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Apollo Group, Inc. Reports Fiscal Year 2012 Third Quarter Results

PHOENIX--(BUSINESS WIRE)--Jun. 25, 2012-- Apollo Group, Inc. (NASDAQ: APOL) (“Apollo Group,” “Apollo” or the “Company”) today reported financial results for the three and nine months ended May 31, 2012.

Third Quarter 2012 Highlights

  • Net revenue of $1,130.8 million, with net income attributable to Apollo of $134.0 million
  • Earnings per share attributable to Apollo of $1.13 per share, or $1.20 per share excluding special items
  • University of Phoenix Degreed Enrollment at 346,300 and New Degreed Enrollment at 51,500
  • Launched initial release of Phoenix Career Services℠, an innovative approach, including an online career portal, to support student success and the Company’s commitment to connect education to careers

“We are focused on delivering the best possible experience and service to support working adults, to address workforce needs, and to strengthen the connection to careers for our students,” said Apollo Group Co-Chief Executive Officer Chas Edelstein. “Evaluating key touch points, we are creating programs and support services that allow our students to focus on learning, experiencing achievements along the way to help inspire them and enhance their long-term outcomes.”

Apollo Group Co-Chief Executive Officer and Apollo Global Chairman Greg Cappelli added, “We are committed to being part of the solution to empower our country by providing access to affordable education and helping students develop the skills they need to succeed. We are investing in innovation to create new and better ways, enhanced by technology, to support adult learners and to connect our students' academic path to their career aspirations.”

Unaudited Third Quarter of Fiscal Year 2012 Results of Operations

Net revenue for the third quarter of fiscal year 2012 totaled $1,130.8 million, which represents an 8.5% decrease compared to the third quarter of fiscal year 2011. The decrease was the result of a 9.1% decrease in University of Phoenix net revenue, due principally to lower University of Phoenix enrollment, partially offset by selective tuition price and other fee changes. For the quarter, University of Phoenix Degreed Enrollment decreased 13.1% to 346,300. New Degreed Enrollment decreased 8.0%, or 5.3% adjusting for available start dates, as compared to the third quarter of fiscal year 2011.

The Company reported income from continuing operations attributable to Apollo Group for the three months ended May 31, 2012, of $134.0 million, or $1.13 per share (118.8 million weighted average diluted shares outstanding), compared to income from continuing operations attributable to Apollo Group of $211.9 million, or $1.51 per share (140.3 million weighted average diluted shares outstanding) for the three months ended May 31, 2011.

Results for the third quarter of fiscal year 2012 included the following:

  • Restructuring and other charges of $7.6 million ($5.4 million net of tax and the portion attributable to noncontrolling interests) associated with a series of restructuring activities to reengineer business processes and refine the Company’s educational delivery structure in order to increase operating efficiencies and effectiveness, and enhance students’ educational experience and outcomes.
  • Litigation charge of $4.7 million ($2.9 million net of tax) reflecting a rejected settlement offer made by the Company and estimated future legal costs that may be incurred in connection with that legal matter.

Results for the third quarter of fiscal year 2011 included the following:

  • A $2.0 million charge ($1.2 million net of tax) related to the Policeman’s Annuity and Benefit Fund of Chicago securities class action lawsuit.
  • A $9.6 million tax benefit resulting from the resolution with the Internal Revenue Service regarding the deductibility of payments made to settle a lawsuit in fiscal year 2010.

Excluding the special items noted above, income from continuing operations attributable to Apollo Group for the three months ended May 31, 2012, was $142.3 million, or $1.20 per share, compared to income from continuing operations attributable to Apollo Group of $203.5 million, or $1.45 per share for the three months ended May 31, 2011. (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 increased $12.0 million, or 2.6%, to $470.1 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011, which represents a 450 basis point increase as a percentage of net revenue. The expense increase was primarily related to the Company’s initiatives, including technology, to more effectively support students and improve their educational outcomes. This was partially offset by a decrease in costs that are more variable in nature such as faculty and certain advisory functions.

