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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: August 31, 1999
OR
[ ] 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.
(Exact name of registrant as specified in its charter)
ARIZONA 86-0419443
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4615 EAST ELWOOD STREET, PHOENIX, ARIZONA 85040
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (480) 966-5394
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE NONE
(Title of each class) (Name of each exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, NO PAR
(Title of class)
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 such reports); and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
No shares of the Company's Class B Common Stock, its voting stock, is held by
non-affiliates. The holders of the Company's Class A Common stock are not
entitled to any voting rights. Aggregate market value of Class A Common
Stock held by non-affiliates as of November 12, 1999, was approximately
$1.2 billion. The number of shares outstanding for each of the registrant's
classes of common stock, as of November 12, 1999, is as follows:
Class A Common Stock, no par 75,926,795 Shares
Class B Common Stock, no par 511,484 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the year
ended August 31, 1999 are incorporated herein by reference into part II.
1
APOLLO GROUP, INC. AND SUBSIDIARIES
FORM 10-K
INDEX
PAGE
PART I ----
Item 1. Business 3
Item 2. Properties 29
Item 3. Legal Proceedings 30
Item 4. Submission of Matters to a Vote of Security Holders 30
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 31
Item 6. Selected Consolidated Financial Data 32
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 32
Item 7a. Quantitative and Qualitative Disclosures about Market Risk 32
Item 8. Financial Statements and Supplementary Data 32
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 32
PART III
Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Executive Compensation 37
Item 12. Security Ownership of Certain Beneficial
Owners and Management 44
Item 13. Certain Relationships and Related Transactions 45
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 46
SIGNATURES 50
2
PART I
Item 1 -- Business
OVERVIEW
Apollo Group, Inc. ("Apollo" or the "Company"), through its
subsidiaries, the University of Phoenix, Inc. ("UOP"), the Institute for
Professional Development ("IPD"), the College for Financial Planning
Institutes Corporation (the "College"), Western International University,
Inc. ("WIU"), and Apollo Learning Group, Inc. ("ALG"), is a leading provider
of higher education programs for working adults based on the number of
working adults enrolled in its programs. The consolidated enrollment in the
Company's educational programs would make it the largest private institution
of higher education in the United States. The Company currently offers its
programs and services at 51 campuses and 80 learning centers in 35 states,
Puerto Rico and Vancouver, British Columbia. The Company's degree enrollments
have increased to approximately 86,800 at August 31, 1999 from approximately
36,800 at August 31, 1995.
UOP is currently one of the largest regionally accredited private
universities in the United States based on its degree enrollments of over
66,700 adult students and has one of the nation's largest private business
schools. UOP has been accredited by the Commission on Institutions of Higher
Education of the North Central Association of Colleges and Schools ("NCA")
since 1978 and has successfully replicated its teaching/learning model while
maintaining educational quality at 28 campuses and 53 learning centers in
Arizona, California, Colorado, Florida, Hawaii, Louisiana, Maryland,
Michigan, Nevada, New Mexico, Oklahoma, Oregon, Pennsylvania, Utah,
Washington, Puerto Rico and Vancouver, British Columbia. UOP has developed
specialized systems for student tracking, marketing, faculty recruitment and
training and academic quality management. These systems enhance UOP's
ability to expand into new markets while still maintaining academic quality.
Currently, approximately 59% of UOP's students receive some level of tuition
reimbursement from their employers, many of which are Fortune 500 companies.
ALG was established in 1997 to focus on education opportunities in
information technology ("IT") for enhancing the skills of IT professionals.
ALG curriculum includes courses for the administration of computer networks,
internetworking and customized technical training. ALG's services currently
support twelve UOP locations, with 26 computer labs, offering Authorized
Academic Training Programs to deliver Microsoft Official Curriculum. These
campuses offer lab-based computer courses to prepare students for Microsoft
Certified Systems Engineer exams.
IPD provides program development and management services under long-term
contracts that meet the guidelines of the client institutions' respective
regional accrediting associations and the institution's mission. IPD
provides these services to regionally accredited private colleges and
universities at 21 campuses and 25 learning centers in 22 states and shares
in the tuition revenues generated from these programs. In addition, IPD has
contracted to develop online degree programs for the United States Marine
Corp. IPD is able to assist these colleges and universities to expand and
diversify their programs for working adults. IPD places a priority on
institutions that: (1) are interested in developing or expanding off-campus
degree programs for working adults; (2) recognize that working adults require
a different teaching/learning model than the 18 to 24 year old student;
(3) desire to increase enrollments with a limited investment in institutional
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capital and (4) recognize the unmet educational needs of the working adult
students in their market. Approximately 18,300 degree-seeking students are
currently enrolled in IPD-assisted programs.
The College is one of the largest U.S. providers of financial planning
education programs, including the Certified Financial Planner Professional
Education Program. The College began piloting its non-degree programs at
several UOP campuses in 1999. The Company plans to expand these offerings to
UOP students in 2000.
WIU currently offers graduate and undergraduate degree programs to
approximately 1,400 students in Phoenix, Fort Huachuca and Chandler, Arizona.
The Company was incorporated in Arizona in 1981 and maintains its
principal executive offices at 4615 East Elwood Street, Phoenix, Arizona
85040. The Company's telephone number is (480) 966-5394. The Company's
Internet Web Site addresses are as follows:
- Apollo http://www.apollogrp.edu
- UOP http://www.uophx.edu
- IPD http://www.ipd.org
- WIU http://www.wintu.edu
- the College http://www.fp.edu
- ALG http://www.mcse.com
The Company's fiscal year is from September 1 to August 31. Unless
otherwise stated, references to the years 1999, 1998 and 1997 relate to the
fiscal years ended August 31, 1999, 1998 and 1997, respectively.
This Annual Report on Form 10-K contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements relating to future plans, expectations, events or
performances involve risks and uncertainties and a number of factors could
affect the validity of such forward-looking statements, including those set
forth in Item 1 of this Form 10-K under the sections "Regulatory
Environment," "Accreditation," "Federal Financial Aid Programs" and "State
Authorization."
MARKET
The United States education market may be divided into the following
distinct segments: kindergarten through twelfth grade schools ("K-12"),
vocational and technical training schools, workplace and consumer training,
and degree-granting colleges and universities ("higher education"). The
Company primarily operates in the higher education segment and, with the
acquisition of the College and the introduction of other non-degree programs,
also operates in the workplace and consumer training segment. The
U.S. Department of Education National Center for Education Statistics
("NCES") estimated that for 1998 (the most recent historical year reported),
adults over 24 years of age comprised approximately 6.1 million, or 39.2%, of
the 15.5 million students enrolled in higher education programs. Currently,
the U.S. Bureau of Census estimates that approximately 76% of students over
the age of 24 work while attending school. The NCES estimates that by the
year 2003, the number of adult students over the age of 24 will remain
approximately the same at 6.1 million, or 40.3%, of the 15.2 million students
projected to be enrolled in higher education programs.
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The Company believes that the unique needs of working adults include the
following:
- Convenient access to a learning environment (including both location
and delivery system)
- Degree programs offered by regionally accredited institutions that
can be completed in a reasonable amount of time
- Programs that provide knowledge and skills with immediate practical
value in the workplace
- Education provided by academically qualified faculty with current
practical experience in fields related to the subjects they instruct
- Administrative services designed to accommodate the full-time
working adult's schedule
- Recognition of adult students as critical consumers of educational
programs and services
- A learning environment characterized by a low student-to-faculty
ratio
- Learning resources available electronically to all students
regardless of geographical location
The Company also believes that the increasing demand from and the unique
requirements of the adult working population represent a significant market
opportunity to regionally accredited higher education institutions that can
offer programs that meet these unique needs.
Most regionally accredited colleges and universities are focused on
serving the 18 to 24 year old student market. This focus has resulted in a
capital-intensive teaching/learning model that may be characterized by: (1) a
high percentage of full-time tenured faculty with doctoral degrees;
(2) fully-configured library facilities and related full-time staff;
(3) dormitories, student unions and other significant plant assets to support
the needs of younger students and (4) an emphasis on research and the related
staff and facilities. In addition, the majority of accredited colleges and
universities continue to provide the bulk of their educational programming
from September to mid-December and from mid-January to May. As a result,
most full-time faculty members only teach during that limited period of time.
While this structure serves the needs of the full-time 18 to 24 year old
student, it limits the educational opportunity for working adults who must
delay their education for up to five months during these spring, summer and
winter breaks. In addition, this structure generally requires working adults
to attend one or more courses three times a week, commute to a central site,
take work time to complete administrative requirements and, in undergraduate
programs, participate passively in an almost exclusively lecture-based
learning format primarily focused on a theoretical presentation of the
subject matter. For the majority of working adults, earning an undergraduate
degree in this manner would take seven to ten years. In recent years, many
regionally accredited colleges and universities have begun offering more
flexible programs for working adults, although their focus appears to remain
on the 18 to 24 year old students.
5
BUSINESS STRATEGY
The Company's strategic goal is to become the preferred provider of
higher education programs for working adult students and the preferred
provider of workplace training to their employers. The Company is managed as
a for-profit corporation in a higher education industry served principally by
not-for-profit providers. By design, the Company treats both its adult
students and their employers as its primary customers. Key elements of the
Company's business strategy include the following:
Establish New UOP Campuses and Learning Centers -----------------------------
UOP plans to continue the addition of campuses and learning centers
throughout the United States and Canada. New locations are selected based on
an analysis of various factors, including the population of working adults in
the area, the number of local employers and their educational reimbursement
policies and the availability of similar programs offered by other
institutions. Campuses consist of classroom and administrative facilities
with full student and administrative services. Learning centers differ from
campuses in that they consist primarily of classroom facilities with limited
on-site administrative staff.
The timing related to the establishment of new locations and the
expansion of programs may vary depending on regulatory requirements and
market conditions.
Establish New IPD Relationships ---------------------------------------------
IPD plans to enter into additional long-term contracts with private
colleges and universities in proximity to metropolitan areas throughout the
United States.
Expand Educational Programs -------------------------------------------------
The Company expects to continue to respond to the changing educational
needs of working adults and their employers primarily through the
introduction of new undergraduate and graduate degree programs and non-degree
programs in business and information technology. During fiscal year 1999,
UOP introduced a Bachelor of Science in Health Care Services and a Bachelor
of Science in Information Technology. The Company currently has a full-time
staff of over 60 persons involved in its centralized curriculum development
process.
The Company is also exploring international opportunities, where it can
leverage its educational expertise and/or delivery systems in a cost-
effective manner.
Expand Access to Programs ---------------------------------------------------
The Company plans to continue expanding its distance education programs
and services. Enrollments in distance education degree programs, primarily
UOP Online, have increased to approximately 10,700 in 1999 from approximately
2,400 in 1995. The Company has started the process of converting many of its
non-degree business and financial programs so that they can be delivered
through the Internet. The Company currently utilizes a customized version of
Microsoft Outlook Express as the technology for its UOP Online degree
programs.
6
International Expansion -----------------------------------------------------
The Company is conducting ongoing market and operations research in
various foreign countries. The Company's first Canadian campus in Vancouver,
British Columbia, commenced classes during the second quarter of 1999.
Additionally, the Company plans to offer the UOP educational model in
international markets pursuant to agreements with Apollo International, Inc.
as described in Item 13. The first offering under these agreements was
started in the Netherlands in September 1999. The Company will continue to
monitor and assess the feasibility of expanding its educational programs to
other international markets through similar licensing agreements or
independently.
TEACHING/LEARNING MODEL-DEGREE PROGRAMS
The Company's teaching/learning model used by UOP and IPD client
institutions was designed for working adults. This model is structured to
enable students who are employed full-time to earn their degrees and still
meet their personal and professional responsibilities. Students attend
weekly classes, averaging 15 students in size, and also meet weekly as part
of a three to five person study group. The study group sessions, an integral
part of each course, are used for in-depth discussion and review of class
materials, work on assigned group projects, and work on communication and
teamwork skills. Courses are designed to facilitate the application of
knowledge and skills to the workplace and are taught by faculty members who
possess advanced degrees and have professional experience in business,
industry, government or the professions. In this way, faculty members are
able to share their professional knowledge and skills with the students.
