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

Apollo Group, Inc. (NASDAQ: APOL) ("Apollo Group,” "Apollo” or the "Company”) today reported financial results for the three and six months ended February 29, 2012.

Second Quarter 2012 Highlights

• Net revenue of $969.6 million, with net income attributable to Apollo of $63.9 million
• Earnings per share attributable to Apollo, of $0.51 per share, or $0.58 per share excluding a charge related to the Company’s real estate rationalization plan
• University of Phoenix New Degreed Enrollment up 1.0%, compared to prior year period, with Total Degreed Enrollment of 355,800
• Surpassed graduation milestone of 700,000 University of Phoenix Alumni
• Opened John Sperling Center for Educational Innovation featuring the new prototype Classroom without Boundaries, designed to foster student engagement

"Empowering our students to achieve their desired academic and life outcomes is our highest priority,” said Apollo Group Co-Chief Executive Officer and Apollo Global Chairman Greg Cappelli. "We are building on our mission to provide world class education, as well as connecting education to careers, in order to further differentiate University of Phoenix. We are committed to leading education into the future.”

Apollo Group Co-Chief Executive Officer Chas Edelstein added, "We are working to continually improve our services to students to enhance their educational experience and outcomes. As we pursue opportunities for increased operating efficiency, our efforts to optimize allow us to invest in innovation and create new and better ways to reach adult learners, while keeping education affordable and accessible and delivering the best possible experience to our students.”

Unaudited Second Quarter of Fiscal Year 2012 Results of Operations

Consolidated net revenue for the second quarter of fiscal year 2012 totaled $969.6 million, which represents a 7.5% decrease compared to the second quarter of fiscal year 2011. The decrease is the result of an 8.0% 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 12.2% to 355,800, largely due to the decrease in New Degreed Enrollment during fiscal year 2011. The Company believes the decrease in 2011 New Degreed Enrollment was primarily the result of a number of important changes and initiatives implemented in recent years to more effectively support students and enhance their educational outcomes. Although University of Phoenix New Degreed Enrollment increased 1.0% in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011, we believe it has been impacted by changes in marketing content and channels to better identify potential students more likely to succeed at University of Phoenix, by changes in economic conditions and, in particular, an improving U.S. labor market, as well as by a continuing robust competitive environment.

The Company reported income from continuing operations attributable to Apollo Group for the three months ended February 29, 2012, of $63.9 million, or $0.51 per share (126.5 million weighted average diluted shares outstanding), compared to a loss from continuing operations attributable to Apollo Group of $66.6 million, or $0.47 per share (142.4 million weighted average diluted shares outstanding) for the three months ended February 28, 2011.

Results for the second quarter of fiscal year 2012 included restructuring and other charges of $16.1 million associated with the Company’s real estate rationalization plan.

Results for the second quarter 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).
• A $1.6 million charge representing an accrual for incremental post-judgment interest and other estimated costs related to the Policeman’s Annuity and Benefit Fund of Chicago securities class action lawsuit.
• A $5.0 million tax benefit, net of noncontrolling interests, associated with these charges. The Company did not record a tax benefit associated with the goodwill impairment as it is not deductible for tax purposes.

Excluding the special items noted above, income from continuing operations attributable to Apollo Group for the three months ended February 29, 2012, was $73.8 million, or $0.58 per share (126.5 million weighted average diluted shares outstanding), compared to income from continuing operations attributable to Apollo Group of $118.2 million, or $0.83 per share (142.7 million weighted average diluted shares outstanding) for the three months ended February 28, 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 $7.9 million, or 1.9%, to $429.5 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011, which represents a 410 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.

Marketing increased $2.0 million, or 1.3%, to $159.3 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011, which represents a 140 basis point increase as a percentage of net revenue. Marketing expense included costs attributable to establishing relationships with employers and community colleges.

Admissions advisory decreased $0.9 million, or 0.9%, to $101.4 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011, which represents a 60 basis point increase as a percentage of net revenue. While admissions advisory head count decreased, the cost savings was offset by higher average employee compensation costs.

General and administrative decreased $0.3 million, or 0.4%, to $84.0 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011, which represents a 70 basis point increase as a percentage of net revenue.

Depreciation and amortization increased $2.8 million, or 7.3%, to $42.0 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011, which represents a 60 basis point increase as a percentage of net revenue. The increase is principally attributable to $3.1 million of intangible asset amortization in the second quarter of fiscal year 2012 as a result of the Carnegie Learning acquisition.

