UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
Date of Report (Date of Earliest Event Reported): October 21, 2014
Apollo Education Group, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Arizona
 
0-25232
 
86-0419443
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
 
  
 
 
 
 
4025 S. Riverpoint Parkway, Phoenix, Arizona
 
 
 
85040
(Address of principal executive offices)
 
 
 
(Zip Code)
 
 
 
Registrant’s telephone number, including area code: (480) 966-5394
 
 
 
 
 
 
 
 
 
 
(Former name or former address, if changed since last report)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
On October 21, 2014, Apollo Education Group, Inc. issued a press release announcing its financial results for the fiscal year ended August 31, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.
The information in Item 2.02 of this Form 8-K and Exhibit 99.1 furnished herewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is furnished herewith:
Exhibit Number
 
Description
 
99.1
 
Text of press release of Apollo Education Group, Inc. dated October 21, 2014.
 






Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
APOLLO EDUCATION GROUP, INC.
  
 
 
 
 
October 21, 2014
 
By:
 
 /s/ Brian L. Swartz
 
 
 
 
Name: Brian L. Swartz
Title: Senior Vice President and Chief Financial Officer






Exhibit Index
 
 
 
 
Exhibit Number
 
Description
 
99.1
 
Text of press release of Apollo Education Group, Inc. dated October 21, 2014.
 






Exhibit 99.1
Apollo Education Group, Inc.
News Release

Apollo Education Group, Inc. Reports Fourth Quarter and Fiscal Year 2014 Results
Phoenix, October 21, 2014 - Apollo Education Group, Inc. (NASDAQ: APOL) today reported financial results for the three months and fiscal year ended August 31, 2014, with fourth quarter revenue of $709.7 million and diluted earnings per share from continuing operations of $0.29 per share, or $0.34 per share excluding special items.
“In 2014, we made significant progress on our ambitious plans to differentiate the University of Phoenix, diversify Apollo Education Group, and build a more efficient organization,” said Greg Cappelli, Chief Executive Officer, Apollo Education Group. “Our teams worked to realign the University of Phoenix around our distinct college-based strategy, expanded the Apollo Global network to now serve students on six continents, while maintaining a healthy balance sheet with ample capital to deploy our long-term strategic plan.”
Fourth Quarter 2014 Results of Operations
Apollo Education Group (“the Company”) reported net revenue for the fourth quarter 2014 of $709.7 million, compared to $836.4 million for the fourth quarter 2013. Fourth quarter 2014 University of Phoenix New Degreed Enrollment was 38,600, down 5.9% from fourth quarter 2013, and Degreed Enrollment decreased 13.2% to 233,500, compared to the same period from the prior year. Operating income for the fourth quarter 2014 was $42.0 million, compared to $38.6 million from the prior year fourth quarter. Income from continuing operations attributable to Apollo Education Group for the fourth quarter 2014 was $32.0 million, or $0.29 per share, compared to $23.9 million, or $0.21 per share from the prior year fourth quarter.
Excluding special items, operating income was $56.7 million for the fourth quarter 2014, compared to $104.5 million for the fourth quarter 2013, and income from continuing operations attributable to Apollo Education Group for the fourth quarter 2014 was $37.2 million, or $0.34 per share, compared to $65.4 million, or $0.58 per share, for the fourth quarter 2013. (Special items for the fourth quarter 2014 and 2013 are included in the reconciliation of GAAP to non-GAAP financial information tables of this press release.)
Fiscal Year 2014 Results of Operations
Net revenue for fiscal year 2014 was $3.0 billion, compared to $3.6 billion in the prior year, representing a 16.8% decrease. University of Phoenix Average Degreed Enrollment for fiscal year 2014 was 251,500, a 16.5% decrease from the prior year, and Aggregate New Degreed Enrollment was 146,700, down 15.2% from the prior year. Operating income was $339.0 million, compared to $434.4 million from the prior year. Income from continuing operations attributable to Apollo Education Group was $215.9 million, or $1.92 per share, compared to $253.1 million, or $2.23 per share in fiscal year 2013.
Excluding special items, operating income was $446.9 million for fiscal year 2014, compared to $606.8 million in fiscal year 2013, and income from continuing operations attributable to Apollo Education Group for fiscal year 2014 was $277.3 million, or $2.46 per share, compared to $361.7 million, or $3.19 per share, for fiscal year 2013. (Special items for fiscal year 2014 and 2013 are included in the reconciliation of GAAP to non-GAAP financial information tables of this press release.)




