Apollo Group, Inc. (NASDAQ: APOL) (“Apollo Group,” “Apollo” or
the “Company”) today reported financial results for the three and
nine months ended May 31, 2011.
“During the third quarter, we continued to execute on our key
initiatives to improve outcomes, enhance student protections, and
elevate the educational experience throughout every touch point of
the student lifecycle,” said Apollo Group Co-Chief Executive
Officer and Apollo Global Chairman Greg Cappelli. “We are
encouraged by the progress we are making in improving retention
rates and continuing to shift the mix of our students toward higher
degree level programs.”
Apollo Group Co-Chief Executive Officer Chas Edelstein added,
“We are committed to differentiating the University of Phoenix by
focusing on academic quality and delivering a world class student
experience. Our actions, over time, are intended to elevate the
brand and reputation of our institutions, improve student outcomes,
reduce enterprise risk, and position us for stable, long-term
growth.”
Unaudited Third Quarter of Fiscal 2011
Results of Operations
Consolidated net revenue for the third quarter of fiscal 2011
totaled $1,235.8 million, which represents a 7.6% decrease from the
third quarter of fiscal 2010, principally due to lower enrollments
at University of Phoenix, partially offset by selective tuition
price and other fee changes. For the quarter, University of Phoenix
Degreed Enrollment decreased 16.4% to 398,400 compared with the
prior year third quarter, primarily due to decreases in New Degreed
Enrollment in recent quarters, including a 40.5% decrease in New
Degreed Enrollment in the third quarter of fiscal 2011 compared
with the prior year period. The Company believes the decline in New
Degreed Enrollment is primarily the result of the operational
changes and initiatives it has implemented to more effectively
support students and improve educational outcomes, as well as the
broader competitive environment. The operational changes include
the manner in which admissions personnel and other employees are
evaluated and compensated, the full implementation of University
Orientation, and the Company’s efforts to more effectively identify
students who have a greater likelihood to succeed in University of
Phoenix’s educational programs.
The Company reported income from continuing operations
attributable to Apollo Group for the three months ended May 31,
2011, of $211.9 million, or $1.51 per share (140.3 million diluted
weighted average shares outstanding), compared to income from
continuing operations attributable to Apollo Group of $177.2
million, or $1.16 per share (152.3 million diluted weighted average
shares outstanding) for the three months ended May 31, 2010.
Results for the third quarter of fiscal 2011 contain special
items that include a $2.0 million pre-tax charge ($1.2 million net
of tax) for accrued incremental post-judgment interest and future
estimated legal costs related to a securities class action lawsuit
(Policeman’s Annuity and Benefit Fund of Chicago) and a tax benefit
of $9.6 million resulting from the resolution with the Internal
Revenue Service regarding the deductibility of payments made to
settle a lawsuit in fiscal 2010. The fiscal 2010 third quarter
results contain special items that include a goodwill impairment
charge of $8.7 million ($7.5 million net of the portion
attributable to noncontrolling interest) and a $132.6 million
pre-tax charge ($79.9 million net of tax) representing an accrual
related to the securities class action lawsuit mentioned above. The
Company did not record a net tax benefit associated with the
goodwill impairment, as it is not deductible for tax purposes
Excluding these special items, income from continuing operations
attributable to Apollo Group for the three months ended May 31,
2011, was $203.5 million, or $1.45 per share (140.3 million diluted
weighted average shares outstanding), compared to income from
continuing operations attributable to Apollo Group for the three
months ended May 31, 2010 of $264.6 million, or $1.74 per share
(152.3 million diluted weighted average shares outstanding). (See
the reconciliation of GAAP financial information to non-GAAP
financial information in the tables section of this press
release.)
