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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Apollo Education Grp., Inc. | NASDAQ:APOL | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 9.995 | 9.89 | 10.00 | 0 | 01:00:00 |
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended:
May 31, 2016
|
OR
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|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from ______ to ______
|
ARIZONA
(State or other jurisdiction of incorporation or organization)
|
86-0419443
(I.R.S. Employer Identification No.)
|
|
|
|
(Former name, former address and former fiscal year, if changed since last report)
|
Large accelerated filer
þ
|
Accelerated filer
o
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Non-accelerated filer
o
(Do not check if smaller reporting company)
|
Smaller reporting company
o
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Page
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•
|
Changes in regulation of the U.S. education industry and eligibility of proprietary schools to participate in U.S. federal student financial aid programs, including the factors discussed in Item 1, Business, of our Annual Report on Form 10-K for the year ended
August 31, 2015
, under “Accreditation and Jurisdictional Authorizations,” “Financial Aid Programs” and “Regulatory Environment;”
|
•
|
The impact and effectiveness of the initiatives to transform University of Phoenix into a more focused, higher retaining and less complex institution, as discussed in Item 1, Business, of our Annual Report on Form 10-K for the year ended
August 31, 2015
, under “University of Phoenix;”
|
•
|
Each of the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended
August 31, 2015
and Part II, Item 1A, Risk Factors, in this Form 10-Q; and
|
•
|
Those factors set forth in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended
August 31, 2015
and Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Form 10-Q.
|
|
As of
|
||||||
($ in thousands)
|
May 31,
2016 |
|
August 31,
2015 |
||||
ASSETS
|
|||||||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
361,526
|
|
|
$
|
503,705
|
|
Restricted cash and cash equivalents
|
185,320
|
|
|
198,369
|
|
||
Marketable securities
|
242,301
|
|
|
194,676
|
|
||
Accounts receivable, net
|
193,477
|
|
|
198,459
|
|
||
Prepaid taxes
|
29,165
|
|
|
38,371
|
|
||
Other current assets
|
53,201
|
|
|
48,823
|
|
||
Assets of business held for sale
|
—
|
|
|
40,897
|
|
||
Total current assets
|
1,064,990
|
|
|
1,223,300
|
|
||
Marketable securities
|
39,323
|
|
|
95,815
|
|
||
Property and equipment, net
|
343,094
|
|
|
370,281
|
|
||
Goodwill
|
265,765
|
|
|
247,190
|
|
||
Intangible assets, net
|
200,756
|
|
|
143,244
|
|
||
Deferred taxes
|
93,772
|
|
|
92,105
|
|
||
Other assets
|
29,926
|
|
|
29,129
|
|
||
Total assets
|
$
|
2,037,626
|
|
|
$
|
2,201,064
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY
|
|||||||
Current liabilities:
|
|
|
|
|
|
||
Short-term borrowings and current portion of long-term debt
|
$
|
19,514
|
|
|
$
|
14,080
|
|
Accounts payable
|
56,297
|
|
|
64,100
|
|
||
Student deposits
|
213,986
|
|
|
245,470
|
|
||
Deferred revenue
|
185,025
|
|
|
186,950
|
|
||
Accrued and other current liabilities
|
248,863
|
|
|
280,847
|
|
||
Liabilities of business held for sale
|
—
|
|
|
40,897
|
|
||
Total current liabilities
|
723,685
|
|
|
832,344
|
|
||
Long-term debt
|
42,597
|
|
|
31,566
|
|
||
Deferred taxes
|
16,924
|
|
|
7,729
|
|
||
Other long-term liabilities
|
182,491
|
|
|
172,452
|
|
||
Total liabilities
|
965,697
|
|
|
1,044,091
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Redeemable noncontrolling interests
|
7,204
|
|
|
11,915
|
|
||
Shareholders’ equity:
|
|
|
|
|
|
||
Preferred stock, no par value
|
—
|
|
|
—
|
|
||
Apollo Class A nonvoting common stock, no par value
|
103
|
|
|
103
|
|
||
Apollo Class B voting common stock, no par value
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
—
|
|
|
—
|
|
||
Apollo Class A treasury stock, at cost
|
(3,915,279
|
)
|
|
(3,928,419
|
)
|
||
Retained earnings
|
5,061,631
|
|
|
5,153,452
|
|
||
Accumulated other comprehensive loss
|
(82,286
|
)
|
|
(80,579
|
)
|
||
Total Apollo shareholders’ equity
|
1,064,170
|
|
|
1,144,558
|
|
||
Noncontrolling interests
|
555
|
|
|
500
|
|
||
Total equity
|
1,064,725
|
|
|
1,145,058
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
2,037,626
|
|
|
$
|
2,201,064
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
(In thousands, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net revenue
|
$
|
558,002
|
|
|
$
|
676,358
|
|
|
$
|
1,609,371
|
|
|
$
|
1,965,986
