Apollo Group, Inc. (NASDAQ: APOL) (“Apollo Group,” “Apollo” or
the “Company”) today reported financial results for the three and
nine months ended May 31, 2010.
“We are pleased to have made significant progress on our
strategic initiatives designed to enhance the student experience,
expand student protections and ensure we enroll students who we
believe can succeed in our programs,” said Apollo Group Co-Chief
Executive Officer and Apollo Global Chairman Greg Cappelli. “This
quarter’s results reflect continued success with our efforts to
shift the mix of our enrollments toward bachelor level students.
Additionally, based on the favorable results we’ve seen from our
University Orientation pilot, we have decided to roll out the
program more broadly this fall. We are confident that this is the
right thing to do for our students, and believe it will allow us to
deliver sustainable, high quality results over the long term.”
Apollo Group Co-Chief Executive Officer Chas Edelstein added,
“We are committed to strengthening and capitalizing on Apollo
Group’s position as a leading provider of high quality, accessible
education for individuals around the world, and for us that means
putting the student first. We are focused on delivering quality
academic programs that are relevant to today’s working learners,
and providing them with high levels of service and support from
their first day in class through graduation—all of which should
maximize the value of our students’ return on their educational
investment.”
Unaudited Third Quarter of
Fiscal 2010 Results of Operations
Consolidated net revenue for the three months ended May 31,
2010, totaled $1,337.4 million, which represents a 27.7% increase
over the third quarter of fiscal 2009. Contributing to the growth
in the third quarter was a 13.3% year-over-year increase in
University of Phoenix total Degreed Enrollment to 476,500, as well
as $75.8 million in net revenue from BPP Holdings, which was
acquired in the fourth quarter of fiscal 2009. The Company reported
income from continuing operations attributable to Apollo Group for
the three months ended May 31, 2010, of $177.2 million, or $1.16
per share (152.3 million weighted average diluted shares
outstanding), compared to income from continuing operations
attributable to Apollo Group of $206.4 million, or $1.30 per share
(159.3 million weighted average diluted shares outstanding) for the
three months ended May 31, 2009.
The third quarter of fiscal 2010 results contain a goodwill
impairment charge of $8.7 million ($7.5 million net of the portion
attributable to noncontrolling interest) for the Universidad
Latinoamericana (“ULA”) subsidiary of Apollo Global (the Company
did not record an associated tax benefit because the goodwill is
not deductible for tax purposes), as well as a pre-tax charge of
$132.6 million ($79.9 million net of tax) representing an accrual
related to a securities class action lawsuit. Excluding these
special items, income from continuing operations attributable to
Apollo Group for the three months ended May 31, 2010, was $264.6
million, or $1.74 per share, compared to income from continuing
operations attributable to Apollo Group of $206.4 million, or $1.30
per share for the three months ended May 31, 2009. (See the
reconciliation of GAAP financial information to non-GAAP financial
information in the tables section of this press release.)
In the third quarter of fiscal 2010, BPP’s operations
contributed $75.8 million to net revenue and increased earnings per
share from continuing operations attributable to Apollo Group by
approximately $0.05. (See the supplemental schedule detailing BPP’s
financial results in the tables section of this press release.)
Instructional costs and services increased by $150.0 million, or
38.4% to $540.6 million for the three months ended May 31, 2010,
compared to the three months ended May 31, 2009. As a percentage of
revenue, instructional costs and services increased 310 basis
points to 40.4% versus 37.3% in the prior year’s third quarter. The
increase, as a percentage of revenue, was primarily due to the
addition of BPP, as its cost structure is more heavily weighted
towards instructional costs and services, as well as higher bad
debt expense for University of Phoenix. Bad debt expense, as a
percentage of revenue, increased 200 basis points to 5.4% in the
third quarter of fiscal 2010 versus 3.4% in the prior year’s third
quarter. BPP’s operations favorably impacted overall bad debt
expense as a percentage of revenue by 30 basis points in the third
quarter of fiscal 2010. The higher bad debt expense, as a
percentage of revenue, is due to lower collection rates. Collection
rates have declined as a result of the economic downturn and
increases in receivables from students enrolled in associate’s
degree programs. Students in associate’s degree programs generally
persist at lower rates than those in higher degree level programs,
resulting in higher bad debt expense.
