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8-K - FORM 8-K - APOLLO EDUCATION GROUP INC | d242513d8k.htm |
Exhibit 99.1
Apollo Group, Inc.
News Release |
APOLLO GROUP, INC. REPORTS FISCAL 2011
FOURTH QUARTER AND YEAR END RESULTS
Phoenix, October 19, 2011 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, 2011.
We set out at the beginning of 2011 to implement leading-edge student protections, differentiate University of Phoenix, and expand our business, said Apollo Group Co-Chief Executive Officer Chas Edelstein. We are pleased with our progress in each of these areas, including enhancing our student-centric approach to admissions, launching University Orientation, investing in our learning platform, and advancing our plans to incorporate adaptive learning and connect education to careers.
Apollo Group Co-Chief Executive Officer and Apollo Global Chairman Greg Cappelli added, Through our focus on academic quality and innovation, we are aligning learning outcomes to student and employer needs and helping to bridge the workforce skills gap, one of the biggest issues facing our economy today. Our commitment is to support our students in achieving long-term success.
Unaudited Fourth Quarter of Fiscal 2011 Results of Operations
Consolidated net revenue for the fourth quarter of fiscal 2011 totaled $1,122.1 million, which represents a 10.9% decrease from the fourth quarter of fiscal 2010, principally due to lower enrollments at University of Phoenix, partially offset by selective tuition price and other fee changes and improving rates of student retention. For the quarter, University of Phoenix Degreed Enrollment decreased 19.1% to 380,800 compared with the prior year fourth quarter, primarily due to decreases in New Degreed Enrollment in recent quarters, including a 33.5% decrease in New Degreed Enrollment in the fourth quarter of fiscal 2011 compared with the prior year period. The Company believes the decline in New Degreed Enrollment was 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 included the manner in which admissions personnel and other employees are evaluated and compensated, the full implementation of University Orientation, and the Companys efforts to more effectively identify students who have a greater likelihood to succeed in University of Phoenixs educational programs.
The Company reported income from continuing operations attributable to Apollo Group for the three months ended August 31, 2011, of $188.6 million, or $1.37 per share (137.3 million weighted average diluted shares outstanding), compared to income from continuing operations attributable to Apollo Group of $47.5 million, or $0.32 per share (148.3 million weighted
average diluted shares outstanding) for the three months ended August 31, 2010. Results for the fourth quarters of fiscal 2011 and 2010 included a number of special items that are detailed below.
Results for the fourth quarter of fiscal 2011 included the following:
| Restructuring and other charges of $19.1 million associated with the Companys real estate rationalization plan. |
| Net credit of $16.5 million primarily attributable to an agreement in principle to settle the Policemans Annuity and Benefit Fund of Chicago securities class action lawsuit. |
| Settlement agreement reached with the Arizona Department of Revenue regarding apportionment of income for Arizona corporate income tax purposes. Based on the settlement, the Company has foregone its refund claims of $51.5 million, and has or will pay a total of $59.8 million through fiscal 2011. The Company recorded appropriate adjustments to its deferred taxes and, as a result, realized a $43 million tax benefit. |
| Tax benefit of $7.3 million associated with the closure of Meritus University. |
Results for the fourth quarter of fiscal 2010 included the following:
| Goodwill and other intangible asset impairment charges of $175.9 million for the BPP subsidiary of Apollo Global ($150.5 million net of the portion attributable to noncontrolling interests). The Company did not record a tax benefit associated with the goodwill impairment, as it is not deductible for tax purposes. |
| A $0.9 million charge representing an accrual for incremental post-judgment interest related to the Policemans Annuity and Benefit Fund of Chicago securities class action lawsuit. |
Excluding the items noted above, income from continuing operations attributable to Apollo Group for the three months ended August 31, 2011, was $139.6 million, or $1.02 per share, compared to income from continuing operations attributable to Apollo Group of $193.9 million, or $1.31 per share for the three months ended August 31, 2010. (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 decreased by $6.8 million, or 1.5%, to $438.5 million for the three months ended August 31, 2011, compared to the three months ended August 31, 2010. The decrease was primarily due to a reduction in faculty costs associated with lower University of Phoenix and Apollo Global enrollment, partially offset by investment in initiatives to more effectively support students and improve their educational outcomes. These initiatives have resulted in increased compensation expense related to certain student advisory and infrastructure support functions.
