Apollo Group, Inc.

183 Pages·2011·2.18 MB·English

Apollo Group, Inc.
PLAying A VitAL ROLe in educAting the WORLd
2010 Annual Report
Nearly
100,000
 students graduated from University of Phoenix in fiscal 2010
Since 1973, Apollo Group has been creating opportunities
for students and employees to reach their full potential,
while enriching society as a whole. Today, Apollo Group
continues to strengthen and capitalize on its position as a
leading provider of high quality, accessible education for
individuals around the world.
Can the higher education system stand still
when the world is changing around it?
The economy And job mArkeT Are chAnGinG. STudenTS’ needS Are chAnGinG.
The economy and labor force of today are much different from As job requirements have changed, so too have the needs of
those of a century ago when much of the traditional higher students seeking access to higher education. The traditional profile
education system was established and when the U.S. was still a of a college student—one who leaves home at age 18 to attend
largely agrarian economy, or even several decades ago when it school full time with his or her parents providing financial support
was the world’s manufacturing powerhouse. —is no longer the typical situation.
Today, knowledge is the backbone of our global information-based According to the U.S. Department of Education National Center for
economy, and the jobs of tomorrow increasingly require advanced Education Statistics, 73 percent of U.S. students are classified as
skills training and education. If Americans do not have the skills nontraditional, meaning they have risk factors that make it more
necessary to compete, jobs can now be more easily transported difficult to reach graduation. Many students today are going back
across borders to other markets. As a result, more Americans to school later in life, working full or part time, raising children and
than ever need a college degree and are seeking access to higher supporting themselves financially while trying to pursue a degree.
education in order to remain competitive and advance in their These nontraditional students have historically been left behind or
careers. However, despite this shift, currently only 35 percent of excluded from the traditional higher education system, as they
American workers have achieved a four-year degree according to require additional flexibility and support services to successfully
the U.S. Bureau of Labor Statistics, leaving over 80 million working complete their educational goals—flexibility and support services
Americans who could potentially benefit from higher education. that accredited, degree-granting proprietary institutions can provide.
Apollo Group is innovating to
meet these changing needs.
In today’s world we need on-demand, rapidly deployed,
effective education. Today’s working learners need
industry-adaptive faculty and curriculum—faculty
who are active in their fields of instruction and teach
curriculum that can be immediately applied in the
workforce. Edu cational programs need to prepare
students for today’s economy, not the economy of the
past. Accredited, degree-granting proprietary colleges
and universities serving nontraditional students,
alongside the traditional public and private independent
institutions, are essential to expanding capacity within
the higher education system.
At Apollo Group, we believe that through our technological
demAndS for publIc reSourceS Are chAnGInG.
investment, advanced learning methodologies, and our
These factors—a greater number of individuals now wanting to international reach we can dramatically accelerate the
pursue a college degree and students having a higher number of
innovation that is essential to transform higher education
risk factors—are placing burdens on a higher education system
throughout the world. We do this by providing flexible
that was not built to accommodate the needs of nontraditional
scheduling, a choice of online or campus-based classrooms,
students. The higher education system must significantly expand
small class sizes, degree programs relevant to today’s
capacity to reach greater numbers of students and provide a
workforce, faculty who have professional experience in
higher level of academic and student support services in order
their field of instruction, and high levels of student
to successfully educate nontraditional students.
support to help students succeed.
These burdens come at a time when public funding for higher
These adaptations and innovations have enabled
education is under pressure and budgets and capacity are being
Apollo Group to provide strong academic outcomes and
cut at traditional schools. Delivering quality education at traditional
career enhancement opportunities to students, as well as
institutions generally relies upon a high fixed-cost, ground-based
helping the global education system evolve from one that
system of learning, and whether by design, or due to resource
caters to a small, selective elite to one that addresses the
constraints, the traditional higher education system is rigid and
needs of a wider population in order to produce more
inflexible. As such, the economics underlying the traditional
broadly educated societies. Apollo Group is committed
university system’s asset-intensive, high cost structure have been
to leading the way in meeting the evolving needs of
essentially unchanged over time.
millions of nontraditional learners and producing the
graduates necessary to achieve the world’s collective
educational goals.