Selling and promotional expenses increased by $32.2 million, or
13.3%, to $273.5 million for the three months ended May 31, 2010,
compared to the three months ended May 31, 2009. The increase was
due in part to greater investments in the University of Phoenix’s
non-internet long-term branding and program-driven initiatives. As
a percentage of revenue, selling and promotional expenses declined
260 basis points to 20.4% versus 23.0% in the prior year’s third
quarter. The decrease, as a percentage of revenue, was driven by
the impact of BPP’s operations in the third quarter of fiscal 2010,
as BPP incurs lower selling and promotional costs as a percentage
of revenue compared to the Company’s other businesses. The
remaining decrease as a percentage of revenue was a result of
continued improvement in enrollment counselor effectiveness and
lower advertising expenditures at University of Phoenix.
General and administrative (“G&A”) expenses increased by
$8.8 million, or 12.4%, to $79.7 million, for the three months
ended May 31, 2010, compared to the three months ended May 31,
2009. As a percentage of revenue, G&A expenses declined 80
basis points to 6.0% versus 6.8% in the prior year’s third quarter.
The decrease, as a percentage of revenue, is primarily attributable
to lower legal costs and lower share-based compensation expense in
the third quarter of fiscal 2010 as compared with the prior year
period. BPP’s operations had little impact on G&A expenses as a
percentage of revenue in the third quarter of fiscal 2010.
Financial and Operating
Metrics
Below are Apollo Group’s unaudited financial data and operating
metrics for the third quarter of fiscal 2010 versus the prior year
period.
Enrollment Operating Metrics
Q3 2010 Q3 2009 Revenues (in
thousands) Degree Seeking Gross Revenues (1) $ 1,261,258 $
1,035,613 Less: Discounts and other (60,441 ) (41,182
) Degree Seeking Net Revenues (1) 1,200,817 994,431 Non-degree
Seeking Revenues (2) 12,502 12,085 Other, net of discounts (3)
124,085 41,058 $ 1,337,404 $
1,047,574
Revenue by Degree Type (in
thousands) (1) Associates $ 464,373 $ 378,626 Bachelors
551,808 435,367 Masters 221,718 202,039 Doctoral 23,359 19,581
Less: Discounts and other (60,441 ) (41,182 ) $
1,200,817 $ 994,431
Degreed Enrollment
(rounded to hundreds) (4)
Associates 212,100 186,600 Bachelors 186,400 156,100 Masters 70,400
71,200 Doctoral 7,600 6,800
476,500 420,700
Degree
Seeking Gross Revenues per Degreed Enrollment (1) (4)
Associates $ 2,189 $ 2,029 Bachelors 2,960 2,789 Masters 3,149
2,838 Doctoral 3,074 2,880 All degrees (after discounts) $ 2,520 $
2,364
New Degreed Enrollment (rounded to
hundreds) (5) Associates 50,200 48,800 Bachelors 31,700
26,000 Masters 11,300 11,900 Doctoral 900 800
94,100 87,500
(1)
Represents revenue from tuition and other fees for students
enrolled in University of Phoenix degree programs. Also includes
revenue from tuition and other fees for students participating in
University of Phoenix certificate programs of at least 18 credit
hours in length with some course applicability into a related
degree program.
(2)
Represents revenue from tuition and other fees for students
participating in University of Phoenix certificate programs less
than 18 hours in length, certificate programs with no applicability
into a related degree program, single course and continuing
education courses.
(3)
Represents revenues from IPD, CFFP, Apollo Global - BPP (acquired
in July 2009), Apollo Global - Other and other.
(4)
Represents individual students enrolled in a University of Phoenix
degree program who attended a course during the quarter and did not
graduate as of the end of the quarter. Degreed Enrollment for a
quarter also includes any student who previously graduated from one
degree program and started a new University of Phoenix degree
program in the quarter (for example, a graduate of the associate’s
degree program returns for a bachelor’s degree or a bachelor’s
degree graduate returns for a master’s degree). In addition,
Degreed Enrollment includes students participating in University of
Phoenix certificate programs of at least 18 credit hours in length
with some course applicability into a related degree program.
