Apollo Group, Inc. (NASDAQ: APOL) (“Apollo Group,” “Apollo” or
the “Company”) today reported financial results for the three
months and fiscal year ended August 31, 2010.
“Fiscal 2010 has been a year of significant progress at Apollo
Group, as we have been completing the development of numerous
strategic initiatives that are being implemented over the coming
year,” said Apollo Group Co-Chief Executive Officer and Apollo
Global Chairman Greg Cappelli. “These initiatives, which are
designed to enhance the student experience, expand student
protections and ensure that we enroll students who we believe have
a greater likelihood to succeed in our programs. These initiatives
will present new challenges for the Company in the year ahead, but
they are the right things to do for our students and they will
better position us to succeed as an organization over the longer
term.”
Apollo Group Co-Chief Executive Officer Chas Edelstein added,
“We agree with the stated goal of the Department of Education and
of Congress to ensure that students in the postsecondary education
system receive a quality education at a good value. We have taken
and intend to continue to take a leadership role within the
proprietary sector by providing students with a good value for
their educational investment while employing marketing practices
that fully and fairly inform our students about the educational
options available to them, as well as the costs and potential
benefits of an education.”
Unaudited Fourth Quarter of Fiscal 2010
Results of Operations
Consolidated net revenue for the fourth quarter of fiscal 2010
totaled $1,259.4 million, which represents a 17.4% increase over
the fourth quarter of fiscal 2009. Contributing to the growth in
the fourth quarter was a 6.3% year-over-year increase in University
of Phoenix total Degreed Enrollment to 470,800, as well as an
increase of $20.5 million in net revenue from BPP Holdings, which
was acquired on July 30, 2009. The Company reported income from
continuing operations attributable to Apollo Group for the three
months ended August 31, 2010, of $47.5 million, or $0.32 per share
(148.3 million weighted average diluted shares outstanding),
compared to income from continuing operations attributable to
Apollo Group of $97.2 million, or $0.62 per share (155.7 million
weighted average diluted shares outstanding) for the three months
ended August 31, 2009.
Results for the fourth quarter of fiscal 2010 contain special
items that include goodwill and other intangible asset impairment
charges of $175.9 million for the BPP subsidiary of Apollo Global
($150.5 million net of non-controlling interests) and a $0.9
million charge representing an accrual for incremental
post-judgment interest related to a securities class action
lawsuit. The Company did not record a tax benefit associated with
the goodwill impairment, as it is not deductible for tax purposes.
The fiscal 2009 fourth quarter results included special items
totaling $95.4 million pre-tax, as well as a discrete charge to the
income tax provision of $4.7 million. The special items included an
accrual for an estimated litigation settlement of $80.5 million, a
$9.4 million write-off of information technology fixed assets that
resulted primarily from the Company’s rationalization of software,
and a $5.5 million charge, net of non-controlling interests,
representing the option premium for a currency hedge in connection
with Apollo Global’s acquisition of BPP.
Excluding these special items, income from continuing operations
attributable to Apollo Group for the three months ended August 31,
2010, was $193.9 million, or $1.31 per share, compared to income
from continuing operations attributable to Apollo Group of $171.3
million, or $1.10 per share for the three months ended August 31,
2009. (See the reconciliation of GAAP financial information to
non-GAAP financial information in the tables section of this press
release.)
In the fourth quarter of fiscal 2010, BPP’s operations
contributed $33.6 million to net revenue compared with $13.1
million in the fourth quarter of fiscal 2009 following the July 30,
2009, acquisition of BPP. BPP’s results diluted earnings per share
from continuing operations attributable to Apollo Group by
approximately $0.15 excluding the goodwill and other intangible
asset impairment charges for the fourth quarter of fiscal 2010
($1.13 including the impairment charges) compared with a decrease
of $0.03 in the fourth quarter of fiscal 2009. (See the
supplemental schedule detailing BPP’s financial results in the
tables section of this press release.)