Marketing expenses decreased by $8.2 million, or 4.6%, to $171.0 million for the three months ended August 31, 2011, compared to the three months ended August 31, 2010. The decrease was primarily a result of a reduction in internet spending, partially offset by investments in non-internet branding.
2
Admissions advisory expenses decreased by $17.2 million, or 14.7%, to $99.4 million for the three months ended August 31, 2011, compared to the three months ended August 31, 2010. The decrease was a result of lower admissions advisory headcount, partially offset by higher average employee compensation costs.
General and administrative (G&A) expenses increased by $12.4 million, or 14.3%, to $98.7 million for the three months ended August 31, 2011, compared to the three months ended August 31, 2010. The increase was primarily attributable to nonrecurring costs to support the formation and independence of Nexus, an educational policy and research organization.
The provision for uncollectible accounts receivable (bad debt expense) decreased by $34.4 million, or 46.5%, to $39.6 million for the three months ended August 31, 2011, compared to the three months ended August 31, 2010. The decrease was primarily attributable to reductions in gross accounts receivable as a result of decreases in University of Phoenix enrollment, a shift in the mix of students from Associates to Bachelors degree level programs, and the full implementation of University Orientation, which has favorably impacted student retention rates. Improved collection rates at University of Phoenix, which were favorably impacted by ongoing business process improvements and an initiative to address the Companys oldest receivables, also contributed to the decrease.
Depreciation and amortization increased by $2.7 million, or 6.9%, to $41.6 million for the three months ended August 31, 2011, compared to the three months ended August 31, 2010. The increase was primarily due to capital expenditures in fiscal years 2010 and 2011 related to information technology, network infrastructure and software, partially offset by a decrease in amortization of BPP intangible assets.
3
Financial and Operating Metrics
Below are Apollo Groups unaudited financial data and operating metrics for the fourth quarter of fiscal 2011 versus the prior year period.
Q4 2011 | Q4 2010 | |||||||
Revenues (in thousands) |
||||||||
Degree Seeking Gross Revenues(1) |
$ | 1,099,572 | $ | 1,238,022 | ||||
Less: Discounts and other |
(63,486 | ) | (68,027 | ) | ||||
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Degree Seeking Net Revenues(1) |
1,036,086 | 1,169,995 | ||||||
Non-degree Seeking Revenue (2) |
12,730 | 13,445 | ||||||
Other, net of discounts(3) |
73,305 | 75,980 | ||||||
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$ | 1,122,121 | $ | 1,259,420 | |||||
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Revenue by Degree Type (in thousands)(1) |
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Associates |
$ | 320,985 | $ | 449,108 | ||||
Bachelors |
580,588 | 558,063 | ||||||
Masters |
174,451 | 207,101 | ||||||
Doctoral |
23,548 | 23,750 | ||||||
Less: Discounts and other |
(63,486 | ) | (68,027 | ) | ||||
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$ | 1,036,086 | $ | 1,169,995 | |||||
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Degreed Enrollment (rounded to hundreds)(4) |
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Associates |
136,300 | 200,800 | ||||||
Bachelors |
183,100 | 193,600 | ||||||
Masters |
54,000 | 68,700 | ||||||
Doctoral |
7,400 | 7,700 | ||||||
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380,800 | 470,800 | |||||||
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Degree Seeking Gross Revenues per Degreed Enrollment(1), (4) |
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Associates |
$ | 2,355 | $ | 2,237 | ||||
Bachelors |
3,171 | 2,883 | ||||||
Masters |
3,231 | 3,015 | ||||||
Doctoral |
3,182 | 3,084 | ||||||
All degrees (after discounts) |
$ | 2,721 | $ | 2,485 | ||||
New Degreed Enrollment (rounded to hundreds)(5) |
||||||||
Associates |
24,200 | 42,200 | ||||||