(5)
Represents any individual student enrolled in a University of
Phoenix degree program who is a new student and started a course in
the quarter, any individual student who previously graduated from
one degree program and started a new degree program in the quarter
(for example, a graduate of an associate’s degree program returns
for a bachelor’s degree program, or a graduate of a bachelor’s
degree program returns for a master’s degree), as well as any
individual student who started a degree program in the quarter and
had been out of attendance for greater than 12 months. In addition,
New Degreed Enrollment includes students who in the quarter started
participating in University of Phoenix certificate programs of at
least 18 credit hours in length with some course applicability into
a related degree program.
Unaudited Nine Months of
Fiscal 2010 Results of Operations
Consolidated net revenue for the nine months ended May 31, 2010,
was $3.7 billion, a 27.3% increase over the comparable period of
fiscal 2009. Contributing to this increase was a 15.6% increase in
University of Phoenix’s average Degreed Enrollment during the nine
months ended May 31, 2010, as compared to the nine months ended May
31, 2009. The Company reported income from continuing operations
attributable to Apollo Group of $520.9 million, or $3.37 per share,
(154.5 million weighted average diluted shares outstanding) for the
nine months ended May 31, 2010, compared to $517.5 million, or
$3.22 per share, (161.0 million weighted average diluted shares
outstanding) for the nine months ended May 31, 2009.
Results for the nine months ended May 31, 2010, contain a
goodwill impairment charge of $8.7 million ($7.5 million net of the
portion attributable to noncontrolling interest) for the
Universidad Latinoamericana (“ULA”) subsidiary of Apollo Global
(the Company did not record an associated tax benefit because the
goodwill is not deductible for tax purposes), a pre-tax charge of
$177.1 million ($106.8 million net of tax) representing an accrual
related to a securities class action lawsuit, and a previously
announced tax benefit of $11.4 million resulting from the
settlement for disputed tax issues with the Internal Revenue
Service. Excluding these special items, income from continuing
operations attributable to Apollo Group for the nine months ended
May 31, 2010, was $623.8 million, or $4.04 per share, compared to
income from continuing operations attributable to Apollo Group of
$517.5 million, or $3.22 per share for the nine months ended May
31, 2009. (See the reconciliation of GAAP financial information to
non-GAAP financial information in the tables section of this press
release.)
BPP’s operations contributed $218.1 million to net revenue and
increased earnings per share from continuing operations
attributable to Apollo Group by approximately $0.02 for the nine
months ended May 31, 2010. (See the supplemental schedule detailing
BPP’s financial results in the tables section of this press
release.)
Unaudited Balance
Sheet
As of May 31, 2010, the Company’s cash and cash equivalents,
excluding restricted cash, totaled $892.0 million as compared to
$968.2 million as of August 31, 2009. The decrease is primarily
attributable to repayments on the Company’s outstanding debt and
share repurchases, largely offset by cash generated from
operations. Restricted cash increased by $49.9 million compared to
August 31, 2009, primarily due to increased student deposits at
University of Phoenix. Subsequent to May 31, 2010, the Company
posted a letter of credit in the amount of approximately $126
million in connection with a program review of University of
Phoenix by the U.S. Department of Education. The letter of credit
is fully cash collateralized, which reduces the Company’s
unrestricted cash and cash equivalent balance. In addition, the
Company may be required to post a bond in association with a
securities class action lawsuit.
At May 31, 2010, accounts receivable decreased to $249.2 million
from $298.3 million at August 31, 2009. Excluding accounts
receivable and the associated net revenue for Apollo Global, the
Company’s days sales outstanding (“DSO”) was 30 days at May 31,
2010, compared to 32 days at August 31, 2009, and to 24 days at May
31, 2009. The increase in DSO versus a year ago is due to increases
in gross accounts receivable as a result of lower collection rates
at University of Phoenix and the effects of certain operational
changes. Collection rates have declined as a result of the economic
downturn and increases in receivables from students enrolled in
associate’s degree programs.
Total debt outstanding (including short-term borrowings and the
current portion of long-term debt) decreased by $422.5 million to
$166.6 million at May 31, 2010, from $589.1 million at August 31,
2009. The decrease is primarily due to the repayment of U.S.
denominated borrowings on the Company’s $500 million credit
facility during the first quarter of fiscal 2010.