Instructional costs and services increased by $104.0 million, or
23.4% to $547.7 million for the three months ended August 31, 2010,
compared to the three months ended August 31, 2009. As a percentage
of revenue, instructional costs and services increased 220 basis
points to 43.5% versus 41.3% in the prior year’s fourth 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, partially offset by the
reversal of a $5.0 million accrual which was recorded in the third
quarter of fiscal 2010, related to a state grant program. Bad debt
expense, as a percentage of revenue, increased 170 basis points to
5.9% in the fourth quarter of fiscal 2010 versus 4.2% in the prior
year’s fourth quarter. The higher bad debt expense, as a percentage
of revenue, is a result of the economic downturn and increases in
receivables from undergraduate students entering with less than 24
credits. Collection rates for these students are generally lower
compared to students with more college experience or those enrolled
in graduate level programs.
Selling and promotional expenses increased by $40.9 million, or
15.7%, to $301.6 million for the three months ended August 31,
2010, compared to the three months ended August 31, 2009. As a
percentage of revenue, selling and promotional expenses declined 40
basis points to 23.9% versus 24.3% in the prior year’s fourth
quarter. The decrease, as a percentage of revenue, was a result of
slower hiring of enrollment advisors, partially offset by higher
advertising expenditures directed at bachelor degree and graduate
degree level programs at University of Phoenix. BPP’s operations
had little impact on selling and promotional expenses as a
percentage of revenue in the fourth quarter of fiscal 2010.
General and administrative (“G&A”) expenses increased by
$2.7 million, or 3.1%, to $91.0 million, for the three months ended
August 31, 2010, compared to the three months ended August 31,
2009. As a percentage of revenue, G&A expenses declined 100
basis points to 7.2% versus 8.2% in the prior year’s fourth
quarter. The decrease, as a percentage of revenue, is primarily
attributable to a $9.4 million fixed asset write-off noted as a
special item in the fourth quarter of fiscal 2009. BPP’s operations
had little impact on G&A expenses as a percentage of revenue in
the fourth quarter of fiscal 2010.
Financial and Operating
Metrics
Below are Apollo Group’s unaudited financial data and operating
metrics for the fourth quarter of fiscal 2010 versus the prior year
period.
Q4 2010 Q4 2009
Revenues (in
thousands)
Degree Seeking Gross Revenues (1) $ 1,238,022 $ 1,063,656 Less:
Discounts and other (68,027 ) (60,479 ) Degree
Seeking Net Revenues (1) 1,169,995 1,003,177 Non-degree Seeking
Revenues (2) 13,445 14,390 Other, net of discounts (3)
75,980 55,600 $ 1,259,420 $ 1,073,167
Revenue by Degree
Type (in thousands) (1)
Associates $ 449,108 $ 399,907 Bachelors 558,063 444,555 Masters
207,101 198,511 Doctoral 23,750 20,683 Less: Discounts and other
(68,027 ) (60,479 ) $ 1,169,995 $ 1,003,177
Degreed Enrollment
(rounded to hundreds) (4)
Associates 200,800 201,200 Bachelors 193,600 163,600 Masters 68,700
71,200 Doctoral 7,700 7,000
470,800 443,000
Degree Seeking Gross
Revenues per Degreed Enrollment (1) (4)
Associates $ 2,237 $ 1,988 Bachelors 2,883 2,717 Masters 3,015
2,788 Doctoral 3,084 2,955 All degrees (after discounts) $ 2,485 $
2,265
New Degreed
Enrollment (rounded to hundreds) (5)
Associates 42,200 55,400 Bachelors 36,200 31,700 Masters 12,700
14,200 Doctoral 900 700 92,000
102,000
(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 credits
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 credits 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 credits 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 credits in length with
some course applicability into a related degree program.
2010 Fiscal Year End Results of
Operations
Consolidated net revenue for the fiscal year ended August 31,
2010, was $4.9 billion, a 24.6% increase over fiscal 2009.