Bachelors |
27,200 | 36,200 | ||||||
Masters |
9,000 | 12,700 | ||||||
Doctoral |
800 | 900 | ||||||
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61,200 | 92,000 | |||||||
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(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 associates degree program returns for a bachelors degree or a bachelors degree graduate returns for a masters 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. |
4
2011 Fiscal Year Results of Operations
Consolidated net revenue for the fiscal year ended August 31, 2011, was $4.7 billion, a 3.9% decrease from fiscal year 2010. The decrease in consolidated net revenue was primarily attributable to a 9.2% decrease in University of Phoenixs average Degreed Enrollment in fiscal year 2011 compared to fiscal year 2010, principally due to a 40.3% decrease in aggregate New Degreed Enrollment for the four quarters of fiscal 2011, as compared to fiscal 2010. The decrease was partially offset by selective tuition price and other fee changes at University of Phoenix and improving rates of student retention.
The Company reported income from continuing operations attributable to Apollo Group of $569.9 million, or $4.02 per share, (141.8 million weighted average diluted shares outstanding) for the fiscal year ended August 31, 2011, compared to $568.4 million, or $3.72 per share, (152.9 million weighted average diluted shares outstanding) for the fiscal year ended August 31, 2010.
Results for the fiscal years 2011 and 2010 contained special items, which are detailed in the reconciliation of GAAP financial information to non-GAAP financial information tables of this press release.
Excluding these special items, income from continuing operations attributable to Apollo Group for the fiscal year ended August 31, 2011, was $700.2 million, or $4.94 per share, compared to income from continuing operations attributable to Apollo Group of $817.7 million, or $5.35 per share for the fiscal year ended August 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 August 31, 2011, the Companys cash and cash equivalents, excluding restricted cash, totaled $1,571.7 million, compared to $1,284.8 million as of August 31, 2010. The increase was primarily attributable to cash generated from operations, proceeds from the sale-leaseback of the Companys principal office buildings in Phoenix, Arizona, and the return of funds associated with the release of the Companys 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. The increase was partially offset by share repurchases and capital expenditures.
At August 31, 2011, accounts receivable decreased to $215.6 million from $264.4 million at August 31, 2010. Excluding accounts receivable and the associated net revenue for Apollo Global, the Companys days sales outstanding (DSO) was 23 days at August 31, 2011, compared to 30 days at August 31, 2010. The decrease in DSO versus a year ago was primarily attributable to reductions in gross accounts receivable as a result of decreases in University of Phoenix 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, also contributed to the decrease.
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Total debt outstanding (including short-term borrowings and the current portion of long-term debt) increased by $14.6 million to $599.0 million at August 31, 2011, from $584.4 million at August 31, 2010. Subsequent to August 31, 2011, the Company repaid $390.1 million of the amount drawn on its revolving credit facility.
Share Repurchases
The Company repurchased approximately 7.7 million and 18.3 million shares of its Class A common stock at a weighted average purchase price of $46.16 and $42.30 per share for a total expenditure of $357.0 million and $775.8 million during the three months and year ended August 31, 2011, respectively. As of August 31, 2011, approximately $0.7 million remained available under the Companys current share repurchase authorization. Subsequent to quarter end, the Board of Directors increased authorization for management to repurchase Class A common shares to the current total amount of $500 million.