Share
Repurchases
During the third quarter of fiscal 2010, the Company repurchased
approximately 2.5 million shares of its common stock at a weighted
average purchase price of $55.50 per share for a total expenditure
of $139.3 million. As of May 31, 2010, approximately $660.7 million
remained available under the Company’s current share repurchase
authorization. Subsequent to May 31, 2010, the Company repurchased
an additional 2.0 million shares of its common stock at a weighted
average purchase price of $49.76 per share for a total expenditure
of approximately $100.0 million. Including these purchases,
approximately $561 million remains available under the Company’s
current share repurchase authorization.
Business
Outlook
The Company offers the following commentary regarding the
outlook for the fourth quarter of fiscal 2010 based on current
business trends, which could change:
- Consolidated net revenue,
including BPP, of approximately $1.25 billion;
- Diluted earnings per share from
continuing operations of approximately $1.30, excluding the impact
of special items or additional share repurchases beyond the
repurchases noted above subsequent to quarter end, but including an
adverse seasonal impact from BPP;
- Effective tax rate of
approximately 40.0%; and
- Diluted shares outstanding of
approximately 148 million.
In addition, the Company has been piloting its University
Orientation program, which is a free three-week, non-credit bearing
program for new students enrolling at University of Phoenix with
fewer than 24 credit hours. The Company currently intends to
require all incoming students with fewer than 24 credit hours to
participate in the orientation program beginning during the latter
half of the first quarter of fiscal 2011, which will adversely
impact the Company’s operating metrics and financial results. Based
on current business trends, which could change, and the results of
the initial pilot orientation program, the Company offers the
following commentary regarding its preliminary outlook for the
fiscal year 2011:
- High-single digit consolidated
net revenue growth; and
- Operating income, excluding the
impact of special items, approximately flat with fiscal year
2010.
Conference Call
Information
The Company will hold a conference call to discuss these
earnings results at 5:00 PM Eastern, 2:00 PM Phoenix time, today,
Wednesday, June 30, 2010. The call may be accessed by dialing (877)
292-6888 (domestic) or (973) 200-3381 (international) and entering
the conference ID number 78017946. A live webcast of this event may
be accessed by visiting the Company’s website at www.apollogrp.edu.
A replay of the call will be available on the website or by dialing
(800) 642-1687 (domestic) or (706) 645-9291 (international) and
entering the conference ID number 78017946 until July 14, 2010.
About Apollo Group,
Inc.
Apollo Group, Inc. is one of the world's largest private
education providers and has been in the education business for more
than 35 years. The Company offers innovative and distinctive
educational programs and services both online and on-campus at the
high school, undergraduate, master’s and doctoral levels through
its subsidiaries: University of Phoenix, Apollo Global, Institute
for Professional Development, College for Financial Planning and
Meritus University. The Company's programs and services are
provided in 40 states and the District of Columbia; Puerto Rico;
Canada; Latin America; and Europe, as well as online throughout the
world (data as of May 31, 2010).
For more information about Apollo Group, Inc. and its
subsidiaries, call (800) 990-APOL or visit the Company’s website at
www.apollogrp.edu.
Forward-Looking Statements
Safe Harbor
Statements in this press release which are not statements of
historical fact, including statements regarding Apollo Group’s
business outlook, future financial and operating results, future
enrollment, and overall future strategy and plans, 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 results may differ materially from those
projected in such statements due to various factors, including
changes in the overall U.S. or global economy, changes in
enrollment or student mix, including as a result of the roll-out of
the Company’s University Orientation program to all eligible
students, the impact of changes in the manner in which the Company
evaluates and compensates its counselors that advise and enroll
students, changes in the rate at which the Company collects
receivables, changes in law or regulation affecting the Company’s
eligibility to participate in or the manner in which it
participates in U.S. federal student financial aid programs,
including the proposed program integrity regulations published for
comment by the U.S. Department of Education on June 18, 2010 and
the proposed regulations relating to “gainful employment” that the
Department indicated will be published later this summer, changes
in the Company’s business necessary to remain in compliance with
existing U.S. federal student financial aid program regulations,
other regulatory and litigation developments, and the degree to
which the Company effectively integrates its acquired businesses.
For a discussion of the various factors that may cause actual
results to differ materially from those projected, please refer to
the risk factors and other disclosures contained in Apollo Group’s
Form 10-K for fiscal year 2009 and subsequent Forms 10-Q, and other
filings with the Securities and Exchange Commission, all of which
are available on the Company’s website at apollogrp.edu.
