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Apollo Group, Inc. Reports Fiscal 2008 Fourth Quarter and Year-End Financial Results

  • Fourth quarter revenue increases approximately 16.5% year-over-year
  • Degreed Enrollment at year-end increases 15.4% year-over-year
  • Fourth quarter New Degreed Enrollment increases 19.1% year-over-year

PHOENIX--(BUSINESS WIRE)--Oct. 28, 2008--Apollo Group, Inc. (Nasdaq: APOL) ("Apollo Group," "Apollo" or "the Company") today reported financial results for the three months and fiscal year ended August 31, 2008. During the fourth quarter, Charles "Chas" B. Edelstein joined the Company as Chief Executive Officer of Apollo Group. Subsequent to the year-end, Joseph L. D'Amico was appointed President of Apollo Group, in addition to being the Chief Financial Officer and Treasurer.

Chas Edelstein commented, "I am delighted to be a part of the successful and talented team at Apollo Group. In my short time here I have validated my prior belief that this is a world-class organization with tremendous opportunity in its future. I look forward to working with the team as we strengthen and grow our business both domestically and internationally."

Unaudited Fourth Quarter of Fiscal 2008 Results of Operations

Consolidated revenues for the three months ended August 31, 2008, totaled $831.4 million, which represents a 16.5% increase over the fourth quarter of fiscal 2007. Total Degreed Enrollment grew by 15.4% year-over-year to 362,100. The Company reported net income for the three months ended August 31, 2008, of $229.6 million, or $1.43 per share (160.1 million weighted average diluted shares outstanding), compared to net income of $103.2 million, or $0.60 per share (171.3 million weighted average diluted shares outstanding) for the three months ended August 31, 2007.

During the fourth quarter, the Company reversed its previously recorded charge for estimated damages of $170 million associated with the judgment in a securities class action lawsuit because the Ninth Circuit vacated the earlier judgment.

Before giving effect to this reversal, and to a $9.5 million gain (including interest) during the fourth quarter of 2008 from a third party's forfeiture of an escrow deposit due to the expiration of their option to purchase the Company's headquarters building, and to restatement costs of $6.4 million in the fourth quarter of fiscal 2007, net income increased 12.5% to $120.5 million, or $0.75 per share in the fourth quarter of fiscal 2008, as compared to net income of $107.1 million, or $0.62 per share in the fourth quarter of fiscal 2007.

Excluding share-based compensation expense of $4.1 million and $13.2 million in the fourth quarters of fiscal 2008 and 2007, respectively, as well as the special items described above, net income would have been $123.0 million, or $0.77 per share in the fourth quarter of fiscal 2008, as compared to net income of $115.1 million, or $0.67 per share in the fourth quarter of fiscal 2007.

(See the reconciliation of Generally Accepted Accounting Principles ("GAAP") financial information to non-GAAP financial information in the tables section of this press release.)

"The fourth quarter concluded a transformative and rewarding year for Apollo Group and its stakeholders, as we made solid financial, operational and organizational strides. In fiscal 2008, we grew our revenue by approximately 15% over the prior year, and importantly, for the first time in several years, meaningfully grew earnings per share, while continuing to produce significant cash flow," said Joseph L. D'Amico. "In the fourth quarter we again reported solid revenue and enrollment growth, and we experienced an increase in the year-over-year growth rate of New Degreed Enrollments for the second quarter in a row. During the fourth quarter we had Degreed Enrollment of 362,100 students, having started a record 83,100 students during the quarter. And, while the overall cost to acquire a student is still higher than we would like, we continue to work diligently and are pleased with the efforts we have in process."

Greg Cappelli, Executive Vice President, Global Strategy and Assistant to the Executive Chairman added, "During the year, we made significant investments in our core University of Phoenix business, which continues to generate the highest returns for our shareholders. We also invested in several new growth opportunities which we believe will generate incremental shareholder value over time. During the fourth quarter, Apollo Global, which was formed a year ago, completed its second acquisition, the purchase of a majority stake in Universidad Latinoamericana, S.C. ("ULA"), a private university based in Mexico City. Separately, Insight Schools, our online high school provider, started the 2008 school year with 11 schools in 10 states, and finally, Meritus, our new Canadian university, had its ribbon-cutting ceremony last month and recently began enrolling its first cohort of students. We are pleased with the progress we made this year toward our goal of being a leading global institution."

