-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L3FO5Zbt0uYp2VQUdpr8L4ZweJ5F9M8pg/l8XjU5In+o+kWZ04jN4/9CSLUn++kp m3rT+W1g82irKzW57ESXCg== 0000929887-97-000006.txt : 19970701 0000929887-97-000006.hdr.sgml : 19970701 ACCESSION NUMBER: 0000929887-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970630 SROS: NASD 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25232 FILM NUMBER: 97632644 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 STREET 2: 4615 E ELWOOD STREET CITY: PHOENIX STATE: AZ ZIP: 85040 10-Q 1 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 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 PART I -- FINANCIAL INFORMATION Item 1 -- Financial Statements Apollo Group, Inc. and Subsidiaries Consolidated Statement of Operations (In thousands, except per share amounts)
Three Months Ended Nine Months Ended May 31, May 31, ------------------ ------------------ 1997 1996 1997 1996 -------- -------- -------- -------- (Unaudited) (Unaudited) 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.
3 Apollo Group, Inc. and Subsidiaries Consolidated Balance Sheet (Dollars in thousands)
May 31, August 31, 1997 1996 ------------ ---------- (Unaudited) 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.
4 Apollo Group, Inc. and Subsidiaries Consolidated Statement of Cash Flows (In thousands)
Nine Months Ended May 31, ---------------------- 1997 1996 --------- --------- (Unaudited) 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.
5 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 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 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 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 RESULTS OF OPERATIONS The following table sets forth consolidated statement of operations data of the Company expressed as a percentage of net revenues for the periods indicated:
Three Months Nine Months Ended May 31, Ended May 31, ----------------- ----------------- 1997 1996 1997 1996 ------ ------ ------ ------ (Unaudited) (Unaudited) 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% ====== ====== ====== ======
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 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 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 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 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 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 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 APOLLO GROUP, INC. AND SUBSIDIARIES EXHIBIT INDEX PAGE 15-1 Letter on Unaudited Interim Financial Information . . . . . . . . . 18 27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . .19 17 EX-15.1 2 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 EX-27 3
5 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. 0000929887 APOLLO GROUP, INC. 1,000 9-MOS AUG-31-1997 MAY-31-1997 87,726 22,308 33,521 4,609 2,940 145,887 36,823 13,943 182,867 67,930 0 0 0 66 111,564 182,867 9,044 206,477 8,630 146,732 0 1,878 50 39,889 15,954 23,935 0 0 0 23,935 .46 .46
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