Shares of for-profit education company Apollo tumble on news of SEC investigation

Apollo Group says SEC starts probe, 4Q profit down

PHOENIX — Apollo Group Inc., owner of online school The University of Phoenix, said Tuesday its fiscal fourth-quarter profit fell 60 percent as it set aside millions to cover a lawsuit settlement, booked other charges and spent more on promotions and instructional costs.

The company also reported that the Securities and Exchange Commission has launched an informal investigation into how it accounts for revenue, sending shares down sharply in after-hours trading.

Apollo said the scope, duration and outcome of the agency’s inquiry cannot yet be determined. The company intends to cooperate fully with the SEC, it said.

The for-profit educational company earned $91.5 million, or 59 cents per share, in the quarter that ended Aug. 31. That is down from the $229.6 million, or $1.43 per share, it earned a year earlier.

Instructional costs and services rose to $452.9 million from $362.3 million, and general and administrative costs nearly doubled to $89.3 million. The company also booked a litigation gain in the year-ago period of $170 million, which buoyed results.

However, excluding $69.4 million worth of charges to cover a lawsuit settlement, write off the value of certain software assets and other items, adjusted quarterly profit totaled $1.06 per share. That beat the average estimate of $1.04 per share of analysts polled by Thomson Reuters.

Meanwhile, revenue rose 29 percent to $1.08 billion from $831.4 million, also topping analysts’ $1.03 billion forecast.

Apollo Group said it saw enrollment rise for degree programs as people sought refuge and new skills in school during the recession.

For the entire fiscal year, Apollo’s profit rose 26 percent to $598.3 million, or $3.75 per share, from $476.5 million, or $2.87 per share, the year before. Adjusted yearly profit of $4.22 beat a consensus estimate of $4.19 per share.

Full-year revenue rose 27 percent to $3.97 billion from $3.14 billion. Analysts had expected $3.93 billion.

Apollo shares fell $12.87, or 17.6 percent, to $60.10 in aftermarket trading, after closing earlier down 23 cents at $72.97.