Instructional costs and services increased by $35.1 million, or 10.7% to $362.3 million for the three months ended August 31, 2008, from $327.2 million in the three months ended August 31, 2007. As a percentage of net revenue, instructional costs and services declined to 43.6% versus 45.8% in the prior year quarter, primarily as a result of decreases as a percentage of net revenue, in bad debt expense, classroom lease expenses and depreciation and other instructional costs and services. These decreases were partially offset by an increase, as a percentage of net revenue, in employee compensation and related expenses which is due, in part, to investments in Insight Schools and Apollo Global, as well as increases in the Company's compensation rates for academic and financial counselors.

As previously reported, during the first quarter of fiscal 2008, the Company reviewed the components of bad debt expense and identified certain items that should have been classified as discounts or refunds (reduction of tuition revenue) rather than bad debt expense. No reclassification was made for prior periods as the amounts were not material to prior period financial statements and had no effect on reported net income. Had the Company reclassified these items in the fourth quarter of fiscal 2007, the amounts reported for net revenue and bad debt expense would have been $6.5 million lower. On a comparable basis, bad debt expense, as a percentage of net revenue, decreased approximately 140 basis points from 4.4% in the fourth quarter of fiscal 2007 to 3.0% in the fourth quarter of fiscal 2008. This decrease is primarily due to the continued focus on front-end collections as well as improvements in student retention rates.

Selling and promotional expenses increased by $49.3 million, or 28.4%, to $223.1 million for the three months ended August 31, 2008, from $173.8 million in the three months ended August 31, 2007. As a percentage of net revenue, selling and promotional expenses increased 250 basis points to 26.8%, from 24.3% in the prior year's fourth quarter. This was a result of an increase, as a percentage of net revenue, in enrollment counselors' compensation and related expenses, advertising and other selling and promotional expenses which includes expenses related to Aptimus which the Company acquired in the first quarter of 2008. The Company continues to invest in marketing to build greater brand identity as well as to drive and support future enrollment growth. As a result, selling and promotional expenses may continue to increase in the near-term; however, the Company believes its efforts and investments will help it reduce these costs over the long-term.

General and administrative ("G&A") expenses for the three months ended August 31, 2008, declined by $14.3 million, or 23.0%, to $48.0 million, from $62.3 million in the three months ended August 31, 2007. As reported, G&A, as a percentage of net revenue, decreased to 5.8% in the fourth quarter of 2008, versus 8.7% in the comparable period a year ago. Excluding special items in the fourth quarter of fiscal 2007, primarily related to the stock option investigation and restatement costs of $6.4 million, G&A expenses were $55.9 million, or 7.8% of net revenue, for the three months ended August 31, 2007. The 200 basis point decline to 5.8%, as a percentage of net revenue, in the fourth quarter of 2008, is mainly attributable to a decrease in share-based compensation expense, due primarily to the forfeiture of unvested options related to the departure of the former President of Apollo Group in June 2008.

Financial and Operating Metrics

Below are Apollo Group's unaudited financial data and operating metrics for fiscal 2008.

                                Q1 2008   Q2 2008   Q3 2008   Q4 2008
                               --------- --------- --------- ---------
Revenues (in thousands)
------------------------------
   Degree Seeking Gross
    Revenues (1)               $773,114  $692,355  $819,445  $820,139
   Less: Discounts and other    (35,083)  (41,463)  (39,231)  (45,382)
                               --------- --------- --------- ---------
   Degree Seeking Net Revenues
    (1)                         738,031   650,892   780,214   774,757
   Non-degree Seeking Revenues
    (1)                           5,038     5,322    10,171    12,916
   Other (2)                     37,605    37,429    44,832    43,724
                               --------- --------- --------- ---------
                               $780,674  $693,643  $835,217  $831,397
                               ========= ========= ========= =========

Revenue by Degree Type (in
 thousands) (1)
------------------------------
   Associates                  $218,642  $204,050  $248,171  $263,220
   Bachelors                    360,324   315,127   365,960   361,569
   Masters                      179,414   158,649   188,917   178,686
   Doctoral                      14,734    14,529    16,397    16,664
   Less: Discounts and other    (35,083)  (41,463)  (39,231)  (45,382)
                               --------- --------- --------- ---------
                               $738,031  $650,892  $780,214  $774,757
                               ========= ========= ========= =========

Degreed Enrollment (rounded to
 hundreds) (3)
------------------------------
   Associates                   114,300   121,200   134,300   146,500
   Bachelors                    137,800   136,400   137,900   141,800
   Masters                       67,300    67,000    67,300    67,700
   Doctoral                       5,600     5,600     5,800     6,100
                               --------- --------- --------- ---------
                                325,000   330,200   345,300   362,100
                               ========= ========= ========= =========