Marketing decreased $2.2 million, or 1.3%, to $158.9 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011, which represents a 110 basis point increase as a percentage of net revenue. The decrease in expense was principally attributable to lower advertising costs, offset by costs attributable to establishing relationships with employers and community colleges.

Admissions advisory decreased $4.6 million, or 4.6%, to $95.3 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011, which represents a 30 basis point increase as a percentage of net revenue. While admissions advisory headcount decreased, the cost savings was partially offset by higher average employee compensation costs.

General and administrative increased $0.2 million, or 0.3%, to $88.1 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011, which represents a 70 basis point increase as a percentage of net revenue.

Depreciation and amortization increased $4.0 million, or 9.8%, to $45.2 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011, which represents a 70 basis point increase as a percentage of net revenue. The increase was principally attributable to $3.1 million of intangible asset amortization in the third quarter of fiscal year 2012 as a result of acquiring Carnegie Learning in the first quarter of fiscal year 2012.

Provision for uncollectible accounts receivable (“bad debt expense”) decreased $3.8 million, or 9.7%, to $35.4 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011, which represents a 10 basis point decrease as a percentage of net revenue. The decrease was primarily attributable to reductions in gross accounts receivable principally resulting from decreases in University of Phoenix Degreed Enrollment.

Financial and Operating Metrics

Below are Apollo Group’s unaudited financial data and operating metrics for the third quarter of fiscal year 2012 versus the prior-year period.

    Q3 2012   Q3 2011
Revenues (in thousands)
Degree Seeking Gross Revenues(1) $ 1,063,755 $ 1,166,880
Less: Discounts and other (65,173 ) (66,888 )
Degree Seeking Net Revenues(1) 998,582 1,099,992
Non-degree Seeking Revenues(2) 10,648 11,365
Other, net of discounts(3) 121,578   124,480  
$ 1,130,808   $ 1,235,837  
Revenue by Degree Type (in thousands)(1)
Associate’s $ 269,566 $ 356,344
Bachelor’s 600,823 592,258
Master’s 170,041 194,365
Doctoral 23,325 23,913
Less: Discounts and other (65,173 ) (66,888 )
$ 998,582   $ 1,099,992  
Degreed Enrollment (rounded to hundreds)(4)
Associate’s 112,100 147,900
Bachelor’s 178,300 184,500
Master’s 48,900 58,500
Doctoral 7,000   7,500  
346,300   398,400  
Degree Seeking Gross Revenues per Degreed Enrollment(1), (4)
Associate’s $ 2,405 $ 2,409
Bachelor’s 3,370 3,210
Master’s 3,477 3,322
Doctoral 3,332 3,188
All degrees (after discounts) $ 2,884 $ 2,761
New Degreed Enrollment (rounded to hundreds)(5)
Associate’s 21,400 23,400
Bachelor’s 22,100 24,000
Master’s 7,400 7,900
Doctoral 600   700  
51,500   56,000  
 
(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, 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 Year 2012 Results of Operations

Net revenue for the first nine months of fiscal year 2012 totaled $3.3 billion, which represents a 9.2% decrease compared to the first nine months of fiscal year 2011. The decrease in net revenue was primarily attributable to University of Phoenix’s 9.7% decrease in net revenue principally due to lower University of Phoenix enrollment, partially offset by selective tuition price and other fee changes. In the first nine months of fiscal year 2012, University of Phoenix's Average Degreed Enrollment decreased 15.0% as compared to the first nine months of fiscal year 2011. The Company reported income from continuing operations attributable to Apollo Group for the nine months ended May 31, 2012, of $347.2 million, or $2.77 per share, (125.3 million weighted average diluted shares outstanding), and $381.3 million, or $2.66 per share, (143.2 million weighted average diluted shares outstanding) for the nine months ended May 31, 2011.