Balance Sheet and Cash Flow
As of August 31, 2014, the Company’s unrestricted cash and cash equivalents and short-term marketable securities totaled $1.4 billion, compared to $1.5 billion as of August 31, 2013. The decrease was primarily attributable to $172.7 million of share repurchases (which includes $13.0 million of share repurchases for tax withholding requirements on restricted stock units), $119.5 million for acquisitions, $100.7 million for capital expenditures, a net investment of $43.9 million in long-term marketable securities, and $36.7 million of net payments on borrowings. These items were partially offset by $375.9 million of cash provided by operations.
Total debt outstanding (including short-term borrowings and the current portion of long-term debt) decreased $35.0 million to $657.1 million as of August 31, 2014. Subsequent to August 31, 2014, the Company repaid the $585.0 million drawn on its principal revolving credit facility.
Institute for Professional Development
During the fourth quarter 2014, Apollo Education Group sold assets of its subsidiary Institute for Professional Development, resulting in recognizing an immaterial gain on sale. The Company sold the business primarily due to recent operating losses and limitations on its ability to further develop and expand the domestic business. Institute for Professional Development’s operating results are presented as discontinued operations for all periods presented.
Business Outlook
The Company offers the following outlook for fiscal year 2015 based on the business trends observed during the fourth quarter of fiscal year 2014, as well as management’s current expectations of future trends.
Net revenue of $2.80 to $2.85 billion; and
Operating income of $300 to $325 million, excluding the impact of special items.
The Company also provides the following outlook for the first quarter of fiscal year 2015.
Net revenue of $720 to $730 million; and
Operating income of $70 to $75 million, excluding the impact of special items.
Conference Call Information
The Company will hold a conference call to discuss these earnings results at 8:30 a.m. (ET), 5:30 a.m. (PT), today, Tuesday, October 21, 2014.
Dial-In Numbers:
877-292-6888 (Domestic)
973-200-3381 (International)
Conference ID: 95220674
A live webcast of this event may be accessed by visiting the Company’s website at www.apollo.edu. A webcast replay will be available approximately one hour following the conclusion of the call at the same link.
A telephone replay will be available approximately two hours following the conclusion of the call until October 28, 2014.
Dial-In Numbers:
855-859-2056 (Domestic)
404-537-3406 (International)
Conference ID: 95220674




About Apollo Education Group, Inc.
Apollo Education Group, Inc. is one of the world’s largest private education providers and has been in the education business since 1973. Through its subsidiaries: Apollo Global, College for Financial Planning, University of Phoenix, and Western International University, Apollo Education Group offers innovative and distinctive educational programs and services, online and on-campus, at the undergraduate, masters and doctoral levels. Its educational programs and services are offered throughout the United States and in Europe, Australia, Latin America, Africa and Asia, as well as online throughout the world.
For more information about Apollo Education Group, Inc. and its subsidiaries, call (800) 990-APOL or visit the Company’s website at www.apollo.edu.




Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
 
Three Months Ended
August 31,
 
Year Ended
August 31,
 
 
(In thousands, except per share data)
2014
 
2013
 
2014
 
2013
Net revenue
$
709,666

 
$
836,358

 
$
3,024,178

 
$
3,635,924

Costs and expenses:
 
 
 
 
 
 
 