Degree Seeking Gross Revenues
 per Degreed Enrollment (1)
 (3)
------------------------------
   Associates                  $  1,913  $  1,684  $  1,848  $  1,797
   Bachelors                      2,615     2,310     2,654     2,550
   Masters                        2,666     2,368     2,807     2,639
   Doctoral                       2,631     2,594     2,827     2,732
   All degrees (after
    discounts)                    2,271     1,971     2,260     2,140

New Degreed Enrollments
 (rounded to hundreds) (4)
------------------------------
   Associates                    33,700    31,100    37,100    41,500
   Bachelors                     21,800    21,500    21,900    27,200
   Masters                       12,400    11,800    11,600    13,600
   Doctoral                         800       600       800       800
                               --------- --------- --------- ---------
                                 68,700    65,000    71,400    83,100
                               ========= ========= ========= =========

(1) Represents information for University of Phoenix and associate's degree students enrolled in Western International University. Degree seeking students (and related revenues) include students enrolled in degree programs or participating in certificate programs of at least 18 credit hours in length with some course applicability into a related degree program. Non-degree seeking students include all other certificate programs, single course and continuing education students.

(2) Represents revenues from IPD, CFP, Western International University (excluding associate's degree students), Insight Schools, Apollo Global and other.

(3) Represents individual students enrolled in a University of Phoenix degree program or Western International University associate's degree program who attended a course during the quarter and did not graduate as of the end of the quarter. Degreed Enrollment for a quarter also includes any student who previously graduated from one degree program and started a new degree program in the quarter (for example, a graduate of the associate's degree program returns for a bachelor's degree or a bachelor's degree graduate returns for a master's degree.) In addition, Degreed Enrollment includes students participating in certificate programs of at least 18 credit hours in length with some course applicability into a related degree program.

(4) Represents any individual student enrolled in a University of Phoenix degree program or Western International University associate's degree program who is a new student and started a course in the quarter, any individual student who previously graduated from one degree program and started a new degree program in the quarter (for example, a graduate of an associate's degree program returns for a bachelor's degree, or a graduate of a bachelor's degree program returns for a master's degree), as well as any individual student who started a degree program in the quarter and had been out of attendance for greater than 12 months. In addition, New Degreed Enrollments includes students who during the quarter started participating in certificate programs of at least 18 credit hours in length with some course applicability into a related degree program.

2008 Fiscal Year-End Results of Operations

Consolidated revenues for the fiscal year ended August 31, 2008, were $3.1 billion, a 15.3% increase over fiscal 2007. Average quarterly Degreed Enrollment grew by 12.1% for fiscal 2008 as compared to fiscal 2007.

The Company reported net income of $476.5 million, or $2.87 per share, (165.9 million weighted average diluted shares outstanding), and $408.8 million, or $2.35 per share, (173.6 million weighted average diluted shares outstanding) for fiscal years 2008 and 2007, respectively. During fiscal 2008, the Company repurchased approximately 9.8 million shares of its common stock at a weighted average purchase price of approximately $46 for a total expenditure of $454 million. The Company currently has an outstanding share repurchase authorization of up to $500 million.

Before giving effect to a $9.5 million gain (including interest) from a third party's forfeiture of an escrow deposit due to the expiration of their option to purchase the Company's headquarters building, in fiscal 2008, and to special items related to the stock option investigation and restatement costs of $33.8 million in fiscal 2007, net income increased 9.6% to $470.7 million, or $2.84 per share in fiscal 2008, as compared to net income of $429.3 million, or $2.47 per share in fiscal 2007.

Excluding total share-based compensation of $53.6 million and the $9.5 million gain, described above, in fiscal 2008, and share-based compensation expense of $54.0 million and stock option investigation and restatement costs of $21.7 million (net of the $12.1 million stock option modification included in share-based compensation) in fiscal 2007, net income would have been $503.3 million, or $3.03 per share in fiscal 2008, as compared to net income of $454.8 million, or $2.62 per share in fiscal 2007.

(See the reconciliation of GAAP financial information to non-GAAP financial information in the tables section of this press release.)

Unaudited Balance Sheet

As of August 31, 2008, the Company's cash, cash equivalents, and marketable securities, excluding restricted cash, totaled $511.5 million as compared to $392.7 million as of August 31, 2007. During the fourth quarter of fiscal 2008, the $95.0 million appeal bond posted in February 2008 was released when the District Court vacated the earlier judgment in the Company's securities class action lawsuit and entered judgment in favor of Apollo Group. As a result, the $95.0 million was removed from restricted cash and is included in cash and cash equivalents.

