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Apollo Group, Inc. Reports First Quarter 2013 Results

Financial and Operating Metrics

Below are Apollo Group’s unaudited financial data and operating metrics for the first quarter 2013 compared to the first quarter 2012.
             
Degreed Enrollment (1) New Degreed Enrollment (2)
Enrollment (rounded to hundreds) Q1 2013     Q1 2012 Q1 2013     Q1 2012
Associate’s 99,100 130,300 22,900 27,800
Bachelor’s 168,000 182,500 22,500 26,100
Master’s 46,000 52,900 8,000 8,900
Doctoral 6,600   7,400   700   900  
319,700   373,100   54,100   63,700  
 
Revenues (in thousands)
Degree Seeking Gross Revenues (3) $ 992,274 $ 1,108,616
Less: Discounts and other (67,275 ) (62,734 )
Degree Seeking Net Revenues (3) 924,999 1,045,882
Non-degree Seeking Revenues 9,813 8,577
Other, net of discounts 120,371   117,441  
$ 1,055,183   $ 1,171,900  
 
Revenue by Degree Type (in thousands) (3)
Associate’s $ 251,890 $ 313,598
Bachelor’s 560,806 592,910
Master’s 158,891 178,445
Doctoral 20,687 23,663
Less: Discounts and other (67,275 ) (62,734 )
$ 924,999   $ 1,045,882  
 
Degree Seeking Gross Revenues per Degreed Enrollment (1), (3)
Associate’s $ 2,542 $ 2,407
Bachelor’s 3,338 3,249
Master’s 3,454 3,373
Doctoral 3,134 3,198
All degrees (after discounts) $ 2,893 $ 2,803
 
(1) 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); and students participating in certain certificate programs of at least 18 credits with some course applicability into a related degree program.
 
(2) 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.
 
(3) 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.
 
 
 
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
      As of
($ in thousands)

November 30, 2012
   

August 31, 2012
ASSETS:
Current assets
Cash and cash equivalents $ 776,009 $ 1,276,375
Restricted cash and cash equivalents 351,575 318,334
Accounts receivable, net 201,456 198,279
Prepaid taxes 5,041 26,341
Deferred tax assets, current portion 55,489 69,052
Other current assets 64,513   49,609  
Total current assets 1,454,083 1,937,990
Property and equipment, net 546,520 571,629
Goodwill 103,558 103,345
Intangible assets, net 145,789 149,034
Deferred tax assets, less current portion 80,446 77,628
Other assets 38,521   28,696  
Total assets $ 2,368,917   $ 2,868,322  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities
Short-term borrowings and current portion of long-term debt $ 22,236 $ 638,588
Accounts payable 63,202 74,872
Income taxes payable 60,717
Student deposits 381,124 362,143
Deferred revenue 262,813 254,555
Accrued and other current liabilities 263,433   324,881  
Total current liabilities 1,053,525 1,655,039
Long-term debt 75,562 81,323
Deferred tax liabilities 16,096 15,881
Other long-term liabilities 203,705   191,756  
Total liabilities 1,348,888   1,943,999  
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 41,311 93,770
Apollo Group Class A treasury stock, at cost (3,864,989 ) (3,878,612 )
Retained earnings 4,876,645 4,743,150
Accumulated other comprehensive loss (34,188 ) (30,034 )
Total Apollo shareholders’ equity 1,018,883   928,378  
Noncontrolling interests (deficit) 1,146   (4,055 )
Total equity 1,020,029   924,323  
Total liabilities and shareholders’ equity $ 2,368,917   $ 2,868,322  
 
 
 
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
      Three Months Ended November 30,       % of Net Revenue
(In thousands, except per share data) 2012     2011 2012     2011
Net revenue $ 1,055,183   $ 1,171,900   100.0 % 100.0 %
Costs and expenses:
Instructional and student advisory 432,150 453,281 40.9 % 38.7 %
Marketing 162,873 165,564 15.4 % 14.1 %
Admissions advisory 71,308 101,388 6.8 % 8.7 %
General and administrative 73,539 79,899 7.0 % 6.8 %
Depreciation and amortization 43,695 46,167 4.1 % 3.9 %
Provision for uncollectible accounts receivable 33,406 41,583 3.2 % 3.6 %
Restructuring and other charges 24,116 5,562 2.3 % 0.5 %
Litigation credit (16,850 ) (1.6 )%
Goodwill and other intangibles impairment   16,788     1.4 %
Total costs and expenses 824,237   910,232   78.1 % 77.7 %
Operating income 230,946 261,668 21.9 % 22.3 %
Interest income 549 506 0.1 %
Interest expense (2,042 ) (1,999 ) (0.2 )% (0.2 )%
Other, net 1,799   140   0.2 %  
Income from continuing operations before income taxes 231,252 260,315 21.9 % 22.2 %
Provision for income taxes (97,512 ) (115,179 ) (9.2 )% (9.8 )%
Income from continuing operations 133,740 145,136 12.7 % 12.4 %
Income from discontinued operations, net of tax   2,148     0.2 %
Net income 133,740 147,284 12.7 % 12.6 %
Net (income) loss attributable to noncontrolling interests (245 ) 2,030     0.1 %
Net income attributable to Apollo $ 133,495   $ 149,314   12.7 % 12.7 %
 