The provision for uncollectible accounts receivable ("bad debt expense”) decreased $14.5 million, or 31.9%, to $31.0 million in the second quarter of fiscal year 2012 compared to the second quarter of fiscal year 2011, which represents a 110 basis point decrease as a percentage of net revenue. The decrease was primarily attributable to reductions in gross accounts receivable associated with decreased University of Phoenix Degreed Enrollment; a decrease in the proportion of receivables that are attributable to students enrolled in associate’s degree programs, as collection rates for these students are generally lower compared to students in more advanced level programs; and improved collection rates due, in part, to process initiatives implemented in fiscal year 2011.

Financial and Operating Metrics

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

		Q2 2012				Q2 2011
Revenues (in thousands)
Degree Seeking Gross Revenues(1)		$	931,610			$	1,002,854
Less: Discounts and other		(56,508		)		(49,908		)
Degree Seeking Net Revenues(1)		875,102				952,946
Non-degree Seeking Revenues(2)		8,885				8,783
Other, net of discounts(3)		85,565				86,900
		$	969,552			$	1,048,629
Revenue by Degree Type (in thousands)(1)
Associate’s		$	245,771			$	320,288
Bachelor’s		516,028				490,076
Master’s		148,867				171,379
Doctoral		20,944				21,111
Less: Discounts and other		(56,508		)		(49,908		)
		$	875,102			$	952,946
Degreed Enrollment (rounded to hundreds)(4)
Associate’s		118,100				155,500
Bachelor’s		179,400				181,200
Master’s		51,000				61,200
Doctoral		7,300				7,400
		355,800				405,300
Degree Seeking Gross Revenues per Degreed Enrollment(1), (4)
Associate’s		$	2,081			$	2,060
Bachelor’s		2,876				2,705
Master’s		2,919				2,800
Doctoral		2,869				2,853
All degrees (after discounts)		$	2,460			$	2,351
New Degreed Enrollment (rounded to hundreds)(5)
Associate’s		18,500				18,900
Bachelor’s		22,000				20,900
Master’s		7,500				7,800
Doctoral		700				600
		48,700				48,200
(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 Six Months of Fiscal Year 2012 Results of Operations

Consolidated net revenue for the first six months of fiscal year 2012 totaled $2.1 billion, which represents a 9.6% decrease compared to the first six months of fiscal year 2011. The decrease in consolidated net revenue was primarily attributable to University of Phoenix’s 10.1% 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 six months of fiscal year 2012, University of Phoenix's Average Degreed Enrollment decreased 15.6% as compared to the first six months of fiscal year 2011. The Company reported income from continuing operations attributable to Apollo Group for the six months ended February 29, 2012, of $213.2 million, or $1.66 per share, (128.7 million weighted average diluted shares outstanding), and $169.4 million, or $1.17 per share, (144.7 million weighted average diluted shares outstanding) for the six months ended February 28, 2011.

Results for the first six months of fiscal year 2012 contained special items that include $21.7 million of restructuring and other charges associated with the Company’s real estate rationalization plan and $16.8 million of goodwill and other intangible asset impairment charges for the UNIACC subsidiary of Apollo Global ($14.4 million net of the portion attributable to noncontrolling interests). The Company did not record a net tax benefit associated with the goodwill and other intangible asset impairment, as they are not deductible for tax purposes. Results for the first six months of fiscal year 2011 include 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); a $3.8 million restructuring charge associated with a strategic reduction in force; and $2.5 million of charges for accrued incremental post-judgment interest and other estimated costs related to the Policeman’s Annuity and Benefit Fund of Chicago securities class action lawsuit. The Company recorded a tax benefit of $5.0 million, net of noncontrolling interests, associated with these charges. The Company did not record a net tax benefit associated with the goodwill impairment, as it is not deductible for tax purposes.

Excluding these special items, income from continuing operations attributable to Apollo Group for the six months ended February 29, 2012, was $241.0 million, or $1.87 per share, compared to income from continuing operations attributable to Apollo Group of $357.1 million, or $2.47 per share, for the six months ended February 28, 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 February 29, 2012, the Company’s cash and cash equivalents, excluding restricted cash, totaled $800.7 million, compared to $1,571.7 million as of August 31, 2011. The decrease was primarily attributable to payments on borrowings, share repurchases, funding a common fund account associated with our preliminary settlement in a legal matter, the purchase of Carnegie Learning and capital expenditures, partially offset by cash generated from operations.

As of February 29, 2012, accounts receivable decreased to $207.1 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 22 days as of February 29, 2012, which remained consistent compared to 23 days as of August 31, 2011, and 22 days as of February 28, 2011.