Operating Expenses
Instructional and student advisory expenses increased by $16.4
million, or 3.7%, to $458.1 million for the three months ended May
31, 2011, compared to the three months ended May 31, 2010. The
increase was primarily due to various strategic initiatives
implemented to more effectively support students and improve their
educational outcomes, which have resulted in increased compensation
expense related to certain student advisory and infrastructure
support functions and increased curriculum development and delivery
costs.
Marketing expenses increased by $9.4 million, or 6.2%, to $161.0
million for the three months ended May 31, 2011, compared to the
three months ended May 31, 2010. The increase was primarily a
result of higher advertising expenditures, driven by the increased
costs associated with the Company's efforts to more effectively
identify students who have a greater likelihood to succeed in its
educational programs and increases in advertising rates for
traditional and online media due to increased competition for
higher degree level students and improving general economic
conditions.
Admissions advisory expenses decreased by $16.4 million, or
14.1%, to $99.9 million for the three months ended May 31, 2011,
compared to the three months ended May 31, 2010. The decrease was a
result of lower admissions advisory headcount primarily
attributable to a strategic reduction in force implemented during
the first quarter of fiscal 2011 that eliminated approximately 700
full-time positions, principally among admissions personnel. This
decrease was partially offset by higher average employee
compensation costs.
General and administrative (“G&A”) expenses increased by
$12.5 million, or 16.6%, to $87.9 million for the three months
ended May 31, 2011, compared to the three months ended May 31,
2010. The increase is primarily attributable to expenses associated
with higher employee compensation costs and other expenses
associated with the Company’s investments in its information
technology resources and capabilities.
The provision for uncollectible accounts receivable (“bad debt
expense”) decreased by $32.8 million, or 45.5%, to $39.2 million
for the three months ended May 31, 2011, compared to the three
months ended May 31, 2010. The decrease is primarily attributable
to reductions in gross accounts receivable as a result of decreases
in New Degreed Enrollment, a shift in the mix of students from
Associates to higher degree-level programs, and improvements in
student retention rates, partially due to the full implementation
of University Orientation. Improved collection rates at University
of Phoenix, which were favorably impacted by ongoing process
improvements and an initiative to address the Company’s oldest
receivables, also contributed to the decrease.
Depreciation and amortization increased by $4.4 million, or
12.1%, to $41.1 million for the three months ended May 31, 2011,
compared to the three months ended May 31, 2010. The increase was
primarily due to increased depreciation related to information
technology, network infrastructure and software, partially offset
by a decrease in amortization of BPP intangible assets and
depreciation of principal office buildings in respect of which the
Company entered into a sale-leaseback arrangement.
Financial and Operating
Metrics
Below are Apollo Group’s unaudited financial data and operating
metrics for the third quarter of fiscal 2011 versus the prior-year
period.
Q3 2011 Q3 2010
Revenues (in thousands) Degree Seeking Gross Revenues
(1) $ 1,166,880 $ 1,261,258 Less: Discounts and other
(66,888 ) (60,441 ) Degree Seeking Net Revenues (1)
1,099,992 1,200,817 Non-degree Seeking Revenues (2) 11,365 12,502
Other, net of discounts (3) 124,480 124,085
$ 1,235,837 $ 1,337,404
Revenue
by Degree Type (in thousands) (1) Associates $ 356,344 $
464,373 Bachelors 592,258 551,808 Masters 194,365 221,718 Doctoral
23,913 23,359 Less: Discounts and other (66,888 )
(60,441 ) $ 1,099,992 $ 1,200,817
Degreed Enrollment (rounded to hundreds) (4)
Associates 147,900 212,100 Bachelors 184,500 186,400 Masters 58,500
70,400 Doctoral 7,500 7,600
398,400 476,500
Degree Seeking
Gross Revenues per Degreed Enrollment (1), (4) Associates $
2,409 $ 2,189 Bachelors 3,210 2,960 Masters 3,322 3,149 Doctoral
3,188 3,074 All degrees (after discounts) $ 2,761 $ 2,520
New Degreed Enrollment (rounded to hundreds) (5)
Associates 23,400 50,200 Bachelors 24,000 31,700 Masters 7,900
11,300 Doctoral 700 900 56,000
94,100
(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, Apollo
Global - Other and other.