Results for the first nine months of fiscal year 2012 included the following:

  • Restructuring and other charges of $29.3 million ($18.7 million net of tax and the portion attributable to noncontrolling interests) primarily associated with a real estate rationalization plan and other restructuring activities to reengineer business processes and refine the Company’s educational delivery structure in order to increase operating efficiencies and effectiveness, and enhance our students’ educational experience and outcomes.
  • Goodwill and other intangible asset impairment charges of $16.8 million at the UNIACC subsidiary of Apollo Global ($14.4 million net of the portion attributable to noncontrolling interests). The Company did not record a tax benefit associated with the goodwill and other intangible asset impairment, as they are not deductible for tax purposes.
  • Litigation charge of $4.7 million ($2.9 million net of tax) reflecting a rejected settlement offer made by the Company and estimated future legal costs that may be incurred in connection with that legal matter.

Results for the first nine months of fiscal year 2011 included the following:

  • Goodwill and other intangible asset impairment charges of $219.9 million for the BPP subsidiary of Apollo Global ($188.3 million net of the portion attributable to noncontrolling interests). The Company did not record a tax benefit associated with the goodwill portion of the impairment charge, as it is not deductible for tax purposes.
  • $4.5 million of charges related to the Policeman’s Annuity and Benefit Fund of Chicago securities class action lawsuit.
  • Restructuring and other charges of $3.8 million associated with a strategic reduction in force, primarily at University of Phoenix.
  • A $9.6 million tax benefit resulting from the resolution with the Internal Revenue Service regarding the deductibility of payments made to settle a lawsuit in fiscal year 2010 and $7.7 million of tax benefits, net of noncontrolling interests, associated with the charges noted above.

Excluding the special items noted above, income from continuing operations attributable to Apollo Group for the nine months ended May 31, 2012, was $383.3 million, or $3.06 per share, compared to income from continuing operations attributable to Apollo Group of $560.6 million, or $3.91 per share for the nine months ended May 31, 2011. (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, 2012, the Company’s cash and cash equivalents, excluding restricted cash, totaled $602.1 million, compared to $1,571.7 million as of August 31, 2011. The decrease was primarily attributable to share repurchases, payments on borrowings, capital expenditures, and the purchase of Carnegie Learning, partially offset by cash generated from operations.

As of May 31, 2012, accounts receivable decreased to $191.7 million from $215.6 million at August 31, 2011. Excluding accounts receivable and the related net revenue for Apollo Global, the Company’s days sales outstanding was 20 days as of May 31, 2012, as compared to 23 days as of August 31, 2011 and May 31, 2011.

Total debt outstanding (including short-term borrowings and the current portion of long-term debt) decreased by $473.0 million to $126.0 million as of May 31, 2012, from $599.0 million as of August 31, 2011 due to the repayment of borrowings.

Share Repurchases

The Company repurchased approximately 9.0 million and 17.1 million shares of its common stock at a weighted average purchase price of $36.41 and $43.02 per share for a total cost of $329.0 million and $736.0 million during the three and nine months ended May 31, 2012, respectively. Additionally, subsequent to May 31, 2012, the Company repurchased approximately 0.5 million shares at a total cost of $15.0 million, resulting in $48.5 million remaining of the current share repurchase authorization.

Business Outlook

The Company offers the following commentary regarding the outlook for fiscal year 2012 based on the business trends observed during the third quarter of fiscal year 2012, as well as management’s current expectations of future trends.

  • Net revenue of $4.2-$4.3 billion; and
  • Operating income, excluding the impact of special items, of $700-$740 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, Monday, June 25, 2012.

Dial-In Numbers:

877-292-6888 (Domestic)
973-200-3381 (International)
Conference ID: 83919479

A live webcast of this event may be accessed by visiting the Company’s website at www.apollogrp.edu. A webcast replay will be available approximately one hour following the conclusion of the call at the same link.

A telephone replay will be available approximately two hours following the conclusion of the call until July 9, 2012.