The Company's teaching/learning model has the following major
characteristics:
Curriculum The curriculum provides for the achievement of
specific educational outcomes that are based on the
input from faculty, students, and the students'
employers. The curriculum is designed to integrate
academic theory and professional practice with a
focus on application to the workplace. The
standardized curriculum for each degree program is
also designed to provide students with specified
levels of knowledge and skills regardless of
delivery method or location.
Faculty Faculty applicants must possess an earned master's
or doctoral degree from a regionally accredited
institution and have a minimum of five years
recent professional experience in a field related to
the subject matter in which they seek to instruct.
To help promote quality delivery of the curriculum,
UOP faculty members are required to: (1) complete an
initial assessment conducted by staff and faculty;
(2) complete a series of certification workshops
related to grading, facilitation of the
teaching/learning model, oversight of
study group activities, adult learning theory, and
use of the Internet; (3) participate in ongoing
development activities and (4) receive ongoing
performance evaluations by students, peer faculty
and staff. The results of these evaluations are
7
used to establish developmental plans to improve
individual faculty performance and to determine
continued eligibility of faculty members to provide
instruction.
Interactive Learning Courses are designed to combine individual and group
activity with interaction between and among students
and the instructor. The curriculum requires a high
level of student participation for purposes of
increasing the student's ability to work as part of
a team.
Learning Resources Students and faculty members are provided with
electronic and other learning resources for their
information needs. These extensive electronic
resources minimize the Company's need for
capital-intensive library facilities and holdings.
Sequential Enrollment Students enroll in and complete courses
sequentially, rather than concurrently, thereby
allowing full-time working adults to focus their
attention and resources on one subject at a time,
thus balancing learning with ongoing personal and
professional responsibilities.
Academic Quality The Company has developed and operationalized an
Academic Quality Management System ("AQMS") that is
designed to maintain and improve the quality of
programs and academic and student services
regardless of the delivery method or location.
Included in the AQMS is the Adult Learning Outcomes
Assessment which seeks to measure student growth in
both the cognitive (subject matter) and affective
(educational, personal and professional values)
domains.
STRUCTURAL COMPONENTS OF TEACHING/LEARNING MODEL
Although adults over 24 years old comprise approximately 39.2% of all
higher education enrollments in the United States, the mission of most
accredited four-year colleges and universities is to serve 18 to 24 year old
students and conduct research. UOP and IPD client institutions acknowledge
the differences in educational needs between older and younger students and
provide programs and services that allow working adult students to earn their
degrees while integrating the process with both their personal and
professional lives.
8
The Company believes that working adults require a different
teaching/learning model than is designed for the 18 to 24 year old student.
The Company has found that working adults seek accessibility, curriculum
consistency, time and cost effectiveness and learning that has an immediate
application to the workplace. The Company's teaching/learning model differs
from the models used by most regionally accredited colleges and universities
because it is designed to enable adults to complete an undergraduate degree
in four years and a graduate degree in two years while working full-time.
The structural components of the Company's teaching/learning model
include:
Accessibility The Company offers standardized curriculum that can
be accessed through a variety of delivery methods
(e.g., campus-based or electronically delivered)
that make the educational programs accessible
regardless of where the students work and live.
Instructional Costs While the majority of the faculty at most accredited
colleges and universities are employed full-time,
most of the UOP and IPD client institutions' faculty
are part-time. All faculty are academically
qualified, are professionally employed, and are
contracted for instructional services on a
course-by-course basis.
Facility Costs The Company leases its campus and learning center
facilities and rents additional classroom space on a
short-term basis to accommodate growth in
enrollments.
Employed Students Substantially all of UOP's students are employed
full-time and approximately 69% have been employed
for nine years or more. This minimizes the need for
capital-intensive facilities and services (e.g.,
dormitories, student unions, food services, personal
and employment counseling, health care, sports and
entertainment).
Employer Support Approximately 59% of UOP's students currently
receive some level of tuition reimbursement from
their employers, many of which are Fortune 500
companies; approximately 49% receive at least half
of their tuition and approximately 12% receive full
tuition reimbursement. The Company develops
relationships with key employers for purposes of
recruiting students and responding to specific
employer needs. This allows the Company to remain
sensitive to the needs and perceptions of employers,
while helping both to generate and sustain diverse
sources of revenues.
The College currently offers text-based self-study programs for students
preparing for the Certified Financial Planner designation and other
financial-related designations, including a Master of Science in Financial
Planning. The College recently modularized the learning content for these
programs to position them for alternative delivery formats, including but not
9
limited to classroom and online modalities. The Company has recently started
offering these same programs in a classroom-based format through UOP campuses
and also plans to offer them through Internet or online-based formats. Most
of the College's students are employed, and over 75% have four or more years
of college education.
WIU's teaching/learning model has similar characteristics to the
teaching/learning model used by UOP and IPD client institutions, including
the use of part-time practitioner faculty, standardized curriculum,
computerized learning resources and leased facilities. However, WIU provides
educational programs in two-month sessions and does not focus exclusively on
working adult students.
PROGRAMS AND SERVICES
UOP Programs ----------------------------------------------------------------
UOP currently offers the following degree programs and related areas of
specialization at one or more campuses and learning centers or through its
distance education delivery systems:
DEGREE AND DEGREE CREDIT PROGRAMS
- ---------------------------------
Associate of Arts in General Studies
Bachelor of Science in Business
Bachelor of Science in Nursing
Bachelor of Science in Human Services
Bachelor of Science in Health Care Services
Bachelor of Science in Information Technology
Microsoft Certified Systems Engineer
Master of Arts in Education
Master of Arts in Organizational Management
Master of Business Administration
Master of Counseling
Master of Science in Nursing
Master of Science in Computer Information Systems
Doctor of Management
AREAS OF SPECIALIZATION AVAILABLE IN CERTAIN DEGREE PROGRAMS
- ------------------------------------------------------------
Undergraduate BUSINESS
Accounting
Administration
Management
Marketing
Project Management
COMPUTER INFORMATION SYSTEMS
Information Systems
Graduate BUSINESS
Administration
Global Management
Health Care Management
Organizational Management
10
COMPUTER INFORMATION SYSTEMS
Technology Management
Information Systems
EDUCATION
Administration and Supervision
Bilingual-Bicultural
Curriculum and Instruction
Diverse Learner
Educational Counseling
Elementary Education
English as a Second Language
Professional Development for Educators
Special Education
NURSING
Women's Health Care Nurse Practitioner
Family Nurse Practitioner
COUNSELING
Community Counseling
Marriage and Family Therapy
Mental Health Counseling
Marriage, Family and Child Counseling
UOP also offers professional education programs, including continuing
education for teachers, custom training, environmental training and many
programs leading to certification in the areas of business, technology and
nursing.
Undergraduate students may demonstrate and document college level
learning gained from experience through an assessment by faculty members
(according to the guidelines of the Council for Adult and Experiential
Learning ("CAEL")) for the potential award of credit. The average number of
credits awarded to the approximately 4,000 UOP undergraduate students who
utilized the process in 1999 was approximately 12 credits of the 120 required
to graduate. CAEL reports that over 1,200 regionally accredited colleges and
universities currently provide for the assessment mechanism of college level
learning gained through experience for the award of credit.
IPD Services ----------------------------------------------------------------
IPD offers services to its client institutions including: (1) conducting
market research; (2) assisting with curriculum development; (3) developing
and executing marketing strategies; (4) marketing and recruiting of students;
(5) establishing operational and administrative infrastructures; (6) training
of faculty; (7) developing and implementing financial accounting and academic
quality management systems; (8) assessing the future needs of adult students;
(9) assisting in developing additional degree programs suitable for the adult
higher education market and (10) assisting in seeking approval from the
respective regional accrediting association for new programs. In
consideration for its services, IPD receives a contractual share of tuition
revenues from students enrolled in IPD-assisted programs.
In order to facilitate the sharing of information related to the
operations of their respective programs, IPD, its client institutions and UOP
formed the Consortium for the Advancement of Adult Higher Education
("CAAHE"). CAAHE meets annually to address issues such as the recruitment
11
and training of part-time, professionally employed faculty, employer input in
the curriculum development process, assessment of the learning outcomes of
adult students and regulatory issues affecting the operation of programs for
working adult students.
IPD client institutions offer the following programs with IPD
assistance:
No. of IPD
Degree Programs Client Institutions
- -------------------------------------------------- --------------------
Associate of Arts 5
Associate of Science in Business 10
Bachelor of Arts in Business Administration 2
Bachelor of Arts in Management 1
Bachelor of Business Administration 9
Bachelor of Science in Business Administration 8
Bachelor of Science in Management 8
Bachelor of Science in Management Information Systems 2
Bachelor of Science in Nursing 1
Master of Arts in Organizational Management 1
Master of Business Administration 12
Master of Business Administration - Online 1
Master of Science in Computer Information Systems 1
Master of Science in Management 7
Master of Science in Health Services Administration 1
The IPD-assisted programs also include a limited number of general
education courses, certificate programs and areas of specialization.
The College Programs --------------------------------------------------------
The College currently offers a Master of Science degree with a
concentration in Financial Planning and the following non-degree programs:
Accredited Asset Management Specialist
Certified Financial Planner Professional Education Program
Chartered Financial Analyst Study/Review Program
Chartered Mutual Fund Counselor
Foundations in Financial Planning
Chartered Retirement Plans Specialist
Chartered Retirement Planning Counselor
Accredited Tax Advisor
Accredited Tax Preparer
WIU Programs ----------------------------------------------------------------
WIU currently offers the following degree and certificate programs:
DEGREE PROGRAMS WITH RELATED MAJORS
- ---------------------------------------------
ASSOCIATE OF ARTS
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BACHELOR OF SCIENCE
- - Accounting
- - Business Administration
- - Finance
- - Information Technology
- - International Business
- - Management
- - Marketing
BACHELOR OF ARTS
- - Administration of Justice
- - Behavioral Science
MASTER OF BUSINESS ADMINISTRATION
- - Finance
- - International Business
- - Management
- - Management Information Technology
- - Marketing
MASTER OF PUBLIC ADMINISTRATION
MASTER OF SCIENCE
- - Information Technology
- - Information Systems Engineering
WIU also offers a limited number of business-related certificate
programs.
Distance Education ----------------------------------------------------------
At August 31, 1999, there were approximately 10,700 degree seeking
students utilizing the Company's distance education delivery systems,
approximately 97% of whom are enrolled in the UOP Online campus. The
Company's distance education components consist primarily of the following:
Online Computer Conferencing
The UOP Online campus was established by UOP in 1989 to provide group-
based, faculty-led instruction through computer-mediated communications.
Students can access their UOP Online classes with a computer and modem from
anywhere in the world, on schedules that meet their individual needs. UOP
Online students work together in small groups of 8 to 13 to engage in class
discussion and study group activities that are focused on the same learning
outcomes and objectives required in UOP's classroom degree programs. This
enables the UOP Online students to enjoy the benefits of a study group, where
they can share their regional and cultural differences with each other in the
context of their coursework. Students are not required to participate at the
same time since the communication method is asynchronous in nature. UOP
Online's degree programs can be accessed though direct-dial or Internet
service providers. The same academic quality management standards applied to
campus-based programs, including the assessment of student learning outcomes,
are applied to programs delivered through the UOP Online campus.
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Directed Study
Working adult students may also complete individual courses under the
direct weekly instructional supervision of a member of the faculty. These
directed study programs utilize the same courses, faculty and resources
available at UOP campuses. Course assignments are completed in a structured
environment that allows the student flexibility with their schedule.
Communication with the faculty member is by telephone, e-mail, fax or mail.
CPE Internet
Business and investment professionals that require continuing
professional education (CPE) as part of their professional certification or
for employment requirements may complete individual CPE courses through the
Internet utilizing most Internet browsers. These programs are short,
interactive courses designed to focus on relevant topics to the students'
trade or profession. The students interact primarily with the Company's web-
based software programs with little or no faculty involvement.