(4) 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
(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); and
• students participating in certain
certificate programs of at least 18 credits with some course
applicability into a related degree program.
(5) 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.
Unaudited First Nine Months of Fiscal
2011 Results of Operations
Consolidated net revenue for the nine months ended May 31, 2011,
was $3.6 billion, a 1.5% decrease from the comparable period of
fiscal 2010. The decrease in consolidated net revenue was primarily
attributable to a 6.6% decrease in University of Phoenix's average
Degreed Enrollment in the first nine months of fiscal year 2011
compared to the first nine months of fiscal year 2010, partially
offset by selective tuition price and other fee changes at
University of Phoenix. The Company reported income from continuing
operations attributable to Apollo Group of $381.3 million, or $2.66
per share, (143.2 million diluted weighted average shares
outstanding), and $520.9 million, or $3.37 per share, (154.5
million diluted weighted average shares outstanding) for the nine
months ended May 31, 2011, and May 31, 2010, respectively.
Results for the nine months ended May 31, 2011 contain special
items that include goodwill and other intangibles impairment
charges of $219.9 million for the BPP subsidiary of Apollo Global
($188.3 million net of the portion attributable to noncontrolling
interests), a $4.5 million charge for accrued incremental
post-judgment interest and future estimated legal costs related to
a securities class action lawsuit (Policeman’s Annuity and Benefit
Fund of Chicago), and a $3.8 million restructuring charge
associated with a strategic reduction in force, primarily at
University of Phoenix. The Company recorded a tax benefit of $7.7
million, net of noncontrolling interests, associated with these
charges, along with a tax benefit of $9.6 million resulting from
the resolution with the Internal Revenue Service regarding the
deductibility of payments made to settle a lawsuit in fiscal 2010.
Results for the nine months ended May 31, 2010 included a goodwill
impairment charge of $8.7 million ($7.5 million net of the portion
attributable to noncontrolling interest), a $177.1 million pre-tax
charge ($106.8 million net of tax) representing an accrual related
to the securities class action lawsuit mentioned above, and a tax
benefit of $11.4 million resulting from the settlement of disputed
tax issues with the Internal Revenue Service. The Company did not
record a net tax benefit associated with the goodwill impairment in
either period, as it is not deductible for tax purposes.
Excluding these special items, income from continuing operations
attributable to Apollo Group for the nine months ended May 31, 2011
was $560.6 million, or $3.91 per share, compared to income from
continuing operations attributable to Apollo Group of $623.8
million, or $4.04 per share, for the nine months ended May 31,
2010. (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 May 31, 2011, the Company’s cash and cash equivalents,
excluding restricted cash, totaled $1,426.3 million as compared to
$1,284.8 million as of August 31, 2010. The increase is
attributable to cash generated from operations, a decrease in
restricted cash, and proceeds from the sale-leaseback of the
Company’s principal office buildings in Phoenix, Arizona, partially
offset by repayments on borrowings, share repurchases and capital
expenditures. Restricted cash and cash equivalents (including
long-term) decreased by $194.3 million compared to August 31, 2010,
primarily due to the return of funds associated with the release of
the Company’s cash-collateralized letter of credit in the amount of
approximately $126 million in connection with a previous program
review of University of Phoenix by the U.S. Department of
Education.
At May 31, 2011, accounts receivable decreased to $227.2 million
from $264.4 million at August 31, 2010. Excluding accounts
receivable and the associated net revenue for Apollo Global, the
Company’s days sales outstanding (“DSO”) was 23 days at May 31,
2011, compared to 30 days at August 31, 2010 and May 31, 2010. The
decrease in DSO versus a year ago is primarily attributable to
reductions in gross accounts receivable as a result of decreases in
New Degreed Enrollment, a shift in the mix of students from
associates to higher degree-level programs, and improvements in
student retention, partially due to the full implementation of
University Orientation. Improved collection rates at University of
Phoenix also contributed to the decrease.