Earnings per share – Basic:
Continuing operations attributable to Apollo $ 1.19 $ 1.13
Discontinued operations attributable to Apollo   0.02  
Basic income per share attributable to Apollo $ 1.19   $ 1.15  
 
Earnings per share – Diluted:
Continuing operations attributable to Apollo $ 1.18 $ 1.13
Discontinued operations attributable to Apollo   0.01  
Diluted income per share attributable to Apollo $ 1.18   $ 1.14  
 
Basic weighted average shares outstanding 112,420   130,318  
Diluted weighted average shares outstanding 112,849   130,874  
 
 
 
Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
     

Three Months Ended November 30,
($ in thousands) 2012     2011
Cash flows provided by (used in) operating activities:
Net income $ 133,740 $ 147,284
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation 16,889 20,892
Excess tax benefits from share-based compensation (372 )
Depreciation and amortization 43,695 46,298
Accelerated depreciation included in restructuring 9,326
Amortization of lease incentives (3,740 ) (3,789 )
Amortization of deferred gains on sale-leasebacks (700 ) (700 )
Goodwill and other intangibles impairment 16,788
Non-cash foreign currency gain, net (607 ) (397 )
Provision for uncollectible accounts receivable 33,406 41,583
Litigation credit (16,850 )
Deferred income taxes 6,064 (1,747 )
Changes in assets and liabilities, excluding the impact of acquisition:
Restricted cash and cash equivalents (33,241 ) 2,315
Accounts receivable (36,349 ) (75,698 )
Other assets (6,432 ) (6,105 )
Accounts payable (11,771 ) 858
Income taxes payable 82,032 115,412
Student deposits 18,522 (22,272 )
Deferred revenue 8,075 22,340
Accrued and other liabilities (31,928 ) (1,448 )
Net cash provided by operating activities 210,131   301,242  
Cash flows provided by (used in) investing activities:
Additions to property and equipment (27,539 ) (23,585 )
Acquisition, net of cash acquired (73,736 )
Other investing activities (14,819 )  
Net cash used in investing activities (42,358 ) (97,321 )
Cash flows provided by (used in) financing activities:
Payments on borrowings (625,762 ) (496,322 )
Proceeds from borrowings 2,176
Purchase of noncontrolling interest (42,500 )
Apollo Group Class A common stock purchased for treasury (3,472 ) (80,682 )
Issuance of Apollo Group Class A common stock 1,113 2,575
Excess tax benefits from share-based compensation   372  
Net cash used in financing activities (668,445 ) (574,057 )
Exchange rate effect on cash and cash equivalents 306   (491 )
Net decrease in cash and cash equivalents (500,366 ) (370,627 )
Cash and cash equivalents, beginning of period 1,276,375   1,571,664  
Cash and cash equivalents, end of period $ 776,009   $ 1,201,037  
Supplemental disclosure of cash flow and non-cash information
Cash paid for income taxes, net of refunds $ 10,243 $ 1,316
Cash paid for interest $ 1,906 $ 2,344
Restricted stock units vested and released $ 9,496 $ 7,125
Capital lease additions $ $ 6,668
Credits received for tenant improvements $ $ 19,941
Debt incurred for acquired technology $ $ 14,389
 
 
 
Apollo Group, Inc. and Subsidiaries
Reconciliation of GAAP financial information to non-GAAP financial information
(Unaudited)
      Three Months Ended November 30,
(In thousands, except per share data) 2012     2011
Net income attributable to Apollo, as reported $ 133,495 $ 149,314
Income from discontinued operations, net of tax and noncontrolling interest   1,839  
Income from continuing operations attributable to Apollo 133,495 147,475
Reconciling items:
Restructuring and other charges (1) 24,116 5,562
Litigation credit (2) (16,850 )
Goodwill and other intangibles impairment, net of noncontrolling interest (3)   14,370  
7,266 19,932
Less: tax effects (2,877 ) (2,091 )
Income from continuing operations attributable to Apollo, adjusted to exclude special items $ 137,884   $ 165,316  
 
Diluted income per share from continuing operations attributable to Apollo, as reported $ 1.18   $ 1.13  
 
Diluted income per share from continuing operations attributable to Apollo, adjusted to exclude special items $ 1.22   $ 1.26  
 
Diluted weighted average shares outstanding 112,849   130,874  
 
(1) Restructuring and other charges represent charges associated with the Company’s series of restructuring activities to reengineer business processes and refine its delivery structure.
 
(2) Litigation credit during the three months ended November 30, 2012 represents the reversal of charges associated with the Securities Class Action (Policeman’s Annuity and Benefit Fund of Chicago) matter .
 
(3) The charges for the three months ended November 30, 2011 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.

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