,
------------------ -----------------
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Costs and expenses:
Instruction costs and services 61.8 63.2 60.4 61.6
Selling and promotional 13.7 14.3 13.2 13.5
General and administrative 10.7 12.3 10.4 11.8
------ ------ ------ ------
Total costs and expenses 86.2 89.8 84.0 86.9
------ ------ ------ ------
Income before income taxes 13.8 10.2 16.0 13.1
Less provision for income taxes 5.5 4.0 6.4 5.3
------ ------ ------ ------
Net income 8.3% 6.2% 9.6% 7.8%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED FEBRUARY 28, 1997 (SECOND QUARTER OF 1997) COMPARED
WITH THREE MONTHS ENDED FEBRUARY 29, 1996 (SECOND QUARTER OF 1996)
Net revenues increased by 33.0% to $61.7 million in the three months
ended February 28, 1997 from $46.4 million in the three months ended February
29, 1996. This is due primarily to an increase in average student enrollments
from 1996 to 1997, tuition price increases averaging four to five percent and
a higher concentration of enrollments at locations that charge a higher rate
per credit hour. All UOP campuses, which include their respective learning
centers and most of WIU and IPD campuses had increases in net revenues and
average student enrollments from 1996 to 1997. Average student enrollments
increased to 51,701 in the three months ended February 28, 1997 from 41,432
in the three months ended February 29, 1996. Ending student enrollments
increased to 54,999 at February 28, 1997 from 44,953 at February 29, 1996.
Interest income, which is included in net revenues, increased to $956,000 in
the three months ended February 28, 1997 from $737,000 in the three months
ended February 29, 1996 due primarily to increased cash generated from the
Company's operations, offset in part by a lower average yield on the related
investments.
10 <PAGE>
Instruction costs and services increased by 30.0% to $38.1 million in
the three months ended February 28, 1997 from $29.3 million in the three
months ended February 29, 1996 due primarily to the direct costs necessary to
support the increase in average student enrollments. These costs consist
primarily of faculty compensation, classroom lease expenses and related staff
salaries. These costs as a percentage of net revenues decreased to 61.8% in
the three months ended February 28, 1997 from 63.2% in the three months ended
February 29, 1996 due to greater net revenues being spread over the fixed
costs related to centralized student services.
Selling and promotional expenses increased by 27.9% to $8.5 million in
the three months ended February 28, 1997 from $6.6 million in the three
months ended February 29, 1996 due primarily to increased marketing and
advertising at the Company's campuses and learning centers. These expenses
as a percentage of net revenues decreased to 13.7% in the three months ended
February 28, 1997 from 14.3% in the three months ended February 29, 1996 due
to the Company's ability to increase enrollments in existing markets and to
open new learning centers with a proportionately lower increase in selling
and promotional expenses. As the Company expands into new markets, it may
not be able to leverage its existing selling and promotional expenses to the
same extent.
General and administrative expenses increased by 15.4% to $6.6 million
in the three months ended February 28, 1997 from $5.7 million in the three
months ended February 29, 1996 due primarily to increased costs required to
support the increased number of UOP and IPD campuses and learning centers and
increases in administrative compensation. These expenses as a percentage of
net revenues decreased to 10.7% in the three months ended February 28, 1997
from 12.3% in the three months ended February 29, 1996 due primarily to
higher net revenues being spread over fixed costs related to various
centralized functions such as information services, corporate accounting and
human resources.
Costs related to the startup of new UOP and IPD campuses and learning
centers are expensed as incurred and totaled approximately $1.1 million in
the three months ended February 28, 1997 and $886,000 in the three months
ended February 29, 1996. Interest expense, which is allocated among all
categories of costs and expenses, was less than $20,000 in the three months
ended February 28, 1997 and February 29, 1996.
The Company's effective tax rate increased to 40.0% in the three months
ended February 28, 1997 from 38.8% in the three months ended February 29,
1996. The increase is due primarily to the relative impact of expenses that
are non-deductible for tax purposes.
Net income increased to $5.1 million in the three months ended February
28, 1997 from $2.9 million in the three months ended February 29, 1996 due
primarily to increased enrollments, increased tuition rates (weighted by
location) and improved utilization of general and administrative costs and
fixed instruction costs and services.