Restricted cash and student deposits increased by approximately $87.7 million and $85.3 million since August 31, 2007, respectively. These increases were primarily due to increased student enrollment and to increases in Title IV funds available to students.

At August 31, 2008, accounts receivable increased to $221.9 million from $190.9 million at August 31, 2007. The increase includes a combined $29.9 million in student account receivables at Universidad de Artes, Ciencias y Comunicacion ("UNIACC") and ULA. Excluding this amount and the associated revenue, the Company's days sales outstanding ("DSO") declined to 29 days for the fourth quarter of fiscal 2008 as compared to 38 days for the fourth quarter of fiscal 2007. The decrease in DSO is primarily due to improvements in processing time for the receipt of student financial aid and the write-off of approximately $125.7 million in previously reserved uncollectible accounts receivable during the year.

Goodwill increased by $56.3 million to $86.0 million at August 31, 2008, from $29.6 million at August 31, 2007, and intangible assets, net, increased by $20.9 million to $23.1 million at August 31, 2008, from $2.2 million at August 31, 2007. The increases in both accounts were primarily due to the acquisition of Aptimus, Inc. in the first quarter of fiscal 2008, and Apollo Global's acquisitions of UNIACC and ULA during the third and fourth quarters of fiscal 2008, respectively.

Long-term liabilities (including the current portion) increased by $100.0 million to $193.0 million at August 31, 2008, from $93.0 million at August 31, 2007, primarily due to the reclassification from income taxes payable of approximately $53.0 million related to the adoption of FIN 48, Accounting for Uncertain Tax Positions, as well as additional capital lease obligations and other borrowings associated with Apollo Global's acquisitions.

Total deferred revenue at August 31, 2008, increased to $231.3 million from $167.3 million at August 31, 2007. The increase is principally due to increased student enrollment.

Conference Call Information

The Company will hold a conference call to discuss these earnings results at 5:00 PM Eastern, 2:00 PM Phoenix time, today, Tuesday, October 28, 2008. The call may be accessed by dialing (877) 292-6888 (domestic) or (706) 634-1393 (international). The conference ID number is 63579735. A live webcast of this event may be accessed by visiting the Company's website at www.apollogrp.edu. A replay of the call will be available on the website or at (706) 645-9291 (conf. ID # 63579735) until November 7, 2008.

About Apollo Group, Inc.

Apollo Group, Inc. has been an education provider for more than 30 years, providing academic access and opportunity to students through its subsidiaries, University of Phoenix, Institute for Professional Development, College for Financial Planning, Western International University, Meritus University, Insight Schools and Apollo Global. It also owns Aptimus, a provider of innovative digital media solutions. The Company's distinctive educational programs and services are provided at the high school, undergraduate and graduate levels in 40 states (as of August 31, 2008) and the District of Columbia; Puerto Rico; Alberta and British Columbia, Canada; Mexico; Chile; and the Netherlands, as well as online throughout the world.

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

Forward-Looking Safe Harbor

Statements in this press release regarding Apollo Group's business outlook, future financial and operating results, future enrollment, and overall future strategy and plans, are forward-looking statements, and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual results may differ materially from those projected in such statements due to various factors. For a discussion of the various factors that may cause actual results to differ materially from those projected, please refer to the risk factors and other disclosures contained in Apollo Group's previously filed Form 10-K, Forms 10-Q, and other filings with the Securities and Exchange Commission.

                 Apollo Group, Inc. and Subsidiaries
                     Consolidated Balance Sheets
                             (Unaudited)

                                                 As of August 31,
                                             -------------------------
($ in thousands)                                 2008         2007
                                             ------------ ------------
Assets:
Current assets
  Cash and cash equivalents                  $   483,195  $   339,319
  Restricted cash and cash equivalents           384,155      296,469
  Marketable securities, current portion           3,060       31,278
  Accounts receivable, net                       221,919      190,912
  Deferred tax assets, current portion            55,434       50,885
  Other current assets                            21,780       16,515
                                             ------------ ------------
Total current assets                           1,169,543      925,378
Property and equipment, net                      439,135      364,207
Marketable securities, less current portion       25,204       22,084
Goodwill                                          85,968       29,633
Intangible assets, net                            23,096        2,214
Deferred tax assets, less current portion         89,499       80,077
Other assets                                      27,967       26,270
                                             ------------ ------------
Total assets                                 $ 1,860,412  $ 1,449,863
                                             ============ ============