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Instructional and student advisory
|
274,486
|
|
|
294,841
|
|
|
836,453
|
|
|
907,348
|
|
||||
Marketing
|
87,530
|
|
|
116,839
|
|
|
279,128
|
|
|
369,120
|
|
||||
Admissions advisory
|
30,192
|
|
|
52,994
|
|
|
94,500
|
|
|
167,919
|
|
||||
General and administrative
|
59,066
|
|
|
64,437
|
|
|
192,300
|
|
|
206,215
|
|
||||
Depreciation and amortization
|
28,330
|
|
|
29,969
|
|
|
82,478
|
|
|
95,705
|
|
||||
Provision for uncollectible accounts receivable
|
15,716
|
|
|
13,005
|
|
|
43,812
|
|
|
42,372
|
|
||||
Restructuring and impairment charges
|
22,366
|
|
|
11,444
|
|
|
149,578
|
|
|
52,722
|
|
||||
Merger, acquisition and other related costs (credit), net
|
8,317
|
|
|
(455
|
)
|
|
25,188
|
|
|
4,506
|
|
||||
Litigation charge
|
—
|
|
|
—
|
|
|
—
|
|
|
100
|
|
||||
Total costs and expenses
|
526,003
|
|
|
583,074
|
|
|
1,703,437
|
|
|
1,846,007
|
|
||||
Operating income (loss)
|
31,999
|
|
|
93,284
|
|
|
(94,066
|
)
|
|
119,979
|
|
||||
Interest income
|
1,041
|
|
|
762
|
|
|
2,883
|
|
|
2,091
|
|
||||
Interest expense
|
(1,569
|
)
|
|
(1,715
|
)
|
|
(4,997
|
)
|
|
(5,116
|
)
|
||||
Other loss, net
|
(273
|
)
|
|
(2,038
|
)
|
|
(2,229
|
)
|
|
(4,480
|
)
|
||||
Income (loss) from continuing operations before income taxes
|
31,198
|
|
|
90,293
|
|
|
(98,409
|
)
|
|
112,474
|
|
||||
Provision for income taxes
|
(11,399
|
)
|
|
(40,667
|
)
|
|
(3,796
|
)
|
|
(53,797
|
)
|
||||
Income (loss) from continuing operations
|
19,799
|
|
|
49,626
|
|
|
(102,205
|
)
|
|
58,677
|
|
||||
Loss from discontinued operations, net of tax
|
—
|
|
|
(2,186
|
)
|
|
(3,259
|
)
|
|
(14,906
|
)
|
||||
Net income (loss)
|
19,799
|
|
|
47,440
|
|
|
(105,464
|
)
|
|
43,771
|
|
||||
Net loss attributable to noncontrolling interests
|
945
|
|
|
624
|
|
|
5,047
|
|
|
4,468
|
|
||||
Net income (loss) attributable to Apollo
|
$
|
20,744
|
|
|
$
|
48,064
|
|
|
$
|
(100,417
|
)
|
|
$
|
48,239
|
|
Earnings (loss) per share - Basic:
|
|
|
|
|
|
|
|
||||||||
Continuing operations attributable to Apollo
|
$
|
0.19
|
|
|
$
|
0.47
|
|
|
$
|
(0.89
|
)
|
|
$
|
0.59
|
|
Discontinued operations attributable to Apollo
|
—
|
|
|
(0.02
|
)
|
|
(0.03
|
)
|
|
(0.14
|
)
|
||||
Basic income (loss) per share attributable to Apollo
|
$
|
0.19
|
|
|
$
|
0.45
|
|
|
$
|
(0.92
|
)
|
|
$
|
0.45
|
|
Earnings (loss) per share - Diluted:
|
|
|
|
|
|
|
|
||||||||
Continuing operations attributable to Apollo
|
$
|
0.19
|
|
|
$
|
0.46
|
|
|
$
|
(0.89
|
)
|
|
$
|
0.58
|
|
Discontinued operations attributable to Apollo
|
—
|
|
|
(0.02
|
)
|
|
(0.03
|
)
|
|
(0.14
|
)
|
||||
Diluted income (loss) per share attributable to Apollo
|
$
|
0.19
|
|
|
$
|
0.44
|
|
|
$
|
(0.92
|
)
|
|
$
|
0.44
|
|
Basic weighted average shares outstanding
|
108,658
|
|
|
107,678
|
|
|
108,567
|
|
|
108,140
|
|
||||
Diluted weighted average shares outstanding
|
109,444
|
|
|
108,623
|
|
|
108,567
|
|
|
109,124
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income (loss)
|
$
|
19,799
|
|
|
$
|
47,440
|
|
|
$
|
(105,464
|
)
|
|
$
|
43,771
|
|
Other comprehensive income (loss) (net of tax):
|
|
|
|
|
|
|
|
||||||||
Currency translation adjustment
|
8,726
|
|
|
(6,931
|
)
|
|
(2,794
|
)
|
|
(44,923
|
)
|
||||
Change in fair value of available-for-sale securities
(1)
|
136
|
|
|
49
|
|
|
89
|
|
|
290
|
|
||||
Comprehensive income (loss)
|
28,661
|
|
|
40,558
|
|
|
(108,169
|
)
|
|
(862
|
)
|
||||
Comprehensive loss attributable to noncontrolling interests
|
667
|
|
|
2,157
|
|
|
6,045
|
|
|
16,498
|
|
||||
Comprehensive income (loss) attributable to Apollo
|
$
|
29,328
|
|
|
$
|
42,715
|
|
|
$
|
(102,124
|
)
|
|
$
|
15,636
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in Capital |
|
Apollo Class A
Treasury Stock
|
|
Retained
Earnings
|
|
Accumulated Other
Comprehensive Loss
|
|
Total Apollo
Shareholders’ Equity
|
|
Noncontrolling
Interests |
|
Total
Equity
|
|
|
Redeemable Noncontrolling Interests
|
|||||||||||||||||||||||||||||||
|
Class A Nonvoting
|
|
Class B Voting
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
|
Shares
|
|
Stated
Value
|
|
Shares
|
|
Stated
Value
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
(In thousands)
|
|
|
|
|
|
Shares
|
|
Cost
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Balance as of August 31, 2015
|
188,007
|
|
|
$
|
103
|
|
|
475
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
80,082
|
|
|
$
|
(3,928,419
|
)
|
|
$
|
5,153,452
|
|
|
$
|
(80,579
|
)
|
|
$
|
1,144,558
|
|
|
$
|
500
|
|
|
$
|
1,145,058
|
|
|
|
$
|
11,915
|
|
Share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91
|
|
|
(732
|
)
|
|
—
|
|
|
—
|
|
|
(732
|
)
|
|
—
|
|