Total debt outstanding (including short-term borrowings and the current portion of long-term debt) decreased by $471.5 million to $127.5 million as of February 29, 2012, from $599.0 million as of August 31, 2011. The decrease is due to the repayment of the borrowings on the Company's $500 million credit facility.

Share Repurchases

The Company repurchased approximately 6.4 million and 8.1 million shares of its common stock at a weighted average purchase price of $51.65 and $50.42 per share for a total cost of $328.8 million and $407.0 million during the three and six months ended February 29, 2012, respectively. Additionally, subsequent to February 29, 2012, the Company repurchased approximately 2.2 million shares at a total cost of $92.5 million, resulting in $0.5 million remaining of the current share repurchase authorization.

SEC Update

On March 21, 2012, the Company was notified by the staff of the Securities and Exchange Commission that the informal inquiry initiated in October 2009 was completed and that the staff does not intend to recommend any enforcement action by the Commission.

Business Outlook

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

• Consolidated net revenue of $4.1-$4.3 billion; and
• Operating income, excluding the impact of special items, of $625-$725 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, March 26, 2012.

Dial-In Numbers:

877-292-6888 (Domestic)

973-200-3381 (International)

Conference ID: 56164637

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 April 10, 2012.

Dial-In Numbers:

855-859-2056 (Domestic)

404-537-3406 (International)

Conference ID: 56164637

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 is authorized to offer programs and services in 41 states and the District of Columbia; Puerto Rico; 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 and, in particular, improvements in employment levels in the U.S., (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) changes in enrollment or student mix, (v) the impact of the Company’s initiatives to improve the student experience, (vi) 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 (vii) 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)			February 29, 2012				August 31, 2011
ASSETS:
Current assets
Cash and cash equivalents			$	800,733			$	1,571,664
Restricted cash and cash equivalents			372,953				379,407
Accounts receivable, net			207,127				215,567
Restricted funds held for legal matter			145,000				—
Prepaid taxes			8,074				35,629
Deferred tax assets, current portion			113,418				124,137
Other current assets			45,318				44,382
Total current assets			1,692,623				2,370,786
Property and equipment, net			570,004				553,027
Marketable securities			5,946				5,946
Goodwill			151,488				133,297
Intangible assets, net			167,038				121,117
Deferred tax assets, less current portion			76,649				70,949
Other assets			25,854				14,584
Total assets			$	2,689,602			$	3,269,706
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities
Short-term borrowings and current portion of long-term debt			$	33,694			$	419,318
Accounts payable			86,916				69,551
Accrued liabilities			394,290				398,806
Student deposits			408,921				424,045
Deferred revenue			302,787				293,436
Other current liabilities			55,785				50,131
Total current liabilities			1,282,393				1,655,287
Long-term debt			93,816				179,691
Deferred tax liabilities			24,065				26,400
Other long-term liabilities			205,767				164,339
Total liabilities			1,606,041				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			89,940				68,724
Apollo Group Class A treasury stock, at cost			(3,510,646		)		(3,125,175		)
Retained earnings			4,533,668				4,320,472
Accumulated other comprehensive loss			(27,566		)		(23,761		)
Total Apollo shareholders’ equity			1,085,500				1,240,364
Noncontrolling (deficit) interests			(1,939		)		3,625
Total equity			1,083,561				1,243,989
Total liabilities and shareholders’ equity			$	2,689,602			$	3,269,706

Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
		Three Months Ended									% of Net Revenue
		February 29, 2012				February 28, 2011					2012			2011
(In thousands, except per share data)
Net revenue		$	969,552			$	1,048,629				100.0	%		100.0	%
Costs and expenses:
Instructional and student advisory		429,500				421,644					44.3	%		40.2	%
Marketing		159,254				157,215					16.4	%		15.0	%
Admissions advisory		101,405				102,283					10.4	%		9.8	%
General and administrative		84,000				84,344					8.7	%		8.0	%
Depreciation and amortization		41,985				39,142					4.3	%		3.7	%
Provision for uncollectible accounts receivable		30,996				45,540					3.2	%		4.3	%
Restructuring and other charges		16,148				—					1.7	%		—	%
Goodwill and other intangibles impairment		—				219,927					—	%		21.0	%
Litigation charge		—				1,574					—	%		0.2	%
Total costs and expenses		863,288				1,071,669					89.0	%		102.2	%
Operating income (loss)		106,264				(23,040		)			11.0	%		(2.2	)%
Interest income		277				785					—	%		0.1	%
Interest expense		(1,789		)		(1,654		)			(0.2	)%		(0.2	)%
Other, net		217				313					—	%		—	%
Income (loss) from continuing operations before income taxes		104,969				(23,596		)			10.8	%		(2.3	)%
Provision for income taxes		(43,798		)		(76,052		)			(4.5	)%		(7.2	)%
Income (loss) from continuing operations		61,171				(99,648		)			6.3	%		(9.5	)%
Income from discontinued operations, net of tax		—				2,575					—	%		0.2	%
Net income (loss)		61,171				(97,073		)			6.3	%		(9.3	)%
Net loss attributable to noncontrolling interests		2,711				33,035					0.3	%		3.2	%
Net income (loss) attributable to Apollo		$	63,882			$	(64,038	)			6.6	%		(6.1	)%
Earnings (loss) per share — Basic:
Continuing operations attributable to Apollo		$	0.51			$	(0.47	)
Discontinued operations attributable to Apollo		—				0.02
Basic income (loss) per share attributable to Apollo		$	0.51			$	(0.45	)
Earnings (loss) per share — Diluted:
Continuing operations attributable to Apollo		$	0.51			$	(0.47	)
Discontinued operations attributable to Apollo		—				0.02
Diluted income (loss) per share attributable to Apollo		$	0.51			$	(0.45	)
Basic weighted average shares outstanding		125,298				142,354
Diluted weighted average shares outstanding		126,467				142,354

Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
		Six Months Ended									% of Net Revenue
		February 29, 2012				February 28, 2011					2012			2011
(In thousands, except per share data)
Net revenue		$	2,148,242			$	2,375,064				100.0	%		100.0	%
Costs and expenses:
Instructional and student advisory		886,297				877,456					41.3	%		37.0	%
Marketing		325,099				323,358					15.1	%		13.6	%
Admissions advisory		202,793				216,035					9.4	%		9.1	%
General and administrative		163,944				169,218					7.6	%		7.1	%
Depreciation and amortization		88,283				76,244					4.1	%		3.2	%
Provision for uncollectible accounts receivable		72,579				102,449					3.4	%		4.3	%
Restructuring and other charges		21,710				3,846					1.0	%		0.2	%
Goodwill and other intangibles impairment		16,788				219,927					0.8	%		9.2	%
Litigation charge		—				2,455					—	%		0.1	%
Total costs and expenses		1,777,493				1,990,988					82.7	%		83.8	%
Operating income		370,749				384,076					17.3	%		16.2	%
Interest income		866				1,768					—	%		0.1	%
Interest expense		(3,788		)		(3,824		)			(0.2	)%		(0.2	)%
Other, net		358				259					—	%		—	%
Income from continuing operations before income taxes		368,185				382,279					17.1	%		16.1	%
Provision for income taxes		(159,730		)		(245,631		)			(7.4	)%		(10.3	)%
Income from continuing operations		208,455				136,648					9.7	%		5.8	%
Income from discontinued operations, net of tax		—				1,947					—	%		—	%
Net income		208,455				138,595					9.7	%		5.8	%
Net loss attributable to noncontrolling interests		4,741				32,780					0.2	%		1.4	%
Net income attributable to Apollo		$	213,196			$	171,375				9.9	%		7.2	%
Earnings per share — Basic:
Continuing operations attributable to Apollo		$	1.67			$	1.17
Discontinued operations attributable to Apollo		—				0.02
Basic income per share attributable to Apollo		$	1.67			$	1.19
Earnings per share — Diluted:
Continuing operations attributable to Apollo		$	1.66			$	1.17
Discontinued operations attributable to Apollo		—				0.01
Diluted income per share attributable to Apollo		$	1.66			$	1.18
Basic weighted average shares outstanding		127,808				144,364
Diluted weighted average shares outstanding		128,729				144,658