Distance education is currently subject to certain regulatory
constraints. See "Business -- Federal Financial Aid Programs -- Restrictions
on Distance Education Programs" and "Business -- State Authorization."
FACULTY ---------------------------------------------------------------------
UOP's faculty is comprised of approximately 126 full-time faculty and
6,600 part-time faculty. Substantially all faculty are working professionals
with earned master's or doctoral degrees and experience in business,
industry, government or the professions. To help promote quality delivery of
the curriculum, UOP faculty members are required to: (1) complete an initial
assessment conducted by staff and faculty; (2) complete a series of
certification workshops related to grading, facilitation of the
teaching/learning model, oversight of study group activities, adult learning
theory and use of the Internet; (3) participate in ongoing development
activities and (4) receive ongoing performance evaluations by students, peer
faculty and staff. The results of these evaluations are used to establish
developmental plans to improve individual faculty performance and to
determine continued eligibility of faculty members to provide instruction.
Most faculty members are recruited as the result of referrals from faculty,
students and corporate contacts. All part-time faculty are contracted on a
course-by-course basis (generally a five to ten week period).
The faculty teaching in IPD-assisted programs are comprised of full-time
faculty from the client institution as well as qualified part-time faculty
who instruct only in these adult programs. The part-time faculty must be
approved by each client institution. IPD makes the AQMS available to its
client institutions to evaluate faculty and academic and administrative
quality. The Company believes that both UOP and IPD will continue to be
successful in recruiting qualified faculty members.
The College's programs are developed internally by approximately 15
full-time faculty. These programs are primarily self-study, non-degree
programs that require little or no faculty involvement in the actual delivery
of the programs.
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WIU's faculty consists of approximately 10 full-time faculty and 170
part-time faculty. WIU's practitioner faculty are working professionals and
possess earned master's or doctoral degrees and participate in a selection
and training process that is similar to that at UOP.
Academic Accountability -----------------------------------------------------
UOP is one of the first regionally accredited universities in the nation
to create and utilize an institution-wide system for the assessment of the
educational outcomes of its students. The information generated is employed
by UOP to improve the quality of the curriculum, the instruction and the
Company's teaching/learning model. UOP's undergraduate and graduate students
complete a comprehensive cognitive (core degree subject matter) and affective
(educational, personal and professional values) assessment prior to and upon
the completion of their core degree requirements.
Students at UOP and IPD client institutions evaluate both academic and
administrative quality. This evaluation begins with a registration survey
and continues with the evaluation of the curriculum, faculty, delivery
method, instruction and administrative services upon the conclusion of each
course. The evaluation also includes a survey of a random selection of
graduates 2-3 years following their graduation. The results provide an
ongoing basis for improving the teaching/learning model, selection of
educational programs and instructional quality.
Admissions Standards --------------------------------------------------------
To gain admission to the undergraduate programs of UOP, WIU and the IPD
client institutions, applicants generally must have a high school diploma or
General Equivalency Diploma ("G.E.D.") and satisfy certain minimum grade
point average, employment and age requirements. Additional requirements may
apply to individual programs. Students already in undergraduate programs
elsewhere may petition to be admitted on provisional status if they do not
meet certain admission requirements.
To gain admission to the graduate programs of UOP, WIU, the College and
the IPD client institutions, students generally must have an undergraduate
degree from a regionally accredited college or university and satisfy minimum
grade point average, work experience and employment requirements. Additional
requirements may apply to individual programs. Students in graduate programs
may petition to be admitted on provisional status if they do not meet certain
admission requirements.
ACQUISITION STRATEGY
The Company periodically evaluates opportunities to acquire businesses
and facilities. In evaluating such opportunities, management considers,
among other factors, location, demographics, price, the availability of
financing on acceptable terms, competitive factors and the opportunity to
improve operating performance through the implementation of the Company's
operating strategies. The Company has no current commitments with regard to
potential acquisitions.
15
CUSTOMERS
The Company's customers consist of working adult students, colleges and
universities, governmental agencies and employers. Following is a percentage
breakdown of the Company's students by the level of program they are seeking,
at August 31:
1999 1998
------ ------
Degree Programs:
Master's 27.8% 30.5%
Bachelor's 66.6% 68.7%
Associate 5.6% .8%
------ ------
Total degree programs 100.0% 100.0%
====== ======
Based on student surveys, the average age of UOP students is in the
mid-thirties, approximately 57% are women and 43% are men, and the average
annual household income is $56,000. Approximately 69% of UOP students have
been employed on a full-time basis for nine years or more. The Company
believes that the demographics of students enrolled in IPD-assisted
programs are similar to those of UOP. The approximate age percentage
distribution of incoming UOP students is as follows:
Age Percentage of Students
------------------------ -----------------------
25 and under 13%
26 to 33 38%
34 to 45 38%
46 and over 11%
-------
100%
=======
Based on student surveys, the average age of students at the College is
in the mid-thirties, approximately 31% are women and 69% are men. Most of the
College's students are employed, and over 75% have four or more years of
college education.
IPD client institutions have historically consisted of small private
colleges; however, IPD also targets larger institutions of higher education
that are in need of marketing and curriculum consulting. IPD understands
that to develop and manage educational programs for working adult students
effectively, these potential client institutions require both capital and
operational expertise. In response to these requirements, IPD
provides the start-up capital, the curriculum development expertise and the
ongoing management in support of the client institutions' provision of
quality programs for working adult students.
16
All of the Apollo Companies consider the employers of their students as
customers. Most of these employers provide tuition reimbursement programs in
order to educate and provide degree opportunities to their employees.
CORPORATE PARTNERSHIPS
The Company works closely with businesses and governmental agencies to
meet their specific needs either by modifying existing programs or, in some
cases, by developing customized programs. These programs are often held at
the employers' offices or on-site at military bases. UOP has also formed
educational partnerships with various corporations to provide programs
specifically designed for their employees.
MARKETING
To generate interest among potential UOP, WIU and IPD client institution
students, the Company engages in a broad range of activities to inform
potential students about the Company's teaching/learning model and the
programs offered. These activities include print and broadcast advertising,
advertising on Internet service providers, direct mail and informational
meetings at targeted organizations. The Company also attempts to locate its
campuses and learning centers near major highways to provide high visibility
and easy access. A substantial portion of new UOP and IPD client institution
students are referred by alumni, employers and currently enrolled students.
The Company also has Web Sites on the Internet World Wide Web
(http://www.apollogrp.edu, http://www.uophx.edu, http://www.ipd.org,
http://www.wintu.edu, http://www.fp.edu and http://www.mcse.com) that allow
electronic access to Company and product information.
UOP and WIU advertising is centrally monitored and is directed primarily
at local markets in which a campus or learning center is located. IPD client
institutions approve and monitor all advertising provided by IPD on their
behalf. Direct responses to advertising and direct mail are received,
tracked and forwarded promptly to the appropriate enrollment counselors. In
addition, all responses are analyzed to provide data for future marketing
efforts.
The College markets its programs and products primarily through
advertising, direct mail, informational meetings, trade shows, and corporate
sales efforts with financial service firms. Marketing activity is primarily
directed at professionals within the financial services industry. Enrollment
advisors are utilized in a comparable fashion to UOP enrollment staff. All
marketing activity is tracked to measure effectiveness and to provide
information for future activity.
The Company employs over 470 enrollment counselors who make visits and
presentations at various organizations and who follow up on leads generated
from referrals from customers and advertising efforts. These individuals
also pursue direct responses to interest from potential individual students
by arranging for interviews either at a UOP, WIU, or IPD location, at a
prospective student's place of employment, or via telephone. Interviews are
designed to establish a prospective student's qualifications, academic
background, course interests and professional goals. Student recruiting
policies and standards and procedures for hiring and training university
representatives are established centrally, but are implemented at the local
level through a director of enrollment or marketing at each location.
17
COMPETITION
The higher education market is highly fragmented and competitive with no
private or public institution enjoying a significant market share. The
Company competes primarily with four-year and two-year degree-granting public
and private regionally accredited colleges and universities. Many of these
colleges and universities enroll working adults in addition to the
traditional 18 to 24 year old students and some have greater financial and
personnel resources than the Company. The Company expects that these
colleges and universities will continue to modify their existing programs to
serve working adults more effectively. In addition, many colleges and
universities have announced various distance-education initiatives.
For its degree programs, the Company competes primarily at a local and
regional level with other regionally accredited colleges and universities
based on the quality of academic programs, the accessibility of programs and
learning resources available to working adults, the cost of the program, the
quality of instruction and the time necessary to earn a degree.
In terms of non-degree programs offered by UOP, IPD and WIU, the Company
competes with a variety of business and IT providers, primarily those in the
for-profit training sector. Many of these competitors have significantly more
market share, longer-term relationships with key vendors and, in some cases,
more financial resources. There is no assurance that UOP, IPD and WIU will
be able to gain market share in these more competitive non-degree markets to
the same extent it has done with its degree programs.
The College currently holds a dominant position in the Certified
Financial Planning ("CFP") education field. Competition has increased
slightly due to the higher number of schools registering CFP curriculum with
the Certified Financial Planner Board of Standards, Inc. The College offers
all of its programs using the flexibility of its distance education format
while the majority of the other competing education programs target local
markets using classroom-based teaching formats. The College has recently
started offering its programs in a classroom-based format through UOP
campuses and also plans to offer them through Internet or online-based
formats.
IPD faces competition from other entities offering higher education
curriculum development and management services for adult education programs.
The majority of IPD's current competitors provide pre-packaged curriculum or
turn-key programs. IPD client institutions, however, face competition from
both private and public institutions offering degree and non-degree programs
to working adults.
18
EMPLOYEES
At September 30, 1999, the Company had the following numbers of
employees:
Full-Time Part-Time Faculty Total
--------- --------- --------- ---------
Apollo 287 10 -- 297
UOP 2,409 91 6,771 9,271
IPD 262 7 -- 269
The College 84 9 15 108
WIU 57 13 183 253
------ ------ ------ ------
Total 3,099 130 6,969 10,198
====== ====== ====== ======
______________
Consists primarily of employees in executive administration,
information systems, corporate accounting, financial aid, and human
resources.
Consists primarily of part-time professional faculty contracted on a
course-by-course basis.
Faculty teaching IPD-assisted programs are employed by IPD client
institutions.
Consists primarily of faculty involved in curriculum development and
the instructional design process.
The Company considers its relations with its employees to be good.
REGULATORY ENVIRONMENT
The Higher Education Act of 1965, as amended (the "HEA") and the
regulations promulgated thereunder (the "Regulations") subject all higher
education institutions eligible to participate in Federal Financial Aid
programs under Title IV of the HEA ("Title IV Programs") to increased
regulatory scrutiny. The HEA mandates specific additional regulatory
responsibilities for each of the following components of the higher education
regulatory triad: (1) the accrediting agencies recognized by the United
States Department of Education ("ED"); (2) the federal government through ED
and (3) state higher education regulatory bodies. All higher education
institutions participating in Title IV Programs must first be accredited by
an association recognized by ED. ED reviews all such participating
institutions for compliance with all applicable HEA standards and
regulations. Under the HEA, accrediting associations are required to include
the monitoring of certain aspects of Title IV Program compliance as part of
their accreditation evaluations.
New or revised interpretations of regulatory requirements could have a
material adverse effect on the Company. In addition, changes in or new
19
interpretations of other applicable laws, rules, or regulations could have a
material adverse effect on the accreditation, authorization to operate in
various states, permissible activities, and costs of doing business of UOP,
WIU, and one or more of the IPD client institutions. The failure to maintain
or renew any required regulatory approvals, accreditation or state
authorizations by UOP or certain of the IPD client institutions could have a
material adverse effect on the Company.
ACCREDITATION
UOP, WIU, the College, and the IPD client institutions are accredited by
regional accrediting associations recognized by ED. Accreditation provides
the basis for: (1) the recognition and acceptance by employers, other higher
education institutions and governmental entities of the degrees and credits
earned by students; (2) the qualification to participate in Title IV Programs
and (3) the qualification for authorization in certain states.