Use of Non-GAAP Financial
Information
This press release and the related conference call contain
non-GAAP financial measures, which 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 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 our 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 than we do, limiting their usefulness as a comparative
measure across companies.
Apollo Group, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (Unaudited)
As
of
May 31,2010
August 31,2009
($ in thousands)
ASSETS: Current assets Cash and cash
equivalents $ 891,981 $ 968,246 Restricted cash and cash
equivalents 482,228 432,304 Marketable securities, current portion
4,405 - Accounts receivable, net 249,231 298,270 Deferred tax
assets, current portion 158,961 88,022 Prepaid taxes 9,563 57,658
Other current assets 38,613 35,517 Assets held for sale from
discontinued operations 27,356 -
Total current assets 1,862,338 1,880,017 Property and
equipment, net 587,931 557,507 Marketable securities, less current
portion 15,174 19,579 Goodwill 456,197 522,358 Intangible assets,
net 164,877 203,671 Deferred tax assets, less current portion
72,911 66,254 Other assets 13,556 13,991
Total assets $ 3,172,984 $ 3,263,377
LIABILITIES AND SHAREHOLDERS' EQUITY: Current
liabilities Short-term borrowings and current portion of
long-term debt $ 51,437 $ 461,365 Accounts payable 73,734 66,928
Accrued liabilities 378,982 268,418 Student deposits 490,877
491,639 Deferred revenue 333,972 333,041 Other current liabilities
63,571 133,887 Liabilities held for sale from discontinued
operations 4,691 -
Total current
liabilities 1,397,264 1,755,278 Long-term debt 115,153 127,701
Deferred tax liabilities 49,506 55,636 Other long-term liabilities
166,415 100,149
Total
liabilities 1,728,338 2,038,764
Commitments and contingencies
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 50,723
1,139 Apollo Class A treasury stock, at cost (2,322,904 )
(2,022,623 ) Retained earnings 3,707,074 3,195,043 Accumulated
other comprehensive loss (49,741 ) (13,740 )
Total
Apollo shareholders' equity 1,385,256
1,159,923
Noncontrolling interests 59,390
64,690
Total equity 1,444,646
1,224,613
Total liabilities and
shareholders' equity $ 3,172,984 $ 3,263,377
Apollo Group, Inc. and Subsidiaries Condensed
Consolidated Statements of Income (Unaudited)
Three Months Ended May 31,
Nine Months Ended May 31, 2010 2009
2010 2009 (in thousands, except per share data)
Net revenue $ 1,337,404 $ 1,047,574 $
3,666,399 $ 2,880,399
Costs and expenses:
Instructional costs and services 540,594 390,642 1,577,382
1,124,034 Selling and promotional 273,480 241,259 811,104 692,189
General and administrative 79,712 70,862 223,746 198,178 Estimated
litigation loss 132,600 - 177,100 - Goodwill impairment
8,712 - 8,712 -
Total costs and expenses 1,035,098
702,763 2,798,044 2,014,401
Operating income 302,306 344,811 868,355 865,998 Interest
income 827 2,395 2,284 11,202 Interest expense (1,979 ) (509 )
(8,107 ) (2,559 ) Other, net (1,312 ) 1,782
(2,061 ) (851 )
Income from continuing operations
before income taxes 299,842 348,479 860,471 873,790 Provision
for income taxes (122,390 ) (142,537 )
(341,435 ) (357,072 )
Income from continuing
operations 177,452 205,942 519,036 516,718 Income (loss) from
discontinued operations, net of tax 2,084
(5,330 ) (8,854 ) (10,722 )
Net income 179,536
200,612 510,182 505,996
Net (income) loss attributable to
noncontrolling interests (253 ) 492
1,849 814
Net income attributable to
Apollo $ 179,283 $ 201,104 $ 512,031 $
506,810
Earnings (loss) per share - Basic:
Continuing operations attributable to Apollo $ 1.17 $ 1.31 $ 3.40 $
3.26 Discontinued operations attributable to Apollo 0.02
(0.03 ) (0.06 ) (0.07 )
Basic income
per share attributable to Apollo $ 1.19 $ 1.28 $
3.34 $ 3.19
Earnings (loss) per share -
Diluted: Continuing operations attributable to Apollo $ 1.16 $