|
(732
|
)
|
|
|
—
|
|
||||||||||
Share reissuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23,219
|
)
|
|
(359
|
)
|
|
13,872
|
|
|
9,985
|
|
|
—
|
|
|
638
|
|
|
—
|
|
|
638
|
|
|
|
—
|
|
||||||||||
Net tax effect for stock incentive plans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,099
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,099
|
)
|
|
—
|
|
|
(4,099
|
)
|
|
|
—
|
|
||||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,318
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,318
|
|
|
—
|
|
|
27,318
|
|
|
|
—
|
|
||||||||||
Currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,796
|
)
|
|
(1,796
|
)
|
|
(49
|
)
|
|
(1,845
|
)
|
|
|
(949
|
)
|
||||||||||
Available-for-sale securities adjustment, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|
89
|
|
|
—
|
|
|
89
|
|
|
|
—
|
|
||||||||||
Redemption value adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,389
|
)
|
|
—
|
|
|
(1,389
|
)
|
|
—
|
|
|
(1,389
|
)
|
|
|
1,389
|
|
||||||||||
Net (loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(100,417
|
)
|
|
—
|
|
|
(100,417
|
)
|
|
104
|
|
|
(100,313
|
)
|
|
|
(5,151
|
)
|
||||||||||
Balance as of May 31, 2016
|
188,007
|
|
|
$
|
103
|
|
|
475
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
79,814
|
|
|
$
|
(3,915,279
|
)
|
|
$
|
5,061,631
|
|
|
$
|
(82,286
|
)
|
|
$
|
1,064,170
|
|
|
$
|
555
|
|
|
$
|
1,064,725
|
|
|
|
$
|
7,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Balance as of August 31, 2014
|
188,007
|
|
|
$
|
103
|
|
|
475
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
79,585
|
|
|
$
|
(3,936,607
|
)
|
|
$
|
5,143,949
|
|
|
$
|
(27,320
|
)
|
|
$
|
1,180,126
|
|
|
$
|
676
|
|
|
$
|
1,180,802
|
|
|
|
$
|
64,527
|
|
Share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,549
|
|
|
(40,700
|
)
|
|
—
|
|
|
—
|
|
|
(40,700
|
)
|
|
—
|
|
|
(40,700
|
)
|
|
|
—
|
|
||||||||||
Share reissuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,593
|
)
|
|
(352
|
)
|
|
14,590
|
|
|
13,998
|
|
|
—
|
|
|
995
|
|
|
—
|
|
|
995
|
|
|
|
—
|
|
||||||||||
Net tax effect for stock incentive plans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,839
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,839
|
)
|
|
—
|
|
|
(3,839
|
)
|
|
|
—
|
|
||||||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,768
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,768
|
|
|
—
|
|
|
29,768
|
|
|
|
—
|
|
||||||||||
Currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,893
|
)
|
|
(32,893
|
)
|
|
(55
|
)
|
|
(32,948
|
)
|
|
|
(11,975
|
)
|
||||||||||
Available-for-sale securities adjustment, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
290
|
|
|
290
|
|
|
—
|
|
|
290
|
|
|
|
—
|
|
||||||||||
Acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
3,437
|
|
||||||||||
Redemption value adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,948
|
)
|
|
—
|
|
|
(4,948
|
)
|
|
—
|
|
|
(4,948
|
)
|
|
|
4,948
|
|
||||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
48,239
|
|
|
—
|
|
|
48,239
|
|
|
124
|
|
|
48,363
|
|
|
|
(4,592
|
)
|
||||||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,664
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,664
|
|
|
—
|
|
|
1,664
|
|
|
|
—
|
|
||||||||||
Balance as of May 31, 2015
|
188,007
|
|
|
$
|
103
|
|
|
475
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
80,782
|
|
|
$
|
(3,962,717
|
)
|
|
$
|
5,201,238
|
|
|
$
|
(59,923
|
)
|
|
$
|
1,178,702
|
|
|
$
|
745
|
|
|
$
|
1,179,447
|
|
|
|
$
|
56,345
|
|
|
Nine Months Ended
May 31, |
||||||
($ in thousands)
|
2016
|
|
2015
|
||||
Operating activities:
|
|
|
|
|
|
||
Net (loss) income
|
$
|
(105,464
|
)
|
|
$
|
43,771
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
||||
Share-based compensation
|
27,318
|
|
|
29,768
|
|
||
Excess tax benefits from share-based compensation
|
—
|
|
|
(236
|
)
|
||
Depreciation and amortization
|
82,478
|
|
|
101,779
|
|
||
Accelerated depreciation included in restructuring
|
12,262
|
|
|
7,207
|
|
||
Impairment charges and loss on asset dispositions
|
76,470
|
|
|
22,228
|
|
||
Non-cash foreign currency loss, net
|
492
|
|
|
1,722
|
|
||
Provision for uncollectible accounts receivable
|
43,812
|
|
|
42,372
|
|
||
Deferred income taxes
|
(6,175
|
)
|
|
(12,471
|
)
|
||
Changes in assets and liabilities, excluding the impact of acquisitions:
|
|
|
|
|
|||
Restricted cash and cash equivalents
|
13,567
|
|
|
5,529
|
|
||
Accounts receivable
|
(37,296
|
)
|
|
(51,555
|
)
|
||
Prepaid taxes
|
8,104
|
|
|
21,038
|
|
||
Other assets
|
(684
|
)
|
|
(1,974
|
)
|
||
Accounts payable
|
(8,872
|
)
|
|
7,753
|
|
||
Student deposits
|
(32,002
|
)
|
|
(25,918
|
)
|
||
