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: May 31, 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 June 20, 1997
Class A Common Stock, no par 50,032,293 Shares
Class B Common Stock, no par 547,819 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 Nine Months Ended
May 31, May 31,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Tuition and other, net $76,633 $58,237 $203,422 $152,841
Interest income 1,209 754 3,055 2,235
------- ------- -------- --------
Total net revenues 77,842 58,991 206,477 155,076
------- ------- -------- --------
Costs and expenses:
Instruction costs and services 43,572 33,978 121,269 93,231
Selling and promotional 8,492 7,431 25,463 20,399
General and administrative 6,522 4,641 19,856 15,941
------- ------- -------- --------
Total costs and expenses 58,586 46,050 166,588 129,571
------- ------- -------- --------
Income before income taxes 19,256 12,941 39,889 25,505
Less provision for income taxes 7,702 5,241 15,954 10,330
------- ------- -------- --------
Net income $11,554 $ 7,700 $ 23,935 $ 15,175
======= ======= ======== ========
Net income per share $ .22 $ .15 $ .46 $ .30
======= ======= ======== ========
Weighted average shares outstanding 51,827 51,457 51,747 51,054
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>
May 31, August 31,
1997 1996
------------ ----------
(Unaudited)
<S> <C> <C>
Assets:
Current assets --
Cash and cash equivalents $ 70,386 $ 51,982
Restricted cash 17,340 11,285
Short-term investments 22,308 13,273
Receivables, net 28,912 25,985
Inventory 2,940 3,112
Deferred tax assets, net 3,020 2,972
Prepaids and other current assets 981 532
-------- --------
Total current assets 145,887 109,141
Property and equipment, net 22,880 18,925
Educational program production costs, net 1,769 1,446
Non-operating property 5,584 4,321
Long-term investments 3,142
Cost in excess of fair value of assets purchased 2,327 2,459
Deposits and other assets 1,278 1,558
-------- --------
Total assets $182,867 $137,850
======== ========
Liabilities and Shareholders' Equity:
Current liabilities --
Current portion of long-term liabilities $ 249 $ 140
Accounts payable 3,700 7,742
Other accrued liabilities 14,427 10,925
Income taxes payable 17 261
Student deposits and deferred tuition 49,537 35,736
-------- --------
Total current liabilities 67,930 54,804
-------- --------
Long-term liabilities, less current portion 2,490 1,773
-------- --------
Deferred tax liabilities, net 817 659
-------- --------
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;
50,023,000 issued and outstanding at May 31, 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;
548,000 and 576,000 issued and outstanding at May 31, 1997 and
August 31, 1996, respectively. 1 1
Additional paid-in capital 48,260 41,201
Retained earnings 63,304 39,347
-------- --------
Total shareholders' equity 111,630 80,614
-------- --------
Total liabilities and shareholders' equity $182,867 $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>
Nine Months Ended
May 31,
----------------------
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Net cash received from (used for)operating activities:
Cash received from customers $205,342 $151,162
Cash paid to employees and suppliers (157,535) (125,707)
Interest received 2,583 2,145
Interest paid (58)
Net income taxes paid ( 16,074) (9,714)
--------- ---------
Net cash received from operating activities 34,316 17,828
--------- ---------
Net cash received from (used for)investing activities:
Purchase of short-term investments (17,518) (11,832)
Proceeds from sale of short-term investments 8,648
Purchase of property and equipment ( 8,551) (6,671)
Purchase of non-operating property ( 1,263) (2,911)
Additions to educational program production costs ( 1,159) (922)
Cash paid at acquisition of Western,
net of cash acquired (585)
Proceeds from sale of assets 62
Purchase of long-term investments ( 3,140)
--------- ---------
Net cash used for investing activities (22,921) (22,921)
--------- ---------
Net cash received from (used for)financing activities:
Tax benefits related to disqualifying dispositions and
exercise of options 5,065 825
Issuance of stock 1,994 935
Principal payments on long-term debt (50)
-------- ----------
Net cash received from financing activities 7,009 1,760
-------- ----------
Net increase in cash and cash equivalents 18,404 (3,333)
Cash and cash equivalents, beginning of period 51,982 50,726
--------- ---------
Cash and cash equivalents, end of period $70,386 $47,393
========= =========
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 May 31, 1997 and 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 nine-month periods
ended May 31, 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 are 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 to expense.
5. During February 1997, the Financial Accounting Standards Board
released Statement of Financial Accounting Standard No. 128, Earnings per
Share ("SFAS No. 128"), which requires the disclosure of both basic earnings
per share and diluted earnings per share. The Company will be required to
adopt SFAS No. 128 for the interim period ending February 28, 1998, and
believes it will not have a material impact on previously reported earnings
per share.
