Apollo Group, Inc. Reports First Quarter 2013 Results Business Wire PHOENIX -- January 8, 2013 Apollo Group, Inc. (NASDAQ: APOL) today reported financial results for the three months ended November 30, 2012, with revenue of $1.1 billion and diluted earnings per share of $1.18 per share, or $1.22 per share excluding special items. “In the first quarter, we continued to execute on our strategy to differentiate University of Phoenix, diversify Apollo Group and to further optimize our operations,” said Apollo Group Chief Executive Officer Greg Cappelli. “We are rolling out new career-oriented tools for students, as well as working with leading companies to help them meet their needs to develop an educated workforce. We are committed to become the educator of choice to connect education to careers and believe this approach will position us for long-term success.” First Quarter 2013 Results of Operations *Net revenue for the first quarter 2013 was $1.1 billion compared to $1.2 billion in the first quarter 2012. *University of Phoenix Degreed Enrollment was 319,700, a 14.3% decrease from the prior year first quarter, and New Degreed Enrollment was 54,100, a 15.1% decrease from the prior year first quarter. *Operating income for the first quarter 2013 was $230.9 million, down 11.7%, compared to $261.7 million from the prior year first quarter. *Income from continuing operations attributable to Apollo Group for the first quarter 2013 was $133.5 million, or $1.18 per share, compared to $147.5 million, or $1.13 per share in the first quarter 2012. Results for the first quarter 2013 include restructuring and other charges of $24.1 million attributable to the Company’s optimization efforts and a $16.9 million credit for the reversal of charges associated with a securities class action lawsuit. Excluding the special items noted above, income from continuing operations for the first quarter 2013 was $137.9 million, or $1.22 per share, compared to income from continuing operations of $165.3 million, or $1.26 per share, for the first quarter 2012. (See the reconciliation of GAAP financial information to non-GAAP financial information in the tables section of this press release for first quarter 2013 and 2012 special items). Operating Expenses Operating expenses for the first quarter 2013 totaled $824.2 million, a decrease of 9.4%, as compared to first quarter 2012. Excluding special items, operating expenses were $817.0 million, a decrease of 8.0%. This decrease was primarily attributable to a reduction in costs from restructuring activities, which contributed to the decline in admissions advisory headcount, rent expense and depreciation expense. Additionally, a portion of the decrease was related to variable expenses due to lower net revenue. The provision for uncollectible accounts receivable (“bad debt”) also declined 19.7% to $33.4 million, primarily due to lower enrollment, as well as improved collection rates for aged receivables, at University of Phoenix. Balance Sheet and Cash Flow As of November 30, 2012, cash and cash equivalents, excluding restricted cash, totaled $776 million compared to $1.3 billion as of August 31, 2012. The decrease was primarily due to $625.8 million used for payments on borrowings, including the payment of $615.0 million borrowed under the Company’s revolving credit facility, the Company’s $42.5 million cash payment for its purchase of the noncontrolling interest in Apollo Global and $27.5 million for capital expenditures. These items were partially offset by $210.1 million of cash provided by operations. Accounts receivable were $201.5 million as of November 30, 2012, compared to $198.3 million at August 31, 2012. Excluding accounts receivable and the related net revenue for Apollo Global, the Company’s days sales outstanding was 20 days as of November 30, 2012, as compared to 24 days as of November 30, 2011. Business Outlook The Company offers the following outlook for fiscal year 2013 based on the business trends observed during the first quarter 2013, as well as management’s current expectations of future trends. *Net revenue of $3.65 – $3.75 billion; and *Operating income of $500.0 – $550.0 million, excluding the impact of special items and restructuring and other charges. Conference Call Information The Company will hold a conference call to discuss these earnings results at 5:00 p.m. ET, 3:00 p.m. MT, today, Tuesday, January 8, 2013. Dial-In Numbers: 877-292-6888 (Domestic) 973-200-3381 (International) Conference ID: 82100134 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 January 22, 2013. Dial-In Numbers: 855-859-2056 (Domestic) 404-537-3406 (International) Conference ID: 82100134 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 nearly 40 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) the impact of increased competition from traditional public universities and proprietary educational institutions, (ii) the impact of the Company’s restructuring initiatives to increase operating efficiency and better align operations with student demand and business strategy, including the substantial reduction in University of Phoenix on-ground locations, (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 initiatives to improve the student experience, improve student outcomes and enhance the connection between education and careers, (v) changes in enrollment or student mix, (vi) changes in the overall U.S. or global economy, (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 2012 and subsequent Form 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. 