Instructional and student advisory
322,604

 
366,307

 
1,301,004

 
1,561,568

Marketing
148,654

 
163,142

 
557,649

 
641,784

Admissions advisory
56,121

 
56,721

 
215,196

 
253,319

General and administrative
70,718

 
91,297

 
287,884

 
326,908

Depreciation and amortization
39,051

 
38,179

 
150,575

 
161,733

Provision for uncollectible accounts receivable
15,822

 
16,232

 
53,819

 
83,798

Restructuring and other charges
23,267

 
67,330

 
85,343

 
197,022

Litigation charge (credit)
775

 
(1,400
)
 
13,900

 
(24,600
)
Contingent consideration (credit) charges and acquisition costs, net
(9,336
)
 

 
19,837

 

Total costs and expenses
667,676

 
797,808

 
2,685,207

 
3,201,532

Operating income
41,990

 
38,550

 
338,971

 
434,392

Interest income
610

 
470

 
2,230

 
1,913

Interest expense
(1,930
)
 
(2,671
)
 
(7,914
)
 
(8,745
)
Other (loss) income, net
(1,177
)
 
1,596

 
(547
)
 
2,407

Income from continuing operations before income taxes
39,493

 
37,945

 
332,740

 
429,967

Provision for income taxes
(8,697
)
 
(14,219
)
 
(121,324
)
 
(176,457
)
Income from continuing operations
30,796

 
23,726

 
211,416

 
253,510

Loss from discontinued operations, net of tax(1)
(2,226
)
 
(2,330
)
 
(6,618
)
 
(4,545
)
Net income
28,570

 
21,396

 
204,798

 
248,965

Net loss (income) attributable to noncontrolling interests
1,213

 
155

 
4,506

 
(439
)
Net income attributable to Apollo
$
29,783

 
$
21,551

 
$
209,304

 
$
248,526

Earnings (loss) per share - Basic:
 
 
 
 
 
 
 
Continuing operations attributable to Apollo
$
0.29

 
$
0.21

 
$
1.94

 
$
2.25

Discontinued operations attributable to Apollo(1)
(0.02
)
 
(0.02
)
 
(0.06
)
 
(0.05
)
Basic income per share attributable to Apollo
$
0.27

 
$
0.19

 
$
1.88

 
$
2.20

Earnings (loss) per share - Diluted:
 
 
 
 
 
 
 
Continuing operations attributable to Apollo
$
0.29

 
$
0.21

 
$
1.92

 
$
2.23

Discontinued operations attributable to Apollo(1)
(0.02
)
 
(0.02
)
 
(0.06
)
 
(0.04
)
Diluted income per share attributable to Apollo
$
0.27

 
$
0.19

 
$
1.86

 
$
2.19

Basic weighted average shares outstanding
109,364

 
113,105

 
111,354

 
112,712

Diluted weighted average shares outstanding
110,839

 
113,740

 
112,610

 
113,285

(1) Institute for Professional Development’s operating results are presented as discontinued operations for all periods presented.




Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
As of August 31,
($ in thousands)
2014
 
2013
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,228,813

 
$
1,414,485

Restricted cash and cash equivalents
224,135

 
259,174

Marketable securities
187,472

 
105,809

Accounts receivable, net
225,398

 
215,401

Prepaid taxes
34,006

 
30,359

Deferred tax assets
83,871

 
60,294

Other current assets
58,855

 
64,134

Total current assets
2,042,550

 
2,149,656

Marketable securities
87,811

 
43,941

Property and equipment, net
435,733

 
472,614

Goodwill
259,901

 
103,620

Intangible assets, net
189,365

 
132,192

Deferred tax assets
37,335

 
63,894

Other assets
40,240

 
32,030

Total assets
$
3,092,935

 
$
2,997,947

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY
Current liabilities:
 
 
 
Short-term borrowings and current portion of long-term debt
$
609,506

 
$
628,050

Accounts payable
63,907

 
73,123

Student deposits
280,562

 
309,176

Deferred revenue
225,818

 
213,260

Accrued and other current liabilities
363,607

 
346,706

Total current liabilities
1,543,400

 
1,570,315

Long-term debt
47,590

 
64,004

Deferred tax liabilities
22,674

 
12,177

Other long-term liabilities
233,942

 
233,442

Total liabilities
1,847,606

 
1,879,938

Commitments and contingencies
 
 
 