UOP was granted accreditation by NCA in 1978. UOP's accreditation was
reaffirmed in 1982, 1987, 1992 and 1997. The next focused evaluation visit
is scheduled to begin in May 2000, and the next NCA reaffirmation visit is
scheduled to begin in 2002. IPD-assisted programs offered by the IPD client
institutions are evaluated by the client institutions' respective regional
accrediting associations either as part of a reaffirmation or focused
evaluation visits. Current IPD client institutions are accredited by NCA,
Middle States, New England or Southern regional accrediting associations.
The College's graduate degree program is accredited by NCA and the
Accrediting Commission of the Distance Education and Training Council
("DETC"). NCA reaffirmed the accreditation of the graduate degree program in
August 1999, and their next reaffirmation visit is schedule for 2003-04.
DETC plans to schedule a focus-visit for the College in 2000.
WIU was accredited by NCA prior to the acquisition by the Company and
the accreditation was reaffirmed in 1998. WIU's next NCA reaffirmation visit
is scheduled to begin in 2004-05.
The withdrawal of accreditation from UOP or certain IPD client
institutions would have a material, adverse effect on the Company.
All accrediting agencies recognized by ED are required to include
certain aspects of Title IV Program compliance in their evaluations of
accredited institutions. As a result, all regionally accredited
institutions, including UOP, WIU, and IPD client institutions, will be
subject to a Title IV Program compliance review as part of accreditation
visits.
Regional accreditation is accepted nationally as the basis for the
recognition of earned credit and degrees for academic purposes, employment,
professional licensure, and, in some states, for authorization to operate as
a degree-granting institution. Under the terms of a reciprocity agreement
among the six regional accrediting associations, representatives of each
region in which a regionally accredited institution operates participate in
the evaluations for reaffirmation of accreditation. The achievement of the
20
UOP and WIU missions require them to employ academically qualified
practitioner faculty that are able to integrate academic theory with current
workplace practice. Because of UOP's and WIU's choice to utilize
practitioner faculty, they have not sought business school program
accreditation of the type found at many institutions whose primary missions
are to serve the 18 to 24 year old student and to conduct research.
UOP's Bachelor of Science in Nursing ("BSN") program received program
accreditation from the National League for Nursing Accrediting Commission
("NLNAC") in 1989. The accreditation was reaffirmed in October 1995. The
Master of Science in Nursing ("MSN") program earned NLNAC accreditation in
1996. The next NLNAC evaluation of both the BSN and MSN programs for
continuing accreditation is scheduled for Spring 2000. The Company believes
that accreditation of the BSN and MSN programs are in good standing.
UOP's Community Counseling program (Master of Counseling in Community
Counseling degree) received initial accreditation for its Phoenix and Tucson
campuses from the Council for Accreditation of Counseling and Related
Educational Programs in 1995 and the next reaffirmation visit is scheduled
for 2002.
UOP received approval from the NCA to offer its first doctoral level
program in 1998. The first students were enrolled in the Doctor of
Management degree beginning in 1999. The Doctor of Management degree is
offered via distance learning technology with annual two-week residencies in
Phoenix throughout the program. The program is limited to a total of 60 new
students per year.
The address and phone number for the accrediting bodies referred to
herein are as follows:
North Central Association of Colleges and Schools (NCA)
Commission on Institutions of Higher Education
30 North LaSalle Street, Suite 2400
Chicago, Illinois 60602-2504
(312) 263-0456
National League for Nursing Accrediting Commission (NLNAC)
61 Broadway, 33rd Floor
New York, New York 10006
(800) 669-1656
American Counseling Association
Council for Accreditation of Counseling and
Related Educational Programs
5999 Stevenson Avenue
Alexandria, VA 22304
(703) 823-9800
Accrediting Commission of the Distance Education and Training Council
1601 18th Street, NW
Washington, D.C. 20009-2529
(202) 234-5100
21
FEDERAL FINANCIAL AID PROGRAMS
Students at UOP, WIU and IPD client institutions may participate in
Title IV Programs. The College does not participate in Title IV Programs
because most of its students are enrolled in non-degree programs. UOP and
WIU derive approximately 48% and 22% of their net revenues from students who
participate in Title IV Programs, respectively. The IPD percentages are
estimated to be similar to those at UOP. The respective IPD client
institutions administer their own Title IV Programs. The Company's students
are eligible to receive Title IV financial aid because: (i) UOP, WIU and IPD
client institutions are accredited by an accrediting association recognized
by ED; (ii) ED has certified UOP's, WIU's, and IPD client institutions' Title
IV Program eligibility and (iii) UOP, WIU, and IPD client institutions have
applicable state authorization to operate.
ED has promulgated Regulations, the most recent of which became
effective on July 1, 1999, that amend certain provisions of the Title IV
Programs and the Regulations promulgated thereunder. Some of the more
important provisions of the Regulations include the following:
Limits on Title IV Program Funds --------------------------------------------
The Regulations define the types of educational programs offered by an
institution that qualify for Title IV Program funds. For students enrolled in
qualified programs, the Regulations place limits on the amount of Title IV
Program funds that a student is eligible to receive in any one academic year
(as defined by ED).
For undergraduate programs, an academic year must consist of at least 30
weeks of instructional time to include a minimum of 360 hours of
instructional time and a minimum of 24 credit hours. The Regulations define
a week of instruction as the equivalent of 12 hours of regularly scheduled
instruction, examinations or preparation for examinations. Most of the
Company's degree programs meet this 360 hour minimum and, therefore, qualify
for Title IV Program funds. The programs that do not qualify for Title IV
Program funds consist primarily of certificate, corporate training, and
continuing professional education programs. These programs are paid for
directly by the students or their employers.
Authorizations for New Locations --------------------------------------------
UOP, WIU, the College and IPD client institutions are required to have
authorization to operate as degree-granting institutions in each state where
they physically provide educational programs. Certain states accept
accreditation as evidence of meeting minimum state standards for
authorization. Other states, including California, require separate
evaluations for authorization. Depending on the state, the addition of a
degree program not offered previously or the addition of a new location must
be included in the institution's accreditation and be approved by the
appropriate state authorization agency. UOP, WIU, the College, and IPD client
institutions are currently authorized to operate in all states in which they
have physical locations. If UOP is unable to obtain authorization to operate
in certain new states, it may have a material adverse effect on the Company's
ability to expand UOP's business.
22
In addition, NCA requires UOP and the College to obtain NCA's prior
approval before they are permitted to expand into new states or foreign
countries. If UOP is unable to obtain NCA's approval for any future
geographic expansion, it may have a material, adverse effect on the Company's
ability to expand UOP's business.
Restricted Cash -------------------------------------------------------------
ED places certain restrictions on Title IV Program funds collected for
unbilled tuition and funds transferred to the Company through electronic
funds transfer. Under certain circumstances, an institution is required to
submit an irrevocable letter of credit to ED in an amount equal to at least
25% of the total dollar amount of refunds paid by the institution in its most
recent fiscal year. The Company has established letters of credit of $2.7
million for UOP and $18,000 for WIU.
Standards of Financial Responsibility ---------------------------------------
Pursuant to the Regulations, as revised, all eligible higher education
institutions must satisfy the minimum standard established for three tests
which assess the financial condition of the institution at the end of the
institution's fiscal year. The three tests are: primary reserve ratio
(adjusted equity to total expenses), equity ratio (modified equity to
modified assets), and net income ratio (income before taxes to total
revenues). The tests provide a combined score which must then satisfy a
composite score standard. The maximum combined score is 3.0. If the
institution achieves a composite score of at least 1.5, it is considered
financially responsible. A composite score from 1.0 to 1.4 is considered
financially responsible, subject to additional monitoring, and the
institution may continue to participate as a financially responsible
institution for up to three years. An institution that does not achieve a
satisfactory composite score will fall under alternative standards. At
August 31, 1999, UOP's composite score was 3.0 and WIU's composite score was
3.0.
Branching and Classroom Locations -------------------------------------------
The Regulations contain specific requirements governing the
establishment of new main campuses, branch campuses, and classroom locations
at which the eligible institution offers at least 50% of an educational
program. In addition to classrooms at campuses and learning centers,
locations affected by these requirements include the business facilities of
client companies, military bases and conference facilities used by UOP and
WIU. ED has in the past stated that it requires written approval for each
location prior to offering Title IV program funds. Currently UOP has several
sites awaiting confirmation of ED approval.
The "90/10 Rule" (formerly the "85/15 Rule") --------------------------------
A requirement of the HEA, commonly referred to as the "90/10 Rule,"
applies only to for-profit institutions of higher education, which includes
UOP and WIU but not IPD client institutions. Under this rule, for-profit
institutions will be ineligible to participate in Title IV Programs if the
amount of Title IV Program funds used by the students or institution to
satisfy tuition, fees and other costs incurred by the students exceeds 90% of
the institution's cash-basis revenues from eligible programs. UOP's and
WIU's percentages were 53% and 23%, respectively, at August 31, 1999. UOP
and WIU are required to calculate this percentage at the end of each fiscal
year.
23
Student Loan Defaults -------------------------------------------------------
Eligible institutions must maintain a student loan cohort default rate
of less than 25% for fiscal year 1994 and all subsequent fiscal years. In
1997, the most recent ED cohort default rate reporting period, the national
cohort default rate average for all higher education institutions was 8.8%.
UOP and WIU students' cohort default rates for the Federal Family Education
Loans for fiscal 1997 as reported by ED were each 5.7%. IPD client
institution students' cohort default rates for fiscal 1997 ranged from 1.3%
to 12.9% with a median cohort default rate of 4.8%.
Compensation of Representatives ---------------------------------------------
The Regulations prohibit an institution from providing any commission,
bonus, or other incentive payment based directly or indirectly on success in
securing enrollments or financial aid to any person or entity engaged in any
student recruitment, admission or financial aid awarding activity. The
Company believes that its current method of compensating enrollment
counselors complies with the Regulations.
Eligibility and Certification Procedures ------------------------------------
The HEA specifies the manner in which ED reviews institutions for
eligibility and certification to participate in Title IV Programs. UOP
submitted its application on a timely basis to ED, and eligibility to
participate in Title IV Programs will continue until ED acts upon the
application. WIU's eligibility to participate in Title IV Programs was
renewed by ED in September 1999 for a four-year period. If ED does not renew
UOP's eligibility, it would have a material adverse effect on the Company.
Administrative Capability ---------------------------------------------------
The HEA directs ED to assess the administrative capability of each
institution to participate in Title IV Programs. The failure of an
institution to satisfy any of the criteria used to assess administrative
capability may allow ED to determine that the institution lacks
administrative capability and, therefore, may be subject to additional
scrutiny or denied eligibility for Title IV Programs.
Title IV Audit --------------------------------------------------------------
UOP's most recent Department of Education program review began in March
1997, and a final program review determination letter was received in July
1999. UOP satisfactorily responded to the findings in ED's program review
report with no additional action required.
In January 1998, the Department of Education Office of the Inspector
General ("OIG") began performing an audit of UOP's administration of the
Title IV Programs. The team previously presented questions regarding UOP's
interpretation of the "12-hour rule," UOP's distance education programs, and
UOP's institutional refund obligations. UOP has received a draft report
addressing these issues and is currently in discussion with the OIG and ED.
Although the Company believes that the OIG audit will be resolved without any
negative impact on UOP's teaching/learning model, as with any program review
or audit, no assurance can be given as to the final outcome since the matters
are not yet resolved. Depending on the interpretation of the various
regulatory requirements, any resulting liability to the Company from the
final audit results will be recorded as an expense.
24
Restrictions on Distance Education Programs ---------------------------------
The Regulations specify that an institution is not eligible to
participate in Title IV Programs funding if 50% or more of its courses are
correspondence courses, or if 50% or more of its regular students are
enrolled in the institution's correspondence courses. Although UOP, IPD and
WIU do not offer correspondence courses, the Regulations currently consider
most distance education courses to be correspondence courses if the number of
distance education courses exceeds 50% of the sum of courses offered in
campus-based delivery systems and courses offered through distance education.
UOP, IPD and WIU do not plan to exceed this 50% level and believe that this
restriction will have no significant impact on their respective business
strategies.