Liabilities and Shareholders' Equity:
Current liabilities
  Accounts payable                           $    46,589  $    80,729
  Accrued liabilities                            121,200      103,651
  Current portion of long-term liabilities        47,228       21,093
  Income taxes payable                             6,111       43,351
  Student deposits                               413,302      328,008
  Current portion of deferred revenue            231,179      167,003
                                             ------------ ------------
Total current liabilities                        865,609      743,835
Deferred revenue, less current portion               104          295
Deferred tax liabilities                           2,743            -
Long-term liabilities, less current portion      145,791       71,893
                                             ------------ ------------
Total liabilities                              1,014,247      816,023
                                             ------------ ------------

Commitments and contingencies

Minority Interest                                 11,956            -

Shareholders' equity
Preferred stock, no par value                          -            -
Apollo Group Class A nonvoting common stock,
 no par value                                        103          103
Apollo Group Class B voting common stock, no
 par value                                             1            1
Additional paid-in capital                             -            -
Apollo Group Class A treasury stock, at cost  (1,757,277)  (1,461,368)
Retained earnings                              2,595,340    2,096,385
Accumulated other comprehensive loss              (3,958)      (1,281)
                                             ------------ ------------
Total shareholders' equity                       834,209      633,840
                                             ------------ ------------
Total liabilities and shareholders' equity   $ 1,860,412  $ 1,449,863
                                             ============ ============
                 Apollo Group, Inc. and Subsidiaries
                  Consolidated Statements of Income
                             (unaudited)

                           Three Months Ended        Year Ended
                               August 31,            August 31,
                          -------------------- -----------------------
(in thousands, except per
 share data)                 2008      2007       2008        2007
                          ---------- --------- -----------------------

Net revenue               $ 831,397  $713,922  $3,140,931  $2,723,793
                          ---------- --------- ----------- -----------
Costs and expenses:
  Instructional costs and
   services                 362,268   327,247   1,370,878   1,237,491
  Selling and promotional   223,137   173,783     805,395     659,059
  General and
   administrative            47,990    62,348     215,192     201,546
  Estimated securities
   litigation loss         (169,966)        -           -           -
                          ---------- --------- ----------- -----------
Total costs and expenses    463,429   563,378   2,391,465   2,098,096
                          ---------- --------- ----------- -----------
Income from operations      367,968   150,544     749,466     625,697
Interest income and
 other, net                  12,350     9,660      33,388      31,600
                          ---------- --------- ----------- -----------
Income before income
 taxes and minority
 interest                   380,318   160,204     782,854     657,297
Provision for income
 taxes                     (151,094)  (57,044)   (306,927)   (248,487)
Minority interest, net of
 tax                            369         -         598           -
                          ---------- --------- ----------- -----------
Net income                $ 229,593  $103,160  $  476,525  $  408,810
                          ========== ========= =========== ===========

Earnings per share:

Basic income per share    $    1.45  $   0.61  $     2.90  $     2.37
                          ========== ========= =========== ===========
Diluted income per share  $    1.43  $   0.60  $     2.87  $     2.35
                          ========== ========= =========== ===========
Basic weighted average
 shares outstanding         158,719   169,770     164,109     172,309
                          ========== ========= =========== ===========
Diluted weighted average
 shares outstanding         160,118   171,347     165,870     173,603
                          ========== ========= =========== ===========
                 Apollo Group, Inc. and Subsidiaries
                Consolidated Statements of Cash Flows
                             (unaudited)

                                                Year Ended August 31,
                                               -----------------------
                                                  2008        2007
                                               ---------- ------------