Redeemable noncontrolling interests
64,527

 

Shareholders’ equity:
 
 
 
Preferred stock, no par value

 

Apollo Class A nonvoting common stock, no par value
103

 
103

Apollo Class B voting common stock, no par value
1

 
1

Additional paid-in capital

 

Apollo Class A treasury stock, at cost
(3,936,607
)
 
(3,824,758
)
Retained earnings
5,143,949

 
4,978,815

Accumulated other comprehensive loss
(27,320
)
 
(36,563
)
Total Apollo shareholders’ equity
1,180,126

 
1,117,598

Noncontrolling interests
676

 
411

Total equity
1,180,802

 
1,118,009

Total liabilities, redeemable noncontrolling interests and shareholders’ equity
$
3,092,935

 
$
2,997,947







Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Year Ended August 31,
($ in thousands)
2014
 
2013
Operating activities:
 
 
 
Net income
$
204,798

 
$
248,965

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Share-based compensation
42,819

 
49,462

Excess tax benefits from share-based compensation
(1,285
)
 
(17
)
Depreciation and amortization
150,575

 
161,733

Accelerated depreciation and impairments included in restructuring
7,580

 
62,267

Loss on asset dispositions and write-offs, net
556

 
8,190

Non-cash foreign currency loss, net
957

 
220

Provision for uncollectible accounts receivable
53,819

 
83,798

Deferred income taxes
(13,912
)
 
(29,517
)
Changes in assets and liabilities, excluding the impact of acquisitions and business dispositions:
 
 
 

Restricted cash and cash equivalents
37,233

 
59,160

Accounts receivable
(61,435
)
 
(103,369
)
Prepaid taxes
(2,890
)
 
(3,985
)
Other assets
6,072

 
(19,514
)
Accounts payable
(11,950
)
 
(1,775
)
Student deposits
(30,738
)
 
(52,587
)
Deferred revenue
657

 
(39,091
)
Accrued and other liabilities
(6,949
)
 
54,108

Net cash provided by operating activities
375,907

 
478,048

Investing activities:
 
 
 
Purchases of property and equipment
(100,666
)
 
(119,348
)
Purchases of marketable securities
(319,079
)
 
(208,878
)
Maturities of marketable securities
188,276

 
65,074

Acquisitions, net of cash acquired
(119,454
)
 

Other investing activities
606

 
(1,500
)
Net cash used in investing activities
(350,317
)
 
(264,652
)
Financing activities:
 
 
 
Payments on borrowings
(627,822
)
 
(636,387
)
Proceeds from borrowings
591,131

 
610,236

Share repurchases
(172,709
)
 
(9,537
)
Share reissuances
1,793

 
3,867

Purchase of noncontrolling interests
(893
)
 
(42,500
)
Excess tax benefits from share-based compensation
1,285

 
17

Other financing activities
(4,143
)
 

Net cash used in financing activities
(211,358
)
 
(74,304
)
Exchange rate effect on cash and cash equivalents
96

 
(982
)
Net (decrease) increase in cash and cash equivalents
(185,672
)
 
138,110

Cash and cash equivalents, beginning of year
1,414,485

 
1,276,375

Cash and cash equivalents, end of year
$
1,228,813

 
$
1,414,485

Supplemental disclosure of cash flow and non-cash information:
 
 
 
Cash paid for income taxes, net of refunds
$
161,163

 
$
201,055

Cash paid for interest
7,657

 
7,869

Restricted stock units vested and released
37,430

 
27,054

Credits received for tenant improvements
1,131

 
6,049

Capital lease additions

 
3,500






Apollo Education Group, Inc. and Subsidiaries
Segment Data and University of Phoenix Operating Metrics
(Unaudited)
 
Three Months Ended
August 31,
 
Year Ended
August 31,
(In thousands, except enrollment data)
2014
 
2013
 
2014
 
2013
Net revenue:
 
 
 
 
 
 
 
University of Phoenix
 
 
 
 
 
 
 