6. The Company has and will continue to make certain investments in its
software systems and applications to ensure the Company is year 2000
compliant. The financial impact to the Company has not been and is not
anticipated to be material to its financial position or results of
operations.
6 <PAGE>
Review by Independent Accountants
The financial information as of May 31, 1997, 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 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 May 31, 1997, and the related consolidated
statement of operations for the three-month and nine-month periods ended May
31, 1997 and 1996 and the consolidated statement of cash flows for the
nine-month periods ended May 31, 1997 and 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
June 16, 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 nine-month periods ended May 31, 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," "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 are not
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 Notes to 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 the North Central
Association of Colleges and Schools'("NCA") 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 Nine Months
Ended May 31, Ended May 31,
----------------- -----------------
1997 1996 1997 1996
------ ------ ------ ------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Tuition and other, net 98.4% 98.7% 98.5% 98.6%
Interest income 1.6 1.3 1.5 1.4
------ ------ ------ ------
Total net revenues 100.0 100.0 100.0 100.0
------ ------ ------ ------
Costs and expenses:
Instruction costs and services 56.0 57.6 58.8 60.1
Selling and promotional 10.9 12.6 12.3 13.2
General and administrative 8.4 7.9 9.6 10.2
------ ------ ------ ------
Total costs and expenses 75.3 78.1 80.7 83.5
------ ------ ------ ------
Income before income taxes 24.7 21.9 19.3 16.5
Less provision for income taxes 9.9 8.9 7.7 6.7
------ ------ ------ ------
Net income 14.8% 13.0% 11.6% 9.8%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED MAY 31, 1997 (THIRD QUARTER OF 1997) COMPARED
WITH THREE MONTHS ENDED MAY 31, 1996 (THIRD QUARTER OF 1996)
Net revenues increased by 32.0% to $77.8 million in the three months
ended May 31, 1997 from $59.0 million in the three months ended May 31, 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 WIU and IPD campuses had increases in net revenues and
average student enrollments from 1996 to 1997. Average student enrollments
increased to 54,135 in the three months ended May 31, 1997 from 44,071 in the
three months ended May 31, 1996. Ending student enrollments increased to
53,137 at May 31, 1997 from 44,311 at May 31, 1996. Interest income
increased to $1,209,000 in the three months ended May 31, 1997 from $754,000
in the three months ended May 31, 1996 due primarily to increased cash
generated from the Company's operations.
10 <PAGE>
Instruction costs and services increased by 28.2% to $43.6 million in
the three months ended May 31, 1997 from $34.0 million in the three months
ended May 31, 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 56.0% in the three
months ended May 31, 1997 from 57.6% in the three months ended May 31, 1996
due to greater net revenues being spread over the fixed costs related to
centralized student services.
Selling and promotional expenses increased by 14.3% to $8.5 million in
the three months ended May 31, 1997 from $7.4 million in the three months
ended May 31, 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 10.9% in the three months ended May 31, 1997
from 12.6% in the three months ended May 31, 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 40.5% to $6.5 million
in the three months ended May 31, 1997 from $4.6 million in the three months
ended May 31, 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 remained relatively the same at 8.4% in the three months ended May
31, 1997 and 7.9% in the three months ended May 31, 1996.
Costs related to the startup of new UOP and IPD campuses and learning
centers are expensed as incurred and totaled approximately $653,000 in the
three months ended May 31, 1997 and $861,000 in the three months ended May
31, 1996. Interest expense, which is allocated among all categories of costs
and expenses, was less than $25,000 in the three months ended May 31, 1997
and 1996.
The Company's effective tax rate remained relatively the same at 40.0%
in the three months ended May 31, 1997 and 40.5% in the three months ended
May 31, 1996.
Net income increased to $11.6 million in the three months ended May 31,
1997 from $7.7 million in the three months ended May 31, 1996 due primarily
to increased enrollments, increased tuition rates (weighted by location) and
improved utilization of selling and promotional costs and fixed instruction
costs and services.
11 <PAGE>
NINE MONTHS ENDED MAY 31, 1997 COMPARED WITH NINE MONTHS ENDED MAY 31, 1996
Net revenues increased by 33.1% to $206.5 million in the nine months
ended May 31, 1997 from $155.1 million in the nine months ended May 31, 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 51,763 in the nine
months ended May 31, 1997 from 41,707 in the nine months ended May 31, 1996.
Interest income increased to $3.1 million in the nine months ended May 31,
1997 from $2.2 million in the nine months ended May 31, 1996 due primarily to
increased cash generated from the Company's operations.
