PHOENIX–(BUSINESS WIRE)–
Apollo Education Group, Inc. (APOL) today reported financial
results for the three and six months ended February 28, 2014, with
second quarter revenue of $679.1 million and diluted earnings per share
of $0.13, or $0.28 excluding special items.
“At Apollo Education Group we are continuing to make progress on our
long-term strategic plan which includes providing our students with a
differentiated and high-quality experience, diversifying our company and
becoming a more efficient organization through operational excellence,”
said Apollo Education Group Chief Executive Officer Greg Cappelli. “As
the global community becomes more competitive, so does the need for a
more competitive workforce. Our institutions are committed to improving
student outcomes, delivering differentiated programs, and providing
students with the right form of postsecondary education to help them
prepare for career success globally.”
Second Quarter 2014 Results of Operations
Net revenue for the second quarter 2014 was $679.1 million, compared
to $834.4 million in the second quarter 2013.
University of Phoenix Degreed Enrollment was 250,300, a 16.8% decrease
from the prior year second quarter, and New Degreed Enrollment was
32,500, a 16.5% decrease from the prior year second quarter.
Operating income for the second quarter 2014 was $7.1 million,
compared to $29.8 million from the prior year second quarter.
Income attributable to Apollo Education Group for the second quarter
2014 was $14.6 million, or $0.13 per share, compared to $13.5 million,
or $0.12 per share, in the second quarter 2013.
Apollo Education Group’s (“the Company”) results for the second quarter
2014 included the following special items: $15.2 million of
restructuring and other charges, $13.0 million of acquisition costs and
contingent consideration charges, a $9.0 million charge associated with
legal matters, and a $10.2 million benefit from a tax settlement.
Excluding special items, operating income was $44.3 million for the
second quarter 2014, compared to $67.5 million in the second quarter
2013, and income attributable to Apollo Education Group for the second
quarter 2014 was $32.1 million, or $0.28 per share, compared to income
attributable to Apollo Education Group of $38.0 million, or $0.34 per
share, for the second quarter 2013. (Special items for the second
quarter 2014 and 2013 are included in the reconciliation of GAAP
financial information to non-GAAP financial information table of this
press release.)
First Six Months of 2014 Results of Operations
Net revenue for the first six months of fiscal year 2014 totaled $1.5
billion, compared to $1.9 billion in the first six months of fiscal year
2013, representing an 18.7% decrease principally due to lower enrollment
at University of Phoenix. In the first six months of 2014, University of
Phoenix Average Degreed Enrollment decreased 17.5% to 260,800 as
compared to the same period a year ago. The Company reported income
attributable to Apollo Education Group for the six months ended February
28, 2014, of $113.5 million, or $1.00 per share, compared to $147.0
million, or $1.30 per share, for the six months ended February 28, 2013.
Results for the first six months of 2014 included the following special
items: $47.2 million of restructuring and other charges, $13.0 million
of acquisition costs and contingent consideration charges, a $9.0
million charge associated with legal matters, and a $10.2 million
benefit from a tax settlement.
Excluding the special items noted above, operating income was $246.1
million for the second quarter 2014, compared to $305.7 million in the
second quarter 2013, and income attributable to Apollo Education Group
for the six months ended February 28, 2014, was $150.8 million, or $1.33
per share, compared to $175.8 million, or $1.56 per share, for the six
months ended February 28, 2013. (See the reconciliation of GAAP
financial information to non-GAAP financial information in the tables
section of this press release for the first six months of 2014 and 2013
special items.)
Balance Sheet and Cash Flow
As of February 28, 2014, the Company’s unrestricted cash and cash
equivalents and short-term marketable securities were $0.8 billion,
compared to $1.5 billion at August 31, 2013. The decrease was primarily
due to $619.3 million used for payments on borrowings, $94.9 million to
acquire Open Colleges, $72.2 million for share repurchases (which
includes $2.5 million of repurchases related to tax withholding
requirements on the restricted stock units), a net investment of $67.8
million in long-term marketable securities, and $58.1 million for
capital expenditures. These items were partially offset by $193.5
million of cash provided by operations.