Degree seeking gross revenues(1)
$
661,029

 
$
824,766

 
$
2,840,946

 
$
3,525,669

Less: Discounts and other
(62,202
)
 
(66,378
)
 
(251,954
)
 
(267,215
)
Degree seeking net revenues(1)
598,827

 
758,388

 
2,588,992

 
3,258,454

Other revenues
13,471

 
13,286

 
43,957

 
46,010

Total University of Phoenix
612,298

 
771,674

 
2,632,949

 
3,304,464

Apollo Global
77,756

 
46,164

 
338,008

 
275,768

Other
19,612

 
18,520

 
53,221

 
55,692

Net revenue
$
709,666

 
$
836,358

 
$
3,024,178

 
$
3,635,924

Operating income (loss):
 
 
 
 
 
 
 
University of Phoenix
$
82,909

 
$
113,673

 
$
488,217

 
$
579,670

Apollo Global
(22,557
)
 
(32,285
)
 
(74,189
)
 
(59,936
)
Other
(18,362
)
 
(42,838
)
 
(75,057
)
 
(85,342
)
Operating income
$
41,990

 
$
38,550

 
$
338,971

 
$
434,392

University of Phoenix Enrollment Data:
 
 
 
 
 
 
 
Degreed Enrollment(2)
233,500

 
269,000

 
 
 
 
Average Degreed Enrollment(3)
 
 
 
 
251,500

 
301,100

New Degreed Enrollment(4)
38,600

 
41,000

 
 
 
 
Degree seeking net revenues per degreed enrollment
$
2,565

 
$
2,819

 
 
 
 
 
(1) Represents revenue from tuition and other fees for students enrolled in University of Phoenix degree programs or certificate programs of at least 18 credits in length with some course applicability into a related degree program.
(2) Represents students enrolled in a University of Phoenix degree program who attended a credit bearing course during the quarter and had not graduated as of the end of the quarter; students who previously graduated from one degree program and started a new degree program in the quarter (e.g., a graduate of the associate’s degree program returns for a bachelor’s degree); and students participating in certain certificate programs of at least 18 credits with some course applicability into a related degree program.
(3) Represents the average of quarterly Degreed Enrollment from the beginning to the end of the respective fiscal years.
(4) Represents new students and students who have been out of attendance for more than 12 months who enroll in a University of Phoenix degree program and start a credit bearing course in the quarter; students who have previously graduated from a degree program and start a new degree program in the quarter; and students who commence participation in certain certificate programs of at least 18 credits with some course applicability into a related degree program.





Apollo Education Group, Inc. and Subsidiaries
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
(Unaudited)
Consolidated Financial Information Reconciliation

Three Months Ended
August 31,
 
Year Ended
August 31,
(In thousands, except per share data)
2014
 
2013
 
2014
 
2013
Operating income
$
41,990

 
$
38,550

 
$
338,971

 
$
434,392

Income from continuing operations before income taxes
$
39,493

 
$
37,945

 
$
332,740

 
$
429,967

Provision for income taxes
$
8,697

 
$
14,219

 
$
121,324

 
$
176,457

Effective income tax rate
22.0
%
 
37.5
%
 
36.5
%
 
41.0
%
Net income attributable to Apollo
$
29,783

 
$
21,551

 
$
209,304

 
$
248,526

Loss from discontinued operations, net of tax
2,226

 
2,330

 
6,618

 
4,545

Income from continuing operations attributable to Apollo
$
32,009

 
$
23,881

 
$
215,922

 
$
253,071

Diluted income per share from continuing operations attributable to Apollo
$
0.29

 
$
0.21

 
$
1.92

 
$
2.23

Special items:
 
 
 
 
 
 
 
Restructuring and other charges
$
23,267

 
$
67,330

 
$
85,343

 
$
197,022

Litigation charge (credit)
775

 
(1,400
)
 
13,900

 
(24,600
)
Contingent consideration (credit) charges and acquisition costs, net
(9,336
)
 

 
19,837

 

Gain related to foreign indirect taxes following resolution with tax authority(1)