1.30 $ 3.37 $ 3.22 Discontinued operations attributable to Apollo
0.02 (0.04 ) (0.06 ) (0.07 )
Diluted income per share attributable to Apollo $ 1.18
$ 1.26 $ 3.31 $ 3.15
Basic
weighted average shares outstanding 151,127
157,616 153,345 158,960
Diluted weighted average shares outstanding 152,291
159,305 154,506 160,952
Apollo Group, Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows From Continuing and
Discontinued Operations (Unaudited)
Nine Months Ended May 31, 2010 2009 ($ in
thousands)
Cash flows provided by (used in) operating
activities: Net income $ 510,182 $ 505,996 Adjustments to
reconcile net income to net cash provided by operating activities:
Share-based compensation 46,236 49,385 Excess tax benefits from
share-based compensation (6,427 ) (11,509 ) Depreciation and
amortization 98,091 72,857 Goodwill impairment on discontinued
operations 9,400 - Goodwill impairment 8,712 - Amortization of
deferred gain on sale-leasebacks (1,294 ) (1,256 ) Non-cash foreign
currency losses, net 931 693 Provision for uncollectible accounts
receivable 208,593 106,890 Estimated litigation loss 177,100 -
Deferred income taxes (69,571 ) 4,017 Changes in assets and
liabilities: Accounts receivable (175,845 ) (81,663 ) Other assets
(8,223 ) (13,077 ) Accounts payable and accrued liabilities (59,413
) 19,715 Income taxes payable 35,203 23,774 Student deposits 897
92,408 Deferred revenue 5,796 33,470 Other liabilities
24,412 8,099
Net cash provided by operating
activities 804,780 809,799
Cash
flows provided by (used in) investing activities: Additions to
property and equipment (108,316 ) (94,873 ) Maturities of
marketable securities - 2,660 Increase in restricted cash and cash
equivalents (49,924 ) (105,464 )
Net cash used in
investing activities (158,240 ) (197,677 )
Cash flows provided by (used in) financing activities:
Payments on borrowings (424,775 ) (16,211 ) Proceeds from
borrowings 17,824 13,620 Issuance of Apollo Class A common stock
18,209 98,963 Apollo Class A common stock purchased for treasury
(341,161 ) (408,768 ) Noncontrolling interest contributions 2,460
2,000 Excess tax benefits from share-based compensation
6,427 11,509
Net cash used in financing
activities (721,016 ) (298,887 ) Exchange rate
effect on cash and cash equivalents (1,789 ) (731 )
Net (decrease) increase in cash and cash equivalents (76,265
) 312,504
Cash and cash equivalents, beginning of period
968,246 483,195
Cash and cash
equivalents, end of period $ 891,981 $ 795,699
Supplemental disclosure of cash flow information Cash paid
during the period for income taxes, net of refunds $ 356,570 $
314,344 Cash paid during the period for interest $ 5,292 $ 1,934
Supplemental disclosure of non-cash investing and financing
activities Credits received for tenant improvements $ 16,026 $
10,861 Accrued purchases of property and equipment $ 9,190 $ 6,222
Restricted stock units vested and released $ 4,938 $ 9,290
Unrealized loss on auction-rate securities $ - $ 2,203 Unsettled
purchase of Apollo Class A common stock for treasury $ - $ 38,780
UNIACC earn-out consideration $ - $ 7,135
Apollo Group, Inc. and
Subsidiaries Supplemental Schedule - Combined Condensed
Statements of Income (Unaudited)
Three Months Ended May 31, 2010
Nine Months Ended May 31, 2010 Apollo
Excluding BPP
BPP Apollo
Consolidated
Apollo
Excluding BPP
BPP Apollo
Consolidated
(in thousands, except per share data)
Net revenue $
1,261,589 $ 75,815 $ 1,337,404 $ 3,448,264
$
218,135
$
3,666,399
Costs and expenses: Instructional costs and services
485,608 54,986 540,594 1,402,486
174,896
1,577,382 Selling and promotional 269,163 4,317 273,480 798,122
12,982 811,104 General and administrative 76,595 3,117 79,712
211,693 12,053 223,746 Estimated litigation loss 132,600 - 132,600
177,100 - 177,100 Goodwill impairment 8,712 -
8,712 8,712 -
8,712
