DOW JONES NEWSWIRES
Apollo Group Inc.'s (APOL) fiscal fourth-quarter profit dropped
55% on a $175.9 million write-down despite revenue growth, as the
results topped expectations.
But shares dropped 8.1% to $45.50 in after-hours trading as the
education company withdrew its guidance for the fiscal year, citing
"the transitional state of the business and the uncertain
regulatory environment."
The stock fell to a four-year low in August after the University
of Phoenix was featured in an undercover investigation by the U.S.
Government Accountability Office exposing questionable practices in
15 for-profit schools' student recruitment offices.
The sector also faces proposed new rules from the U.S.
Department of Education that would penalize individual programs for
graduating students with high debt loads.
Apollo did say Wednesday that it expects a "significant" decline
in new degreed enrollment at its University of Phoenix in the
current quarter from a year earlier, as the decrease in the latest
quarter is expected to accelerate.
The company has reported lower earnings in the previous two
quarters on litigation and other charges. It also has warned its
bottom line will be hurt as it expands an orientation program
expected to improve retention and loan-repayment rates as
unprepared prospective students are weeded out before enrolling.
The program, which had been in a pilot phase since last fall, will
be required starting Nov. 1 for all students entering with less
than a full year of credit beginning in the current quarter.
For the quarter ended Aug. 31, Apollo reported a profit of $41
million, or 28 cents a share, down from $91.5 million, or 59 cents
a share, a year earlier. The latest results included a $175.9
million write-down of its BPP acquisition. The prior-year quarter
included a $80.5 million litigation charge. Excluding such items,
earnings from continuing operations rose to $1.31 from $1.10.
Revenue grew 17% to $1.26 billion.
In June, Apollo forecast a profit of $1.30 on revenue of $1.25
billion, above analysts' then-earnings estimate but below their
revenue view at that time.
Like many other for-profit educators, Apollo expanded quickly as
the recession put people out of jobs and back into classrooms, both
real and virtual. Degreed enrollment rose 6.3% in the most recent
period, while new enrollment declined 9.8%. Total student
enrollment stood at 470,800 at the end of the quarter.
Apollo has tried shifting its growth to the higher-margin,
lower-risk bachelor's and graduate-degree programs and is starting
to see some success. New students in the associate's degree program
fell 24% in the most recent period, compared with a 14% increase in
new bachelor's degree students.
-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357;
kathy.shwiff@dowjones.com