Total debt outstanding (including short-term borrowings and the
current portion of long-term debt) decreased by $389.1 million to
$195.3 million at May 31, 2011, from $584.4 million at August 31,
2010. The decrease is due to the repayment of U.S. denominated
borrowings on the Company’s $500 million credit facility.
Share Repurchases
The Company repurchased approximately 4.1 million and 10.6
million shares of its common stock at a weighted average purchase
price of $40.26 and $39.48 per share for a total expenditure of
$167.3 million and $418.7 million during the three and nine months
ended May 31, 2011, respectively. At May 31, 2011, $11.8 million
was recorded in accrued liabilities in the Condensed Consolidated
Balance Sheets for repurchased shares that settled subsequent to
May 31, 2011. As of May 31, 2011, approximately $357.7 million
remained available under the Company's current share repurchase
authorization.
Business Outlook
The Company offers the following commentary regarding the
outlook for fiscal 2011 and fiscal 2012 based on the business
trends observed during the third quarter of fiscal 2011, as well as
management’s current expectations of future trends, which could
change.
Fiscal 2011:
- Consolidated net revenue of $4.65-$4.75
billion; and
- Operating income, excluding the impact
of special items, of $1.15-$1.20 billion.
Fiscal 2012:
- Consolidated net revenue of $4.00-$4.25
billion; and
- Operating income, excluding the impact
of special items, of $675-$800 million.
Conference Call
Information
The Company will hold a conference call to discuss these
earnings results at 5:00 p.m. Eastern, 2:00 p.m. Phoenix time,
today, Thursday, June 30, 2011. The call may be accessed by dialing
(877) 292-6888 (domestic) or (973) 200-3381 (international) and
entering the conference ID number 71264066. 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 71264066
until July 9, 2011.
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
undergraduate, master’s and doctoral levels through its
subsidiaries: University of Phoenix, Apollo Global, Institute for
Professional Development and College for Financial Planning. The
Company's programs and services are provided in 40 states and the
District of Columbia; Puerto Rico; Latin America; and Europe, as
well as online throughout the world.
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 or implied by such
statements due to various factors, including without limitation (i)
changes in the overall U.S. or global economy, (ii) 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 in November 2010, (iii) the impact of recent changes in
the manner in which the Company evaluates and compensates its
counselors that advise and enroll students, (iv) 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, specifically, the impact on the
Company’s business of the operational and other changes necessary
to comply with the final program integrity regulations published by
the U.S. Department of Education on October 29, 2010, and the final
gainful employment regulations published by the Department on June
13, 2011, (v) 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 to remain in compliance with the
accrediting criteria of the relevant accrediting bodies, and (vi)
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 2010 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 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.