Business Outlook
The Company offers the following commentary regarding the outlook for fiscal 2012 based on the business trends observed during the fourth quarter of fiscal 2011, as well as managements current expectations of future trends. The outlook reflects the acquisition of Carnegie Learning, Inc.
| Consolidated net revenue of $4.1-$4.3 billion; and |
| Operating income, excluding the impact of special items, of $655-$780 million. |
Conference Call Information
The Company will hold a conference call to discuss these earnings results at 8:00 a.m. Eastern, 5:00 a.m. Phoenix time, today, Wednesday, October 19, 2011. The call may be accessed by dialing (877) 292-6888 (domestic) or (973) 200-3381 (international) and entering the conference ID number 12862966. A live webcast of this event may be accessed by visiting the Companys website at www.apollogrp.edu. A replay of the call will be available on the website or by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering the conference ID number 12862966 until October 28, 2011.
About Apollo Group, Inc.
Apollo Group, Inc. is one of the worlds 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, masters and doctoral levels through its subsidiaries: University of Phoenix, Apollo Global, Institute for Professional Development and College for Financial Planning. The Companys 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 Companys website at www.apollogrp.edu.
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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 Groups 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 Companys University Orientation program to all eligible students in November 2010, (iii) the impact of 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 Companys eligibility to participate in or the manner in which it participates in U.S. federal student financial aid programs, (v) changes in the Companys business necessary to remain in compliance with existing, new, or amended 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 Groups 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 Companys 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 Companys 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 Companys performance on a consistent basis across time periods; and (iii) these non-GAAP measures are employed by the Companys 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.
7
Apollo Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
As of August 31, | ||||||||
($ in thousands) | 2011 | 2010 | ||||||
ASSETS: | ||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 1,571,664 | $ | 1,284,769 | ||||
Restricted cash and cash equivalents |
379,407 | 444,132 | ||||||
Accounts receivable, net |
215,567 | 264,377 | ||||||
Deferred tax assets, current portion |
124,137 | 166,549 | ||||||
Prepaid taxes |
35,629 | 39,409 | ||||||
Other current assets |
44,382 | 38,031 | ||||||
Assets held for sale from discontinued operations |
| 15,945 | ||||||
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Total current assets |
2,370,786 | 2,253,212 | ||||||
Property and equipment, net |
553,027 | 619,537 | ||||||
Restricted cash equivalents for collateralization of letter of credit |
| 126,615 | ||||||
Marketable securities |
5,946 | 15,174 | ||||||
Goodwill |
133,297 | 322,159 | ||||||
Intangible assets, net |
121,117 | 150,593 | ||||||
Deferred tax assets, less current portion |
70,949 | 99,071 | ||||||
Other assets |
14,584 | 15,090 | ||||||
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Total assets |
$ | 3,269,706 | $ | 3,601,451 | ||||
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LIABILITIES AND SHAREHOLDERS EQUITY: | ||||||||
Current liabilities |
||||||||
Short-term borrowings and current portion of long-term debt |
$ | 419,318 | $ | 416,361 | ||||
Accounts payable |
69,551 | 90,830 | ||||||
Accrued liabilities |
398,806 | 375,461 | ||||||
Student deposits |
424,045 | 493,245 | ||||||
Deferred revenue |
293,436 | 359,724 | ||||||
Other current liabilities |
50,131 | 53,416 | ||||||
Liabilities held for sale from discontinued operations |
| 4,474 | ||||||