Deferred revenue
|
(28,564
|
)
|
|
22,677
|
|
||
Accrued and other liabilities
|
(35,813
|
)
|
|
(89,987
|
)
|
||
Net cash provided by operating activities
|
9,633
|
|
|
123,703
|
|
||
Investing activities:
|
|
|
|
|
|
||
Purchases of property and equipment
|
(51,414
|
)
|
|
(74,254
|
)
|
||
Purchases of marketable securities
|
(203,504
|
)
|
|
(156,465
|
)
|
||
Maturities and sales of marketable securities
|
208,360
|
|
|
156,337
|
|
||
Acquisitions, net of cash acquired
|
(101,196
|
)
|
|
(21,166
|
)
|
||
Other investing activities
|
(727
|
)
|
|
(14,216
|
)
|
||
Net cash used in investing activities
|
(148,481
|
)
|
|
(109,764
|
)
|
||
Financing activities:
|
|
|
|
|
|
||
Payments on borrowings
|
(63,785
|
)
|
|
(605,214
|
)
|
||
Proceeds from borrowings
|
56,961
|
|
|
4,515
|
|
||
Share repurchases
|
(732
|
)
|
|
(40,700
|
)
|
||
Share reissuances
|
638
|
|
|
995
|
|
||
Excess tax benefits from share-based compensation
|
—
|
|
|
236
|
|
||
Payment for contingent consideration
|
—
|
|
|
(21,371
|
)
|
||
Net cash used in financing activities
|
(6,918
|
)
|
|
(661,539
|
)
|
||
Exchange rate effect on cash and cash equivalents
|
3,587
|
|
|
(3,991
|
)
|
||
Net decrease in cash and cash equivalents
|
(142,179
|
)
|
|
(651,591
|
)
|
||
Cash and cash equivalents, beginning of period
|
503,705
|
|
|
1,228,813
|
|
||
Cash and cash equivalents, end of period
|
$
|
361,526
|
|
|
$
|
577,222
|
|
Supplemental disclosure of cash flow and non-cash information
(1)
:
|
|
|
|
|
|
||
Cash paid for income taxes, net of refunds
|
$
|
1,144
|
|
|
$
|
36,545
|
|
Cash paid for interest
|
5,081
|
|
|
5,134
|
|
||
Restricted stock units vested and released
|
2,083
|
|
|
7,407
|
|
|
|
Page
|
(i)
|
the receipt of consents or approvals from certain federal, state and foreign educational governing bodies, including the Higher Learning Commission; and
|
(ii)
|
the absence of certain conditions or restrictions in the response of the U.S. Department of Education to the pre-acquisition review application filed by University of Phoenix.
|
(i)
|
Our aggregate cash, cash equivalents and marketable securities must not be less than the specified amount for the applicable month end;
|
(ii)
|
University of Phoenix fiscal year-to-date new degreed enrollments as of the applicable month end must not have declined by more than certain levels (which are derived from the projections we prepared in December 2015 in connection with the merger, which we refer to as the December forecast);
|
(iii)
|
University of Phoenix trailing twelve month net revenue as of the applicable month end shall not have declined by more than certain levels (which are derived from the December forecast); and
|
(iv)
|
Our consolidated trailing twelve months adjusted earnings before interest, taxes, depreciation and amortization as of the applicable month end shall not have declined by more than certain levels (which are derived from the December forecast).
|
•
|
University of Phoenix
- University of Phoenix generally has lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to holiday breaks.
|
•
|
Apollo Global
- Our Apollo Global subsidiaries experience seasonality associated with the timing of when courses begin, exam dates, the timing of their respective holidays and other factors. These factors have historically resulted in lower net revenue in our second and fourth fiscal quarters, particularly for BPP, which also results in substantially lower operating results during these quarters due to BPP’s relatively fixed cost structure.
|
•
|
During the fourth quarter of fiscal year 2015, we began presenting Carnegie Learning, Inc.’s operating results as discontinued operations on our Condensed Consolidated Statements of Operations. Refer to
Note 3
,
Discontinued Operations
.
|
•
|
During the first quarter of fiscal year 2016, we began presenting all deferred tax assets and liabilities as noncurrent on our Condensed Consolidated Balance Sheets as discussed further in
New Accounting Standards
below.
|
•
|
During the second quarter of fiscal year 2016, we began presenting expenses incurred associated with our pending merger discussed above in
Merger, acquisition and other related costs (credit), net
on our Condensed Consolidated Statements of Operations. The associated costs incurred in the first quarter of fiscal year 2016 were included in
General and administrative
and we have reclassified such costs for the nine months ended
May 31, 2016
to conform with our current presentation.
|
•
|
ASU No. 2016-08, “
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
”; and
|
•
|
ASU No. 2016-12, “
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
”.