Accounts receivable were $199.1 million as of February 28, 2014,
compared to $215.4 million at August 31, 2013. As of February 28, 2014,
excluding accounts receivable and the related net revenue for Apollo
Global, the Company’s days sales outstanding was 19 days, which was
consistent with the days outstanding as of February 28, 2013.
Share Repurchases
Under its share repurchase program, the Company repurchased
approximately 1.7 million shares of its common stock at a weighted
average purchase price of $31.93 per share for a total cost of $54.7
million during the three months ended February 28, 2014. For the six
months ended February 28, 2014, the Company repurchased 2.3 million
shares of its common stock at a weighted average price of $30.44 for a
total cost of $69.7 million. The Company currently has approximately
$180 million available on its share repurchase authorization. There is
no expiration date on the repurchase authorizations and repurchases
occur at the Company’s discretion.
Business Outlook
The Company offers the following outlook for fiscal year 2014 based on
the business trends observed during the second quarter 2014, as well as
management’s current expectations of future trends.
Net revenue of $3.0 – $3.1 billion; and
Operating income of $400 – $450 million, excluding the impact of
special items.
Conference Call Information
The Company will hold a conference call to discuss these earnings
results at 5:00 p.m. ET, 2:00 p.m. PT, today, Tuesday, April 1, 2014.
Dial-In Numbers:
877-292-6888
(Domestic)
973-200-3381 (International)
Conference ID: 7777523
Webcast and Replay:
A live webcast of
this event will be available on the Apollo Education Group website at www.apollo.edu,
with a webcast replay 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 April 18, 2014.
855-859-2056 (Domestic)
404-537-3406 (International)
Conference
ID: 7777523
About Apollo Education Group, Inc.
Apollo Education Group, Inc. is one of the world’s largest private
education providers and has been in the education business since 1973.
Through its subsidiaries: University of Phoenix, Apollo Global,
Institute for Professional Development, Western International University
and College for Financial Planning, Apollo Education Group offers
innovative and distinctive educational programs and services, online and
on-campus, at the undergraduate, masters and doctoral levels. Its
education programs and services are offered throughout the United States
and in Asia, Australia, Latin America, and Europe, as well as online
throughout the world.
Forward-Looking Statements Safe Harbor
Statements about Apollo Education Group and its business in this release
which are not statements of historical fact, including statements
regarding Apollo Education 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 costs and effectiveness of accelerating the
enhancement of University of Phoenix educational offerings to remain
competitive and to more effectively deliver a quality student experience
at the right value; (iii) any adverse impact on University of Phoenix’s
business arising from the Notice sanction imposed by the University’s
principal accreditor, and any associated impact on the University’s
pending recertification by the U.S. Department of Education for
participation in Title IV student financial aid programs; (iv) the
impact of the Company’s recent campus closures and other restructuring
initiatives; (v) the impact of the operational and governance changes
made to increase University of Phoenix autonomy in response to
governance concerns expressed by its principal accreditor; (vi) the
impact of any reduction in financial aid available to students,
including active and retired military personnel, due to the U.S.