Apollo Group, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (Unaudited)
As
of May 31, August 31, ($ in
thousands)
2011 2010 ASSETS: Current
assets Cash and cash equivalents $ 1,426,346 $ 1,284,769
Restricted cash and cash equivalents 376,474 444,132 Accounts
receivable, net 227,171 264,377 Deferred tax assets, current
portion 148,052 166,549 Prepaid taxes 15,605 39,409 Other current
assets 47,215 38,031 Assets held for sale from discontinued
operations - 15,945
Total current
assets 2,240,863 2,253,212 Property and equipment, net 520,225
619,537 Long-term restricted cash and cash equivalents - 126,615
Marketable securities 5,946 15,174 Goodwill 132,872 322,159
Intangible assets, net 123,525 150,593 Deferred tax assets, less
current portion 112,643 99,071 Other assets 15,778
15,090
Total assets $ 3,151,852 $
3,601,451
LIABILITIES AND SHAREHOLDERS'
EQUITY: Current liabilities Short-term borrowings and
current portion of long-term debt $ 24,153 $ 416,361 Accounts
payable 60,071 90,830 Accrued liabilities 438,205 375,461 Student
deposits 404,155 493,245 Deferred revenue 311,445 359,724 Other
current liabilities 40,730 53,416 Liabilities held for sale from
discontinued operations - 4,474
Total current liabilities 1,278,759 1,793,511 Long-term debt
171,121 168,039 Deferred tax liabilities 32,882 38,875 Other
long-term liabilities 275,732 212,286
Total liabilities 1,758,494 2,212,711
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
82,572 46,865 Apollo Group Class A treasury stock, at cost
(2,805,711 ) (2,407,788 ) Retained earnings 4,131,860 3,748,045
Accumulated other comprehensive loss (23,940 )
(31,176 )
Total Apollo shareholders' equity 1,384,885
1,356,050
Noncontrolling interests
8,473 32,690
Total equity
1,393,358 1,388,740
Total liabilities and
shareholders' equity $ 3,151,852 $ 3,601,451
Apollo Group, Inc. and Subsidiaries Condensed
Consolidated Statements of Income (Unaudited)
Three Months Ended May 31, %
of Revenue 2011 2010 2011 2010 (in
thousands, except per share data)
Net revenue $ 1,235,837
$ 1,337,404 100.0 % 100.0 %
Costs and
expenses: Instructional and student advisory 458,145 441,700
37.1 % 33.0 % Marketing 161,034 151,668 13.0 % 11.3 % Admissions
advisory 99,923 116,344 8.1 % 8.7 % General and administrative
87,857 75,362 7.1 % 5.6 % Provision for uncollectible accounts
receivable 39,217 72,011 3.2 % 5.4 % Depreciation and amortization
41,125 36,701 3.3 % 2.8 % Estimated litigation loss 2,048 132,600
0.2 % 9.9 % Goodwill and other intangibles impairment -
8,712 - 0.7 %
Total costs and
expenses 889,349 1,035,098 72.0 %
77.4 %
Operating income 346,488 302,306 28.0 % 22.6 %
Interest income 867 827 0.1 % 0.1 % Interest expense (2,383 )
(1,979 ) (0.2 %) (0.2 %) Other, net (1,862 ) (1,312 )
(0.1 %) (0.1 %)
Income from continuing operations before income
taxes 343,110 299,842 27.8 % 22.4 % Provision for income taxes
(130,385 ) (122,390 ) (10.6 %) (9.1 %)
Income from
continuing operations 212,725 177,452 17.2 % 13.3 % Income from
discontinued operations, net of tax 540 2,084
0.1 % 0.1 %
Net income 213,265 179,536 17.3 % 13.4 %
Net income attributable to noncontrolling interests
(825 ) (253 ) (0.1 %) -
Net income attributable to
Apollo $ 212,440 $ 179,283 17.2 % 13.4 %
Earnings per share - Basic: Continuing operations
attributable to Apollo $ 1.52 $ 1.17 Discontinued operations
attributable to Apollo - 0.02
Basic
income per share attributable to Apollo $ 1.52 $ 1.19
Earnings per share - Diluted: Continuing
operations attributable to Apollo $ 1.51 $ 1.16 Discontinued
operations attributable to Apollo - 0.02
Diluted income per share attributable to Apollo $
1.51 $ 1.18
Basic weighted average shares
outstanding 139,856 151,127