Dial-In Numbers:

855-859-2056 (Domestic)
404-537-3406 (International)
Conference ID: 83919479

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 offers programs and services throughout the United States and in 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) the impact of increased competition from traditional public universities and proprietary educational institutions, (iii) the impact of changes in marketing channels and other recruiting practices to better identify students who are more likely to succeed at University of Phoenix, (iv) the impact of the Company’s restructuring initiatives to increase operating efficiency and better align its operations with its business strategy, (v) changes in enrollment or student mix, (vi) the impact of the Company’s initiatives to improve the student experience, (vii) changes in law or regulation affecting the Company's eligibility to participate in or the manner in which it participates in U.S. federal and state student financial aid programs, and (viii) changes in the Company's 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. 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 2011 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 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
($ in thousands) May 31, 2012     August 31, 2011
ASSETS:
Current assets
Cash and cash equivalents $ 602,144 $ 1,571,664
Restricted cash and cash equivalents 353,884 379,407
Accounts receivable, net 191,665 215,567
Prepaid taxes 35,595 35,629
Deferred tax assets, current portion 58,084 124,137
Other current assets 42,732   44,382  
Total current assets 1,284,104 2,370,786
Property and equipment, net 559,497 553,027
Marketable securities 5,946 5,946
Goodwill 148,218 133,297
Intangible assets, net 160,562 121,117
Deferred tax assets, less current portion 86,784 70,949
Other assets 24,833   14,584  
Total assets $ 2,269,944   $ 3,269,706  
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities
Short-term borrowings and current portion of long-term debt $ 35,827 $ 419,318
Accounts payable 58,710 69,551
Student deposits 387,188 424,045
Deferred revenue 260,167 293,436
Accrued and other current liabilities 311,219   448,937  
Total current liabilities 1,053,111 1,655,287
Long-term debt 90,167 179,691
Deferred tax liabilities 21,599 26,400
Other long-term liabilities 203,637   164,339  
Total liabilities 1,368,514   2,025,717  
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 103,528 68,724
Apollo Group Class A treasury stock, at cost (3,835,973 ) (3,125,175 )
Retained earnings 4,667,702 4,320,472
Accumulated other comprehensive loss (31,673 ) (23,761 )
Total Apollo shareholders’ equity 903,688   1,240,364  
Noncontrolling (deficit) interests (2,258 ) 3,625  
Total equity 901,430   1,243,989  
Total liabilities and shareholders’ equity $ 2,269,944   $ 3,269,706  
 
 
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
  Three Months Ended May 31,     % of Net Revenue
2012   2011 2012   2011
(In thousands, except per share data)
Net revenue $ 1,130,808   $ 1,235,837   100.0 % 100.0 %
Costs and expenses:
Instructional and student advisory 470,112 458,145 41.6 % 37.1 %
Marketing 158,881 161,034 14.1 % 13.0 %
Admissions advisory 95,290 99,923 8.4 % 8.1 %
General and administrative 88,084 87,857 7.8 % 7.1 %
Depreciation and amortization 45,155 41,125 4.0 % 3.3 %
Provision for uncollectible accounts receivable 35,430 39,217 3.1 % 3.2 %
Restructuring and other charges 7,577 0.7 % %
Litigation charge 4,725   2,048   0.4 % 0.2 %
Total costs and expenses 905,254   889,349   80.1 % 72.0 %
Operating income 225,554 346,488 19.9 % 28.0 %
Interest income 219 867 % 0.1 %
Interest expense (2,830 ) (2,383 ) (0.2 )% (0.2 )%
Other, net (402 ) (1,862 ) % (0.1 )%
Income from continuing operations before income taxes 222,541 343,110 19.7 % 27.8 %
Provision for income taxes (88,159 ) (130,385 ) (7.8 )% (10.6 )%
Income from continuing operations 134,382 212,725 11.9 % 17.2 %
Income from discontinued operations, net of tax   540   % 0.1 %
Net income 134,382 213,265 11.9 % 17.3 %
Net income attributable to noncontrolling interests (348 ) (825 ) % (0.1 )%
Net income attributable to Apollo $ 134,034   $ 212,440   11.9 % 17.2 %
 
Earnings per share — Basic:
Continuing operations attributable to Apollo $ 1.13 $ 1.52
Discontinued operations attributable to Apollo    
Basic income per share attributable to Apollo $ 1.13   $ 1.52  
 
Earnings per share — Diluted:
Continuing operations attributable to Apollo $ 1.13 $ 1.51
Discontinued operations attributable to Apollo    
Diluted income per share attributable to Apollo $ 1.13   $ 1.51  
 