($ in thousands)
Cash flows provided by (used in) operating
 activities:
Net income                                     $ 476,525  $   408,810
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Share-based compensation                        53,570       54,027
  Excess tax benefits from share-based
   compensation                                  (18,648)      (4,022)
  Depreciation and amortization                   79,726       71,115
  Amortization of deferred gain on sale-
   leaseback                                      (1,786)      (1,763)
  Non-cash foreign currency losses, net            2,825            -
  Amortization of marketable securities
   discount and premium, net                          90          268
  Provision for uncollectible accounts
   receivable                                    104,201      120,614
  Minority interest, net of tax                     (598)           -
  Deferred income taxes                           (6,624)     (46,040)
  Changes in assets and liabilities excluding
   the impact of acquisitions:
    Accounts receivable                         (105,726)    (150,943)
    Other assets                                  (7,285)      (1,912)
    Accounts payable and accrued liabilities     (14,155)      31,174
    Income taxes payable                          21,667       (2,440)
    Student deposits                              85,294       73,878
    Deferred revenue                              35,281       31,003
    Other liabilities                             21,649        4,853
                                               ---------- ------------
Net cash provided by operating activities        726,006      588,622
                                               ---------- ------------
Cash flows provided by (used in) investing
 activities:
  Additions to property and equipment            (92,471)     (61,185)
  Additions to land and buildings related to
   new headquarters                              (12,408)     (43,366)
  Acquisitions, net of cash acquired             (93,763)     (15,079)
  Purchase of marketable securities             (875,205)  (1,575,635)
  Maturities of marketable securities            900,715    1,621,636
  Increase in restricted cash and cash
   equivalents                                   (87,686)     (58,163)
  Purchase of other assets                             -         (143)
                                               ---------- ------------
Net cash used in investing activities           (260,818)    (131,935)
                                               ---------- ------------
Cash flows provided by (used in) financing
 activities:
  Payments on long-term debt                      (1,043)           -
  Payments on line of credit                    (250,392)           -
  Borrowings under lines of credit               250,991            -
  Purchase of Apollo Group Class A common
   stock                                        (454,362)    (437,735)
  Issuance of Apollo Group Class A common
   stock                                         102,969        7,738
  Minority interest contributions                 12,149            -
  Excess tax benefits from share-based
   compensation                                   18,648        4,022
                                               ---------- ------------
Net cash used in financing activities           (321,040)    (425,975)
                                               ---------- ------------
  Exchange rate effect on cash and cash
   equivalents                                      (272)        (451)
                                               ---------- ------------
Net increase in cash and cash equivalents        143,876       30,261
Cash and cash equivalents, beginning of year     339,319      309,058
                                               ---------- ------------
Cash and cash equivalents, end of year         $ 483,195  $   339,319
                                               ========== ============
Supplemental disclosure of cash flow
 information
  Cash paid during the year for income taxes   $ 289,630  $   293,089
  Cash paid during the year for interest       $   2,874  $       231
Supplemental disclosure of non-cash investing
 and financing activities
  Credits received for tenant improvements     $   9,604  $     5,378
  Purchases of property and equipment included
   in accounts payable                         $   4,072  $     6,169
  Settlement and reclassification of liability
   awards                                      $  16,655  $     7,011
  Fair value adjustments for liability-
   classified awards                           $       -  $     6,952
  Unrealized loss on auction-rate securities   $   1,621  $         -
                 Apollo Group, Inc. and Subsidiaries
                       Detailed Expense Tables
                             (unaudited)

                                         % of Revenues
                                        ----------------
Instructional costs
 and services            Three Months     Three Months     % Change
                                                         -------------
                       Ended August 31, Ended August 31,
                       ---------------- ----------------
                         2008     2007     2008    2007  2008 vs. 2007
                       --------- ------ ---------- ----- -------------
($ in millions)
Employee compensation
 and related expenses    $131.0  $109.2     15.8%  15.3%        20.0%
Faculty compensation       75.1    63.1      9.0%   8.8%        19.0%
Classroom lease
 expenses and
 depreciation              56.5    52.4      6.8%   7.3%         7.8%
Other instructional
 costs and services        50.2    46.9      6.0%   6.6%         7.0%
Bad debt expense           24.9    37.3      3.0%   5.2%       (33.2%)
Financial aid
 processing costs          20.7    17.9      2.5%   2.5%        15.6%
Share-based
 compensation               3.9     0.4      0.5%   0.1%       875.0%
                       --------- ------ ---------- -----
Instructional costs
 and services            $362.3  $327.2     43.6%  45.8%        10.7%
                       ========= ====== ========== =====

                                         % of Revenues
                                        ----------------
Selling and
 promotional expenses    Three Months     Three Months     % Change
                                                         -------------
                       Ended August 31, Ended August 31,
                       ---------------- ----------------
                         2008     2007     2008    2007  2008 vs. 2007
                       --------- ------ ---------- ----- -------------
($ in millions)
Enrollment counselors'
 compensation and
 related expenses        $102.2  $ 85.2     12.3%  11.9%        20.0%
Advertising                92.1    73.5     11.1%  10.3%        25.3%
Other selling and
 promotional expenses      28.0    15.0      3.3%   2.1%        86.7%
Share-based
 compensation               0.8     0.1      0.1%   0.0%       700.0%
                       --------- ------ ---------- -----
Selling and
 promotional expenses    $223.1  $173.8     26.8%  24.3%        28.4%
                       ========= ====== ========== =====