 

 
(11,173
)
 

Special items before income taxes
14,706

 
65,930

 
107,907

 
172,422

Less: income tax effects of special items
(9,554
)
 
(24,368
)
 
(36,373
)
 
(63,842
)
Tax benefit from Internal Revenue Service settlement

 

 
(10,176
)
 

Special items, net of income tax
$
5,152

 
$
41,562

 
$
61,358

 
$
108,580

Excluding special items:
 
 
 
 
 
 
 
Operating income
$
56,696

 
$
104,480

 
$
446,878

 
$
606,814

Income before income taxes
$
54,199

 
$
103,875

 
$
440,647

 
$
602,389

Provision for income taxes
$
18,251

 
$
38,587

 
$
167,873

 
$
240,299

Effective income tax rate
33.7
%
 
37.1
%
 
38.1
%
 
39.9
%
Income from continuing operations attributable to Apollo
$
37,161

 
$
65,443

 
$
277,280

 
$
361,651

Diluted income per share from continuing operations attributable to Apollo
$
0.34

 
$
0.58

 
$
2.46

 
$
3.19

(1) This gain is included in instructional and student advisory on the Company’s Condensed Consolidated Statements of Income. In fiscal year 2013, the Company recognized a charge of $10.7 million for the foreign indirect tax assessment that was not classified as a special item.





Apollo Education Group, Inc. and Subsidiaries
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
(Unaudited)
Apollo Global Financial Information Reconciliation

Three Months Ended
August 31,
 
Year Ended
August 31,
($ in thousands)
2014
 
2013
 
2014
 
2013
Apollo Global operating loss
$
(22,557
)
 
$
(32,285
)
 
$
(74,189
)
 
$
(59,936
)
Depreciation and amortization
11,747

 
7,027

 
38,168

 
25,982

Restructuring and other charges
707

 
1,954

 
6,091

 
6,053

Contingent consideration (credit) charges and acquisition costs, net
(9,844
)
 

 
18,990

 

Gain related to foreign indirect taxes following resolution with tax authority(1)

 

 
(11,173
)
 

Adjusted Apollo Global Operating Loss(2), (3), (4)
$
(19,947
)
 
$
(23,304
)
 
$
(22,113
)
 
$
(27,901
)
(1) In fiscal year 2013, the Company recognized a charge of $10.7 million for the foreign indirect tax assessment that was not classified as a special item.
(2) Excluding losses from Open Colleges, Adjusted Apollo Global Operating Loss would have been approximately $15 million and $6 million during the three months and year ended August 31, 2014, respectively.
(3) Open Colleges’ educational offerings generally extend beyond one year and the associated revenue is recognized over the contractual period that students are provided access to complete their program, or the time period it takes students to complete their program, as applicable. However, Open Colleges’ operating costs are period costs that are expensed as incurred and a substantial portion are incurred before, or soon after, the students begin their programs. Accordingly, as a result of Open Colleges’ rapid growth, service model, and cost structure, Apollo Global’s operating results are negatively impacted in the near term. However, these factors do not have the same adverse impact on cash flows generated from Open Colleges. Additionally, Apollo Global’s deferred revenue has increased substantially from approximately $50 million as of August 31, 2013 to $127 million as of August 31, 2014, and this amount is expected to continue to increase, perhaps rapidly, as Open Colleges continues to grow.
(4) Apollo Global’s subsidiaries experience seasonality associated with the timing of when courses begin, exam dates, the timing of their respective holidays and other factors. These factors have historically resulted in lower adjusted operating results in the second and fourth quarters because of lower net revenue, particularly for BPP, and due to BPP’s relatively fixed cost structure. The following summarizes the Adjusted Apollo Global Operating Income (Loss) for the respective periods in fiscal year 2014:
 
Three Months Ended
($ in thousands)
November 30,
2013
 
February 28,
2014
 
May 31,
2014
 
August 31,
2014
Apollo Global operating income (loss)
$
2,217

 
$
(40,004
)
 
$
(13,845
)
 