Contributing to this increase was a 13.1% increase in University of
Phoenix’s average Degreed Enrollment for fiscal 2010 as compared
with fiscal 2009. The Company reported income from continuing
operations attributable to Apollo Group of $568.4 million, or $3.72
per share, (152.9 million weighted average diluted shares
outstanding) for the fiscal year ended August 31, 2010, compared to
$614.7 million, or $3.85 per share, (159.5 million weighted average
diluted shares outstanding) for the fiscal year ended August 31,
2009.
Results for the fiscal year ended August 31, 2010, contain
special items that include goodwill and other intangible asset
impairment charges of $184.6 million for the BPP and Universidad
Latinoamericana (“ULA”) subsidiaries of Apollo Global ($158.0
million net of non-controlling interests) and $178.0 million in
charges related to a securities class action lawsuit, as well as a
tax benefit of $11.4 million resulting from the settlement for
disputed tax issues with the Internal Revenue Service. The Company
did not record a tax benefit associated with the goodwill
impairment charges, as they are not deductible for tax purposes.
Results for the fiscal year ended August 31, 2009, included special
items totaling $95.4 million pre-tax, as well as a discrete charge
to the income tax provision of $4.7 million. The special items
included an accrual for an estimated litigation settlement of $80.5
million, a $9.4 million write-off of information technology fixed
assets that resulted primarily from the Company’s rationalization
of software, and a $5.5 million charge, net of non-controlling
interests, representing the option premium for a currency hedge in
connection with Apollo Global’s acquisition of BPP.
Excluding these special items, income from continuing operations
attributable to Apollo Group for the fiscal year ended August 31,
2010, was $817.7 million, or $5.35 per share, compared to income
from continuing operations attributable to Apollo Group of $688.8
million, or $4.32 per share for the fiscal year ended August 31,
2009. (See the reconciliation of GAAP financial information to
non-GAAP financial information in the tables section of this press
release.)
Unaudited Balance Sheet
As of August 31, 2010, the Company’s cash and cash equivalents,
excluding restricted cash, totaled $1,284.8 million as compared to
$968.2 million as of August 31, 2009. The increase is primarily
attributable to cash generated from operations, partially offset by
share repurchases, capital expenditures, and an increase in
restricted cash. Restricted cash and cash equivalents (including
long-term) increased by $138.4 million compared to August 31, 2009,
primarily due to funds used to collateralize 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, as well as increased student deposits at University of
Phoenix.
At August 31, 2010, accounts receivable decreased to $264.4
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 August 31,
2010, compared to 32 days at August 31, 2009. The decrease in DSO
versus a year ago is primarily attributable to a more pronounced
seasonal increase in accounts receivable at August 31, 2009, due to
University of Phoenix annual student financial aid system
enhancements and upgrades.
Total debt outstanding (including short-term borrowings and the
current portion of long-term debt) decreased by $4.7 million to
$584.4 million at August 31, 2010, from $589.1 million at August
31, 2009. Subsequent to August 31, 2010, the Company repaid
approximately $400 million of the outstanding balance.
Share Repurchases
During the fourth quarter of fiscal 2010, the Company
repurchased approximately 2.0 million shares of its common stock at
a weighted average purchase price of $49.76 per share for a total
expenditure of $100.0 million. As of August 31, 2010, approximately
$561 million remained available under the Company’s current share
repurchase authorization.
Business Outlook
The Company expects fiscal 2011 to be a year of continuing
transition in its operations as it implements initiatives,
primarily at University of Phoenix, aimed at enhancing the student
experience, expanding student protections and shifting the mix of
enrollment to more experienced students who have a greater
likelihood of succeeding in the Company’s programs. Some of these
initiatives include:
- Changes in the roles of the Company’s
admissions personnel and comprehensive changes in their evaluation
and compensation systems, including the elimination of enrollment
results as a component of compensation effective September 1,
2010;
- University Orientation, a free,
three-week, non-credit bearing program which, beginning November 1,
2010, will be required for all new students enrolling at University
of Phoenix with fewer than 24 transfer credits; and
- The continued reduction in emphasis on
third-party affiliates for lead generation and other enhancements
to the Company’s marketing approach.