government deficit reduction proposals, debt ceiling limitations, budget
sequestration or otherwise; (vii) the impact of changes in marketing
channels and other recruiting practices; (viii) the costs and
effectiveness of University of Phoenix initiatives to improve student
retention, improve student outcomes and demonstrate a compelling
relationship between a student’s education and career; (ix) changes in
law or regulation affecting the University of Phoenix’s eligibility to
participate in or the manner in which it participates in U.S. federal
and state student financial aid programs, including changes that may be
included in the reauthorization of the federal Higher Education Act and
the proposed Department of Education regulations relating to gainful
employment and state authorization; (x) changes in University of
Phoenix’s business necessary to remain in compliance with U.S. federal
student financial aid program regulations, including the so-called 90/10
Rule and the limitations on student loan cohort default rates, and to
remain in compliance with the accrediting criteria of the relevant
accrediting bodies; (xi) changes in University of Phoenix enrollment or
student mix; (xii) unexpected expenses or other challenges in
integrating acquired businesses, consumer or regulatory impact arising
from consummation of the acquired businesses, and unexpected changes or
developments in the acquired businesses, and (xiii) unexpected changes
in the U.S. or global economy. 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 Education Group’s quarterly reports and Form 10-K
for fiscal year 2013, and other filings with the Securities and Exchange
Commission which are available at www.apollo.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.
Summary Financial Data and Operating Metrics
Below are Apollo Education Group’s unaudited financial data and
operating metrics for the respective periods:
Three Months Ended
February 28,
Six Months Ended
February 28,
($ in thousands)
2014
2013
2014
2013
Net revenue:
University of Phoenix
Degree seeking gross revenues(1)
$
642,994
$
800,863
$
1,440,734
$
1,793,137
Less: Discounts and other
(58,136
)
(56,700
)
(120,697
)
(123,975
)
Degree seeking net revenues(1)
584,858
744,163
1,320,037
1,669,162
Other revenues
9,223
9,403
18,907
20,188
Total University of Phoenix
594,081
753,566
1,338,944
1,689,350
Apollo Global
68,634
56,965
159,793
147,479
Other
16,343
23,841
36,656
52,726
$
679,058
$
834,372
$
1,535,393
$
1,889,555
Operating income (loss):
University of Phoenix
$
86,682
$
74,757
$
270,155
$
318,617
Apollo Global
(40,004
)
(25,921
)
(37,787
)
(35,287
)
Other
(39,548
)
(19,056
)
(55,444
)
(22,604
)
$
7,130
$
29,780
$
176,924
$
260,726
University of Phoenix Enrollment Data:
Degreed Enrollment(2)
250,300
300,800
New Degreed Enrollment(3)
32,500
38,900
Degree seeking net revenues per degreed enrollment
$
2,337
$
2,474
(1) Represents revenue from tuition and other fees for
students enrolled in University of Phoenix degree programs or
certificate programs of at least
18 credits in length with
some course applicability into a related degree program.
(2) 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 (e.g., 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.
(3) 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.
Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
As of
($ in thousands)
February 28,
2014
August 31,
2013
ASSETS
Current assets:
Cash and cash equivalents
$
645,940
$
1,414,485
Restricted cash and cash equivalents
283,929
259,174
Marketable securities
158,243
105,809
Accounts receivable, net
199,102
215,401
Prepaid taxes
15,826
30,359
Deferred tax assets
64,758