                                         % of Revenues
                                        ----------------
General and
 administrative
 expenses                Three Months     Three Months     % Change
                                                         -------------
                       Ended August 31, Ended August 31,
                       ---------------- ----------------
                         2008     2007     2008    2007  2008 vs. 2007
                       --------- ------ ---------- ----- -------------
($ in millions)
Employee compensation
 and related expenses    $ 24.9  $ 21.6      3.0%   3.0%        15.3%
Share-based
 compensation              (0.6)   12.7     (0.1%)  1.8%      (104.7%)
Legal, audit, and
 corporate insurance        6.8     6.4      0.8%   0.9%         6.3%
Administrative space
 and depreciation           6.2     5.5      0.7%   0.8%        12.7%
Other general and
 administrative
 expenses                  10.7    16.1      1.4%   2.2%       (33.5%)
                       --------- ------ ---------- -----
General and
 administrative
 expenses                $ 48.0  $ 62.3      5.8%   8.7%       (23.0%)
                       ========= ====== ========== =====

The table below details special items included in general and
 administrative expenses.

                                   Three Months
                                 Ended August 31,
                                 -----------------
($ in millions)                                    Line item included
                                  2008     2007          in above
                                 ------ ---------- -------------------
Fair value adjustment                              Other general and
 for former employee                                administrative
 stock options                   $    -    $ 4.3    expenses
Stock option investigation/                        Other general and
 financial statement restatement                    administrative
                                      -      2.1    expenses
                                 ------ ----------
Subtotal                         $    -    $ 6.4
                                 ====== ==========
                 Apollo Group, Inc. and Subsidiaries
                       Detailed Expense Tables
                             (unaudited)

                                           % of Revenues
                                           -------------
Instructional costs and
 services                   Year Ended      Year Ended
                            August 31,      August 31,     % Change
                         ----------------- ------------- -------------
                           2008     2007    2008   2007  2008 vs. 2007
                         ----------------- ------- ----- -------------
($ in millions)
Employee compensation
 and related expenses    $  491.1 $  424.4   15.6% 15.6%        15.7%
Faculty compensation        272.5    236.9    8.7%  8.7%        15.0%
Classroom lease expenses
 and depreciation           214.2    205.2    6.8%  7.5%         4.4%
Other instructional
 costs and services         189.9    173.3    6.0%  6.4%         9.6%
Bad debt expense            104.2    120.6    3.3%  4.4%       (13.6%)
Financial aid processing
 costs                       78.4     63.8    2.5%  2.3%        22.9%
Share-based compensation     20.6     13.3    0.7%  0.5%        54.9%
                         -------- -------- ------- -----
Instructional costs and
 services                $1,370.9 $1,237.5   43.6% 45.4%        10.8%
                         ======== ======== ======= =====

                                           % of Revenues
                                           -------------
Selling and promotional
 expenses                   Year Ended      Year Ended
                            August 31,      August 31,     % Change
                         ----------------- ------------- -------------
                           2008     2007    2008   2007  2008 vs. 2007
                         -------- -------- ------- ----- -------------
($ in millions)
Enrollment counselors'
 compensation and
 related expenses        $  385.8 $  320.3   12.3% 11.8%        20.4%
Advertising                 322.5    277.7   10.3% 10.2%        16.1%
Other selling and
 promotional expenses        93.5     58.0    2.9%  2.1%        61.2%
Share-based compensation      3.6      3.1    0.1%  0.1%        16.1%
                         -------- -------- ------- -----
Selling and promotional
 expenses                $  805.4 $  659.1   25.6% 24.2%        22.2%
                         ======== ======== ======= =====

                                           % of Revenues
                                           -------------
General and
 administrative expenses    Year Ended      Year Ended
                            August 31,      August 31,     % Change
                         ----------------- ------------- -------------
                           2008     2007    2008   2007  2008 vs. 2007
                         -------- -------- ------- ----- -------------
($ in millions)
Employee compensation
 and related expenses    $   93.8 $   71.9    3.0%  2.6%        30.5%
Share-based compensation     29.4     37.6    0.9%  1.4%       (21.8%)
Legal, audit, and
 corporate insurance         25.8     15.5    0.8%  0.6%        66.5%
Administrative space and
 depreciation                24.8     21.1    0.8%  0.8%        17.5%
Other general and
 administrative expenses     41.4     55.4    1.4%  2.0%       (25.3%)
                         -------- -------- ------- -----
General and
 administrative expenses $  215.2 $  201.5    6.9%  7.4%         6.8%
                         ======== ======== ======= =====

The table below details special items included in general and
 administrative expenses.