The Company expects that the implementation of these
initiatives, together with the effect of other challenges the
proprietary education industry is facing will adversely impact its
operating metrics and financial results. Some of the industry
challenges include ongoing regulatory and other scrutiny which has
led to heightened media attention, much of which has portrayed the
sector in an unflattering light. Given the transitional state of
the business, and the uncertain regulatory environment, the Company
is withdrawing its prior preliminary business outlook for fiscal
2011. However, the Company provides the following commentary:
- The decline in University of Phoenix
new degreed enrollment experienced in the fourth quarter of fiscal
year 2010 is expected to accelerate during the first quarter of
fiscal 2011, resulting in a significant year-over-year
decline.
- During this period of transition, the
Company expects to continue to make investments in key areas to
support its long-term objectives but also intends to more
aggressively manage its cost structure.
- The Company believes that, over time,
its efforts will improve student outcomes, including student
retention and completion rates, and will position the Company for
quality long-term growth.
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, October 13, 2010. The call may be accessed by dialing
(877) 292-6888 (domestic) or (973) 200-3381 (international) and
entering the conference ID number 10181004. 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 10181004
until October 22, 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 August 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 about Apollo Group and its business in this release
which are not statements of historical fact, including statements
regarding Apollo 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 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 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" published for comment by the U.S.
Department of Education on July 23, 2010, changes in the Company'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 cohort default rates, and the
accrediting criteria of the relevant accrediting bodies, and other
regulatory developments. 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 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 http://www.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 Consolidated
Balance Sheets (Unaudited)
As of August 31,
2010 2009 ($ in thousands)
ASSETS:
Current assets Cash and cash equivalents $ 1,284,769 $
968,246 Restricted cash and cash equivalents 444,132 432,304
Accounts receivable, net 264,377 298,270 Deferred tax assets,
current portion 166,549 88,022 Prepaid taxes 39,409 57,658 Other
current assets 38,031 35,517 Assets held for sale from discontinued
operations 15,945 -
Total current assets
2,253,212 1,880,017 Property and equipment, net 619,537 557,507
Long-term restricted cash and cash equivalents 126,615 - Marketable
securities 15,174 19,579 Goodwill 322,159 522,358 Intangible
assets, net 150,593 203,671 Deferred tax assets, less current
portion 99,071 66,254 Other assets 15,090 13,991
Total assets $ 3,601,451 $ 3,263,377
LIABILITIES
AND SHAREHOLDERS' EQUITY: Current liabilities Short-term
borrowings and current portion of long-term debt $ 416,361 $
461,365 Accounts payable 90,830 66,928 Accrued liabilities 375,461
268,418 Student deposits 493,245 491,639 Deferred revenue 359,724
333,041 Other current liabilities 53,416 133,887 Liabilities held
for sale from discontinued operations 4,474 -
Total current liabilities 1,793,511 1,755,278 Long-term debt
168,039 127,701 Deferred tax liabilities 38,875 55,636 Other
long-term liabilities 212,286 100,149