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Total current liabilities |
1,655,287 | 1,793,511 | ||||||
Long-term debt |
179,691 | 168,039 | ||||||
Deferred tax liabilities |
26,400 | 38,875 | ||||||
Other long-term liabilities |
164,339 | 212,286 | ||||||
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Total liabilities |
2,025,717 | 2,212,711 | ||||||
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Commitments and contingencies |
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Shareholders equity |
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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 |
68,724 | 46,865 | ||||||
Apollo Group Class A treasury stock, at cost |
(3,125,175 | ) | (2,407,788 | ) | ||||
Retained earnings |
4,320,472 | 3,748,045 | ||||||
Accumulated other comprehensive loss |
(23,761 | ) | (31,176 | ) | ||||
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Total Apollo shareholders equity |
1,240,364 | 1,356,050 | ||||||
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Noncontrolling interests |
3,625 | 32,690 | ||||||
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Total equity |
1,243,989 | 1,388,740 | ||||||
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Total liabilities and shareholders equity |
$ | 3,269,706 | $ | 3,601,451 | ||||
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8
Apollo Group, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Three Months Ended August 31, | % of Revenue | |||||||||||||||
(in thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net revenue |
$ | 1,122,121 | $ | 1,259,420 | 100.0 | % | 100.0 | % | ||||||||
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Costs and expenses: |
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Instructional and student advisory |
438,486 | 445,301 | 39.1 | % | 35.4 | % | ||||||||||
Marketing |
170,970 | 179,150 | 15.2 | % | 14.2 | % | ||||||||||
Admissions advisory |
99,428 | 116,591 | 8.9 | % | 9.3 | % | ||||||||||
General and administrative |
98,676 | 86,295 | 8.8 | % | 6.8 | % | ||||||||||
Provision for uncollectible accounts receivable |
39,631 | 74,035 | 3.5 | % | 5.9 | % | ||||||||||
Depreciation and amortization |
41,637 | 38,939 | 3.7 | % | 3.1 | % | ||||||||||
Goodwill and other intangibles impairment |
| 175,858 | | % | 14.0 | % | ||||||||||
Restructuring and other charges |
19,067 | | 1.7 | % | | % | ||||||||||
Litigation (credit) charge, net |
(16,454 | ) | 882 | (1.5 | )% | | % | |||||||||
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Total costs and expenses |
891,441 | 1,117,051 | 79.4 | % | 88.7 | % | ||||||||||
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Operating income |
230,680 | 142,369 | 20.6 | % | 11.3 | % | ||||||||||
Interest income |
587 | 636 | | % | 0.1 | % | ||||||||||
Interest expense |
(2,724 | ) | (3,784 | ) | (0.2 | )% | (0.3 | )% | ||||||||
Other, net |
15 | 1,376 | | % | 0.1 | % | ||||||||||
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Income from continuing operations before income taxes |
228,558 | 140,597 | 20.4 | % | 11.2 | % | ||||||||||
Provision for income taxes |
(44,622 | ) | (122,628 | ) | (4.0 | )% | (9.8 | )% | ||||||||
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Income from continuing operations |
183,936 | 17,969 | 16.4 | % | 1.4 | % | ||||||||||
Loss from discontinued operations, net of tax |
| (6,570 | ) | | % | (0.5 | )% | |||||||||
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Net income |
183,936 | 11,399 | 16.4 | % | 0.9 | % | ||||||||||
Net loss attributable to noncontrolling interests |
4,676 | 29,572 | 0.4 | % | 2.4 | % | ||||||||||
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Net income attributable to Apollo |
$ | 188,612 | $ | 40,971 | 16.8 | % | 3.3 | % | ||||||||
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Earnings (loss) per share - Basic: |
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Continuing operations attributable to Apollo |
$ | 1.38 | $ | 0.32 | ||||||||||||
Discontinued operations attributable to Apollo |
| (0.04 | ) | |||||||||||||
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Basic income per share attributable to Apollo |
