FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (TMF 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 (July 1, 1997)/FOOLWIRE/ --- The Apollo Group reported their third quarter 1997 results recently. This was the 11th quarter since their IPO in December of 1994 that they have met their numbers. Revenues were up 32% and income was up 50% to $0.22 per share. Revenues were $77.8 million compared to $59 million in the third quarter last year. Net income is up 50% to $11.6 million or $0.22 per share compared to $0.15 per share in Q3 last year.

NINE MONTH RESULTS. For the nine months, revenues are up 33.1% over the prior year. They are currently at $206.5 million compared with $155 million in revenues for the same period last year. Net income for the nine months was up 57% to $0.46 per share compared to $0.30 per share for the same period last year.

ENROLLMENT GROWTH STATISTICS. Enrollment growth was 28.6% increase in average enrollments for the University of Phoenix, 9.3% increase in average enrollments for IPD, and a 12% increase for Western International. Ending enrollments were up 19.9% to 53,000 students at May 31st compared to 44,000 students at May 31st last year. Almost 80% of this growth is from "same market" growth, generated at campuses opened prior to fiscal 1996. So, they are still seeing very strong enrollment growth at their existing campuses. Looking at enrollments in their five largest markets: Southern California was up 9.8% over the prior year with actual enrollments of 9,284, Arizona was up 19.6% with actual enrollments of 7,344, Northern California was up 26% with actual enrollments of 5,555, Colorado was up 17% with actual enrollments of 3,506, distance education was up 34% with actual enrollments of 4,291, and Indiana Wesleyan was up 12.6%. In distance education, online was up 61% and currently has 2725 students. The center for distance education was up 4.2%. UOP consolidated enrollments at the end of May was 38,619, IPD was 13,273, and Western International was 1.245.

NEW MARKETS. Michigan is up 245% over the prior year and is currently at 1191 students. Louisiana is up 164% over the prior year and is at 369 students, and Florida wasn't open this time last year but they currently have 430 students. Florida is doing much better than Louisiana and Michigan is doing the best out of the three new markets.

NEW LOCATIONS OPENED IN Q3. During the quarter they opened four total new locations -- a new learning center in Stockton, one in Phoenix, and one in Las Vegas, and a new IPD contract in Stamford, Connecticut. They currently have a total of 93 sites and anticipate being at 101 sites by the end of August. In 1997 they will open 16-17 new sites and expect about the same number in 1998.

PRICE INCREASES. At the beginning of the fiscal year they had a 5-6% tuition price increase. In the third quarter they would have been impacted by that increase. Plus, because online is growing at a 60% rate, and because of the growth rates in some of their markets where they charge a higher tuition rate, they are getting a 3-4% bump in addition to the price increase just due to the mix. For example, online they can charge $12,000 per year for the online program whereas their average tuition per year is around $6,300 or so. So, as online and some of these other markets become a higher and higher concentration of enrollments within the University of Phoenix enrollments, the overall mix will increase.

STARTUP COSTS. Startup costs for the quarter were $653,000 compared to $861,000 in the prior year and contributed significantly to the margin improvement. They have revised their startup cost estimates for the entire year. Previously they were looking for about $5 million in startup costs, but it looks like they will shift about $1 million of those costs from this year to next year. So they will do about $4 million in startup costs this year and closer to $5.5-6 million next year. That won't affect the estimates that are out there for 1998 to any great degree.

CASH AND INTEREST INCOME. They have broken out interest income separately on their income statement. They had less than $20,000 worth of interest expense during the quarter. They have about $120 million of cash on the balance sheet.

STATUS ON NCA APPROVAL FOR NORTHWEST MARKET. The review committee meeting with the NCA was June 23rd and they expect to hear shortly after that with regard to moving into the Northwest. They think their response is pretty good. They have had several discussions with the NCA now. If they receive approval which is what they expect, they still won't be able to do anything until the actual commission meeting in August. Assuming they get approval, they are set to go with Seattle and Portland and will open those as well as a couple of learning centers in Orlando. They have a couple of states they can go into and will do that sometime later in the year while they are still trying to absorb Seattle and Portland. They have identified sites in both Seattle and Portland as well as the management who will serve both of those locations. More so in Seattle than in Portland, but in both locations they have had an increase in the number of calls enquiring about information because people are aware that their state license has been approved in both of those states. They expect enrollment to be very good.

UPDATE ON PENNSYLVANIA MARKET. They were in Pennsylvania to speak to the state legislature. Pennsylvania is the only state in the union that has a statute on the books that says that only non-profit institutions can operate in the state. At this point they feel pretty confident that they are going to get that law removed so that any accredited institution of higher education which would give them the right to apply for a license in Pennsylvania. They would still have to be approved, but it was nice to have the Licensing Director of the Licensing Board of Education testify in favor of revised legislation.

UPDATE ON DOCTORATE PROGRAM. The doctorate program will remain coupled with the Northwest approval process because the commission can approve or disapprove pieces of the application. With regard to the doctorate program, if they get approved by the review committee and the commission, they are ready to go. They have all the curriculum and several thousand leads in terms of interested students. As far as the key points of contention, the NCA wanted them to strengthen the research part of the program. Apollo Group put their response together. It is really kind of a minor issue as far as Apollo Group was concerned in that it was pretty easy to do. The difficulty comes in the fact that the team chair from NCA who visited the campuses doesn't agree with the commission. He thinks that a really strong research component doesn't belong in a Doctor of Management program, it belongs in a Ph.D. program, so he doesn't want them to do it. So, one arm of NCA wants it and the commission doesn't, so they will have to see what happens at the review committee. They are happy to do either.

UPDATE ON INFORMATION TECHNOLOGY PROGRAM. On the IT training component, they have developed a lot of curriculum now and are testing it in a couple of different markets before they roll it out to see what people like and don't like because it is a new model for them. They have a new degree in Information Technology but they are not going to take that to NCA until after August when they get through the other approvals. Basically, they are in the process of developing and testing the curriculum and will start rolling it out to the campuses around the first part of the next calendar year. They will try it in a bunch of different locations because markets differ and the program may need to be adjusted to accommodate those differences.

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