DOW JONES NEWSWIRES 
 

Apollo Group Inc.'s (APOL) fiscal third-quarter profit fell 11% as better-than-expected revenue growth and higher enrollment numbers were offset by a $132.6 million pretax charge related to a class-action lawsuit.

The University of Phoenix operator also predicted a fourth-quarter profit of $1.30 a share on revenue of $1.25 billion. Analysts surveyed by Thomson Reuters expected $1.20 and $1.27 billion, respectively.

Shares fell 3.7% to $40.58 in after-hours trading.

Last week, the company disclosed that a federal appeals court reversed a lower court's ruling that had been in favor of the company in securities litigation arising out of a 2003 review by the U.S. Department of Education. BMO Capital calculated the company could need to book an additional charge of $180.5 million to square everything away, while Sterne Agee said the reversal of the ruling threatened to cost the company meaningfully.

Sterne Agee, meanwhile, on Monday warned the company's future was under threat from potential regulatory changes that could cut earnings by as much as 50% or more in some cases.

For the quarter ended May 31, Apollo posted a profit of $179.3 million, or $1.18 a share, down from $201.1 million, or $1.26 a share, a year earlier. Excluding litigation costs, write-downs and other items, earnings from continuing operations rose to $1.74 from $1.30 as revenue climbed 28% to $1.34 billion.

In March, the company projected a profit of $1.55 on revenue of $1.3 billion, above Wall Street's estimates at the time.

Apollo said its degreed enrollment increased 13%, while new enrollment jumped 7.5%.

Like many other for-profit educators, Apollo has seen strong results recently as the recession has put people out of jobs and back into classrooms, both real and virtual. But last month, the company said it was reviewing its growth plans for its associate's degree, saying the program diverted resources from other educational offerings and hasn't performed as well as expected.

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

 
 
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