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Restructuring charges
|
$
|
22,366
|
|
|
$
|
11,444
|
|
|
$
|
73,673
|
|
|
$
|
46,772
|
|
Goodwill impairments
(1)
|
—
|
|
|
—
|
|
|
73,393
|
|
|
—
|
|
||||
Property and equipment impairments
|
—
|
|
|
—
|
|
|
2,512
|
|
|
5,950
|
|
||||
Restructuring and impairment charges
|
$
|
22,366
|
|
|
$
|
11,444
|
|
|
$
|
149,578
|
|
|
$
|
52,722
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
University of Phoenix
|
$
|
15,787
|
|
|
$
|
6,043
|
|
|
$
|
46,380
|
|
|
$
|
28,292
|
|
Apollo Global
|
1,183
|
|
|
41
|
|
|
1,902
|
|
|
142
|
|
||||
Other
|
5,396
|
|
|
5,360
|
|
|
25,391
|
|
|
18,338
|
|
||||
Restructuring charges
|
$
|
22,366
|
|
|
$
|
11,444
|
|
|
$
|
73,673
|
|
|
$
|
46,772
|
|
|
Lease and Related
Costs, Net
|
|
Severance and Other Employee
Separation Costs
|
|
Other Restructuring
Related Costs
|
|
Total
|
||||||||||||||||||||
($ in thousands)
|
2016 Restructuring
|
|
Prior Year Restructuring
(1)
|
|
2016 Restructuring
|
|
Prior Year Restructuring
(1)
|
|
2016 Restructuring
|
|
Prior Year Restructuring
(1)
|
|
|||||||||||||||
August 31, 2015
|
$
|
—
|
|
|
$
|
74,990
|
|
|
$
|
—
|
|
|
$
|
8,210
|
|
|
$
|
—
|
|
|
$
|
90
|
|
|
$
|
83,290
|
|
Expense
|
—
|
|
|
10,479
|
|
|
10,380
|
|
|
1,058
|
|
|
210
|
|
|
2,303
|
|
|
24,430
|
|
|||||||
Other
|
—
|
|
|
(387
|
)
|
|
(53
|
)
|
|
—
|
|
|
—
|
|
|
(1,211
|
)
|
|
(1,651
|
)
|
|||||||
Payments
|
—
|
|
|
(12,662
|
)
|
|
(3,158
|
)
|
|
(5,257
|
)
|
|
—
|
|
|
(813
|
)
|
|
(21,890
|
)
|
|||||||
November 30, 2015
|
—
|
|
|
72,420
|
|
|
7,169
|
|
|
4,011
|
|
|
210
|
|
|
369
|
|
|
84,179
|
|
|||||||
Expense
|
—
|
|
|
16,178
|
|
|
7,133
|
|
|
696
|
|
|
1,058
|
|
|
1,812
|
|
|
26,877
|
|
|||||||
Other
|
—
|
|
|
(3,705
|
)
|
|
(164
|
)
|
|
—
|
|
|
—
|
|
|
(1,543
|
)
|
|
(5,412
|
)
|
|||||||
Payments
|
—
|
|
|
(10,771
|
)
|
|
(11,029
|
)
|
|
(1,788
|
)
|
|
(405
|
)
|
|
(522
|
)
|
|
(24,515
|
)
|
|||||||
February 29, 2016
|
—
|
|
|
74,122
|
|
|
3,109
|
|
|
2,919
|
|
|
863
|
|
|
116
|
|
|
81,129
|
|
|||||||
Expense
|
—
|
|
|
8,973
|
|
|
10,468
|
|
|
802
|
|
|
444
|
|
|
1,679
|
|
|
22,366
|
|
|||||||
Other
|
—
|
|
|
(73
|
)
|
|
(303
|
)
|
|
—
|
|
|
(141
|
)
|
|
(1,338
|
)
|
|
(1,855
|
)
|
|||||||
Payments
|
—
|
|
|
(11,597
|
)
|
|
(8,452
|
)
|
|
(1,426
|
)
|
|
(525
|
)
|
|
(298
|
)
|
|
(22,298
|
)
|
|||||||
May 31, 2016
(2)
|
$
|
—
|
|
|
$
|
71,425
|
|
|
$
|
4,822
|
|
|
$
|
2,295
|
|
|
$
|
641
|
|
|
$
|
159
|
|
|
$
|
79,342
|
|
($ in thousands)
|
As of
August 31, 2015
|
||
Cash
|
$
|
10,220
|
|
Accounts receivable, net
|
10,327
|
|
|
Property and equipment, net
|
15,912
|
|
|
Intangible assets, net
|
14,100
|
|
|
Other
|
3,972
|
|
|
Allowance for reduction of assets of business held for sale
|
(13,634
|
)
|
|
Total assets
|
$
|
40,897
|
|
|
|
||
Deferred revenue
|
$
|
35,602
|
|
Other
|
5,295
|
|
|
Total liabilities
|
$
|
40,897
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net revenue
|
$
|
—
|
|
|
$
|
5,123
|
|
|
$
|
2,993
|
|
|
$
|
13,119
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Intangibles impairment
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
12,999
|
|
||||
Loss on sale
|
—
|
|
|
—
|
|
|
2,773
|
|
|
—
|
|
||||
Other
|
—
|
|
|
7,756
|
|
|
4,519
|
|
|
23,469
|
|
||||
Loss from discontinued operations before income taxes
|
—
|
|
|
(2,633
|
)
|
|
(4,299
|
)
|
|
(23,349
|
)
|
||||
Benefit from income taxes
|
—
|
|
|
447
|
|
|
1,040
|
|
|
8,443
|
|
||||
Loss from discontinued operations, net of tax
|
$
|
—
|
|
|
$
|
(2,186
|
)
|
|
$
|
(3,259
|
)
|
|
$
|
(14,906
|
)
|
•
|
Intangibles
- We used income approaches to value the substantial majority of the acquired intangibles. The trademarks were valued using the relief-from-royalty method, which represents the benefit of owning these intangible assets rather than paying royalties for their use. The accreditations were valued using the with and with-out method, and the remaining intangibles were valued using the cost savings method or the excess earnings method.
|
•
|
Deferred revenue
- We estimated the fair value of deferred revenue using the cost build-up method, which represents the cost to deliver the services, plus a normal profit margin.
|
•
|
Capital leases
- Substantially all of the property and equipment in the above table represents capital lease assets. The fair value of the capital lease assets represents our right to use the respective assets over the remaining lease term, and the fair value of the corresponding obligations represents the future minimum lease payments discounted at a current borrowing rate.
|
•
|
Other assets and liabilities
- The carrying value of all other assets and liabilities approximated fair value at the time of acquisition.
|
•
|
The Iron Yard
- On June 11, 2015, we acquired a
62%
interest in TIY Academy, LLC (“The Iron Yard”), a provider of nondegree information technology bootcamp programs in the United States, for
$15.9 million
.