$ | 1.38 | $ | 0.28 | ||||||||||||
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Earnings (loss) per share - Diluted: |
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Continuing operations attributable to Apollo |
$ | 1.37 | $ | 0.32 | ||||||||||||
Discontinued operations attributable to Apollo |
| (0.04 | ) | |||||||||||||
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Diluted income per share attributable to Apollo |
$ | 1.37 | $ | 0.28 | ||||||||||||
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Basic weighted average shares outstanding |
136,594 | 147,829 | ||||||||||||||
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Diluted weighted average shares outstanding |
137,295 | 148,334 | ||||||||||||||
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9
Apollo Group, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Year Ended August 31, | % of Revenue | |||||||||||||||
(in thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net revenue |
$ | 4,733,022 | $ | 4,925,819 | 100.0 | % | 100.0 | % | ||||||||
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Costs and expenses: |
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Instructional and student advisory |
1,774,087 | 1,733,134 | 37.5 | % | 35.2 | % | ||||||||||
Marketing |
655,362 | 623,743 | 13.9 | % | 12.7 | % | ||||||||||
Admissions advisory |
415,386 | 466,358 | 8.8 | % | 9.5 | % | ||||||||||
General and administrative |
355,751 | 301,116 | 7.5 | % | 6.1 | % | ||||||||||
Provision for uncollectible accounts receivable |
181,297 | 282,628 | 3.8 | % | 5.7 | % | ||||||||||
Depreciation and amortization |
159,006 | 145,564 | 3.4 | % | 3.0 | % | ||||||||||
Goodwill and other intangibles impairment |
219,927 | 184,570 | 4.6 | % | 3.7 | % | ||||||||||
Restructuring and other charges |
22,913 | | 0.5 | % | | % | ||||||||||
Litigation (credit) charge, net |
(11,951 | ) | 177,982 | (0.3 | )% | 3.6 | % | |||||||||
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Total costs and expenses |
3,771,778 | 3,915,095 | 79.7 | % | 79.5 | % | ||||||||||
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|||||||||
Operating income |
961,244 | 1,010,724 | 20.3 | % | 20.5 | % | ||||||||||
Interest income |
3,222 | 2,920 | 0.1 | % | 0.1 | % | ||||||||||
Interest expense |
(8,931 | ) | (11,891 | ) | (0.2 | )% | (0.3 | )% | ||||||||
Other, net |
(1,588 | ) | (685 | ) | | % | | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations before income taxes |
953,947 | 1,001,068 | 20.2 | % | 20.3 | % | ||||||||||
Provision for income taxes |
(420,638 | ) | (464,063 | ) | (8.9 | )% | (9.4 | )% | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations |
533,309 | 537,005 | 11.3 | % | 10.9 | % | ||||||||||
Income (loss) from discontinued operations, net of tax |
2,487 | (15,424 | ) | | % | (0.3 | )% | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
535,796 | 521,581 | 11.3 | % | 10.6 | % | ||||||||||
Net loss attributable to noncontrolling interests |
36,631 | 31,421 | 0.8 | % | 0.6 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to Apollo |
$ | 572,427 | $ | 553,002 | 12.1 | % | 11.2 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings (loss) per share - Basic: |
||||||||||||||||
Continuing operations attributable to Apollo |
$ | 4.03 | $ | 3.74 | ||||||||||||
Discontinued operations attributable to Apollo |
0.02 | (0.10 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Basic income per share attributable to Apollo |
$ | 4.05 | $ | 3.64 | ||||||||||||
|
|
|
|
|||||||||||||
Earnings (loss) per share - Diluted: |
||||||||||||||||
Continuing operations attributable to Apollo |
$ | 4.02 | $ | 3.72 | ||||||||||||
Discontinued operations attributable to Apollo |
0.02 | (0.10 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Diluted income per share attributable to Apollo |
$ | 4.04 | $ | 3.62 | ||||||||||||
|
|
|
|
|||||||||||||
Basic weighted average shares outstanding |
141,269 | 151,955 | ||||||||||||||
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|
|
|
|||||||||||||
Diluted weighted average shares outstanding |
141,750 | 152,906 | ||||||||||||||
