Apollo Group, Inc. Reports First Quarter 2013 Results
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
beth.coronelli@apollogrp.edu
Media Contact:
Media Relations Hotline, 602-254-0086
media@apollogrp.edu
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