Total costs and expenses 972,678
62,420 1,035,098
2,598,113 199,931
2,798,044
Operating income 288,911 13,395 302,306 850,151
18,204 868,355 Interest income 575 252 827 1,935 349 2,284 Interest
expense (1,131 ) (848 ) (1,979 ) (3,623 ) (4,484 ) (8,107 ) Other,
net 937 (2,249 ) (1,312 ) 5,312
(7,373 ) (2,061 )
Income from continuing
operations before income taxes 289,292 10,550 299,842 853,775
6,696 860,471 Provision for income taxes (120,686 )
(1,704 ) (122,390 ) (339,525 ) (1,910 )
(341,435 )
Income from continuing operations 168,606 8,846
177,452 514,250 4,786 519,036 Income (loss) from discontinued
operations, net of tax 2,084 -
2,084 (8,854 ) - (8,854 )
Net
income 170,690 8,846 179,536 505,396 4,786 510,182
Net loss
(income) attributable to noncontrolling interests 1,325
(1,578 ) (253 ) 3,409
(1,560 ) 1,849
Net income attributable to
Apollo $ 172,015 $ 7,268 $ 179,283 $
508,805 $ 3,226 $ 512,031
Earnings
(loss) per share - Basic: Continuing operations attributable to
Apollo $ 1.12 $ 0.05 $ 1.17 $ 3.38 $ 0.02 $ 3.40 Discontinued
operations attributable to Apollo 0.02 -
0.02 (0.06 ) -
(0.06 )
Basic income per share attributable to Apollo $ 1.14
$ 0.05 $ 1.19 $ 3.32 $ 0.02 $
3.34
Earnings (loss) per share - Diluted:
Continuing operations attributable to Apollo $ 1.11 $ 0.05 $ 1.16 $
3.35 $ 0.02 $ 3.37 Discontinued operations attributable to Apollo
0.02 - 0.02 (0.06
) - (0.06 )
Diluted income per share
attributable to Apollo $ 1.13 $ 0.05 $ 1.18
$ 3.29 $ 0.02 $ 3.31
Basic
weighted average shares outstanding 151,127
151,127 151,127 153,345
153,345 153,345
Diluted weighted
average shares outstanding 152,291 152,291
152,291 154,506 154,506
154,506
Apollo Group, Inc. and
Subsidiaries Reconciliation of GAAP financial information to
non-GAAP financial information (Unaudited)
Three Months Ended May 31,
Nine Months Ended May 31, 2010 2009
2010 2009 (in thousands, except per share data) Net
income attributable to Apollo, as reported $ 179,283 $ 201,104 $
512,031 $ 506,810 Income (loss) from discontinued operations, net
of tax (1) 2,084 (5,330 ) (8,854 )
(10,722 ) Income from continuing operations attributable to
Apollo 177,199 206,434 520,885 517,532 Reconciling items:
Estimated litigation loss (2) 132,600 - 177,100 - Goodwill
impairment (3) 7,457 - 7,457
- 140,057 - 184,557 - Less: tax effects
(52,700 ) - (70,328 ) - Tax benefit from IRS settlement (4)
- - (11,356 ) -
Income from continuing operations
attributable to Apollo adjusted to exclude special items
$ 264,556 $ 206,434 $ 623,758 $ 517,532
Diluted income per share from
continuing operations attributable to Apollo, as reported
$ 1.16 $ 1.30 $ 3.37 $ 3.22
Diluted income per share from
continuing operations attributable to Apollo, adjusted to exclude
special items
$ 1.74 $ 1.30 $ 4.04 $ 3.22
Diluted weighted average shares outstanding 152,291
159,305 154,506 160,952
(1)
The loss from discontinued
operations, net of tax for the nine months ended May 31, 2010
includes a $9.4 million charge for goodwill impairment recorded in
the second quarter of fiscal year 2010. We did not record an
associated tax benefit because the goodwill is not deductible for
tax purposes.
(2)
The $132.6 million and $177.1
million charges for the three and nine months ended May 31, 2010,
respectively, represent an estimated charge related to the
Securities Class Action matter.
(3)
The $7.5 million charge for the
three and nine months ended May 31, 2010 represents the ULA
goodwill impairment, net of noncontrolling interest. We did not
record an associated tax benefit because the goodwill is not
deductible for tax purposes.
(4)
The $11.4 million tax benefit
during the nine months ended May 31, 2010 resulted from our
settlement of disputed tax issues with the Internal Revenue Service
during the first quarter of fiscal year 2010.
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