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|
|
10
Apollo Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows From Continuing and Discontinued Operations
(Unaudited)
Year Ended August 31, | ||||||||
($ in thousands) | 2011 | 2010 | ||||||
Cash flows provided by (used in) operating activities: |
||||||||
Net income |
$ | 535,796 | $ | 521,581 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Share-based compensation |
70,040 | 64,305 | ||||||
Excess tax benefits from share-based compensation |
(4,014 | ) | (6,648 | ) | ||||
Depreciation and amortization |
159,006 | 147,035 | ||||||
Amortization of lease incentives |
(18,822 | ) | (13,358 | ) | ||||
Impairment on discontinued operations |
| 9,400 | ||||||
Goodwill and other intangibles impairment |
219,927 | 184,570 | ||||||
Amortization of deferred gains on sale-leasebacks |
(2,221 | ) | (1,705 | ) | ||||
Non-cash foreign currency loss, net |
1,662 | 643 | ||||||
Provision for uncollectible accounts receivable |
181,297 | 282,628 | ||||||
Litigation (credit) charge, net |
(11,951 | ) | 177,982 | |||||
Restructuring and other charges |
22,913 | | ||||||
Deferred income taxes |
55,823 | (125,399 | ) | |||||
Changes in assets and liabilities, excluding the impact of acquisitions and business disposition: |
||||||||
Change in restricted cash and cash equivalents |
64,725 | (11,828 | ) | |||||
Accounts receivable |
(121,120 | ) | (265,996 | ) | ||||
Prepaid taxes |
(25,241 | ) | 10,421 | |||||
Other assets |
(9,900 | ) | 2,183 | |||||
Accounts payable and accrued liabilities |
4,851 | (44,653 | ) | |||||
Student deposits |
(70,120 | ) | 3,445 | |||||
Deferred revenue |
(79,488 | ) | 32,887 | |||||
Other liabilities |
(76,041 | ) | 65,749 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
897,122 | 1,033,242 | ||||||
|
|
|
|
|||||
Cash flows provided by (used in) investing activities: |
||||||||
Additions to property and equipment |
(162,573 | ) | (168,177 | ) | ||||
Acquisitions, net of cash acquired |
| (5,497 | ) | |||||
Maturities of marketable securities |
10,000 | 5,000 | ||||||
Proceeds from sale-leaseback, net |
169,018 | | ||||||
Proceeds from business disposition |
21,251 | | ||||||
Collateralization of letter of credit |
126,615 | (126,615 | ) | |||||
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
164,311 | (295,289 | ) | |||||
|
|
|
|
|||||
Cash flows provided by (used in) financing activities: |
||||||||
Payments on borrowings |
(437,925 | ) | (477,568 | ) | ||||
Proceeds from borrowings |
410,051 | 475,454 | ||||||
Apollo Group Class A common stock purchased for treasury |
(783,168 | ) | (446,398 | ) | ||||
Issuance of Apollo Group Class A common stock |
24,903 | 19,671 | ||||||
Noncontrolling interest contributions |
6,875 | 2,460 | ||||||
Excess tax benefits from share-based compensation |
4,014 | 6,648 | ||||||
|
|
|
|
|||||
Net cash used in financing activities |
(775,250 | ) | (419,733 | ) | ||||
|
|
|
|
|||||
Exchange rate effect on cash and cash equivalents |
712 | (1,697 | ) | |||||
|
|
|
|
|||||
Net increase in cash and cash equivalents |
286,895 | 316,523 | ||||||
Cash and cash equivalents, beginning of year |
1,284,769 | 968,246 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of year |
$ | 1,571,664 | $ | 1,284,769 | ||||
|
|
|
|
|||||
Supplemental disclosure of cash flow and non-cash information |
||||||||
Cash paid for income taxes, net of refunds |
$ | 464,701 | $ | 514,532 | ||||
Cash paid for interest |
$ | 10,972 | $ | 7,837 | ||||
Capital lease additions |
$ | 31,818 | $ | 2,372 | ||||
Credits received for tenant improvements |
$ | 25,538 | $ | 17,372 | ||||
Restricted stock units vested and released |
$ | 21,470 | $ | 19,868 |
11
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, | |||||||||||||||
(in thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net income attributable to Apollo, as reported |
$ | 188,612 | $ | 40,971 | $ | 572,427 | $ | 553,002 | ||||||||
(Loss) income from discontinued operations, net of tax(1) |
| (6,570 | ) | 2,487 | (15,424 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations attributable to Apollo |