Apollo Group is playing a leadership role in higher education, and we are proud of our
heritage in helping to pioneer higher education for the working learner over 35 years
ago, followed by the introduction of online education over 20 years ago.
Apollo Group, Inc. was founded in response to a gradual shift in higher education demographics from a student population
dominated by youth to a more diverse population, the majority of which are working adults. It began with the belief that
the era of lifelong employment with a single employer was ending, and workers would have to become lifelong learners
to stay competitive in the global economy. Lifelong learning requires an institution dedicated to meeting the educational
needs of the working learner.
Traditional colleges and universities
are the backbone of the U.S. higher
education system, but they alone
cannot meet the country’s needs.
This system, which is exclusive by
design, was built to meet the needs
of a different era when only a small
portion of the nation’s workforce
needed a college degree. Today’s
globally competitive, knowledge-based
economy requires a more broadly
educated society. We believe
innovation and new alternatives
are required to adapt to our rapidly
changing world. Accredited,
degree-granting proprietary
institutions play a critical role in
the future of education.
Apollo Group, Inc. 2010 Annual Report p.1
Letter to Our Shareholders
Fiscal 2010 was a year of significant debate in the external environment surrounding the regulatory
rulemaking process for the U.S. postsecondary education system, but it was also a year of
tremendous progress for Apollo Group and our stakeholders, as we continued to execute on our
long-term strategic plan.
We are committed to strengthening and capitalizing on Apollo Group’s position as a leading provider of high quality, accessible
education for individuals around the world. This means putting the student first as we focus on academic quality and the
student experience. To that end, we are intensely focused on leveraging our core capabilities and expertise—developed over
our 35-plus year history—to, first and foremost, maximize the long-term value of University of Phoenix, which is our top
investment priority for Apollo Group, and then, to expand intelligently beyond University of Phoenix.
FoR UnIveRsIty oF PhoenIx, thIs meAns:
1) Growing our business the right way by better identifying and attracting students who are willing to put in the effort to
succeed and who we believe can benefit from our programs;
2) Delivering a high-value, energizing and compelling learning experience to our students through quality, convenient and
relevant academic programs, engaging instruction, innovative content delivery, and student-centric services and protections; and
3) Increasing the efficiency of our operations through scalability and process innovation.
Beyond University of Phoenix, one of our most exciting initiatives is the work we are doing to create a global education
network through the educational institutions of Apollo Global. By leveraging the organizational knowledge, capabilities and
systems resident at Apollo Group and applying that knowledge to our sister institutions, we have the opportunity to reach
a broad population of students across the large and growing global education sector over the years to come.
p.2 Apollo Group, Inc. 2010 Annual Report
A year in review. In fiscal 2010, Apollo Group delivered consolidated revenue of $4.9
billion, a 25 percent increase over the prior year, and net income from continuing operations As a result of quality academic
attributable to Apollo was $568.4 million, or $3.72 per diluted share. Importantly, it was a year programs, qualified faculty, and
in which we made several key strategic decisions aimed at enhancing the student experience a comprehensive student
and, over time, improving student outcomes. Implementation of several of these initiatives will experience, Apollo Group’s
result in a period of transition but should position the Company for more sustainable growth schools are respected institutions
and greater predictability over time. of higher education. University
of Phoenix holds regional
Over the course of the past year, much of the debate amongst policymakers—and the
accreditation, considered to
corresponding media coverage—has primarily centered on ensuring that institutions in the be the gold standard of
proprietary segment of the U.S. postsecondary education system are employing the appropriate Reavcecnrueed (i $t ian btililioonsn ), as well as
scope and approach to their marketing practices, delivering a quality education to students, programmatic accred$it4a.t0ions in
and ensuring that students are not overly burdened with debt. These objectives are ones that n$u4.0rsing, counseling, business
we share. We take seriously our responsibility as one of the leading universities in the country, and education. Apollo Group’s
and believe we are in a position to be a leader in developing and implementing positive industry other schools and institutions
practices as well as student protections. th3r.0oughout the world are also
accredited by various local
Growing our business the right way. During fiscal 2010, we continued to enhance accrediting bodies within their
our approach to marketing and developing sophisticated tools to better identify students with 2.0respective geographic or
the greatest likelihood of success in our programs. This approach has resulted in a notable programmatic areas of
reduction in the use of third-party lead generators over the last few years, which has allowed us instruction.