Total
liabilities 2,212,711 2,038,764
Commitments and contingencies
Shareholders' equity
Preferred stock, no par value - - Apollo Group Class A nonvoting
common stock, no par value 103 103 Apollo Group Class B voting
common stock, no par value 1 1 Additional paid-in capital 46,865
1,139 Apollo Group Class A treasury stock, at cost (2,407,788)
(2,022,623) Retained earnings 3,748,045 3,195,043 Accumulated other
comprehensive loss (31,176) (13,740)
Total Apollo
shareholders' equity 1,356,050 1,159,923
Noncontrolling interests 32,690 64,690
Total equity 1,388,740 1,224,613
Total
liabilities and shareholders' equity $ 3,601,451 $ 3,263,377
Apollo Group, Inc. and Subsidiaries Consolidated
Statements of Income (Unaudited)
Three Months
Ended August 31, Year Ended August 31,
2010 2009 2010 2009 (in
thousands, except per share data)
Net revenue $ 1,259,420
$ 1,073,167 $ 4,925,819 $ 3,953,566
Costs and expenses: Instructional costs and services 547,700
443,720 2,125,082 1,567,754 Selling and promotional 301,562 260,695
1,112,666 952,884 General and administrative 91,049 88,315 314,795
286,493 Goodwill and other intangibles impairment 175,858 - 184,570
- Estimated litigation loss 882 80,500
177,982 80,500
Total costs and
expenses 1,117,051 873,230
3,915,095 2,887,631
Operating income
142,369 199,937 1,010,724 1,065,935 Interest income 636 1,389 2,920
12,591 Interest expense (3,784 ) (1,889 ) (11,891 ) (4,448 ) Other,
net 1,376 (6,300 ) (685 ) (7,151
)
Income from continuing operations before income taxes
140,597 193,137 1,001,068 1,066,927 Provision for income taxes
(122,628 ) (99,648 ) (464,063 )
(456,720 )
Income from continuing operations 17,969 93,489
537,005 610,207 Loss from discontinued operations, net of tax
(6,570 ) (5,655 ) (15,424 ) (16,377 )
Net income 11,399 87,834 521,581 593,830
Net loss
attributable to noncontrolling interests 29,572
3,675 31,421 4,489
Net
income attributable to Apollo $ 40,971 $ 91,509 $
553,002 $ 598,319
Earnings (loss) per share
- Basic: Continuing operations attributable to Apollo $ 0.32 $
0.63 $ 3.74 $ 3.90 Discontinued operations attributable to Apollo
(0.04 ) (0.04 ) (0.10 ) (0.11 )
Basic income per share attributable to Apollo $ 0.28
$ 0.59 $ 3.64 $ 3.79
Earnings (loss)
per share - Diluted: Continuing operations attributable to
Apollo $ 0.32 $ 0.62 $ 3.72 $ 3.85 Discontinued operations
attributable to Apollo (0.04 ) (0.03 ) (0.10 )
(0.10 )
Diluted income per share attributable to
Apollo $ 0.28 $ 0.59 $ 3.62 $ 3.75
Basic weighted average shares outstanding
147,829 154,201 151,955
157,760
Diluted weighted average shares outstanding
148,334 155,722 152,906
159,514
Apollo Group, Inc. and
Subsidiaries Consolidated Statements of Cash Flows
From Continuing and Discontinued Operations (Unaudited)
Year Ended August 31, 2010 2009
($ in thousands)
Cash flows provided by (used in) operating
activities: Net income $ 521,581 $ 593,830 Adjustments to
reconcile net income to net cash provided by operating activities:
Share-based compensation 64,305 68,038 Excess tax benefits from
share-based compensation (6,648) (18,543) Depreciation and
amortization 147,035 113,350 Amortization of lease incentives
(13,358) (12,807) Impairment on discontinued operations 9,400 -
Goodwill and other intangibles impairment 184,570 - Loss on fixed
assets write-off - 9,416 Amortization of deferred gain on
sale-leasebacks (1,705) (1,715) Non-cash foreign currency loss
(gain), net 643 (62) Provision for uncollectible accounts
receivable 282,628 152,490 Estimated litigation loss 177,982 80,500
Deferred income taxes (125,399) (13,799) Changes in assets and
liabilities, excluding the impact of acquisitions: Accounts
receivable (265,996) (192,289) Other assets 2,183 9,945 Accounts