11 <PAGE>
SIX MONTHS ENDED FEBRUARY 28, 1997 COMPARED WITH SIX MONTHS ENDED FEBRUARY
29, 1996
Net revenues increased by 33.9% to $128.6 million in the six months ended
February 28, 1997 from $96.1 million in the six months ended February 29,
1996. This is due primarily to an increase in average student enrollments
from 1996 to 1997, tuition price increases averaging four to five percent and
a higher concentration of enrollments at locations that charge a higher rate
per credit hour. Average student enrollments increased to 50,577 in the six
months ended February 28, 1997 from 40,525 in the six months ended February
29, 1996 Interest income, which is included in net revenues, increased to
$1.8 million in the six months ended February 28, 1997 from $1.5 million in
the six months ended February 29, 1996 due primarily to increased cash
generated from the Company's operations, offset in part by a lower average
yield on the related investments.
Instruction costs and services increased by 31.1% to $77.7 million in
the six months ended February 28, 1997 from $59.3 million in the six months
ended February 29, 1996 due primarily to the direct costs necessary to
support the increase in average students enrollments. These costs as a
percentage of net revenues decreased to 60.4% in the six months ended
February 28, 1997 from 61.6% in the six months ended February 29, 1996 due to
greater net revenues being spread over the fixed costs related to centralized
student services.
Selling and promotional expenses increased by 30.9% to $17.0 million in
the six months ended February 28, 1997 from $13.0 million in the six months
ended February 29, 1996 due primarily to increased marketing and advertising
at the Company's campuses and learning centers. These expenses as a
percentage of net revenues decreased to 13.2% in the six months ended
February 28, 1997 from 13.5% in the six months ended February 29, 1996 due to
the Company's ability to increase enrollments in existing markets and to open
new learning centers with a proportionately lower increase in selling and
promotional expenses. As the Company expands into new markets, it may not be
able to leverage its existing selling and promotional expenses to the same
extent.
General and administrative expenses increased by 18.0% to $13.3 million
in the six months ended February 28, 1997 from $11.3 million in the six
months ended February 29, 1996 due primarily to increased costs required to
support the increased number of UOP and IPD campuses and learning centers and
increases in administrative compensation. These expenses as a percentage of
net revenues decreased to 10.4% in the six months ended February 28, 1997
from 11.8% in six month ended February 29, 1996 due primarily to higher net
revenues being spread over fixed costs related to various centralized
functions such as information services, corporate accounting and human
resources.
Costs related to the startup of new UOP and IPD campuses and learning
centers are expensed as incurred and totaled approximately $2.3 million for
the six months ended February 28, 1997 and $1.6 million for the six months
ended February 29, 1996. Interest expense, which is allocated among all
categories of costs and expenses, was less than $40,000 in the six months
ended February 28, 1997 and February 29, 1996.
12 <PAGE>
The Company's effective tax rate remained relatively the same at 40.0%
and 40.5% in the six months ended February 28, 1997 and February 29, 1996,
respectively.
Net income increased to $12.4 million in the six months ended February
28, 1997 from $7.5 million in the six months ended February 29, 1996 due
primarily to increased enrollments, increased tuition rates (weighted by
location) and improved utilization of general and administrative costs and
fixed instruction costs and services.
SEASONALITY
The Company experiences seasonality in its results of operations
primarily as a result of changes in the level of student enrollments. While
the Company enrolls students throughout the year, second quarter (December to
February) average enrollments and related revenues generally are lower than
other quarters due to the holiday breaks in December and January. Second
quarter costs and expenses historically increase as a percentage of net
revenues as a result of certain fixed costs not significantly affected by the
seasonal second quarter declines in net revenues.
The Company experiences a seasonal increase in new enrollments in August
of each year when most other colleges and universities begin their fall
semesters. As a result, instruction costs and services and selling and
promotional expenses historically increase as a percentage of net revenues in
the fourth quarter due to increased costs in preparation for the August peak
enrollments. These increased costs result in accounts payable levels being
higher in August than in any other month during the year. The Company
anticipates that these seasonal trends in the second and fourth quarters will
continue in the future.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $69.7 million at February 28,
1997 from $54.3 million at August 31, 1996 due primarily to the $21.2 million
in cash generated from operations during the six months ended February 28,
1997, offset in part by capital expenditures. At February 28, 1997, the
Company had no outstanding borrowings on its $4.0 million line of credit,
which bears interest at prime. The line of credit is renewed annually and
any amounts borrowed under the line are payable upon its termination in
December 1997.
