Apollo Group's Q4
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Apollo Group's Q4
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(FOOL CONFERENCE CALL SYNOPSIS)* By Dale Wettlaufer (MF Raleigh)
APOLLO GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: APOL)") else Response.Write("(NASDAQ: APOL)") end if %> ALEXANDRIA, Va., October 21, 1996 /FOOLWIRE/ -- Apollo Group, Inc. reported on October 21 fiscal 1996 financial results for the fourth quarter and year ended August 31, 1996.
Total revenues for the fourth quarter of fiscal 1996 rose 30.3% to $59.2 million, compared with $45.4 million in the fourth quarter of fiscal 1995. Net income for the three months increased 50% to $6.2 million, or $.12 per share, as compared to $4.2 million, or $.08 per share, reported for the same period last year.
Total revenues for the fiscal year ended August 31, 1996 increased by 31.1% to $214.3 million, compared with $163.4 million for the prior fiscal year. Net income for the fiscal year ended August 31, 1996 increased by 70% to $21.4 million, or $.42 per share, as compared to $12.6 million, or $.27 per share, reported for the prior fiscal year.
Revenue growth in the fourth quarter resulted primarily from a 29.1% increase in average enrollments for the University of Phoenix and an 8.5% increase in average enrollments for the Institute for Professional Development. Consolidated enrollments at August 31, 1996 increased by 27.4% to 46,935 students as compared to 36,848 students at August 31, 1995. Over 75% of this growth is attributable to increased enrollments at campuses that existed prior to September 1995.
Dr. John G. Sperling, Chairman of the Board and President, said, "Higher education for the American workforce is an economic imperative. Now that the fastest growing part of the American economy is the knowledge-sector of the service industry, the nation's human capital and the new ideas and innovations generated by that human capital constitute a major engine of economic growth. For individuals, there is a direct and powerful correlation between higher education and higher incomes. We believe that Apollo offers those individuals, mainly working adults, a more affordable and convenient means of accessing higher education. For all workers, the world of work is no longer a secure place. Today, a worker's security depends upon maintaining the knowledge and skills that all employers find desirable. If one expects to prosper with a rising career, worklife-long education is an economic imperative."
Dr. Sperling also added, "In the past year, the Company expanded its number of campuses and learning centers to 85 at August 31, 1996, compared to 68 at the end of last year. The University of Phoenix, Apollo's largest subsidiary, is now the 2nd largest private university and has one of the largest business schools in the U.S. The Institute for Professional Development expanded the number of contracts with private universities to 18 at August 31, 1996 from 15 at the end of last year. Most of these contracts extend beyond the year 2000."
The company is now the largest private institution of higher education in the United States. "The Company plans to open several additional campuses and learning centers in 1997 and plans to expand its product offerings to address increased market demands. We are pleased with our financial performance and accomplishments during fiscal 1996 and look forward to continued growth in fiscal 1997."
ADDITIONAL COMMENTS ON FINANCIALS AND GEOGRAPHICAL BREAKDOWN
Start-up costs totaled $3.5 million, compared with $1.1 million for 1995. The company is planning for roughly $5.5 million for 1997. These costs are expensed as incurred. Interest income was $3 million, compared with $2.4 million last year.
The company's five largest markets are (growth rate added to list but not ranking the order): Arizona (including Western International results), up 47%; S. California, up 18%, N. California, up 34%; distance education, up 56% (online was up 61%); Colorado, up 24%; and Indiana/Westland, up 19%. Enrollments by division were: University of Phoenix, 33,096; distance education, which is included in the UP number, was 3,691 (online was 2,179 and CDE was 1,512); IPD was 12,601; and Western International was 1,238. Total enrollment was 46,935.
QUESTION AND ANSWER SESSION
In 1995, most of the company's interest-bearing investments were taxable securities; this year, the company invested in tax-free items. This brought down the company's tax rate from last year. Selling and promotional leverage has slowed as a result of new market start-ups in Louisiana and Michigan as well as for IPD campuses. The company is planning about 16 new locations, which will be a combination of UP and IPD. The tax rate next year should be about 40%. Interest income will impact net earnings to a lesser degree in the coming year.
Cash and equivalents at year-end was $52 million; restricted cash was $11 million; short term investments totaled $13.5 million.
The Department of Education has changed the standards by which it judges financial strength -- the company sees no problem in meeting those regulatory guidelines. Other regulations, involving changes in corporate control, are being proposed, but the company sees no problem with those due to the voting power, or lack thereof, of its different classes of stock.
The company is in the process of looking at the primary and secondary school market.
Projected start-ups for 1997 include 11 for UP, five or six for IPD, and two or three learning centers.
Taking out Western International, the Arizona market grew 28%. With WI, the market grew 47%.
Western International is being positioned for international market penetration and penetration into technical training.
Michigan's enrollment was 610 students and Louisiana was 214. After a one-year period, the norm for enrollment is 200 students. Florida just began enrolling students in August. Over 200 students have not enrolled over 200 students. For a three-month period, the company is far ahead of historical trends for that start-up. Almost all campuses in the entire system are growing -- IPD growth is somewhat smaller than UP.
Weighted average shares is planned to be 51.8 million for 1997.
Most of the company's growth is coming from existing campuses -- new markets depend upon regulatory environments.
Training of recruiters has been progressing well. The amount of students brought in per recruiter has been about 16 while the company had expected only 10-12.
Learning center expansion is planned in Michigan, as enrollment has maxed out available space. Florida will expand as needed.
Leads (on prospective students) have increased about 40%, which is the best leading indicator for the business.
The relationship with AT&T is going very well. AT&T revenues are running about 5% ahead of budget. McDonnell Douglas is another large customer. The company is also working with US West and is evaluating training opportunities with that company.
Transmitted: 10/22/96 * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. |
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Copyright 1996, The Motley Fool |