60,294
Other current assets
59,283
64,134
Total current assets
1,427,081
2,149,656
Marketable securities
111,709
43,941
Property and equipment, net
457,503
472,614
Goodwill
233,037
103,620
Intangible assets, net
191,343
132,192
Deferred tax assets
60,409
63,894
Other assets
50,348
32,030
Total assets
$
2,531,430
$
2,997,947
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt
$
30,781
$
628,050
Accounts payable
64,290
73,123
Student deposits
328,394
309,176
Deferred revenue
256,899
213,260
Accrued and other current liabilities
328,240
346,706
Total current liabilities
1,008,604
1,570,315
Long-term debt
43,642
64,004
Deferred tax liabilities
24,814
12,177
Other long-term liabilities
222,064
233,442
Total liabilities
1,299,124
1,879,938
Commitments and contingencies
Redeemable noncontrolling interests
49,388
—
Shareholders’ equity:
Preferred stock, no par value
—
—
Apollo Education Group Class A nonvoting common stock, no par value
103
103
Apollo Education Group Class B voting common stock, no par value
1
1
Additional paid-in capital
—
—
Apollo Education Group Class A treasury stock, at cost
(3,880,394
)
(3,824,758
)
Retained earnings
5,092,511
4,978,815
Accumulated other comprehensive loss
(30,024
)
(36,563
)
Total Apollo shareholders’ equity
1,182,197
1,117,598
Noncontrolling interests
721
411
Total equity
1,182,918
1,118,009
Total liabilities, redeemable noncontrolling interests and
shareholders’ equity
$
2,531,430
$
2,997,947
Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
February 28,
Six Months Ended
February 28,
2014
2013
% of Net Revenue
2014
2013
% of Net Revenue
(In thousands, except per share data)
2014
2013
2014
2013
Net revenue
$
679,058
$
834,372
100.0
%
100.0
%
$
1,535,393
$
1,889,555
100.0
%
100.0
%
Costs and expenses:
Instructional and student advisory
319,575
383,702
47.1
%
46.0
%
659,254
815,852
42.9
%
43.2
%
Marketing
143,392
173,313
21.1
%
20.8
%
281,236
336,186
18.3
%
17.8
%
Admissions advisory
55,072
68,232
8.1
%
8.2
%
106,581
139,540
6.9
%
7.4
%
General and administrative
67,676
81,218
10.0
%
9.7
%
142,906
154,757
9.3
%
8.2
%
Depreciation and amortization
37,465
41,499
5.5
%
5.0
%
73,803
85,194
4.8
%
4.5
%
Provision for uncollectible accounts receivable
11,534
18,902
1.7
%
2.2
%
25,512
52,308
1.7
%
2.7
%
Restructuring and other charges
15,209
44,076
2.3
%
5.3
%
47,172
68,192
3.1
%
3.6
%
Acquisition costs and contingent consideration charges
13,005
—
1.9
%
—
%
13,005
—
0.9
%
—
%
Litigation charge (credit), net
9,000
(6,350
)
1.3
%
(0.8
)%
9,000
(23,200
)
0.6
%
(1.2
)%
Total costs and expenses
671,928
804,592
99.0
%
96.4
%
1,358,469
1,628,829
88.5
%
86.2
%
Operating income
7,130
29,780
1.0
%
3.6
%
176,924
260,726
11.5
%
13.8
%
Interest income
599
388
0.1
%
—
%
1,167
937
0.1
%
—
%
Interest expense
(1,983
)
(2,092
)
(0.3
)%
(0.3
)%
(4,069
)
(4,134
)
(0.3
)%
(0.2
)%
Other, net
107
(126
)
0.1
%
—
%
914
1,673
0.1
%
0.1
%
Income before income taxes
5,853
27,950
0.9
%
3.3
%
174,936
259,202
11.4
%
13.7
%
Benefit from (provision for) income taxes
6,324
(14,291
)
0.9
%
(1.7
)%
(63,718
)
(111,803
)
(4.2
)%
(5.9
)%
Net income
12,177
13,659
1.8
%
1.6
%
111,218
147,399
7.2
%
7.8
%
Net loss (income) attributable to noncontrolling interests
2,428
(132
)
0.4
%
—
%
2,278
(377
)
0.2
%
—
%
Net income attributable to Apollo
$
14,605
$
13,527
2.2
%
1.6
%
$
113,496
$
147,022
7.4
%
7.8
%
Basic income per share attributable to Apollo
$
0.13
$
0.12
$
1.01
$
1.31
Diluted income per share attributable to Apollo
$
0.13
$
0.12
$
1.00
$
1.30
Basic weighted average shares outstanding
112,151
112,573
112,742
112,496
Diluted weighted average shares outstanding
113,380
113,068
113,676
112,984