                                     Year Ended
                                     August 31,
                                  ----------------
($ in millions)                                    Line item included
                                    2008    2007         in above
                                  -------- ------- -------------------
Stock option investigation /                       Other general and
 financial statement restatement                    administrative
                                  $      -  $14.7   expenses
Stock option                                       Share-based
 modifications                           -   12.1   compensation
Fair value adjustment for former                   Other general and
 employee stock options                             administrative
                                         -    7.0   expenses
                                  -------- -------
Subtotal                          $      -  $33.8
                                  ======== =======
Reconciliation of GAAP financial information to non-GAAP financial
 information

                                Three Months           Year
                              Ended August 31,   Ended August 31,
                            -------------------- -----------------
                              2008      2007      2008      2007
                            --------   -------   -------   -------
(in millions, except per
 share data)

Net income as reported      $ 229.6    $103.2    $476.5    $408.8
                            --------   -------   -------   -------

Reconciling items:
  Gain on termination of
   sale and leaseback
   option                      (9.5)(1)     -      (9.5)(1)     -
  Estimated securities
   litigation loss           (170.0)(2)     -         -         -
  Fair value adjustment for
   former employee stock
   options                        -       4.3 (3)     -       7.0 (3)
  Option investigation and
   restatement costs              -       2.1 (4)     -      14.7 (4)
  Stock option
   modifications                  -         -         -      12.1 (5)
                            --------   -------   -------   -------
                             (179.5)      6.4      (9.5)     33.8
  Less: tax effects            70.4      (2.5)      3.7     (13.3)
                            --------   -------   -------   -------
                             (109.1)      3.9      (5.8)     20.5
                            --------   -------   -------   -------
Net income adjusted to
 exclude
special items               $ 120.5    $107.1    $470.7    $429.3
                            ========   =======   =======   =======

Diluted income per share
 adjusted to exclude
special items               $  0.75    $ 0.62    $ 2.84    $ 2.47
                            ========   =======   =======   =======


Net income as reported      $ 229.6    $103.2    $476.5    $408.8
                            --------   -------   -------   -------

Reconciling items:
  Gain on termination of
   sale and leaseback
   option                      (9.5)(1)     -      (9.5)(1)     -
  Estimated securities
   litigation loss           (170.0)(2)     -         -         -
  Fair value adjustment for
   former employee stock
   options                        -       4.3 (3)     -       7.0 (3)
  Option investigation and
   restatement costs              -       2.1 (4)     -      14.7 (4)
  Share-based compensation      4.1 (6)  13.2 (6)  53.6 (6)  54.0 (6)
                            --------   -------   -------   -------
                             (175.4)     19.6      44.1      75.7
  Less: tax effects            68.8      (7.7)    (17.3)    (29.7)
                            --------   -------   -------   -------
                             (106.6)     11.9      26.8      46.0
                            --------   -------   -------   -------


Net income adjusted to
 exclude share-based
 compensation expense and
 special items              $ 123.0    $115.1    $503.3    $454.8
                            ========   =======   =======   =======



Diluted income per share
 adjusted to exclude share-
 based compensation expense
 and special items          $  0.77    $ 0.67    $ 3.03    $ 2.62
                            ========   =======   =======   =======

Diluted weighted average
 shares outstanding           160.1     171.3     165.9     173.6
                            ========   =======   =======   =======

(1) The $9.5 million gain during the three months and year ended August 31, 2008 represents the gain associated with the termination of an option agreement related to our headquarters land and building.

(2) The $170.0 million gain during the three months ended August 31, 2008 represents the reversal of the charge for the securities litigation loss.

(3) The $4.3 million and $7.0 million in charges for the three months and year ended August 31, 2007, respectively, represent fair value adjustments to the stock options of former employees.

(4) The $2.1 million and $14.7 million in charges for the three months and year ended August 31, 2007, respectively, represent costs related to the stock option investigation and restatement.

(5) The $12.1 million in charges for the year ended August 31, 2007 represents stock option modifications.

(6) Share-based compensation was $4.1 million and $53.6 million for the three months and year ended August 31, 2008, respectively, compared with $13.2 million and 54.0 million (including $12.1 million related to stock option modifications) for the three months and year ended August 31, 2007, respectively.

CONTACT: Apollo Group, Inc.
Investor Relations Contacts:
Allyson Pooley, 312-660-2025
allyson.pooley@apollogrp.edu
Janess Pasinski, 602-557-1719
janess.pasinski@apollogrp.edu
Media Contact:
Wendy Paul, 866-222-8910
wendy.paul@phoenix.edu
SOURCE: Apollo Group, Inc.