to maintain better control over student messaging and to ensure accurate information is being 1.0
provided to students. Our intent is to enhance control surrounding our marketing practices
to ensure that students are fully and fairly informed about the education options available to
them, as well as the potential costs and benefits of an education. 0
’06 ’07 ’08 ’09 2010
Also in fiscal 2010, we conducted an evaluation of our enrollment practices and procedures,
resulting in comprehensive changes in the evaluation and compensation systems for our
admissions personnel, including the elimination of any tie between compensation and enrollment Revenue ( $ in billions )
results. We designed and are implementing for fiscal 2011 a system that allows our admissions $4.9
personnel to more fully develop relationships with prospective and current students to more $5.0 5
effectively support them as they pursue their educational goals. We are empowering our
employees to provide outstanding service to students during the admissions process. $4.0
4.0 4
During fiscal 2010, we also piloted a free, three-week program called University Orientation
$3.1
for students with limited college experience, which is designed to help a student determine if 3.0 $2.7 3
college—and specifically University of Phoenix—is right for them prior to their enrolling and $2.5
possibly taking on debt. While this initiative will reduce the number of new students enrolling
2.0 2
at the University as it is fully implemented in fiscal 2011, we expect to see improved student
satisfaction and improved student outcomes, including better retention rates and ultimately
higher graduation rates. 1.0 1
Together, these efforts are focused on better identifying and admitting the right students into
0 0
the right programs so that they have a higher likelihood of success. ’06 ’07 ’08 ’09 2010
Delivering a high-value, energizing and compelling learning experience
Diluted EPS from
to our students. During fiscal 2010, University of Phoenix produced nearly 100,000 Continuing Operations
Attributable to Apollo ( $ )
graduates in the critical areas of teaching, nursing, criminal justice and business, among
others. Our students historically have seen salary improvement that exceeds national averages $4.00 $3.85 $3.72 4.0
while enrolled in their degree programs, and they leave with student debt levels comparable
3.5
to national averages of independent private four-year institutions. Importantly, our graduates
$2.94
have extremely low default rates on their student loans. 3.00 3.0
$2.35$2.38 2.5
2.00 2.0
Apollo Group, Inc. 2010 Annual Report p.3 1.5
1.00 1.0
0.5
0 0.0
’06 ’07 ’08 ’09 2010
Revenue ( $ in billions )
$4.0
$4.0
3.0
During fiscal 2010, we increased our training of financial counselors and developed financial
2.0
In acknowledgement of the need literacy tools aimed at helping students make more informed financial decisions and to
to produce greater accountability help our students maximize the value of their education. These have included enhanced
and transparency throughout transparency of total program and anticipated borrowing costs. We also implemented a
1.0
higher education, University responsible borrower tool that has resulted in a meaningful decline in the number of
of Phoenix, Apollo Group’s students who take out the maximum allowable amount of debt.
flagship university, publishes
0 We continue to invest heavily in our students’ education as well as student services. To
an A’c06ad’0e7m’0i8c A’09nnua2l0 1R0eport.
further enhance the learning experience and ultimately deliver academic content to more
The report provides a look at
students more effectively, we continued to invest in a next-generation learning platform
indicators such as student
during 2010. Parts of this new platform, including our PhoenixConnectSM online community
Repveernfuoer m( $ ian bnilliocnes ), completion
that connects faculty, students and alumni in an academically focused social network, were
rates and inclusion of
$4.9
underrepresented populations. launched in recent months, while other components of the platform and adaptive learning
$5.0 5
Its third Academic Annual technologies are expected to be delivered over the course of fiscal 2011 and beyond.
Report, publish$e4.d0 in December
24.0010, focused specifically on In4creasing the efficiency of our operations. We recognize that the various
how academic quality—always student-focused initiatives that we have designed and tested during fiscal 2010 and are
$3.1
the3.0 mains$2t.a7y of education—has im3plementing in fiscal 2011 will result in a period of transition. We expect these initiatives
becom$2.5e more important than to have a significant impact on both our enrollment metrics and financial results during the
ever as we endeavor to return transition; however, we believe these actions are the right things to do for our students, and
2.0 2
the U.S. to a global leadership importantly, we are confident that over time they will solidify our leadership role within the
role in education. industry and put our organization on a path of more consistently delivering high quality growth.