188,612 | 47,541 | 569,940 | 568,426 | ||||||||||||
Reconciling items: |
||||||||||||||||
Goodwill and other intangibles impairment, net of noncontrolling interest(2) |
| 150,535 | 188,258 | 157,992 | ||||||||||||
Restructuring and other charges(3) |
19,067 | | 22,913 | | ||||||||||||
Litigation (credit) charge, net(4) |
(16,454 | ) | 882 | (11,951 | ) | 177,982 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
2,613 | 151,417 | 199,220 | 335,974 | |||||||||||||
Less: tax effects, net of noncontrolling interest |
(1,022 | ) | (5,035 | ) | (8,737 | ) | (75,363 | ) | ||||||||
Tax benefit from sales apportionment resolution(5) |
(43,319 | ) | | (43,319 | ) | | ||||||||||
Tax benefit from Meritus University closure(6) |
(7,306 | ) | | (7,306 | ) | | ||||||||||
Tax benefit from IRS settlement(7) |
| | (9,646 | ) | (11,356 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations attributable to Apollo, adjusted to exclude special items |
$ | 139,578 | $ | 193,923 | $ | 700,152 | $ | 817,681 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted income per share from continuing operations attributable to Apollo, as reported |
$ | 1.37 | $ | 0.32 | $ | 4.02 | $ | 3.72 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted income per share from continuing operations attributable to Apollo, adjusted to exclude special items |
$ | 1.02 | $ | 1.31 | $ | 4.94 | $ | 5.35 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted average shares outstanding |
137,295 | 148,334 | 141,750 | 152,906 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | The loss from discontinued operations, net of tax for the year ended August 31, 2010 includes a $9.4 million goodwill impairment charge. The Company did not record an associated tax benefit because the goodwill is not deductible for tax purposes. |
(2) | The charges for the year ended August 31, 2011 and the three months ended August 31, 2010 represent impairments of BPPs goodwill and other intangibles, net of noncontrolling interests. The charge for the year ended August 31, 2010 also includes an impairment of ULAs goodwill recorded in the third quarter of fiscal year 2010, net of noncontrolling interest. The Company did not record a tax benefit associated with the goodwill impairments because the goodwill is not deductible for tax purposes. |
(3) | Restructuring and other charges for the three months ended August 31, 2011 represents charges associated with a real estate rationalization plan. The charges for the year ended August 31, 2011 also includes costs associated with a strategic reduction in force at University of Phoenix during the first quarter of fiscal year 2011. |
(4) | The $16.5 million and $12.0 million credits for the three and twelve months ended August 31, 2011 are principally the result of our agreement in principle to settle the Policemans Annuity and Benefit Fund of Chicago securities class action lawsuit. This was partially offset in both periods by a charge recorded in the fourth quarter of fiscal year 2011 associated with another legal matter. The charges for the three and twelve months ended August 31, 2010 represent estimated losses associated with the Policemans Annuity and Benefit Fund of Chicago securities class action lawsuit. |
(5) | The $43.3 million tax benefit for the three months and year ended August 31, 2011 resulted from our resolution with the Arizona Department of Revenue regarding the apportionment of income for Arizona corporate income tax purposes. |
(6) | The $7.3 million tax benefit for the quarter and fiscal year ended August 31, 2011 represents a benefit associated with the closure of Meritus University. |
(7) | The $9.6 million tax benefit for the year ended August 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 year ended August 31, 2010 resulted from a settlement of disputed tax issues with the Internal Revenue Service during the first quarter of fiscal year 2010. |
12
Investor Relations Contacts:
Beth Coronelli ~ (312) 660-2059 ~ beth.coronelli@apollogrp.edu
Jeremy Davis ~ (312) 660-2071 ~ jeremy.davis@apollogrp.edu
Media Contact:
Media Relations Hotline ~ (602) 254-0086 ~ media@apollogrp.edu
13