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 Q1 2013 Q1 2012 Q1 2013 Q1 2012 hundreds) 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 $ 992,274 $ 1,108,616 Gross Revenues^(3) Less: Discounts (67,275 ) (62,734 ) and other Degree Seeking Net 924,999 1,045,882 Revenues^(3) Non-degree Seeking 9,813 8,577 Revenues Other, net 120,371 117,441 of discounts $ 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 (67,275 ) (62,734 ) and other $ 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 $ 2,893 $ 2,803 discounts) ^(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, August 31, 2012 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 80,446 77,628 portion 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 $ 22,236 $ 638,588 portion of long-term debt 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 103 103 stock, no par value Apollo Group Class B voting common 1 1 stock, no par value Additional paid-in capital 41,311 93,770 Apollo Group Class A treasury stock, at (3,864,989 ) (3,878,612 ) cost 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’ $ 2,368,917 $ 2,868,322 equity Apollo Group, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) Three Months Ended November 30, % of Net Revenue (In thousands, except per 2012 2011 2012 2011 share data) Net revenue $ 1,055,183 $ 1,171,900 100.0 % 100.0 % Costs and expenses: Instructional and student 432,150 453,281 40.9 % 38.7 % advisory Marketing 162,873 165,564 15.4 % 14.1 % Admissions 71,308 101,388 6.8 % 8.7 % advisory General and 73,539 79,899 7.0 % 6.8 % administrative Depreciation and 43,695 46,167 4.1 % 3.9 % amortization Provision for uncollectible 33,406 41,583 3.2 % 3.6 % accounts receivable Restructuring and other 24,116 5,562 2.3 % 0.5 % charges Litigation (16,850 ) — (1.6 )% — credit Goodwill and other — 16,788 — 1.4 % intangibles impairment Total costs 824,237 910,232 78.1 % 77.7 % and expenses Operating 230,946 261,668 21.9 % 22.3 % income Interest 549 506 — 0.1 % income Interest (2,042 ) (1,999 ) (0.2 )% (0.2 )% expense Other, net 1,799 140 0.2 % — Income from continuing operations 231,252 260,315 21.9 % 22.2 % before income taxes Provision for (97,512 ) (115,179 ) (9.2 )% (9.8 )% income taxes Income from continuing 133,740 145,136 12.7 % 12.4 % operations Income from discontinued — 2,148 — 0.2 % operations, net of tax Net income 133,740 147,284 12.7 % 12.6 % Net (income) loss attributable (245 ) 2,030 — 0.1 % to noncontrolling interests Net income attributable $ 133,495 $ 149,314 12.7 % 12.7 % to Apollo Earnings per share – Basic: Continuing operations $ 1.19 $ 1.13 attributable to Apollo Discontinued operations — 0.02 attributable to Apollo Basic income per share $ 1.19 $ 1.15 attributable to Apollo Earnings per share – Diluted: Continuing operations $ 1.18 $ 1.13 attributable to Apollo Discontinued operations — 0.01 attributable to Apollo Diluted income per share $ 1.18 $ 1.14 attributable to Apollo Basic weighted average shares 112,420 130,318 outstanding Diluted weighted 112,849 130,874 average shares outstanding 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 — (372 ) compensation Depreciation and amortization 43,695 46,298 Accelerated depreciation included in 9,326 — restructuring Amortization of lease incentives (3,740 ) (3,789 ) Amortization of deferred gains on (700 ) (700 ) sale-leasebacks Goodwill and other intangibles impairment — 16,788 Non-cash foreign currency gain, net (607 ) (397 ) Provision for uncollectible accounts 33,406 41,583 receivable 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 (3,472 ) (80,682 ) purchased for treasury Issuance of Apollo Group Class A common 1,113 2,575 stock Excess tax benefits from share-based — 372 compensation Net cash used in financing activities (668,445 ) (574,057 ) Exchange rate effect on cash and cash 306 (491 ) equivalents Net decrease in cash and cash equivalents (500,366 ) (370,627 ) Cash and cash equivalents, beginning of 1,276,375 1,571,664 period 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 $ 133,495 $ 149,314 reported Income from discontinued operations, net — 1,839 of tax and noncontrolling interest Income from continuing operations 133,495 147,475 attributable to Apollo Reconciling items: Restructuring and other charges^(1) 24,116 5,562 Litigation credit^(2) (16,850 ) — Goodwill and other intangibles impairment, net of noncontrolling — 14,370 interest^(3) 7,266 19,932 Less: tax effects (2,877 ) (2,091 ) Income from continuing operations attributable to Apollo, adjusted to $ 137,884 $ 165,316 exclude special items Diluted income per share from continuing operations attributable to Apollo, as $ 1.18 $ 1.13 reported Diluted income per share from continuing operations attributable to Apollo, $ 1.22 $ 1.26 adjusted to exclude special items Diluted weighted average shares 112,849 130,874 outstanding ^(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. Contact: Apollo Group, Inc. Investor Relations Contact: Beth Coronelli, 312-660-2059 firstname.lastname@example.org Media Contact: Media Relations Hotline, 602-254-0086 email@example.com
Apollo Group, Inc. Reports First Quarter 2013 Results
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