payable and accrued liabilities (44,653) 45,406 Income taxes
payable 10,421 (30,848) Student deposits 3,445 59,458 Deferred
revenue 32,887 80,315 Other liabilities 65,749 17,542
Net cash provided by operating activities 1,045,070
960,227
Cash flows provided by (used in) investing
activities: Additions to property and equipment (168,177)
(127,356) Acquisitions, net of cash acquired (5,497) (523,795)
Maturities of marketable securities 5,000 8,035 Increase in
restricted cash and cash equivalents (138,443)
(48,149)
Net cash used in investing activities
(307,117) (691,265)
Cash flows provided by (used in)
financing activities: Payments on borrowings (477,568) (37,341)
Proceeds from borrowings 475,454 513,170 Apollo Class A common
stock purchased for treasury (446,398) (452,487) Issuance of Apollo
Class A common stock 19,671 117,076 Noncontrolling interest
contributions 2,460 58,980 Excess tax benefits from share-based
compensation 6,648 18,543
Net cash (used in)
provided by financing activities (419,733)
217,941 Exchange rate effect on cash and cash equivalents
(1,697) (1,852)
Net increase in cash and cash
equivalents 316,523 485,051
Cash and cash equivalents,
beginning of year 968,246 483,195
Cash and
cash equivalents, end of year $ 1,284,769 $ 968,246
Supplemental disclosure of cash flow information Cash paid
for income taxes, net of refunds $ 514,532 $ 472,241 Cash paid for
interest $ 7,837 $ 3,683
Supplemental disclosure of non-cash
investing and financing activities Restricted stock units
vested and released $ 19,868 $ 22,617 Credits received for tenant
improvements $ 17,372 $ 12,674 Accrued purchases of property and
equipment $ 10,136 $ 5,081
Apollo Group, Inc. and
Subsidiaries Supplemental Schedule - Combined Statements of
Operations (Unaudited)
Three Months Ended August 31, 2010 Three
Months Ended August 31, 2009 Apollo
Excluding BPP
BPP Apollo
Consolidated
Apollo
Excluding BPP
BPP Apollo
Consolidated
(in thousands, except per share data)
Net revenue $
1,225,812 $ 33,608 $ 1,259,420 $ 1,060,105
$ 13,062
$
1,073,167
Costs and expenses: Instructional costs and
services 492,710 54,990 547,700 426,697 17,023 443,720 Selling and
promotional 295,151 6,411 301,562 259,200 1,495 260,695 General and
administrative 89,944 1,105 91,049 87,164 1,151 88,315 Goodwill and
other intangibles impairment - 175,858 175,858 - - - Estimated
litigation loss 882 - 882
80,500 - 80,500
Total
costs and expenses 878,687 238,364
1,117,051 853,561 19,669
873,230
Operating income (loss) 347,125
(204,756 ) 142,369 206,544 (6,607 ) 199,937 Interest income 636 -
636 1,375 14 1,389 Interest expense (1,793 ) (1,991 ) (3,784 )
(1,056 ) (833 ) (1,889 ) Other, net 3,774
(2,398 ) 1,376 (6,357 ) 57
(6,300 )
Income (loss) from continuing operations before
income taxes 349,742 (209,145 ) 140,597 200,506 (7,369 )
193,137 (Provision for) benefit from income taxes (136,125 )
13,497 (122,628 ) (101,587 )
1,939 (99,648 )
Income (loss) from continuing
operations 213,617 (195,648 ) 17,969 98,919 (5,430 ) 93,489
Loss from discontinued operations, net of tax (6,570 )
- (6,570 ) (5,655 ) -
(5,655 )
Net income (loss) 207,047 (195,648 ) 11,399
93,264 (5,430 ) 87,834
Net loss attributable to noncontrolling
interests 1,390 28,182
29,572 2,944 731 3,675
Net income (loss) attributable to Apollo $ 208,437
$ (167,466 ) $ 40,971 $ 96,208 $ (4,699 ) $
91,509
Earnings (loss) per share - Basic:
Continuing operations attributable to Apollo $ 1.45 $ (1.13 ) $
0.32 $ 0.66 $ (0.03 ) $ 0.63 Discontinued operations attributable
to Apollo (0.04 ) - (0.04 )
(0.04 ) - (0.04 )
Basic income (loss) per
share attributable to Apollo $ 1.41 $ (1.13 ) $ 0.28
$ 0.62 $ (0.03 ) $ 0.59
Earnings
(loss) per share - Diluted: Continuing operations attributable