Diluted weighted average shares outstanding 140,343
152,291
Apollo Group, Inc. and
Subsidiaries Condensed Consolidated Statements of Income
(Unaudited)
Nine
Months Ended May 31, % of Revenue 2011
2010 2011 2010 (in thousands, except per share
data)
Net revenue $ 3,610,901 $ 3,666,399
100.0 % 100.0 %
Costs and expenses: Instructional and
student advisory 1,335,601 1,287,833 37.0 % 35.1 % Marketing
484,392 444,593 13.4 % 12.1 % Admissions advisory 315,958 349,767
8.8 % 9.6 % General and administrative 257,075 214,821 7.1 % 5.9 %
Provision for uncollectible accounts receivable 141,666 208,593 3.9
% 5.7 % Depreciation and amortization 117,369 106,625 3.3 % 2.9 %
Estimated litigation loss 4,503 177,100 0.1 % 4.8 % Goodwill and
other intangibles impairment 219,927 8,712 6.1 % 0.2 %
Restructuring 3,846 - 0.1 % -
Total costs and expenses 2,880,337
2,798,044 79.8 % 76.3 %
Operating income 730,564
868,355 20.2 % 23.7 % Interest income 2,635 2,284 0.1 % 0.1 %
Interest expense (6,207 ) (8,107 ) (0.2 %) (0.2 %) Other, net
(1,603 ) (2,061 ) - (0.1 %)
Income from
continuing operations before income taxes 725,389 860,471 20.1
% 23.5 % Provision for income taxes (376,016 )
(341,435 ) (10.4 %) (9.3 %)
Income from continuing
operations 349,373 519,036 9.7 % 14.2 % Income (loss) from
discontinued operations, net of tax 2,487
(8,854 ) - (0.3 %)
Net income 351,860 510,182 9.7 %
13.9 %
Net loss attributable to noncontrolling interests
31,955 1,849 0.9 % 0.1 %
Net income
attributable to Apollo $ 383,815 $ 512,031 10.6 %
14.0 %
Earnings (loss) per share - Basic: Continuing
operations attributable to Apollo $ 2.67 $ 3.40 Discontinued
operations attributable to Apollo 0.02 (0.06 )
Basic income per share attributable to Apollo $ 2.69
$ 3.34
Earnings (loss) per share -
Diluted: Continuing operations attributable to Apollo $ 2.66 $
3.37 Discontinued operations attributable to Apollo 0.02
(0.06 )
Diluted income per share attributable to
Apollo $ 2.68 $ 3.31
Basic weighted
average shares outstanding 142,845 153,345
Diluted weighted average shares outstanding
143,222 154,506
Apollo Group, Inc. and
Subsidiaries Condensed Consolidated Statements of Cash Flows
From Continuing and Discontinued Operations (Unaudited)
Nine Months Ended May 31, 2011
2010 ($ in thousands)
Cash flows provided by (used in)
operating activities: Net income $ 351,860 $ 510,182
Adjustments to reconcile net income to net cash provided by
operating activities: Share-based compensation 50,453 46,236 Excess
tax benefits from share-based compensation (1,214 ) (6,427 )
Depreciation and amortization 117,369 108,033 Amortization of lease
incentives (10,523 ) (9,942 ) Impairment of discontinued operations
- 9,400 Goodwill and other intangibles impairment 219,927 8,712
Amortization of deferred gains on sale-leasebacks (1,491 ) (1,294 )
Non-cash foreign currency loss, net 1,767 931 Provision for
uncollectible accounts receivable 141,666 208,593 Estimated
litigation loss 4,503 177,100 Deferred income taxes (3,327 )
(69,571 ) Changes in certain assets and liabilities, excluding the
impact of disposition: Accounts receivable (81,215 ) (175,845 )
Prepaid taxes 21,218 35,203 Other assets (13,955 ) (8,223 )
Accounts payable and accrued liabilities 13,117 (59,413 ) Student
deposits (89,944 ) 897 Deferred revenue (60,763 ) 5,796 Other
liabilities 21,446 24,412
Net cash
provided by operating activities 680,894
804,780
Cash flows provided by (used in) investing
activities: Additions to property and equipment (119,726 )
(108,316 ) Maturities of marketable securities 10,000 - Change in
restricted cash and cash equivalents 194,273 (49,924 ) Proceeds
from sale-leaseback 169,018 - Proceeds from disposition
9,612 -
Net cash provided by (used in)