Change of Ownership or Control ----------------------------------------------
A change of ownership or control of the Company, depending on the type
of change, may have significant regulatory consequences for UOP and WIU.
Such a change of ownership or control could trigger recertification by ED,
reauthorization by certain state licensing agencies or the evaluation of the
accreditation by NCA.
For institutions owned by publicly-held corporations, ED has adopted the
change of ownership and control standards used by the federal securities
laws. Upon a change of ownership and control sufficient to require the
Company to file a Form 8-K with the Securities and Exchange Commission, UOP
and WIU would cease to be eligible to participate in Title IV Programs until
recertified by ED. This recertification would not be required, however, if
the transfer of ownership and control was made upon a person's retirement or
death and was made either to a member of the person's immediate family or to
a person with an ownership interest in the Company who had been involved in
its management for at least two years preceding the transfer.
In addition, certain states where the Company is presently licensed have
requirements governing change of ownership or control. Currently, Arizona
and California would require UOP and WIU, as applicable, to be reauthorized
upon a 20% and 25% change of ownership or control of the Company,
respectively. These states require a new application to be filed for state
licensing if such a change of ownership or control occurs. Washington has a
similar reauthorization requirement triggered by a change of ownership, but
provides that a temporary certificate of authorization may be issued pending
the reauthorization process.
Moreover, the Company is required to report any change in stock
ownership of UOP, the College, WIU or Apollo to NCA. At that time, NCA may
seek to evaluate the effect of such a change of stock ownership on the
continuing operations of UOP, the College and WIU.
If UOP is not re-certified by ED, does not obtain reauthorization from
the necessary state agencies, or has its accreditation withdrawn as a
consequence of any change in ownership or control, there would be a material,
adverse effect on the Company.
25
STATE AUTHORIZATION
UOP currently is authorized to operate in all 15 states where there is a
physical presence. UOP has held these authorizations for periods ranging
from less than one year to twenty-one years. Other state applications have
been submitted and are awaiting approval in New York, Massachusetts,
Missouri, and Ohio.
All regionally accredited institutions, including UOP, are required to
be evaluated separately for authorization to operate in Puerto Rico. UOP was
granted its most recent authorization in Puerto Rico in December 1995 for a
period of five years.
UOP is registered with British Columbia's Private Post-Secondary
Education Commission and will pursue accreditation through the province of
British Columbia after the required one-year period of operation. An
application for approval to operate in Alberta, Canada is currently pending.
IPD client institutions possess authorization to operate in all states
in which they offer educational programs, which are subject to renewal. The
College is currently authorized to operate in Colorado and does not require
authorization for its self-study programs that are offered worldwide. WIU is
currently authorized to operate in Arizona.
Certain states assert authority to regulate all degree-granting
institutions if their educational programs are available to their residents,
whether or not the institutions maintain a physical presence within those
states. If a state were to establish grounds for asserting authority over
telecommunicated learning, UOP may be required to obtain authorization for,
or restrict access to, its programs available through the UOP Online campus
in those states.
TAX REFORM ACT OF 1997
In August 1997, Congress passed the Tax Reform Act of 1997 that added
several new tax credits and incentives for students and extended benefits
associated with the educational assistance program. The Hope Scholarship
Credit provides up to $1,500 tax credit per year per eligible student for
tuition expenses in the first two years of postsecondary education in a
degree or certificate program. The Lifetime Learning Credit provides up to
$1,000 tax credit per year per taxpayer return for tuition expenses for all
postsecondary education, including graduate studies. Both of these credits
are phased out for taxpayers with modified adjusted gross income between
$40,000 and $50,000 ($80,000 and $100,000 for joint returns) and are subject
to other restrictions and limitations. The Act also provides for the
deduction of interest from gross income on education loans and limited
educational IRA's for children under the age of 18. These deductions are
also subject to adjusted gross income limitations and other restrictions.
These new provisions became effective for 1998 individual tax returns.
EMPLOYER TUITION REIMBURSEMENT
Many of the Company's students receive some form of tuition
reimbursement from their employers. In certain situations, as defined by the
Internal Revenue Code (the "Code"), this tuition assistance qualifies as a
26
deductible business expense when adequately documented by the employer and
employee. The Code also provides a safe-harbor provision for an exclusion
from wages of up to $5,250 of tuition reimbursement per year per student
under the Educational Assistance Program ("EAP") provision. Although the EAP
provision of the Code expired in June 1997, the Tax Reform Act of 1997, which
was signed into law in August 1997, extended the EAP until June 2000. The
EAP provision does not apply to graduate level programs beginning after June
30, 1996. Employers or employees may still continue to deduct such tuition
assistance where it qualifies as a deductible business expense and is
adequately documented. The percentage of incoming students with access to
employer tuition reimbursement was 59% in 1999.
27
LOCATIONS
UOP currently has campuses and learning centers located in 15 states,
Puerto Rico and Vancouver, British Columbia. Following is a list of UOP main
campuses as of September 30, 1999, with the year the campus was first opened
and degree enrollments as of August 31, 1999:
Number Fiscal Enroll-
Of Learning Year ment at
UOP Main Campuses Centers Opened 8/31/99
- ------------------------------------------ ----------- -------- --------
ARIZONA
Phoenix Campus 6 1978 6,861
Tucson Campus 2 1983 2,877
CALIFORNIA
Fountain Valley (Southern California Campus) 9 1981 9,581
Sacramento Campus 4 1993 2,809
San Diego Campus 5 1989 3,403
San Jose Campus 7 1980 6,161
COLORADO
Greenwood Village (Denver Campus) 2 1982 3,910
Colorado Springs (Southern Colorado Campus) 2000 --
FLORIDA
Plantation (Fort Lauderdale Campus) 1999 414
Jacksonville Campus 1998 1,031
Maitland (Orlando Campus) 1 1996 1,703
Tampa Campus 1998 1,124
HAWAII
Honolulu Campus 2 1993 997
LOUISIANA
Metairie (New Orleans Campus) 1996 1,352
MARYLAND
Columbia (Baltimore Campus) 1999 178
MICHIGAN
Grand Rapids Campus 1999 51
Livonia (Detroit Campus) 1 1996 2,371
NEVADA
Las Vegas Campus 4 1994 1,879
NEW MEXICO
Albuquerque Campus 3 1985 3,104
OKLAHOMA
Oklahoma City Campus 1999 389
Tulsa Campus 1999 369
28
Number Fiscal Enroll-
Of Learning Year ment at
UOP Main Campuses Centers Opened 8/31/99
- ------------------------------------------ ----------- -------- --------
OREGON
Tigard (Portland Campus) 2 1998 1,024
PENNSYLVANIA
Malvern (Philadelphia Campus) 2000 --
UTAH
Salt Lake City Campus 3 1984 2,255
WASHINGTON
Tukwila (Seattle Campus) 1 1998 1,177
PUERTO RICO
Guaynabo Campus 1 1980 1,252
CANADA
Vancouver Campus 1999 129
ONLINE (Phoenix Campus) 1989 10,382
------
TOTAL UOP ENROLLMENTS AT AUGUST 31, 1999 66,783
======
Programs are offered throughout the United States and internationally.
IPD has 22 institutional contracts at August 31, 1999. IPD-assisted
programs are currently offered at 21 campuses and 25 learning centers in
Connecticut, Delaware, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia
and Wisconsin.
The College operations are located in Denver, Colorado.
WIU's main campus is located in Phoenix, Arizona. Additionally, WIU
operates two learning centers in Arizona.
Item 2 -- Properties
The Company leases all of its administrative and educational facilities.
In some cases, classes are held in the facilities of the students' employers
at no charge to the Company. Leases generally range from five to seven
years; however, the Company attempts to secure longer leases if it is
advantageous to do so. The Company also leases space from time-to-time on a
short-term basis in order to provide specific courses or programs. The lease
on the Company's corporate headquarters, which includes the UOP Phoenix Main
Campus, expires on August 31, 2003. As of August 31, 1999, the Company
leased approximately 2.4 million square feet.
The Company evaluates current utilization of the educational facilities
and projected enrollment growth to determine facility needs. The Company
anticipates that an additional 476,000 square feet will be leased in 2000.
29
Item 3 -- Legal Proceedings
The Company is not involved in any legal proceedings which it believes
would have a material effect on the Company's financial position or operating
results.
Item 4 -- Submission of Matters to a Vote of Security Holders
None
30
PART II
Item 5 -- Market for Registrant's Common Equity and Related Stockholder
Matters
There is no established public trading market for the Company's Class B
Common Stock, and all shares of the Company's Class B Common Stock are
beneficially owned by the Company's executive officers. The Company's Class
A Common Stock trades on the Nasdaq-Amex National Market ("Nasdaq") under the
symbol "APOL". The holders of the Company's Class A Common Stock are not
entitled to any voting rights. The table below sets forth the high and low
bid prices, adjusted for a 3-for-2 stock split effected in the form of a
stock dividend in April 1998, for the Company's Class A Common Stock as
reported by Nasdaq.
High Low
------ ------
Fiscal 1998
---------------------
First quarter $32.58 $22.42
Second quarter 32.75 25.92
Third quarter 35.92 28.04
Fourth quarter 43.25 29.25
Fiscal 1999
---------------------
First quarter $39.25 $20.50
Second quarter 36.25 22.13
Third quarter 34.25 20.13
Fourth quarter 31.13 21.50
These over-the-counter market quotations may reflect inter-dealer prices
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
At September 30, 1999 there were approximately 200 and 4 holders of
record of shares of Class A and Class B Common Stock, respectively. The
Company estimates that, when you include shareholders whose shares are held
in nominee accounts by brokers, there were approximately 18,400 total holders
of its Class A Common Stock.
The Company has never paid cash dividends on its Common Stock and does
not anticipate paying cash dividends in the near future. It is the current
policy of the Company's Board of Directors to retain earnings to finance the
operations and expansion of the Company's business. Holders of Class A
Common Stock and Class B Common Stock are entitled to equal per share cash
dividends to the extent declared by the Board.
31
Item 6 -- Selected Consolidated Financial Data
Information relating to this item appears under the caption "Selected
Consolidated Financial Data" on page 13 of the Annual Report, and such
information is incorporated herein by reference in accordance with General
Instruction G(2) of Form 10-K. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial
Statements and the Notes thereto.
Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
Information relating to this item appears under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 14 through 22 of the Annual Report, and such information
is incorporated herein by reference in accordance with General Instruction
G(2) of Form 10-K. This information should be read in conjunction with the
Company's Consolidated Financial Statements and the Notes thereto.
Item 7a -- Quantitative and Qualitative Disclosures about Market Risk
Information relating to this item appears under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 22 of the Annual Report, and such information is
incorporated herein by reference in accordance with General Instruction G(2)
of Form 10-K.
Item 8 -- Financial Statements and Supplementary Data
Information relating to this item appears on pages 23 through 38 of the
Annual Report, and such information is incorporated herein by reference in
accordance with General Instruction G(2) of Form 10-K. Other financial
statements and schedules required under Regulation S-X promulgated under the
Securities Act of 1933 are identified in Item 14 hereof and are incorporated
herein by reference.
Item 9 -- Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
32
PART III
Item 10 -- Directors and Executive Officers of the Registrant
The Company's directors serve one year terms and are elected each year
by the holders of the Company's Class B Common Stock. The following sets
forth information as of October 31, 1999 concerning the Company's directors
and executive officers:
Name Age Position
- ---------------------------------- --- ---------------------------
John G. Sperling, Ph.D. 78 Chairman of the Board and Chief Executive
Officer
Todd S. Nelson 40 President and Director
J. Jorge Klor de Alva, J.D., Ph.D. 51 Senior Vice President and Director
Jerry F. Noble 57 Senior Vice President and Director
Peter V. Sperling 40 Senior Vice President, Secretary,
Treasurer and Director
Kenda B. Gonzales 42 Chief Financial Officer
Junette C. West 35 Vice President - Controller and Chief
Accounting Officer
Thomas C. Weir 65 Director
Dino J. DeConcini 65 Director
Hedy F. Govenar 54 Director
John R. Norton III 70 Director
JOHN G. SPERLING, Ph.D., is the founder, Chief Executive Officer and
Chairman of the Board of Directors of the Company. Dr. Sperling was also
President of the Company from its inception until February 1998. Prior to
his involvement with the Company, from 1961 to 1973, Dr. Sperling was a
professor of Humanities at San Jose State University where he was the
Director of the Right to Read Project and the Director of the NSF Cooperative
College-School Science Program in Economics. At various times from 1955 to
1961, Dr. Sperling was a member of the faculty at the University of Maryland,
Ohio State University and Northern Illinois University. Dr. Sperling
received his Ph.D. from Cambridge University, an M.A. from the University of
California at Berkeley and a B.A. from Reed College. Dr. Sperling is the
father of Peter V. Sperling.