Apollo Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows From Continuing and Discontinued Operations
(Unaudited)
								Six Months Ended
								February 29, 2012					February 28, 2011
($ in thousands)
Cash flows provided by (used in) operating activities:
Net income								$	208,455				$		138,595
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation								40,492					30,490
Excess tax benefits from share-based compensation								(1,137			)		(569			)
Depreciation and amortization								88,283					76,244
Amortization of lease incentives								(7,668			)		(7,023			)
Amortization of deferred gains on sale-leasebacks								(1,399			)		(822			)
Goodwill and other intangibles impairment								16,788					219,927
Non-cash foreign currency gain, net								(295			)		(267			)
Provision for uncollectible accounts receivable								72,579					102,449
Litigation charge								—					2,455
Restructuring and other charges								21,710					3,846
Deferred income taxes								(9,843			)		843
Changes in assets and liabilities, excluding the impact of business acquisition and disposition:
Restricted cash and cash equivalents								6,454					(21,502			)
Accounts receivable								(64,093			)		(32,443			)
Prepaid taxes								27,529					(856			)
Other assets								(9,789			)		(9,399			)
Accounts payable and accrued liabilities								(10,110			)		(10,056			)
Student deposits								(13,777			)		2,831
Deferred revenue								8,551					(53,403			)
Other liabilities								11,749					21,305
Net cash provided by operating activities								384,479					462,645
Cash flows provided by (used in) investing activities:
Additions to property and equipment								(62,357			)		(81,422			)
Restricted funds held for legal matter								(145,000			)		—
Maturities of marketable securities								—					10,000
Acquisition, net of cash acquired								(73,736			)		—
Proceeds from disposition								3,285					6,250
Other investing activities								(1,694			)		—
Net cash used in investing activities								(279,502			)		(65,172			)
Cash flows provided by (used in) financing activities:
Payments on borrowings								(498,895			)		(419,454			)
Proceeds from borrowings								—					8,129
Apollo Group Class A common stock purchased for treasury								(386,716			)		(252,003			)
Issuance of Apollo Group Class A common stock								9,336					6,082
Noncontrolling interest contributions								—					6,875
Excess tax benefits from share-based compensation								1,137					569
Net cash used in financing activities								(875,138			)		(649,802			)
Exchange rate effect on cash and cash equivalents								(770			)		903
Net decrease in cash and cash equivalents								(770,931			)		(251,426			)
Cash and cash equivalents, beginning of period								1,571,664					1,284,769
Cash and cash equivalents, end of period								$	800,733				$		1,033,343
Supplemental disclosure of cash flow and non-cash information
Cash paid for income taxes, net of refunds								$	141,047				$		222,442
Cash paid for interest								$	4,859				$		5,590
Unsettled share repurchases								$	25,461				$		—
Credits received for tenant improvements								$	22,671				$		8,021
Capital lease additions								$	19,440				$		10,017
Restricted stock units vested and released								$	14,640				$		1,602
Acquired technology								$	14,389				$		—
Apollo Group, Inc. and Subsidiaries
Reconciliation of GAAP financial information to non-GAAP financial information
(Unaudited)
	Three Months Ended								Six Months Ended
	February 29, 2012				February 28, 2011				February 29, 2012					February 28, 2011
(In thousands, except per share data)
Net income (loss) attributable to Apollo, as reported	$	63,882			$	(64,038	)		$	213,196				$	171,375
Income from discontinued operations, net of tax	—				2,575				—					1,947
Income (loss) from continuing operations attributable to Apollo	63,882				(66,613		)		213,196					169,428
Reconciling items:
Restructuring and other charges(1)	16,148				—				21,710					3,846
Goodwill and other intangibles impairment, net of noncontrolling interest(2)	—				188,258				14,370					188,258
Litigation charge(3)	—				1,574				—					2,455
	16,148				189,832				36,080					194,559
Less: tax effects	(6,199		)		(5,043		)		(8,290			)		(6,914		)
Income from continuing operations attributable to Apollo, adjusted to exclude special items	$	73,831			$	118,176			$	240,986				$	357,073
Diluted income (loss) per share from continuing operations attributable to Apollo, as reported	$	0.51			$	(0.47	)		$	1.66				$	1.17
Diluted income per share from continuing operations attributable to Apollo, adjusted to exclude special items	$	0.58			$	0.83			$	1.87				$	2.47
Diluted weighted average shares outstanding(4)	126,467				142,677				128,729					144,658
(1) Restructuring and other charges for the three and six months ended February 29, 2012 represents charges associated with the Company’s real estate rationalization plan. The charges for the six months ended February 28, 2011 represent charges associated with a strategic reduction in force at University of Phoenix.
(2) The charges for the six months ended February 29, 2012 represent impairments of UNIACC’s goodwill and other intangible assets, net of noncontrolling interest, with no income tax benefit as UNIACC’s goodwill and other intangible assets are not deductible for tax purposes. The charges for the three and six months ended February 28, 2011 represent impairments of BPP’s goodwill and other intangible assets, 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.
(3) The charges for the three and six months ended February 28, 2011 represent estimated losses associated with the Policeman’s Annuity and Benefit Fund of Chicago securities class action lawsuit.
(4) Diluted weighted average shares outstanding for the three months ended February 28, 2011 includes the dilutive effect of share-based awards that are not reflected in the comparable GAAP reported number due to their anti-dilutive effect on the net loss from continuing operations attributable to Apollo.