1.0 1
As we undertake this transition, we intend to continue investing in the student experience
and making investments in key areas to support our long-term objectives; however, we also
0 ’06 ’07 ’08 ’09 2010 int0end to more aggressively manage our cost structure to appropriately align it with our
operating results.
Diluted EPS from
Our long-term strategic plan is aimed at helping address the unmet educational needs of tens
Continuing Operations
Attributable to Apollo ( $ ) of millions of American workers—and millions more internationally—who do not have, yet
could benefit from, a postsecondary degree. If nations are to remain globally competitive, their
$4.00 $3.85 $3.72 4.0
labor forces will need the education, skills and training to prepare them for the ever-changing
d3e.5mands of today’s global economy. Apollo Group provides practical, quality educational
offerings that can help the U.S. and other countries meet their national educational goals.
$2.94
3.00 3.0
As we address these opportunities in the U.S. and abroad, the initiatives we are undertaking
$2.35$2.38 2.5
to support our strategic plan are aimed at aligning our people, technology and organizational
2.00 st2r.0ucture to effectively attract, engage, teach and service our students in order to maximize
the returns on their education investment. We believe that providing this value proposition
1.5
and delivering a positive student experience will, in turn, drive returns for our shareholders.
1.00 1.0
Our management team, faculty, and employees enter 2011 united by a clear strategic
d0ir.5ection and are focused on executing upon the key initiatives currently underway. We
are well positioned in a global industry with significant long-term growth potential, and we
0 0.0
’06 ’07 ’08 ’09 2010 believe we have significant opportunities in front of us. Overall, we are pleased with the
strategic initiatives we are undertaking, and we remain committed to leading the way as
we reinvent education, again.
Gregory W. Cappelli Charles B. Edelstein
Co-Chief Executive Officer Co-Chief Executive Officer
Chairman of Apollo Global, Inc.
p.4 Apollo Group, Inc. 2010 Annual Report
Apollo Group, Inc.
FORM 10-K
Apollo Group, Inc. 2010 Annual Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
¥ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: August 31, 2010
OR
n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number: 0-25232
APOLLO GROUP, INC.
(Exactnameofregistrantasspecifiedinitscharter)
ARIZONA 86-0419443
(Stateorotherjurisdictionof (I.R.S.Employer
incorporationororganization) IdentificationNo.)
4025 S. RIVERPOINT PARKWAY, PHOENIX, ARIZONA85040
(Addressofprincipalexecutiveoffices,includingzipcode)
Registrant’s telephone number, including area code:
[phone]
Securities registered pursuant to Section 12(b) of the Act:
(TitleofEachClass) (NameofEachExchangeonWhichRegistered)
Apollo Group, Inc. The NASDAQ Stock Market LLC
Class A common stock, no par value
Securities registered pursuant to Section 12(g) of the Act:
None
(TitleofClass)
Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct. YES ¥ NO n
IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct. YES n NO ¥
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file suchreports),
and (2) has been subject to such filing requirements for the past 90 days. YES ¥ NO n
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
InteractiveData File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant wasrequired to submit and post such files). YES ¥ NO n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-Kis not contained herein, and will not
be contained, to the best of registrant’sknowledge, in definitiveproxy or information statements incorporated by reference in PartIII of
this Form 10-Kor any amendment to this Form 10-K. n
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer ¥ Accelerated filer n Non-accelerated filer n Smaller reporting company n
(Donot check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). YES n NO ¥
No shares of Apollo Group, Inc. Class B common stock, its voting stock, are held by non-affiliates. The holders of Apollo Group,
Inc. ClassA common stock are not entitled to anyvotingrights. The aggregate market value of Apollo Group ClassA common stock
held by non-affiliates as of February 28, 2010(last day of the registrant’smost recently completed second fiscal quarter), was
approximately $7.7 billion.
The number of shares outstanding for each of the registrant’s classes of common stock as of October 12, 2010 is as follows:
Apollo Group, Inc. Class A common stock, no par value 147,331,000 Shares
Apollo Group, Inc. Class B common stock, no par value 475,000 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Information Statement for the 2011 Annual Meeting of Class B Shareholders (PartIII)