Instruction costs and services increased by 30.1% to $121.3 million in
the nine months ended May 31, 1997 from $93.2 million in the nine months
ended May 31, 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 58.8% in the nine months ended May 31, 1997 from 60.1%
in the nine months ended May 31, 1996 due to greater net revenues being
spread over the fixed costs related to centralized student services.
Selling and promotional expenses increased by 24.8% to $25.5 million in
the nine months ended May 31, 1997 from $20.4 million in the nine months
ended May 31, 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 12.3% in the nine months ended May 31, 1997 from
13.2% in the nine months ended May 31, 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 24.6% to $19.9 million
in the nine months ended May 31, 1997 from $15.9 million in the nine months
ended May 31, 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 9.6% in the nine months ended May 31, 1997 from 10.2%
in the nine months ended May 31, 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 $2.9 million for
the nine months ended May 31, 1997 and $2.4 million for the nine months ended
May 31, 1996. Interest expense, which is allocated among all categories of
costs and expenses, was less than $60,000 in the nine months ended May 31,
1997 and 1996.
12 <PAGE>
The Company's effective tax rate remained relatively the same at 40.0%
and 40.5% in the nine months ended May 31, 1997 and 1996, respectively.
Net income increased to $23.9 million in the nine months ended May 31,
1997 from $15.2 million in the nine months ended May 31, 1996 due primarily
to increased enrollments, increased tuition rates (weighted by location) and
improved utilization of selling and promotional costs, 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. Historically, the third quarter of each fiscal year
is the highest in terms of operating profits and net income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $78.0 million at May 31, 1997
from $54.3 million at August 31, 1996 due primarily to the $34.3 million in
cash generated from operations during the nine months ended May 31, 1997,
offset in part by capital expenditures and the purchase of long-term
investments. At May 31, 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 $34.3 million
in the nine months ended May 31, 1997 from $17.8 million in the nine months
ended May 31, 1996 due primarily to an $8.8 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, increased to $11.0 million in the nine months ended May 31,
1997 from $10.5 million in the nine months ended May 31, 1996 due primarily
to purchases made to support the increase in student enrollments and number
of locations. 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 not expected to exceed $4.0 million for the year ended
August 31, 1997.
Net receivables at May 31, 1997 totaled $28.9 million, or 37.1% of third
quarter 1997 net revenues. This compares to $26.0 million in net receivables
at August 31, 1996, or 43.9% of fourth quarter 1996 net revenues and $19.9
million in net receivables at May 31, 1996, or 33.7% of third quarter 1996
net revenues. The increase as a percentage of net revenues from May 1996 to
August 1996 was due to a previously reported backlog in collections. Most of
the backlog was eliminated as of May 31, 1997.
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 May 31,
1997, the Company had approximately $17.3 million in these separate accounts,
which are reflected as restricted cash, to comply with these requirements.
ACCREDITATION
On June 23, 1997, the North Central Association of Colleges and Schools
("NCA") Review Committee reviewed a prior visitation Team Report concerning
UOP. The Review Committee recommended following the visitation Team Report
with respect to reaffirming UOP's continuing accreditation and permitting
UOP's expansion into two new states (Oregon and Washington). The Review
Committee recommended that the Team Report not be followed with respect to
its recommended approval of a planned doctoral program in management and the
elimination of required prior approval for all future geographic expansion.
The Review Committee also recommended that a focus visit be conducted in two
years. The Review Committee recommendations will be forwarded to the NCA
Commission on Institutions of Higher Education for a final decision at its
meeting schedule to be held on August 6-8, 1997. The Company is pleased with
the Review Committee's recommendation to reaffirm UOP's continuing
accreditation and the approval of the new state locations. The Company
believes, however, that the planned doctoral program in management merits
approval and that NCA should eliminate the requirement of prior approval for
geographic expansion. The Company is committed to geographic expansion and
will continue to evaluate its alternatives to reduce unnecessary restraints
on growth imposed by various regulatory bodies.
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 . . .Not Applicable
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 three months ended
May 31, 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: June 30, 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
June 27, 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 June 16, 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> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 87,726
<SECURITIES> 22,308
<RECEIVABLES> 33,521
<ALLOWANCES> 4,609
<INVENTORY> 2,940
<CURRENT-ASSETS> 145,887
<PP&E> 36,823
<DEPRECIATION> 13,943
<TOTAL-ASSETS> 182,867
<CURRENT-LIABILITIES> 67,930
<BONDS> 0
0
0
<COMMON> 66
<OTHER-SE> 111,564
<TOTAL-LIABILITY-AND-EQUITY> 182,867
<SALES> 9,044
<TOTAL-REVENUES> 206,477
<CGS> 8,630
<TOTAL-COSTS> 146,732
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,878
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 39,889
<INCOME-TAX> 15,954
<INCOME-CONTINUING> 23,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,935
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
