FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Apollo Group, Inc.
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4615 E. Elwood Street
Phoenix, AZ 85040
(602) 966-5394
http://www.apollogrp.com

UNION CITY, CA (March 26, 1997)/FOOLWIRE/ --- Apollo Group released their second quarter fiscal 1997 results on March 19th. This was the ninth consecutive quarter of good results since their IPO in December of 1994. Revenues for the second quarter were up 33% to $61.7 million compared to $46.4 million in revenues for the second quarter last year. Net income was $5.1 million or $0.10 per share. That compares to $2.9 million or $0.06 per share the prior year.

SIX-MONTH RESULTS. Revenues for the six months were up 33.9% to $128.6 million. Net income was up to $12.4 million or $0.24 per share compared to $0.15 per share for the same period last year.

INTEREST INCOME. Interest income for the second quarter was $956,000 compared to $737,000 in the prior year. Year-to-date interest income was $1,846,000 which compares to the prior year of $1,482,000.

ENROLLMENT GROWTH. The growth is being fueled by 31% growth in University of Phoenix (UOP) enrollments, almost a 30% increase in enrollments at Western International, and then IPD which typically has grown slower was at a 9.5% increase. Looking at all of their enrollment increases, about 78% was generated at campuses that were open prior to fiscal 1996. They are still getting very consistent and strong same market growth. IPD has a little different model than UOP. They tend to grow by adding new contracts. So, much of IPD's growth is coming from the contracts that were opened in the last year or so. In the older markets they have, Indiana is IPD's largest market and were up 13% year over year; the Milwaukee area was up around 10% over the prior year. But some of the newer campuses like Ohio was up 178%, Albertus Magnus was up 60%, Bellehaven was up 40% so that's where most of IPD's growth will come going forward as well. At Indiana Wesleyan IPD has 2899 students and that is a 15 year-old contract. Ohio Dominican is fairly new, just within the last year, and they have 131 students. Bellehaven has 342 students. Albertus Magnus has 611 students.

GROWTH BY MARKET. Looking at enrollments in their five largest markets, Southern California had an 11% increase, Arizona was up 27.5%, Northern California was up 26.7%, distance education (online) was up 56%. The Center for Distance education was up around 16%. Colorado was up 25.8%.

LOCATIONS. Enrollments are now nearly 55,000 students, up from 45,000 a year ago. They are pleased with the continued growth of the company. They have opened new learning centers in Los Alamos New Mexico, Rancho Bernardo California and the 32nd Street Naval Base in San Diego. Their online campus was their fastest-growing campus, nearly 56%, and is now up to 2400 students. They now have 89 campuses and learning centers across the US.

EXPANSION PLANS. They plan to open their Seattle and Portland campuses in 1997 and continue opening new campuses and learning centers throughout the remainder of the year. Since they will not be able to do Seattle and Portland now until October, they will focus their efforts on some new campuses they wanted to do in states they are already approved in. Once Seattle and Portland happens at the end of this year, they have said all along they are working on a whole series of states politically, and that political process is going very well. Those states are in the New England area -- New York, Pennsylvania, New Jersey, etc. The process is going better than it has historically gone for them, primarily because they have pretty high visibility right now. It's a little bit difficult to predict that political process. Clearly with the half dozen or more states they are working on right now, they don't think they are going to have any problem fulfilling their expansion plans with those states that they do obtain licensure in. The Florida rollout is going pretty good. They think demand is high down there, maybe not quite as high as Michigan, but it is still early in the process. They are definitely pleased and with these bigger states with the high population centers, it is pretty tough to make a mistake with that much demand. Florida, as of the end of February had 347 students, which is good. Normally after a year to fifteen months they would have 200-250 students and this is about 7 months after enrollment, so they are still well-ahead of plan. Michigan, which was opened about 18 months ago is at 1231 students. Louisiana is at more of a typical pattern at 353 students after 18 months. Florida is really where Louisiana is now, but about 12 months earlier in terms of the time it took.

NEW MARKETS. As far as dynamics of new markets, such as Michigan, they think that one of the things people have to realize about Michigan is that until they got there nobody like them had ever been there before. And, so it's like all of a sudden they have this new way of looking at things and everyone's gravitating towards them in terms of students because there are not many innovative alternatives. In addition, coupling that with a pretty sizeable population, they think that's one of the reasons Michigan has been successful for them. In Florida, there is a lot more interest in involving the University of Phoenix in other areas. Florida has asked for Apollo Group's help -- this is higher education in general -- in their learning resource area, in the training area, and they do think there will be a lot more opportunities than their typical degree program growth in these areas. They are finding that in Michigan as well and even in some of their older markets.