|
•
|
FAEL
- On December 4, 2014, we acquired a
75%
interest in Sociedade Técnica Educacional da Lapa S.A., a provider of postsecondary educational programs in Brazil under the name Faculdade da Educacional da Lapa (“FAEL”). We made an initial cash payment of
R$73.8 million
(equivalent to
$28.9 million
on the acquisition date), and the acquisition includes a potential contingent consideration payment in the future that is principally based on FAEL’s calendar year 2018 net revenue. The contingent payment has a maximum of approximately
R$34 million
(equivalent to
$9.5 million
as of
May 31, 2016
), and its fair value on the acquisition date was insignificant based on our estimate of FAEL’s future revenue in relation to the contingent payment threshold as defined in the acquisition agreement.
|
($ in thousands)
|
The Iron Yard
|
|
FAEL
|
||||
Tangible assets (net of acquired liabilities)
|
$
|
5,262
|
|
|
$
|
(2,807
|
)
|
Indefinite-lived intangibles
|
—
|
|
|
15,163
|
|
||
Finite-lived intangibles
|
4,690
|
|
|
5,394
|
|
||
Goodwill
|
15,888
|
|
|
14,538
|
|
||
Total assets acquired and liabilities assumed, net
|
25,840
|
|
|
32,288
|
|
||
Less: Fair value of redeemable noncontrolling interests
|
(9,900
|
)
|
|
(3,437
|
)
|
||
Total fair value of consideration transferred
|
15,940
|
|
|
28,851
|
|
||
Less: Cash acquired
|
(5,401
|
)
|
|
(7,685
|
)
|
||
Cash paid for acquisition, net of cash acquired
|
$
|
10,539
|
|
|
$
|
21,166
|
|
|
May 31, 2016
|
||||||||||||||||||||||||||
($ in thousands)
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Cash and Cash
Equivalents
(1)
|
|
Current
Marketable
Securities
|
|
Noncurrent
Marketable
Securities
|
||||||||||||||
Cash
|
$
|
408,823
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
408,823
|
|
|
$
|
408,823
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Money market funds
|
111,236
|
|
|
—
|
|
|
—
|
|
|
111,236
|
|
|
111,236
|
|
|
—
|
|
|
—
|
|
|||||||
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate bonds
|
113,004
|
|
|
30
|
|
|
(155
|
)
|
|
112,879
|
|
|
—
|
|
|
96,531
|
|
|
16,348
|
|
|||||||
Tax-exempt municipal bonds
|
104,281
|
|
|
33
|
|
|
(43
|
)
|
|
104,271
|
|
|
600
|
|
|
84,324
|
|
|
19,347
|
|
|||||||
Time deposits
|
50,458
|
|
|
—
|
|
|
—
|
|
|
50,458
|
|
|
25,187
|
|
|
25,271
|
|
|
—
|
|
|||||||
Other
|
40,797
|
|
|
12
|
|
|
(6
|
)
|
|
40,803
|
|
|
1,000
|
|
|
36,175
|
|
|
3,628
|
|
|||||||
Total
|
$
|
828,599
|
|
|
$
|
75
|
|
|
$
|
(204
|
)
|
|
$
|
828,470
|
|
|
$
|
546,846
|
|
|
$
|
242,301
|
|
|
$
|
39,323
|
|
|
August 31, 2015
|
||||||||||||||||||||||||||
($ in thousands)
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Cash and Cash
Equivalents
(1)
|
|
Current
Marketable
Securities
|
|
Noncurrent
Marketable
Securities
|
||||||||||||||
Cash
|
$
|
564,225
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
564,225
|
|
|
$
|
564,225
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Money market funds
|
107,408
|
|
|
—
|
|
|
—
|
|
|
107,408
|
|
|
107,408
|
|
|
—
|
|
|
—
|
|
|||||||
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate bonds
|
137,283
|
|
|
16
|
|
|
(271
|
)
|
|
137,028
|
|
|
1,823
|
|
|
82,047
|
|
|
53,158
|
|
|||||||
Tax-exempt municipal bonds
|
97,022
|
|
|
68
|
|
|
(60
|
)
|
|
97,030
|
|
|
2,408
|
|
|
61,530
|
|
|
33,092
|
|
|||||||
Time deposits
|
50,267
|
|
|
—
|
|
|
—
|
|
|
50,267
|
|
|
25,110
|
|
|
25,157
|
|
|
—
|
|
|||||||
Other
|
36,634
|
|
|
10
|
|
|
(37
|
)
|
|
36,607
|
|
|
1,100
|
|
|
25,942
|
|
|
9,565
|
|
|||||||
Total
|
$
|
992,839
|
|
|
$
|
94
|
|
|
$
|
(368
|
)
|
|
$
|
992,565
|
|
|
$
|
702,074
|
|
|
$
|
194,676
|
|
|
$
|
95,815
|
|
•
|
Money market funds - We use Level 1 inputs that primarily consist of real-time quotes for transactions in active exchange markets involving identical assets.
|
•
|
Other financial instruments - We use a market approach with Level 2 observable inputs for all other securities. The Level 2 inputs include quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active.