TODD S. NELSON has been with the Company since 1987. Mr. Nelson has
been the President of the Company since February 1998. Mr. Nelson was Vice
President of the Company from 1994 to February 1998 and the Executive Vice
President of UOP from 1989 to February 1998. From 1987 to 1989, Mr. Nelson
was the Director of UOP's Utah campus. From 1985 to 1987, Mr. Nelson was the
General Manager at Amembal and Isom, a management training company. From
1984 to 1985, Mr. Nelson was a General Manager for Vickers & Company, a
diversified holding company. From 1983 to 1984, Mr. Nelson was a Marketing
Director at Summa Corporation, a recreational properties company. Mr. Nelson
received an M.B.A. from the University of Nevada at Las Vegas and a B.S. from
Brigham Young University. Mr. Nelson was a member of the faculty at
University of Nevada at Las Vegas from 1983 to 1984.
33
J. JORGE KLOR DE ALVA, J.D., Ph.D., has been President of UOP and a
Senior Vice President of the Company since February 1998 and has been a
director of the Company since 1991. Dr. Klor de Alva was Vice President of
Business Development of the Company from 1996 to 1998. Dr. Klor de Alva was
a Professor at the University of California at Berkeley from July 1994 until
July 1996. From 1989 to 1994, Dr. Klor de Alva was a Professor at Princeton
University. From 1984 to 1989, Dr. Klor de Alva was the Director of the
Institute for Mesoamerican Studies, and from 1982 to 1989, was an Associate
Professor at the State University of New York at Albany. From 1971 to 1982,
Dr. Klor de Alva served at various times as associate professor, assistant
professor or lecturer at San Jose State University and the University of
California at Santa Cruz. Dr. Klor de Alva received a B.A. and J.D. from the
University of California at Berkeley and a Ph.D. from the University of
California at Santa Cruz.
JERRY F. NOBLE has been with the Company since 1981. Mr. Noble has been
a Senior Vice President of the Company since 1987 and the President of IPD
since 1984. From 1981 to 1987, Mr. Noble also was the controller of the
Company. From 1977 to 1981, Mr. Noble was the corporate accounting manager
for Southwest Forest Industries, a forest products company. Mr. Noble
received his M.B.A. from UOP and his B.A. from the University of Montana.
PETER V. SPERLING has been with the Company since 1983. Mr. Sperling
has been a Senior Vice President since June 1998. Mr. Sperling was the Vice
President of Administration from 1992 to June 1998 and has been the Secretary
and Treasurer of the Company since 1988. From 1987 to 1992, Mr. Sperling was
the Director of Operations at AEC. From 1983 to 1987, Mr. Sperling was
Director of Management Information Services of the Company. Mr. Sperling
received his M.B.A from UOP and his B.A. from the University of California at
Santa Barbara. Mr. Sperling is the son of John G. Sperling.
KENDA B. GONZALES has been with the Company since October 1998. Ms.
Gonzales is the Chief Financial Officer of the Company. Prior to joining
Apollo, Ms. Gonzales was the Senior Executive Vice President and Chief
Financial Officer of UDC Homes, Inc. from 1996. From 1985 to 1996, Ms.
Gonzales was the Senior Vice President and Chief Financial Officer of
Continental Homes Holding Corp. Ms. Gonzales began her career as a Certified
Public Accountant with Peat, Marwick, Mitchell and Company and is a graduate
of the University of Oklahoma with a Bachelor of Accountancy.
JUNETTE C. WEST has been with the Company since 1986. Ms. West has been
the Vice President-Controller since 1994 and the Chief Accounting Officer
since February 1998. Ms. West has held various accounting and finance
positions at the Company from 1986 to 1994. Ms. West received a B.S. in
Accounting from Grand Canyon University in Phoenix, Arizona in 1985. Ms. West
is a Certified Public Accountant in the State of Arizona.
34
THOMAS C. WEIR has been a director of the Company since 1983 and is a
member of the Audit and Compensation Committees of the Board of Directors of
the Company. During 1994, Mr. Weir became the President of Dependable
Nurses, Inc., a provider of temporary nursing services, W.D. Enterprises,
Inc., a financial services company and Dependable Personnel, Inc., a provider
of temporary clerical personnel. In 1996, Mr. Weir became the President of
Dependable Nurses of Phoenix, Inc., a provider of temporary nursing services.
In addition, Mr. Weir has been an independent financial consultant since
1990. From 1989 to 1990, Mr. Weir was President of Tucson Electric Power
Company. From 1979 to 1987, Mr. Weir was Chairman and Chief Executive
Officer of Home Federal Savings & Loan Association, Tucson, Arizona.
DINO J. DECONCINI has been a director of the Company since 1981 and is
currently a member of the Audit Committee of the Board of Directors of the
Company. Mr. DeConcini is currently Executive Director, Savings Bonds
Marketing Office, U.S. Department of the Treasury. From 1979 to 1995, Mr.
DeConcini was a shareholder in DeConcini, McDonald, Brammer, Yetwin and
Lacy, P.C., Attorneys at Law. From 1993 to 1995, Mr. DeConcini
was a Vice President and Senior Associate of Project International
Associates, Inc., an international business consulting firm. From 1991 to
1993 and 1980 to 1990, Mr. DeConcini was a Vice President and partner of Paul
R. Gibson & Associates, an international business consulting firm.
HEDY F. GOVENAR has been a director of the Company since March of 1997.
Ms. Govenar is founder and President of Governmental Advocates, Inc., a
lobbying and political consulting firm in Sacramento, California. An active
lobbyist with the firm since 1979, she represents a variety of corporate and
trade association clients. From 1989 to 1999, Ms. Govenar served as a
Commissioner on the California Film Commission as an appointee of the
California State Assembly. Ms. Govenar received an M.A. from California
State University, and a B.A. from UCLA.
JOHN R. NORTON III has been a director of the Company since March of
1997 and is currently a member of the Audit and Compensation Committees of
the Board of Directors of the Company. Mr. Norton founded his own company in
1955 engaged in diversified agriculture including crop production and cattle
feeding. He served as the Deputy Secretary of the United States Department
of Agriculture in 1985 and 1986. Mr. Norton is also on the Board of
Directors of Terra Industries, Inc.. He attended Stanford University and the
University of Arizona where he received a B.S. in Agriculture in 1950.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely upon
a review of the copies of such forms furnished to the Company, or written
representations that no Forms 5 were required, the Company believes that
during the fiscal year ended August 31, 1999, its officers and directors
complied with all Section 16(a) filing requirements with the following
exception: Jerry F. Noble filed a late Form 4 for July 1999, related to
transactions involving the selling of 35,900 and 8,000 shares of Class A
Common Stock on July 2, 1999, and July 27, 1999, respectively.
35
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two principal committees: (1) an Audit
Committee comprised of Thomas C. Weir (Chairperson), Dino J. DeConcini, and
John R. Norton III and (2) a Compensation Committee comprised of Thomas
C. Weir (Chairperson) and John R. Norton III.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the year ended August 31, 1999, the Board of Directors of the
Company met on four occasions. All of the directors attended 75% or more of
the Board of Directors meetings and meetings of each of the committees on
which they served.
Compensation Committee ------------------------------------------------------
The Compensation Committee of the Board of Directors, which met three
times during 1999, reviews all aspects of compensation of executive officers
of the Company and determines or makes recommendations on such matters to the
full Board of Directors. The report of the Compensation Committee for 1999
is set forth in Item 11.
Audit Committee -------------------------------------------------------------
The Audit Committee, which met on five occasions in 1999, represents the
Board of Directors in evaluating the quality of the Company's financial
reporting process and internal financial controls through consultations with
the Company's independent accountants, internal management and the Board of
Directors.
Other Committees ------------------------------------------------------------
The Company does not maintain a standing nominating committee or other
committee performing similar functions.
36
Item 11 -- Executive Compensation
DIRECTOR COMPENSATION
Fees ------------------------------------------------------------------------
In 1999, non-employee directors of the Company received a $18,000 annual
retainer, $1,500 for each board meeting attended, and $750 for each committee
meeting attended. Mr. DeConcini has elected not to receive any director
compensation because of his position with the U.S. Department of the
Treasury. In addition, non-employee directors are reimbursed for
out-of-pocket expenses. Ms. Govenar was retained by the Company as a
consultant and received a consulting fee of $100,000 and $62,000 in 1999 and
1998, respectively.
Apollo Group, Inc. Director Stock Plan --------------------------------------
In August 1994, the Board of Directors of the Company adopted the Apollo
Group, Inc. Director Stock Plan (the "Director Plan") to attract and retain
independent directors for the Company. The aggregate number of shares of
Class A Common Stock subject to the Director Plan may not exceed 675,000,
subject to adjustment. Options granted under the Director Plan are fully
vested six months and one day after the date of grant and are exercisable in
full thereafter until the date that is ten years after the date of grant.
The exercise price per share under the Director Plan is equal to the fair
market value of such shares upon the date of grant. In addition, on September
1 of each year, non-employee Directors receive an annual grant of options to
purchase 20,250 shares of the Company's Class A Common Stock. Mr. DeConcini
has elected not to receive this annual grant because of his position with the
U.S. Department of the Treasury.
37
EXECUTIVE COMPENSATION
The following table discloses the annual and long-term compensation
earned for services rendered in all capacities by the Company's Chairman of
the Board and Chief Executive Officer and the Company's four other most
highly compensated executive officers for 1999, 1998, and 1997:
-- SUMMARY COMPENSATION TABLE --
Long-Term
Annual Compensation
Compensation Awards
--------------------------------- ---------------------
Other Restrict- Securities All Other
Annual ed Stock Underlying LTIP Compen-
Name and Principal Salary Bonus Compensation Awards Options Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------------ ------- --------- -------- ------------ --------- ---------- -------- -----------
John G. Sperling
Chairman of the Board 1999 $400,000 $ -- $64,141 $ -- 125,000 $ -- $ --
and Chief Executive 1998 387,500 -- 72,373 -- -- -- --
Officer 1997 387,500 290,625 62,463 -- -- -- --
Todd S. Nelson
President 1999 350,000 262,500 -- -- 100,000 -- --
1998 247,917 200,000 -- -- -- -- --
1997 175,000 131,250 -- -- -- -- --
Jorge Klor de Alva
Senior Vice President, 1999 275,000 206,250 -- -- 75,000 -- 3,072
and President of UOP 1998 218,750 175,000 -- -- -- -- 1,850
1997 175,000 131,250 -- -- 112,500 -- --
Jerry F. Noble
Senior Vice President 1999 250,000 161,752 -- -- 50,000 -- 3,072
and President of IPD 1998 225,000 168,750 -- -- -- -- 3,073
1997 225,000 84,375 -- -- -- -- 2,980
Kenda B. Gonzales
Chief Financial Officer 1999 174,359 90,000 -- -- 42,000 -- --
1998 -- -- -- -- -- -- --
1997 -- -- -- -- -- -- --
_______________
Messrs. Klor de Alva, Nelson, and Noble also received certain
perquisites, the value of which did not exceed the lesser of $50,000
for each person or 10% of their cash compensation. Dr. John Sperling
received perquisites primarily in the form of a Company provided car,
available for business and personal use, and tax consulting services.
Amounts shown consist of contributions made by the Company to the
Company's Savings and Investment Plan paid in fiscal years 1999, 1998
and 1997.