Basic weighted average shares outstanding 118,134   139,856  
Diluted weighted average shares outstanding 118,793   140,343  
 
 
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
  Nine Months Ended May 31,     % of Net Revenue
2012   2011 2012   2011
(In thousands, except per share data)
Net revenue $ 3,279,050   $ 3,610,901   100.0 % 100.0 %
Costs and expenses:
Instructional and student advisory 1,356,409 1,335,601 41.4 % 37.0 %
Marketing 483,980 484,392 14.7 % 13.4 %
Admissions advisory 298,083 315,958 9.1 % 8.8 %
General and administrative 252,028 257,075 7.7 % 7.1 %
Depreciation and amortization 133,438 117,369 4.1 % 3.3 %
Provision for uncollectible accounts receivable 108,009 141,666 3.3 % 3.9 %
Restructuring and other charges 29,287 3,846 0.9 % 0.1 %
Goodwill and other intangibles impairment 16,788 219,927 0.5 % 6.1 %
Litigation charge 4,725   4,503   0.1 % 0.1 %
Total costs and expenses 2,682,747   2,880,337   81.8 % 79.8 %
Operating income 596,303 730,564 18.2 % 20.2 %
Interest income 1,085 2,635 % 0.1 %
Interest expense (6,618 ) (6,207 ) (0.2 )% (0.2 )%
Other, net (44 ) (1,603 ) % %
Income from continuing operations before income taxes 590,726 725,389 18.0 % 20.1 %
Provision for income taxes (247,889 ) (376,016 ) (7.5 )% (10.4 )%
Income from continuing operations 342,837 349,373 10.5 % 9.7 %
Income from discontinued operations, net of tax   2,487   % %
Net income 342,837 351,860 10.5 % 9.7 %
Net loss attributable to noncontrolling interests 4,393   31,955   0.1 % 0.9 %
Net income attributable to Apollo $ 347,230   $ 383,815   10.6 % 10.6 %
 
Earnings per share — Basic:
Continuing operations attributable to Apollo $ 2.79 $ 2.67
Discontinued operations attributable to Apollo   0.02  
Basic income per share attributable to Apollo $ 2.79   $ 2.69  
 
Earnings per share — Diluted:
Continuing operations attributable to Apollo $ 2.77 $ 2.66
Discontinued operations attributable to Apollo   0.02  
Diluted income per share attributable to Apollo $ 2.77   $ 2.68  
 
Basic weighted average shares outstanding 124,560   142,845  
Diluted weighted average shares outstanding 125,335   143,222  
 
 
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows From Continuing and Discontinued Operations
(Unaudited)
  Nine Months Ended May 31,
2012   2011
($ in thousands)
Cash flows provided by (used in) operating activities:
Net income $ 342,837 $ 351,860
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation 59,438 50,453
Excess tax benefits from share-based compensation (1,137 ) (1,214 )
Depreciation and amortization 133,438 117,369
Amortization of lease incentives (11,604 ) (10,523 )
Amortization of deferred gains on sale-leasebacks (2,098 ) (1,491 )
Goodwill and other intangibles impairment 16,788 219,927
Non-cash foreign currency loss, net 173 1,767
Provision for uncollectible accounts receivable 108,009 141,666
Litigation charge 4,725 4,503
Deferred income taxes 31,386 (3,327 )
Changes in assets and liabilities, excluding the impact of business acquisition and disposition:
Restricted cash and cash equivalents 25,523 67,658
Accounts receivable (85,788 ) (81,215 )
Prepaid taxes 6 21,218
Other assets (6,260 ) (13,955 )
Accounts payable (8,174 ) (12,440 )
Student deposits (35,215 ) (89,944 )
Deferred revenue (32,667 ) (60,763 )
Accrued and other liabilities (123,605 ) 47,003  
Net cash provided by operating activities 415,775   748,552  
Cash flows provided by (used in) investing activities:
Additions to property and equipment (85,702 ) (119,726 )
Maturities of marketable securities 10,000
Acquisition, net of cash acquired (73,736 )
Proceeds from sale-leaseback, net 169,018
Proceeds from disposition 3,285 9,612
Collateralization of letter of credit 126,615
Other investing activities (1,694 )  
Net cash (used in) provided by investing activities (157,847 ) 195,519  
Cash flows provided by (used in) financing activities:
Payments on borrowings (508,449 ) (425,325 )
Proceeds from borrowings 2,437 11,682
Apollo Group Class A common stock purchased for treasury (731,772 ) (408,220 )
Issuance of Apollo Group Class A common stock 10,521 10,240
Noncontrolling interest contributions 6,875
Excess tax benefits from share-based compensation 1,137   1,214  
Net cash used in financing activities (1,226,126 ) (803,534 )
Exchange rate effect on cash and cash equivalents (1,322 ) 1,040  
Net (decrease) increase in cash and cash equivalents (969,520 ) 141,577
Cash and cash equivalents, beginning of period 1,571,664   1,284,769  
Cash and cash equivalents, end of period $ 602,144   $ 1,426,346  
Supplemental disclosure of cash flow and non-cash information
Cash paid for income taxes, net of refunds $ 211,500 $ 326,999
Cash paid for interest $ 7,178 $ 8,063
Capital lease additions $ 26,906 $ 14,693
Credits received for tenant improvements $ 24,856 $ 12,047
Restricted stock units vested and released $ 16,926 $ 3,614
Acquired technology $ 14,389 $
Unsettled share repurchases $ 10,244 $ 11,802
 