|
($ in thousands)
|
May 31,
2016 |
|
August 31,
2015 |
||||
Student accounts receivable
|
$
|
225,379
|
|
|
$
|
234,204
|
|
Less allowance for doubtful accounts
|
(44,871
|
)
|
|
(42,259
|
)
|
||
Net student accounts receivable
|
180,508
|
|
|
191,945
|
|
||
Other receivables
|
12,969
|
|
|
6,514
|
|
||
Total accounts receivable, net
|
$
|
193,477
|
|
|
$
|
198,459
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Beginning allowance for doubtful accounts
|
$
|
48,125
|
|
|
$
|
49,891
|
|
|
$
|
42,259
|
|
|
$
|
50,145
|
|
Provision for uncollectible accounts receivable
|
15,716
|
|
|
13,005
|
|
|
43,812
|
|
|
42,372
|
|
||||
Write-offs, net of recoveries
|
(19,638
|
)
|
|
(15,791
|
)
|
|
(41,376
|
)
|
|
(43,861
|
)
|
||||
Currency translation adjustment
|
668
|
|
|
(214
|
)
|
|
176
|
|
|
(1,765
|
)
|
||||
Ending allowance for doubtful accounts
|
$
|
44,871
|
|
|
$
|
46,891
|
|
|
$
|
44,871
|
|
|
$
|
46,891
|
|
($ in thousands)
|
University of
Phoenix
|
|
Apollo
Global
|
|
Other
|
|
Total
|
||||||||
Goodwill as of August 31, 2015
|
$
|
71,812
|
|
|
$
|
142,599
|
|
|
$
|
32,779
|
|
|
$
|
247,190
|
|
Career Partner acquisition
|
—
|
|
|
92,840
|
|
|
—
|
|
|
92,840
|
|
||||
Impairments
|
(71,812
|
)
|
|
—
|
|
|
(1,581
|
)
|
|
(73,393
|
)
|
||||
Currency translation adjustment
|
—
|
|
|
(872
|
)
|
|
—
|
|
|
(872
|
)
|
||||
Goodwill as of May 31, 2016
|
$
|
—
|
|
|
$
|
234,567
|
|
|
$
|
31,198
|
|
|
$
|
265,765
|
|
|
May 31, 2016
|
|
August 31, 2015
|
||||||||||||||||||||||||||||
($ in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Effect of
Foreign
Currency
Translation
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Effect of
Foreign
Currency
Translation
|
|
Net
Carrying
Amount
|
||||||||||||||||
Curriculum
(1)
|
$
|
22,238
|
|
|
$
|
(9,645
|
)
|
|
$
|
(2,349
|
)
|
|
$
|
10,244
|
|
|
$
|
19,715
|
|
|
$
|
(7,361
|
)
|
|
$
|
(2,470
|
)
|
|
$
|
9,884
|
|
Accreditations and designations
|
21,628
|
|
|
(9,648
|
)
|
|
(3,024
|
)
|
|
8,956
|
|
|
21,628
|
|
|
(6,972
|
)
|
|
(3,153
|
)
|
|
11,503
|
|
||||||||
Trademarks
|
21,019
|
|
|
(4,274
|
)
|
|
(2,910
|
)
|
|
13,835
|
|
|
21,019
|
|
|
(2,942
|
)
|
|
(3,034
|
)
|
|
15,043
|
|
||||||||
Student and customer relationships
(1)
|
14,534
|
|
|
(4,910
|
)
|
|
(1,864
|
)
|
|
7,760
|
|
|
5,517
|
|
|
(2,632
|
)
|
|
(1,975
|
)
|
|
910
|
|
||||||||
Other
|
3,577
|
|
|
(752
|
)
|
|
(662
|
)
|
|
2,163
|
|
|
3,746
|
|
|
(597
|
)
|
|
(633
|
)
|
|
2,516
|
|
||||||||
Total finite-lived intangibles
|
82,996
|
|
|
(29,229
|
)
|
|
(10,809
|
)
|
|
42,958
|
|
|
71,625
|
|
|
(20,504
|
)
|
|
(11,265
|
)
|
|
39,856
|
|
||||||||
Trademarks
(1)
|
132,106
|
|
|
—
|
|
|
(14,067
|
)
|
|
118,039
|
|
|
101,637
|
|
|
—
|
|
|
(9,906
|
)
|
|
91,731
|
|
||||||||
Accreditations and designations
(1)
|
42,418
|
|
|
—
|
|
|
(2,659
|
)
|
|
39,759
|
|
|
14,470
|
|
|
—
|
|
|
(2,813
|
)
|
|
11,657
|
|
||||||||
Total indefinite-lived intangibles
|
174,524
|
|
|
—
|
|
|
(16,726
|
)
|
|
157,798
|
|
|
116,107
|
|
|
—
|
|
|
(12,719
|
)
|
|
103,388
|
|
||||||||
Total intangible assets, net
|
$
|
257,520
|
|
|
$
|
(29,229
|
)
|
|
$
|
(27,535
|
)
|
|
$
|
200,756
|
|
|
$
|
187,732
|
|
|
$
|
(20,504
|
)
|
|
$
|
(23,984
|
)
|
|
$
|
143,244
|
|
($ in thousands)
|
Remainder of 2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
||||||||||||||||
Estimated future amortization expense
(1)
|
$
|
3,831
|
|
|
$
|
14,074
|
|
|
$
|
10,103
|
|
|
$
|
4,937
|
|
|
$
|
3,041
|
|
|
$
|
2,127
|
|
|
$
|
4,845
|
|
|
$
|
42,958
|
|
|
|
|
Fair Value Measurements at Reporting Dates Using
|
||||||||||||
|
Fair Value
as of Respective
Reporting Dates
|
|
Quoted Prices in
Active Markets for Identical Liabilities
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
($ in thousands)
|
|
|
|
||||||||||||
Contingent consideration as of May 31, 2016
|
$
|
19,326
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,326
|
|
Contingent consideration as of August 31, 2015
|
$
|
7,499
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,499
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Beginning balance
|
$
|
18,200
|
|
|
$
|
6,416
|
|
|
$
|
7,499
|
|
|
$
|
41,893
|
|
Initial contingent consideration at fair value
|
—
|
|
|
—
|
|
|
10,717
|
|
|
—
|
|
||||
Change in fair value included in net income (loss)
|
973
|
|
|
154
|
|
|
897
|
|
|
(843
|
)
|
||||
Payment for contingent consideration
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(34,480
|
)
|
||||
Currency translation adjustment
|
153
|
|
|
—
|
|
|
213
|
|
|
—
|
|
||||
Ending balance
|
$
|
19,326
|
|
|
$
|
6,570
|
|
|
$
|
19,326
|
|
|
$
|
6,570
|
|
•
|
Career Partner
- We acquired Career Partner during the second quarter of fiscal year 2016 and have contingent consideration of up to
€11 million
. The contingent consideration is principally based on Career Partner’s operating results for calendar year 2016 and we estimated its fair value to be $10.7 million as of the acquisition date. As of
May 31, 2016
, the estimated fair value for this contingent consideration was
$11.5 million
and the associated liability is included in accrued and other current liabilities on our Condensed Consolidated Balance Sheets.