38
The following table discloses options granted by the Company to the
Chairman of the Board and Chief Executive Officer and the four other most
highly compensated executive officers of the Company for 1999:
-- OPTION GRANTS IN THE LAST FISCAL YEAR --
Option Grants in Fiscal Year 1999 Potential Realizable
---------------------------------------------------- Value at Assumed
% of Total Annual Rates of
Number of Options/SARs Stock Price
Securities Granted to Exercise Appreciation for
Underlying Employees or Base Option Term
Options/SARs in Fiscal Price Expiration ----------------------
Name Granted Year ($/Share) Date 5% 10%
- ------------------ ---------- ----------- --------- --------- ---------- ----------
John G. Sperling 125,000 11.3 $25.63 12/18/08 $2,014,428 $5,104,956
Todd S. Nelson 100,000 9.0 25.63 12/18/08 1,611,542 4,083,965
Jorge Klor de Alva 75,000 6.8 25.63 12/18/08 1,208,657 3,062,974
Jerry F. Noble 50,000 4.5 25.63 12/18/08 805,771 2,041,983
Kenda B. Gonzales 22,000 2.0 25.63 12/18/08 354,539 898,472
Kenda B. Gonzales 20,000 1.8 23.00 04/19/09 289,292 733,122
The following table discloses the number of shares received from the
exercise of Company options, the value received therefrom and the number and
value of in-the-money and out-of-the-money options held by the Company's
Chairman of the Board and Chief Executive Officer and the four other most
highly compensated officers of the Company for 1999:
-- AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 --
AND OPTION VALUES AT AUGUST 31, 1999
Value of Unexercised
Shares Number of Unexercised In-the-Money Options at
Acquired Value Options at Fiscal Year-End Fiscal Year-End
on Exercise Realized --------------------------- ---------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- --------- ----------- ------------- ----------- -------------
John G. Sperling 513,176 $10,910,340 51,469 176,468 $ 741,442 $ 741,427
Todd S. Nelson -- -- 109,407 151,468 1,576,073 741,427
Jorge Klor de Alva 76,500 692,280 28,125 103,125 127,148 --
Jerry F. Noble -- -- 154,407 101,468 2,224,325 741,427
Kenda B. Gonzales -- -- -- 42,000 -- --
39
Employment and Deferred Compensation Agreements ----------------------------
In December 1993, the Company entered into an employment agreement (the
"Employment Agreement") and deferred compensation agreement (the "Deferred
Compensation Agreement") with Dr. John G. Sperling, the Chairman of the Board
and Chief Executive Officer of the Company. The term of the Employment
Agreement was for four years, and expired on December 31, 1997. The
Employment Agreement has automatically renewed for two additional one-year
periods through December 31, 1999, and will automatically renew for
additional one-year periods thereafter. Under the terms of the Employment
Agreement, Dr. Sperling received an annual salary for 1997 and 1998 of
$387,500. Effective for 1999, Dr. Sperling's salary was increased to
$400,000. This salary is subject to annual review by the Compensation
Committee. The Company may terminate the Employment Agreement only for
cause, and Dr. Sperling may terminate the Employment Agreement at any time
upon 30 days written notice.
The Deferred Compensation Agreement provides that upon his termination
of employment with the Company and until his death, Dr. Sperling shall
receive monthly payments equal to one-twelfth of his highest annual base
salary paid by the Company during any one of the three calendar years
preceding the calendar year in which Dr. Sperling's employment is terminated.
In addition, upon Dr. Sperling's death, his designated beneficiary shall be
paid an amount equal to three times his highest annual base salary in 36
equal monthly installments with the first such installment due on the first
day of the month following the month of Dr. Sperling's death.
The Company does not have employment agreements with any of its other
executive officers.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is composed
entirely of independent outside members of the Company's Board of Directors.
The Committee reviews and approves each of the elements of the executive
compensation program of the Company related to John G. Sperling, Todd S.
Nelson, J. Jorge Klor de Alva, Peter V. Sperling, and Jerry F. Noble ("Senior
Executives") and periodically assesses the effectiveness and competitiveness
of the program in total. In addition, the Committee administers the key
provisions of the executive compensation program and reviews with the Board
of Directors in detail all aspects of compensation for the Senior Executives.
The Committee has furnished the following report on executive compensation:
Overview and Philosophy -----------------------------------------------------
The Company's compensation program for Senior Executives is primarily
comprised of base salary, annual bonus, and long-term incentives in the form
of stock option grants. Senior Executives also participate in various other
benefit plans, including medical and retirement plans, generally available to
all employees of the Company.
The Company's philosophy is to pay base salaries to Senior Executives
that enable the Company to attract, motivate and retain highly qualified
executives. The annual bonus program is designed to reward for performance
based on financial results. Stock option grants are intended to provide
substantial rewards to executives based on stock price appreciation and
improved overall financial performance. The vesting of the options can be
accelerated if certain profit and stock price goals are achieved.
40
Base Salary -----------------------------------------------------------------
Each of the Company's Senior Executives receives a base salary, which
when aggregated with their maximum bonus amount, is intended to be
competitive with similarly situated executives in comparable industries. The
Company targets base pay at the level required to attract and retain highly
qualified executives. In determining salaries, the Committee also takes into
account position within the Company, individual experience and performance,
and specific needs particular to the Company.
Annual Bonus Program --------------------------------------------------------
In addition to a base salary, Senior Executives were eligible to receive
a bonus of up to seventy-five percent (75%) of their respective base
salaries. All annual bonuses are tied to the Company's financial performance.
At the beginning of each fiscal year, the Committee establishes an
after-tax net income goal for the Company and operating profit goals for the
Company's subsidiaries. The annual bonuses are calculated differently for
(i) Senior Executives who also serve as executive officers of either The
University of Phoenix, Inc. ("UOP") or the Institute for Professional
Development ("IPD") (collectively, the "Division Executives") and (ii) Senior
Executives who do not serve as executive officers of either UOP or IPD
(collectively, the "Company Executives").
The annual bonuses for the Company Executives are tied solely to the
after-tax net income goal for the Company. If that goal is achieved, the
Company Executives earn a bonus equal to fifty percent (50%) of their
respective annual maximum bonus. If the after-tax net income goal is
exceeded, the Company Executives earn a larger percentage of their annual
bonus depending on the amount by which the after-tax net income goal is
exceeded up to a maximum annual bonus equal to seventy-five percent (75%) of
their respective base salaries.
The annual bonuses for the Division Executives are earned (1) fifty
percent (50%) if their division operating profit goal is achieved, (2) an
additional twenty-five percent (25%) if the after-tax income goal for the
Company is achieved and (3) up to another twenty-five percent (25%) depending
on the amount by which the after-tax net income goal is exceeded up to a
maximum annual bonus equal to seventy-five percent (75%) of their respective
base salaries.
Options ---------------------------------------------------------------------
The Company believes that it is important for Senior Executives to have
an equity stake in the Company and, toward this end, makes option grants to
key Senior Executives from time to time under the Apollo Group, Inc. Long-
Term Incentive Plan. In making option awards, the Committee reviews the
Company's financial performance during the past fiscal year, the awards
granted to other executives within the Company and the individual officer's
specific role at the Company.
Other Benefits --------------------------------------------------------------
Senior Executives are eligible to participate in benefit programs
designed for all full-time employees of the Company and also received certain
perquisites primarily including Company cars and Company paid tax consulting.
41
These programs include medical, disability and life insurance, and a
qualified retirement program allowed under Section 401(k) of the Internal
Revenue Code, as amended (the "Code").
Chief Executive Officer Compensation ----------------------------------------
Dr. John G. Sperling is the founder, Chief Executive Officer and
Chairman of the Board of Directors of the Company. In December 1993, the
Company entered into an employment agreement (the "Employment Agreement") and
deferred compensation agreement (the "Deferred Compensation Agreement") with
Dr. Sperling. The Employment Agreement terminated on December 31, 1997. The
Employment Agreement has automatically renewed for two additional one-year
periods through December 31, 1999, and will automatically renew for
additional one-year periods thereafter. The Deferred Compensation Agreement
provides that upon Dr. Sperling's termination of employment with the Company
and until his death, Dr. Sperling shall receive monthly payments equal to
1/12 of his highest annual base salary paid by the Company during any one of
the three calendar years preceding the calendar year in which Dr. Sperling's
employment is terminated. In addition, upon Dr. Sperling's death, his
designated beneficiary shall be paid an amount equal to three times his
highest annual base salary in 36 equal monthly installments with the first
installment due on the first day of the month following the month of Dr.
Sperling's death.
During fiscal year 1999, Dr. Sperling received an annual base salary of
$400,000. In addition, because the after-tax net income goal for the Company
was exceeded, Dr. Sperling was eligible for a bonus for 1999. Dr. Sperling
has elected to forego this bonus in exchange for options that will be granted
in Fiscal 2000. All options are granted at fair market value and expire ten
years after the grant date.
Under Dr. Sperling's leadership, the Company's tuition and other net
revenues increased 29.6% to $498.8 million in 1999 from $384.9 million in
1998. In addition, diluted earnings per share increased to $.75 in 1999 from
$.59 in 1998.
All share numbers and prices contained in this report have been adjusted
for the stock splits effected in the form of stock dividends that were
approved by the Company's Board of Directors.
-- COMPENSATION COMMITTEE --
Thomas C. Weir
John R. Norton III
42
STOCK PERFORMANCE GRAPH
The line graph below compares the cumulative total shareholder return on
the Company's Class A Common Stock with the cumulative total return for the
Standard & Poor's 400 Index and an index of Company-selected peer group
companies for the period from December 6, 1994 (the effective date of the
Company's initial public offering) through August 31, 1999. The graph
assumes that the value of the investment in the Company's Class A Common
Stock and each index was $100 at December 6, 1994, and that all dividends
paid by those companies included in the indexes were reinvested.
Dec. 6, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1994 1995 1996 1997 1998 1999
------- -------- -------- --------- --------- ---------
Apollo Group, Inc.
Class A Common Stock $100.00 $336.80 $966.30 $1,352.40 $1,726.60 $1,246.97
S&P 400 100.00 128.27 143.51 197.02 178.54 252.76
Education Peer Group-
Current 100.00 146.02 297.28 362.08 418.97 384.06
Education Peer Group-
Prior 100.00 129.95 212.49 233.50 257.58 235.92
The education peer group - current is composed of the publicly-traded
common stock of 9 education-related companies that include Career Education
Corporation (CECO), Corinthian Colleges, Inc. (COCO), DeVry Inc. (DV),
Education Management Corporation (EDMC), ITT Educational Services, Inc.
(ESI), Quest Education Corporation (QEDC), Sylvan Learning Systems, Inc.
(SLVN), Strayer Education, Inc. (STRA), Whitman Education Group, Inc. (WIX).
The education peer group - prior is composed of the publicly-traded
common stock of 12 education-related companies that include Berlitz
International, Inc. (BTZ), California Culinary Academy, Inc. (COOK),
Canterbury Information Technology, Inc. (XCEL), DeVry Inc. (DV), ITC Learning
Corporation (ITCC), ITT Educational Services, Inc. (ESI), Nobel Learning
Communities, Inc. (NLCI) (formerly Nobel Education Dynamics, Inc.), Sylvan
Learning Systems, Inc. (SLVN), TesseracT Group, Inc. (TSST) (formerly
Education Alternatives, Inc.), TRO Learning, Inc. (TUTR), Wave Technologies
International, Inc. (WAVT), and Whitman Education Group, Inc. (WIX).
Children's Discovery Centers of America, Inc. (CDCR) was acquired by KBI
Acquisitions and is no longer included in the peer group.
The Company believes that the education peer group - current is more
representative of the education industry in which the Company operates than
the education peer group - prior.
43
Item 12 -- Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of September 30,
1999. Except as otherwise indicated, to the knowledge of the Company, all
persons listed below have sole voting and investment power with respect to
their shares, except to the extent that authority is shared by spouses under
applicable law or as otherwise noted below.