Apollo Education Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
February 28,
($ in thousands)
2014
2013
Operating activities:
Net income
$
111,218
$
147,399
Adjustments to reconcile net income to net cash provided by
operating activities:
Share-based compensation
22,510
27,515
Depreciation and amortization
73,803
85,194
Accelerated depreciation included in restructuring
4,316
30,641
Gain on disposition
(1,984
)
—
Non-cash foreign currency loss, net
596
146
Provision for uncollectible accounts receivable
25,512
52,308
Litigation charge (credit), net
9,000
(23,200
)
Deferred income taxes
(6,255
)
(4,100
)
Changes in assets and liabilities, excluding the impact of
acquisition and disposition:
Restricted cash and cash equivalents
(24,165
)
(11,438
)
Accounts receivable
(6,469
)
(33,919
)
Prepaid taxes
15,230
16,143
Other assets
(11,445
)
(3,939
)
Accounts payable
(11,454
)
1,094
Student deposits
17,409
2,551
Deferred revenue
32,881
8,632
Accrued and other liabilities
(57,219
)
3,923
Net cash provided by operating activities
193,484
298,950
Investing activities:
Purchases of property and equipment
(58,119
)
(49,024
)
Purchases of marketable securities
(227,978
)
(39,444
)
Maturities of marketable securities
105,237
7,470
Acquisition, net of cash acquired
(94,937
)
—
Other investing activities
3,446
(1,500
)
Net cash used in investing activities
(272,351
)
(82,498
)
Financing activities:
Payments on borrowings
(619,268
)
(629,544
)
Proceeds from borrowings
—
2,176
Purchase of noncontrolling interest
—
(42,500
)
Purchases of stock for treasury
(72,237
)
(3,881
)
Issuances of stock
1,793
2,131
Net cash used in financing activities
(689,712
)
(671,618
)
Exchange rate effect on cash and cash equivalents
34
(46
)
Net decrease in cash and cash equivalents
(768,545
)
(455,212
)
Cash and cash equivalents, beginning of period
1,414,485
1,276,375
Cash and cash equivalents, end of period
$
645,940
$
821,163
Supplemental disclosure of cash flow and non-cash information:
Cash paid for income taxes, net of refunds
$
70,868
$
100,713
Cash paid for interest
3,911
4,010
Restricted stock units vested and released
7,104
10,825
Capital lease additions
—
2,755
Credits received for tenant improvements
—
1,540
Apollo Education Group, Inc. and Subsidiaries
Reconciliation of GAAP Financial Information to Non-GAAP
Financial Information
(Unaudited)
Three Months Ended
February 28,
Six Months Ended
February 28,
(In thousands, except per share data)
2014
2013
2014
2013
Consolidated Special Items Reconciliation:
Operating income
$
7,130
$
29,780
$
176,924
$
260,726
Net income attributable to Apollo
$
14,605
$
13,527
$
113,496
$
147,022
Diluted income per share attributable to Apollo
$
0.13
$
0.12
$
1.00
$
1.30
Diluted weighted average shares outstanding
113,380
113,068
113,676
112,984
Special items:
Restructuring and other charges
$
15,209
$
44,076
$
47,172
$
68,192
Acquisition costs and contingent consideration charges
13,005
—
13,005
—
Litigation charge (credit), net
9,000
(6,350
)
9,000
(23,200
)
Special items before taxes
37,214
37,726
69,177
44,992
Less: tax effects of special items
(9,508
)
(13,292
)
(21,648
)
(16,169
)
Tax benefit from Internal Revenue Service settlement
(10,176
)
—
(10,176
)
—
Special items, net of tax
$
17,530
$
24,434
$
37,353
$
28,823
Excluding special items:
Operating income
$
44,344
$
67,506
$
246,101
$
305,718
Net income attributable to Apollo
$
32,135
$
37,961
$
150,849
$
175,845
Diluted income per share attributable to Apollo
$
0.28
$
0.34
$
1.33
$
1.56
Professional Services
Investment Company Information
University of Phoenix
Article source: Article Source
The post Apollo Education Group, Inc. Reports Second Quarter 2014 Results appeared first on .