 
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,
2012   2011 2012   2011
(In thousands, except per share data)
Net income attributable to Apollo, as reported $ 134,034 $ 212,440 $ 347,230 $ 383,815
Income from discontinued operations, net of tax   540     2,487  
Income from continuing operations attributable to Apollo 134,034 211,900 347,230 381,328
Reconciling items:
Restructuring and other charges, net of noncontrolling interest(1) 7,191 28,901 3,846
Litigation charge(2) 4,725 2,048 4,725 4,503
Goodwill and other intangibles impairment, net of noncontrolling interest(3)     14,370   188,258  
11,916 2,048 47,996 196,607
Less: tax effects (3,664 ) (801 ) (11,954 ) (7,715 )
Tax benefit from IRS settlement(4)   (9,646 )   (9,646 )
Income from continuing operations attributable to Apollo, adjusted to exclude special items $ 142,286   $ 203,501   $ 383,272   $ 560,574  
 
Diluted income per share from continuing operations attributable to Apollo, as reported $ 1.13   $ 1.51   $ 2.77   $ 2.66  
 
Diluted income per share from continuing operations attributable to Apollo, adjusted to exclude special items $ 1.20   $ 1.45   $ 3.06   $ 3.91  
 
Diluted weighted average shares outstanding 118,793   140,343   125,335   143,222  
 
(1) Restructuring and other charges represents charges associated with the Company’s series of restructuring activities to reengineer business processes and refine the Company’s educational delivery structure. The charges for the three and nine months ended May 31, 2012 include $2.3 million of costs associated with a reduction in force at UNIACC, net of noncontrolling interest.
(2) The charges for the three and nine months ended May 31, 2012 represent a rejected settlement offer the Company made in connection with a legal matter and estimated future legal costs that the Company may incur in this matter. The charges for the three and nine months ended May 31, 2011 are associated with the Policeman’s Annuity and Benefit Fund of Chicago securities class action.
(3) The charges for the nine months ended May 31, 2012 represent impairments of UNIACC’s goodwill and other intangibles, net of noncontrolling interest, with no income tax benefit as UNIACC’s goodwill and other intangibles are not deductible for tax purposes. The charges for the nine months ended May 31, 2011 represent impairments of BPP’s goodwill and other intangibles, net of noncontrolling interest. The Company did not record a tax benefit associated with BPP’s goodwill impairment because the goodwill is not deductible for tax purposes.
(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.

Source: Apollo Group, Inc.

Apollo Group, Inc.
Investor Relations Contact:
Beth Coronelli, 312-660-2059
beth.coronelli@apollogrp.edu
Media Contact:
Media Relations Hotline, 602-254-0086
media@apollogrp.edu