to Apollo $ 1.45 $ (1.13 ) $ 0.32 $ 0.65 $ (0.03 ) $ 0.62
Discontinued operations attributable to Apollo (0.04 )
- (0.04 ) (0.03 ) -
(0.03 )
Diluted income (loss) per share attributable to
Apollo $ 1.41 $ (1.13 ) $ 0.28 $ 0.62 $
(0.03 ) $ 0.59
Basic weighted average shares
outstanding 147,829 147,829
147,829 154,201 154,201
154,201
Diluted weighted average shares outstanding
148,334 148,334 148,334
155,722 155,722 155,722
Apollo Group, Inc. and Subsidiaries Reconciliation
of GAAP financial information to non-GAAP financial information
(Unaudited)
Three
Months Ended August 31, Year Ended August 31,
2010 2009 2010 2009 (in millions,
except per share data) Net income attributable to Apollo, as
reported $ 40.971 $ 91.509 $ 553.0 598.3 Loss from discontinued
operations, net of tax (1) $ (6.500 ) $ (5.655 ) (15.4 )
(16.4 ) Income from continuing operations attributable to
Apollo $ 47.471 $ 97.164 568.4 614.7 Reconciling items:
Estimated litigation loss (2) $ 0.900 $ 80.500 178.0 80.5 Goodwill
and other intangibles impairment (3) $ 150.500 $ - 158.0 - Software
and equipment write-off (4) $ - $ 9.416 - 9.4 BPP acquisition
option premium (5) $ - $ 5.500 -
5.5 $ 151.400 $ 95.416 336.0 95.4 Less: tax effects $ (5.000
) $ (26.000 ) (75.3 ) (26.0 ) Tax benefit from IRS settlement (6) -
- (11.4 ) - Non-deductible compensation (7) -
4.700 - 4.7
Income from continuing operations
attributable to Apollo adjusted to exclude special items
$ 193.871 $ 171.280 $ 817.700 $ 688.8
Diluted income per share from continuing
operations attributable to Apollo, as reported
$ 0.32 $ 0.62 $ 3.72 $ 3.85
Diluted income per share from continuing
operations attributable to Apollo, adjusted to exclude special
items
$ 1.31 $ 1.10 $ 5.35 $ 4.32
Diluted weighted average shares
outstanding
148.3 155.7 152.9
159.5 (1) The loss from discontinued operations, net
of tax for the twelve months ended August 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 $0.9 million and $178.0 million charges for the three and
twelve months ended August 31, 2010, respectively, represent an
estimated loss related to a securities litigation matter. The $80.5
million charge during the three and twelve months ended August 31,
2009 represents an accrual for an estimated litigation loss related
to a qui tam legal matter which we settled in fiscal year 2010.
(3) The $150.5 million charge for the
three months ended August 31, 2010 represents impairments of BPP's
goodwill and other intangible assets, net of noncontrolling
interest. The $158.0 million charge for the twelve months ended
August 31, 2010 represents the impairment of BPP's goodwill and
other intangible assets, and the ULA goodwill impairment recorded
in the third quarter of fiscal year 2010, all net of noncontrolling
interest. We did not record a tax benefit associated with the
goodwill impairments because the goodwill is not deductible for tax
purposes.
(4) The $9.4 million charge during the
three and twelve months ended August 31, 2009 represents the
write-off of information technology fixed assets that resulted
primarily from our rationalization of software.
(5) The $5.5 million charge during the
three and twelve months ended August 31, 2009 represents the option
premium, net of noncontrolling interest, related to our acquisition
of BPP.
(6) The $11.4 million tax benefit during
the twelve months ended August 31, 2010 resulted from our
settlement of disputed tax issues with the Internal Revenue Service
during the first quarter of fiscal year 2010.
(7) The $4.7 million charge during the
three and twelve months ended August 31, 2009 represents the
write-off of a deferred tax asset related to options held and
exercised by an executive.
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