Class A Class B
Shares Shares
of Common of Common
Name and Address of Beneficial Owner Stock % Owned Stock % Owned
- --------------------------------------- ---------------- --------- ----------- ----------
John G. Sperling 13,885,158 17.7% 243,081 47.5%
Peter V. Sperling 14,371,831 18.3 232,068 45.4
Jerry F. Noble 554,407 .7 27,950 5.5
Todd S. Nelson 179,616 .2 8,385 1.6
J. Jorge Klor de Alva 104,937 .1 -- --
Thomas C. Weir 107,000 .1 -- --
Hedy F. Govenar 41,550 .1 -- --
John R. Norton III 41,500 .1 -- --
Dino J. DeConcini 28,113 -- -- --
Total for All Directors and Executive
Officers as a Group (11 persons) 27,987,155 35.7% 511,484 100.0
_______________
The address of each of the listed shareholders, unless noted
otherwise, is in care of Apollo Group, Inc., 4615 East Elwood Street,
Phoenix, Arizona 85040.
Includes 1,335,040 shares held by the John Sperling 1994 Irrevocable
Trust dated April 27, 1994 for which Messrs. John and Peter Sperling
are the co-trustees.
Includes 186,157 shares held by the John G. Sperling Revocable Trust
dated January 31, 1995.
Includes 1,350,000 shares held by The Sperling Foundation.
Includes 51,469 shares that Dr. John Sperling has the right to
acquire within 60 days of the date of the table set forth above.
Includes 290,090 shares held by the Peter V. Sperling Revocable Trust
dated January 31, 1995.
Includes 51,469 shares that Mr. Peter Sperling has the right to
acquire within 60 days of the date of the table set forth above.
Includes 154,407 shares that Mr. Noble has the right to acquire within
60 days of the date of the table set forth above.
Includes 109,407 shares that Mr. Nelson has the right to acquire
within 60 days of the date of the table set forth above.
Includes 28,125 shares that Dr. Klor de Alva has the right to
acquire within 60 days of the date of the table set forth above.
44
Includes 93,500 shares that Mr. Weir has the right to acquire within
60 days of the date of the table set forth above.
Includes 37,500 shares that Ms. Govenar has the right to acquire
within 60 days of the date of the table set forth above.
Includes 40,500 shares that Mr. Norton has the right to acquire within
60 days of the date of the table set forth above.
Includes 27,438 shares that Mr. DeConcini has the right to acquire
within 60 days of the date of the table set forth above.
Includes 608,099 shares that all Directors and Executive Officers as
a group have the right to acquire within 60 days of the date of the
table set forth.
Includes 243,080 shares held by the John G. Sperling Revocable Trust
dated January 31, 1995.
Includes 232,067 shares held by the Peter V. Sperling Revocable Trust
dated January 31, 1995.
Item 13 -- Certain Relationships and Related Transactions
On August 14, 1998, the Company, Hughes Network Systems ("Hughes"), and
Hermes Onetouch L.L.C. ("Hermes") formed Interactive Distance Learning, Inc.
for the purpose of acquiring One Touch Systems, Inc. ("One Touch"). In
connection with the transaction, the Company, Hughes, and Hermes entered into
certain agreements regarding the relationships among the parties. As
contemplated in the agreements, it is anticipated that the Company may from
time to time engage in transactions with One Touch for the provision of
distance learning products and services. Hermes, which owns 30% of the
outstanding shares of Interactive Distance Learning, Inc., is wholly-owned by
Dr. John G. Sperling, the Company's Chairman, and Peter V. Sperling, the
Company's Senior Vice President.
Effective July 15, 1999, the Company entered into contracts with Apollo
International, Inc. ("AI") to provide educational products and services in
certain locations outside of the United States, Canada, and Puerto Rico.
John G. Sperling, Jorge Klor de Alva, and Todd Nelson are directors of the
Company and also directors of AI. Jorge Klor de Alva is Senior Vice
President of the Company and is acting as Chief Executive Officer of AI until
AI selects a permanent chief executive officer. Shares of AI stock are
beneficially owned by the Company (2.6% for which it paid $999,989) and by an
investment entity controlled by John G. Sperling and Peter V. Sperling, son
of John G. Sperling, and a Vice President and Director of the Company (26%).
In addition, the Company has an option to acquire additional shares in AI.
During the fiscal year ended August 31, 1999, the Company received no revenue
from AI for educational products and services.
45
PART IV
Item 14 -- Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Apollo Group,
Inc. and Subsidiaries, included in the Annual Report to Shareholders
for the year ended August 31, 1999, are incorporated by reference in
Item 8.
Report of Independent Accountants
Consolidated Balance Sheet as of August 31, 1999 and 1998
Consolidated Statement of Operations for the Years Ended August 31,
1999, 1998, and 1997
Consolidated Statement of Comprehensive Income for the Years Ended
August 31, 1999, 1998, and 1997
Consolidated Statement of Changes in Shareholders' Equity for the
Years Ended August 31, 1999, 1998, and 1997
Consolidated Statement of Cash Flows for the Years Ended August 31,
1999, 1998, and 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedule:
None.
3. Exhibits
Sequentially
Numbered
Exhibit Page or Method
Number Description of Exhibit of Filing
------- --------------------------------------- ----------------
2.1 Asset Purchase Agreement by and among Incorporated by
National Endowment for Financial Educa- reference to
tion, (R) College for Financial Planning, Exhibit 10.1 of
Inc., as assignee of Apollo Online, Inc., the Company's
as Buyer, and Apollo Group, Inc. dated Registration
August 21, 1997 Statement No.
333-35465 on
Form S-3 filed
September 11,
1997
46
Sequentially
Numbered
Exhibit Page or Method
Number Description of Exhibit of Filing
------- --------------------------------------- ----------------
2.2 Assignment and Amendment of Asset Purch- Incorporated by
ase Agreement by and among National reference to
Endowment for Financial Education, Inc., the Exhibit 10.2 of
the College for Financial Planning, Inc., the Company's
Apollo Online, Inc., and Apollo Group, Inc., Registration
dated September 23, 1997 Statement No.
333-35465 on
Form S-3 filed
September 11,
1997
3.1 Restated and Amended Articles of Incorporated by
Incorporation of the Company reference to
(As Amended Through September 18, 1997) Exhibit 3.1 of
the August 31,
1997 Form 10-K
3.2 Amended Bylaws of the Company Incorporated by
(As Amended Through June 1996) reference to
Exhibit 3.2 of
the August 31,
1996 Form 10-K
10.1a Business Loan Agreement between Apollo Incorporated by
Group, Inc. and Wells Fargo Bank, National reference to
Association Exhibit 10.1a of
the November 30,
1997 Form 10-Q.
10.1b Revolving Promissory Note between Apollo Incorporated by
Group, Inc. and Wells Fargo Bank, National reference to
Association Exhibit 10.1c of
the November 30,
1997 Form 10-Q.
10.1c Modification Agreement between Apollo Group, Incorporated by
Inc. and Wells Fargo Bank, National reference to
Association Exhibit 10.1d of
the February 28,
1998 Form 10-Q.
10.1d Second Modification Agreement between Apollo Incorporated by
Group, Inc. and Wells Fargo Bank, National reference to
Association dated August 13, 1998 Exhibit 10.1e of
the February 28,
1999 Form 10-Q.
10.1e Third Modification Agreement between Apollo Incorporated by
Group, Inc. and Wells Fargo Bank, National reference to
Association dated April 30, 1999 Exhibit 10.1f of
the May 31, 1999
Form 10-Q.
47
Sequentially
Numbered
Exhibit Page or Method
Number Description of Exhibit of Filing
------- --------------------------------------- ----------------
10.1f Fourth Modification Agreement between Apollo Filed herewith
Group, Inc. and Wells Fargo Bank, National
Association dated August 3, 1999
10.1g Fifth Modification Agreement between Apollo Filed herewith
Group, Inc. and Wells Fargo Bank, National
Association dated November 1, 1999
10.2 Apollo Group, Inc. Director Stock Incorporated by
Plan reference to
Exhibit 10.2 of
the August 31,
1995 Form 10-K
10.3 Apollo Group, Inc. Long-Term Incorporated by
Incentive Plan reference to
Exhibit 10.3 of
Form S-1 No.
33-83804
10.4 Apollo Group, Inc. Savings and Incorporated by
Investment Plan reference to
Exhibit 10.4 of
the August 31,
1996 Form 10-K.
10.5 Apollo Group, Inc. 1994 Employee Incorporated by
Stock Purchase Plan (As Amended reference to
Through August 1996) Exhibit 10.5 of
the August 31,
1996 Form 10-K.
10.6 Employment Agreement between Apollo Incorporated by
Group, Inc. and John G. Sperling reference to
Exhibit 10.6 of
Form S-1 No.
33-83804
10.7 Deferred Compensation Agreement between Incorporated by
John G. Sperling and Apollo Group, Inc. reference to
Exhibit 10.7 of
Form S-1 No.
33-83804
10.8 Shareholder Agreement Dated September Incorporated by
7, 1994, by and between the Company and reference to
each holder of the Company's Class B Exhibit 10.10 of
Common Stock Form S-1 No.
33-83804
48
Sequentially
Numbered
Exhibit Page or Method
Number Description of Exhibit of Filing
------- --------------------------------------- ----------------
10.9 Agreement of Purchase and Sale of Incorporated by
Assets of Western International reference to
University Dated June 30, 1995 Exhibit 10.11 of
(without schedules and exhibits) the August 31,
1995 Form 10-K.
10.10 Purchase and Sale Agreement Dated Incorporated by
October 10, 1995 reference to
Exhibit 10.12 of
the August 31,
1996 Form 10-K.
13 Pages 13 through 38 of the Annual Report to Filed herewith
Shareholders for the year ended August 31,
1999
21 List of Subsidiaries Filed herewith
23 Consent of Independent Accountants Filed herewith
27 Financial Data Schedule Filed herewith
27.1 Restated Financial Data Schedule for the Filed herewith
periods ending November 30, 1998, February
28, 1999, and May 31, 1999
27.2 Restated Financial Data Schedule for the Filed herewith
periods ending November 30, 1997, February
28, 1998, May 31, 1998, and August 31, 1998
27.3 Restated Financial Data Schedule for the Filed herewith
period ending August 31, 1997
99.1 Form of Agreement of Institute for Incorporated by
Professional Development reference to
Exhibit 99.1 of
Form S-1 No.
33-83804
(b) Reports on Form 8-K
During the last quarter of the 1999 fiscal year, the Company filed no
reports on Form 8-K.
49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Phoenix, State of Arizona, on November 22, 1999.
APOLLO GROUP, INC.
An Arizona Corporation
By: /s/ John G. Sperling
--------------------------------
John G. Sperling
Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John G. Sperling and Todd S. Nelson, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Form 10-K
Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as he might or could do in person hereby ratifying
and confirming all that said attorneys-in-fact and agents, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date indicated.
Signature Title Date
- -----------------------------------------------------------------------------
/s/ John G. Sperling Chairman of the Board November 22, 1999
- ------------------------- of Directors and Chief
John G. Sperling Executive Officer
(Principal Executive Officer)
/s/ Todd S. Nelson President and Director November 22, 1999
- -------------------------
Todd S. Nelson
/s/ J. Jorge Klor de Alva Senior Vice President November 22, 1999
- -------------------------- and Director
J. Jorge Klor de Alva
50
Signature Title Date
- -----------------------------------------------------------------------------
/s/ Jerry F. Noble Senior Vice President and November 22, 1999
- ------------------------- Director
Jerry F. Noble
/s/ Peter V. Sperling Senior Vice President, November 22, 1999
- ------------------------- Secretary, Treasurer and
Peter V. Sperling Director
/s/ Kenda B. Gonzales Chief Financial Officer November 22, 1999
- ------------------------- (Principal Financial Officer)
Kenda B. Gonzales
/s/ Junette C. West Vice President and Controller November 22, 1999
- ------------------------- (Chief Accounting Officer)
Junette C. West
/s/ Dino J. DeConcini Director November 22, 1999
- -------------------------
Dino J. DeConcini
/s/ Thomas C. Weir Director November 22, 1999
- -------------------------
Thomas C. Weir
/s/ John R. Norton III Director November 22, 1999
- -------------------------
John R. Norton III
/s/ Hedy F. Govenar Director November 22, 1999
- -------------------------
Hedy F. Govenar
51