$
(22,557
)
Depreciation and amortization
6,359

 
9,007

 
11,055

 
11,747

Restructuring and other charges
1,263

 
304

 
3,817

 
707

Contingent consideration charges (credit) and acquisition costs, net

 
12,997

 
15,837

 
(9,844
)
Gain related to foreign indirect taxes following resolution with tax authority

 

 
(11,173
)
 

Adjusted Apollo Global Operating Income (Loss)
$
9,839

 
$
(17,696
)
 
$
5,691

 
$
(19,947
)
Use of Non-GAAP Financial Information
The Company’s non-GAAP financial measures are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management uses, and chooses to disclose to investors, these non-GAAP financial measures because: (i) such measures provide an additional analytical tool to clarify the Company’s results from operations and help to identify underlying trends in its results of operations; (ii) as to the non-GAAP earnings measures, such measures help compare the Company’s and Apollo Global’s performance on a consistent basis across time periods; and (iii) these non-GAAP measures are employed by the Company’s management in its own evaluation of performance and are utilized in financial and operational decision-making processes, such as budgeting and forecasting. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently, limiting their usefulness as a comparative measure across companies.
Adjusted Apollo Global Operating Income (Loss) represents Apollo Global’s operating income (loss) excluding depreciation and amortization and certain items that the Company believes provides a




meaningful indicator of operating performance across time periods principally due to the impact of acquisitions.
Forward-Looking Statements Safe Harbor
Statements about Apollo Education Group and its business in this release which are not statements of historical fact, including statements regarding Apollo Education Group’s future strategy and plans and commentary regarding future results of operations and prospects, are forward-looking statements and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual plans implemented and actual results achieved may differ materially from those set forth in or implied by such statements due to various factors, including without limitation: (i) the impact of increased competition from traditional public universities and proprietary educational institutions; (ii) the costs and effectiveness of University of Phoenix initiatives to improve student retention, improve student outcomes and demonstrate a compelling and cost effective relationship between a student’s education and career; (iii) changes in law or regulation affecting the University of Phoenix’s eligibility to participate in or the manner in which it participates in U.S. federal and state student financial aid programs, including changes that may be included in the reauthorization of the federal Higher Education Act and the proposed Department of Education regulations relating to gainful employment and state authorization; (iv) any adverse impact on University of Phoenix’s business arising from the Notice sanction imposed by the University’s principal accreditor, and any associated impact on the University’s pending recertification by the U.S. Department of Education for participation in Title IV student financial aid programs; (v) the impact of the Company’s restructuring initiatives; (vi) the impact of the operational and governance changes made to increase University of Phoenix autonomy in response to governance concerns expressed by its principal accreditor; (vii) the impact of any reduction in financial aid available to students, including active and retired military personnel, due to the U.S. government deficit reduction proposals, debt ceiling limitations, budget sequestration or otherwise; (viii) the impact of changes in marketing channels and other recruiting practices; (ix) changes in University of Phoenix’s business necessary to remain in compliance with U.S. federal student financial aid program regulations, including the so-called 90/10 Rule and the limitations on student loan cohort default rates, and to remain in compliance with the accrediting criteria of the relevant accrediting bodies; (x) changes in University of Phoenix enrollment or student mix; (xi) unexpected expenses or other challenges in integrating acquired businesses, consumer or regulatory impact arising from consummation of the acquired businesses, and unexpected changes or developments in the acquired businesses, and (xii) unexpected changes in the U.S. or global economy. For a discussion of the various factors that may cause actual plans implemented and actual results achieved to differ materially from those set forth in the forward-looking statements, please refer to the risk factors and other disclosures contained in Apollo Education Group’s Form 10-K for fiscal year 2014, and other filings with the Securities and Exchange Commission which are available at www.apollo.edu.

Investor Relations Contacts:
Beth Coronelli, (312) 660-2059
beth.coronelli@apollo.edu
Erin Kelly, (602) 557-3830
erin.kelly@apollo.edu
Media Contact:
Media Relations Hotline, (602) 254-0086
media@apollo.edu

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