investing activities 263,177 (158,240 )
Cash flows provided by (used in) financing activities:
Payments on borrowings (425,325 ) (424,775 ) Proceeds from
borrowings 11,682 17,824 Issuance of Apollo Group Class A common
stock 10,240 18,209 Apollo Group Class A common stock purchased for
treasury (408,220 ) (341,161 ) Noncontrolling interest
contributions 6,875 2,460 Excess tax benefits from share-based
compensation 1,214 6,427
Net cash
used in financing activities (803,534 ) (721,016
) Exchange rate effect on cash and cash equivalents 1,040
(1,789 )
Net increase (decrease) in cash and cash
equivalents 141,577 (76,265 )
Cash and cash equivalents,
beginning of period 1,284,769 968,246
Cash and cash equivalents, end of period $ 1,426,346
$ 891,981
Supplemental disclosure of cash flow
information Cash paid for income taxes, net of refunds $
326,999 $ 356,570 Cash paid for interest $ 8,063 $ 5,292
Supplemental disclosure of non-cash investing and financing
activities Credits received for tenant improvements $ 12,047 $
16,026 Unsettled purchase of Class A common stock for treasury $
11,802 $ - Accrued purchases of property and equipment $ 6,585 $
9,190 Restricted stock units vested and released $ 3,614 $ 4,938
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,
2011 2010 2011 2010 (in
thousands, except per share data) Net income attributable to
Apollo, as reported $ 212,440 $ 179,283 $ 383,815 $ 512,031 Income
(loss) from discontinued operations, net of tax 540
2,084 2,487 (8,854 ) Income from
continuing operations attributable to Apollo 211,900 177,199
381,328 520,885 Reconciling items: Estimated litigation loss
(1) 2,048 132,600 4,503 177,100 Goodwill and other intangibles
impairment, net of noncontrolling interest (2) - 7,457 188,258
7,457 Restructuring (3) - -
3,846 - 2,048 140,057 196,607 184,557 Less:
tax effects, net of noncontrolling interest (801 ) (52,700 ) (7,715
) (70,328 ) Tax benefit from IRS settlement (4) (9,646 )
- (9,646 ) (11,356 ) Income from
continuing operations attributable to Apollo, adjusted to exclude
special items $ 203,501 $ 264,556 $ 560,574 $
623,758 Diluted income per share from continuing
operations attributable to Apollo, as reported $ 1.51 $ 1.16
$ 2.66 $ 3.37 Diluted income per share
from continuing operations attributable to Apollo, adjusted to
exclude special items $ 1.45 $ 1.74 $ 3.91 $
4.04 Diluted weighted average shares outstanding
140,343 152,291 143,222
154,506 (1) These charges represent estimated
losses associated with the Securities Class Action (Policeman's
Annuity and Benefit Fund of Chicago). (2) The $188.3 million charge
for the nine months ended May 31, 2011 represents impairments of
BPP’s goodwill and other intangible assets, net of noncontrolling
interest. The $7.5 million charge for the three and nine months
ended May 31, 2010 represents an impairment of ULA's goodwill, net
of noncontrolling interest. The Company did not record a tax
benefit associated with either goodwill impairment because the
goodwill is not deductible for tax purposes. (3) The $3.8 million
charge for the nine months ended May 31, 2011 represents a charge
associated with a strategic reduction in force at University of
Phoenix during the first quarter of fiscal year 2011. (4) The $9.6
million tax benefit for the three and nine months ended May 31,
2011 resulted from resolution with the Internal Revenue Service
regarding the deductibility of payments made to settle a lawsuit in
fiscal year 2010. The $11.4 million tax benefit during the nine
months ended May 31, 2010 resulted from a settlement of disputed
tax issues with the Internal Revenue Service during the first
quarter of fiscal year 2010.
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