Net cash received from operating activities increased to $21.2 million
in the six months ended February 28, 1997 from $10.0 million in the six
months ended February 29, 1996 due primarily to a $4.9 million increase in
net income from 1996 to 1997 and the timing of receipts from customers and
payments to suppliers. Capital expenditures, including additions to
educational program production costs, decreased to $7.0 million in the six
months ended February 28, 1997 from $8.3 million in the six months ended
February 29, 1996 due primarily to a $1.6 million reduction in non-operating
property additions during that same period. Total purchases of property and
equipment for the year ended August 31, 1997 are expected to total
approximately $12.0 million Additions to educational program production
costs are not expected to exceed $2.0 million for the year ended August 31,
1997.
13 <PAGE>
Startup costs are expected to increase from $3.6 million in 1996 to
approximately $5.0 million in 1997 due to recent and planned expansion into
new geographical markets. UOP has requested approval from the North Central
Association of Colleges and Schools (NCA) for a new doctoral program and the
expansion into certain new markets. The requests were reviewed at the March
1997 NCA meeting and have been forwarded to a NCA review panel for
consideration in June 1997. Consequently, the Company plans to open its
Seattle and Portland campuses in October 1997. In addition, the Company
plans to open several new campuses and learning centers in existing markets
in 1997 and plans to expand its products and offerings to address increased
market demand.
Net receivables at February 28, 1997 totaled $28.0 million, or 45.3% of
second quarter 1997 revenues. This compares to $26.0 million in net
receivables at August 31, 1996, or 43.9% of fourth quarter 1996 revenues and
$18.7 million at February 29, 1996, or 40.4% of second quarter 1996 revenues.
The increase from February 29, 1996 to February 28, 1997 is due primarily to
the increase in revenues from 1996 to 1997 and the backlog in collections
resulting from the substantial growth in new enrollment. At the present
time, most of the financial aid processing backlog noted in the prior quarter
has been eliminated.
The DOE requires that Title IV Program funds collected by an institution
for unbilled tuition be kept in a separate cash or cash equivalent account
until the students are billed for the portion of their program related to
these Title IV Program funds. In addition, all funds transferred to the
Company through electronic funds transfer programs are held in a separate
cash account until certain conditions are satisfied. As of February 28,
1997, the Company had approximately $15.4 million in these separate accounts,
which are reflected as restricted cash, to comply with these requirements.
IMPACT OF INFLATION
Inflation has not had a significant impact on the Company's historical
operations.
14 <PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . .Not Applicable
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . .Not Applicable
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . .Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
On December 13, 1996, the holders of the Company's Class B Common
Stock held their annual meeting and unanimously re-elected the
Company's Board of Directors in its entirety. In addition, the acts
and proceedings of the directors, officers, employees and agents of
the Company that were performed and taken within the scope of their
respective powers were ratified, approved and adopted by the Class B
shareholders.
Item 5. Other Information . . . . . . . . . . . . . . . . . . . .Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 15-1 Letter on Unaudited Interim Financial Information
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the six months ended
February 28, 1997.
15 <PAGE>
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: March 18, 1997 By: /s/James W. Hoggatt
----------------------------------
James W. Hoggatt
Vice President of Finance
and Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
and Accounting Officer)
16 <PAGE>
APOLLO GROUP, INC. AND SUBSIDIARIES
EXHIBIT INDEX
PAGE
15-1 Letter on Unaudited Interim Financial Information . . . . . . . . . 18
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . .19
17 <PAGE>
Exhibit 15-1
Letter on Unaudited Interim Financial Information
March 18, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that Apollo Group, Inc. has incorporated by reference our report
dated March 18, 1997 (issued pursuant to the provisions of Statement on
Auditing Standards No. 71) in its Registration Statements on Form S-8
(Registration No. 33-87844, Registration No. 33-88982, Registration No.
33-88984 and Registration No. 33-63429). We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ PRICE WATERHOUSE LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Operations and the Consolidated Balance Sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000929887
<NAME> APOLLO GROUP, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 79,821
<SECURITIES> 20,221
<RECEIVABLES> 33,143
<ALLOWANCES> 5,191
<INVENTORY> 3,034
<CURRENT-ASSETS> 134,543
<PP&E> 33,465
<DEPRECIATION> 12,278
<TOTAL-ASSETS> 166,638
<CURRENT-LIABILITIES> 64,802
<BONDS> 0
0
0
<COMMON> 66
<OTHER-SE> 98,292
<TOTAL-LIABILITY-AND-EQUITY> 166,638
<SALES> 5,927
<TOTAL-REVENUES> 128,635
<CGS> 5,380
<TOTAL-COSTS> 94,668
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,221
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 20,633
<INCOME-TAX> 8,252
<INCOME-CONTINUING> 12,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,381
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