NCA ACCREDITATION/DOCTORAL PROGRAM. The North Central Association accreditation visit was followed by a meeting of the NCA in March of 1997. This was forwarded to a review panel that will consider it in June of 1997 and then it will go on to the Commission. Some background on this, in November of last year they had a site visit where there were about 10 NCA representatives that came out, looked at everything, and wrote a report. It was clearly the best report Apollo had ever had. The group recommended approval of all Apollo's geographic stuff plus approval of a doctoral program. The Commission meeting was in March. They had the option of going to a review panel before the Commission meeting, but both Apollo and the staff at NCA, given the strength of the team report, didn't think it was necessary for them to go to a review panel. So, when the Commission meeting was held they decided that Apollo should in fact go to a review panel. Apollo doesn't exactly know yet what their reasons are. The only thing they can say is that it would have been unusual for the Commission, especially for the doctoral program, to approve them the first time through the process. But, given how much the team liked it, they really thought that was going to happen. But it didn't and they want Apollo to go through a review panel that will meet in June. Then the Commission meets again in August and that's when they will be approved. The review panel is mostly to discuss the curriculum and ask questions about it. It's hard to say what the review panel wants, but nothing Apollo has been told indicates that the geographic thing was an issue at all. Apollo's programs have been accredited. This is a five year review and what is going to the panel review is the new programs they want to put in place. While they don't like this complicated and convoluted process they have to go through, one of the benefits of it is that it is a huge barrier to entry for potential competitors.

STATE APPROVALS. On a state level, the hoops Apollo has to jump through for approval varies by state. What it all has in common is the political process with a function of how "traditionally entrenched" the education folks are, the licensing people, how closely they are tied with the traditional education people in their state. The legislators are Apollo's best friends in this process because competition helps them reduce costs, improve service, etc. So, Apollo's task is to work the political channels and break down all the arguments because almost all the arguments fall apart when any reason is applied to them. How they do this varies pretty significantly by state. Basically they have to get everyone on board throughout the process. Some states like Pennsylvania have laws almost specifically prohibiting "for-profit" entities and so they literally have to get those laws changed. In other states like New York where, for example people like De Vry have plowed the ground for them, the process will be smoother. Although the process varies, Apollo is very strong in this area and they have an approach that seems to work for them.

NEW PROGRAMS/CURRICULUM FOR IT PROFESSIONALS. They are working very hard to add more curriculum and programs for IT professionals. There is a huge demand for IT professionals and an under-served supply right now. They are working on that not only from the degree standpoint but also from the training standpoint both in a face-to-face method as well as a new campus they are working on right now they are calling the Internet Campus, which will deliver the courses over the Internet. Other than that they are still in the process of developing the stuff so they aren't ready to announce anything yet, but they are working on it very hard. They think their strategy will be first to offer the training and they will simultaneously be working on training programs that offer certification in skills using specific software/systems, etc. The question they haven't answered yet is whether everyone who wants training also wants certification. They will have to get to that, because if there's a degree in training that's it. And it is relatively simple. They are doing Microsoft and Novell training right now in 6 of their locations as pilots. But they don't have this consolidated, major, organized push, but they are doing the development and planning for that now. They don't know the timing on the major push yet.

K-12 MARKET. They are looking very closely at the charter school movement (addressing K-12) and it is quite possible, although they are not announcing they will do it, they are seriously considering starting a model K-12 school just to practice -- not to run K-12 schools, but rather to determine what services can be vended to these schools. Their pilot is coming along quite nicely but they aren't ready to announce exactly what their initiatives are going to be.

EXPENSES. Startup costs for the quarter were at $1.085 million compared to $886,000 in the second quarter last year. Year-to-date their startup costs are about $2.3 million and they are still anticipating about $5 million in startup costs for the entire year. Interest expense was less than $20,000 this quarter, fairly insignificant.

CASH. With cash, restricted cash, and short-term investments they are now at $100 million in cash. There is no long-term debt. They have some non-interest-bearing long-term liabilities which is roughly $2.5 million.

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