|
•
|
Apollo Global
- As a result of our purchase of the noncontrolling interest in Apollo Global during fiscal year 2013, we have contingent consideration that is based on a portion of Apollo Global’s operating results through the fiscal years ending August 31, 2017. As of
May 31, 2016
, the estimated fair value for this contingent consideration was
$7.8 million
and the associated liability is included in other long-term liabilities on our Condensed Consolidated Balance Sheets.
|
|
|
|
Fair Value Measurements at Measurement Date Using
|
|
|
||||||||||||||
($ in thousands)
|
Fair Value at
Measurement
Date
|
|
Quoted Prices in
Active Markets for
Identical Liabilities
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Losses for
Nine Months Ended
May 31, 2016
|
||||||||||
Restructuring obligations
|
$
|
24,275
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,275
|
|
|
$
|
24,275
|
|
($ in thousands)
|
May 31,
2016 |
|
August 31,
2015 |
||||
Salaries, wages and benefits
|
$
|
57,103
|
|
|
$
|
74,454
|
|
Student discounts, grants and scholarships
|
43,644
|
|
|
44,682
|
|
||
Restructuring obligations
|
38,352
|
|
|
38,921
|
|
||
Legal and other professional obligations
|
22,009
|
|
|
23,961
|
|
||
Contingent consideration
|
11,500
|
|
|
—
|
|
||
Advertising
|
9,865
|
|
|
21,931
|
|
||
Deferred rent and other lease liabilities
|
9,855
|
|
|
12,181
|
|
||
Curriculum materials
|
7,360
|
|
|
11,690
|
|
||
Other
|
49,175
|
|
|
53,027
|
|
||
Total accrued and other current liabilities
|
$
|
248,863
|
|
|
$
|
280,847
|
|
($ in thousands)
|
May 31,
2016 |
|
August 31,
2015 |
||||
Deferred rent and other lease liabilities
|
$
|
44,845
|
|
|
$
|
49,745
|
|
Restructuring obligations
|
40,990
|
|
|
44,369
|
|
||
Deferred revenue
|
25,230
|
|
|
16,687
|
|
||
Deferred gains on sale-leasebacks
|
19,075
|
|
|
20,168
|
|
||
Other
|
52,351
|
|
|
41,483
|
|
||
Total other long-term liabilities
|
$
|
182,491
|
|
|
$
|
172,452
|
|
($ in thousands)
|
May 31,
2016 |
|
August 31,
2015 |
||||
Revolving Credit Facility
|
$
|
—
|
|
|
$
|
—
|
|
Capital lease obligations
|
30,804
|
|
|
16,863
|
|
||
Other
|
31,307
|
|
|
28,783
|
|
||
Total debt
|
62,111
|
|
|
45,646
|
|
||
Less short-term borrowings and current portion of long-term debt
|
(19,514
|
)
|
|
(14,080
|
)
|
||
Long-term debt
|
$
|
42,597
|
|
|
$
|
31,566
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
(In thousands, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Share repurchases under share repurchase program:
|
|
|
|
|
|
|
|
||||||||
Number of shares repurchased
|
—
|
|
|
—
|
|
|
—
|
|
|
1,440
|
|
||||
Weighted average purchase price per share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26.45
|
|
Cost of share repurchases
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,092
|
|
Share repurchases related to vesting of share-based awards:
|
|
|
|
|
|
|
|
||||||||
Number of shares repurchased
|
13
|
|
|
22
|
|
|
91
|
|
|
109
|
|
||||
Cost of share repurchases
|
$
|
106
|
|
|
$
|
382
|
|
|
$
|
732
|
|
|
$
|
2,608
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||
(In thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Number of shares reissued
|
38
|
|
|
70
|
|
|
359
|
|
|
352
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
(In thousands, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to Apollo (basic and diluted)
|
$
|
20,744
|
|
|
$
|
48,064
|
|
|
$
|
(100,417
|
)
|
|
$
|
48,239
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average shares outstanding
|
108,658
|
|
|
107,678
|
|
|
108,567
|
|
|
108,140
|
|
||||
Dilutive effect of restricted stock units and performance share awards
(1)
|
786
|
|
|
828
|
|
|
—
|
|
|
818
|
|
||||
Dilutive effect of stock options
(1)
|
—
|
|
|
117
|
|
|
—
|
|
|
166
|
|
||||
Diluted weighted average shares outstanding
|
109,444
|
|
|
108,623
|
|
|
108,567
|
|
|
109,124
|
|
||||
Basic income (loss) per share attributable to Apollo
|
$
|
0.19
|
|
|
$
|
0.45
|
|
|
$
|
(0.92
|
)
|
|
$
|
0.45
|
|
Diluted income (loss) per share attributable to Apollo
|
$
|
0.19
|
|
|
$
|
0.44
|
|
|
$
|
(0.92
|
)
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive securities excluded from diluted income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive restricted stock units and performance share awards
(1)
|
2,984
|
|
|
33
|
|
|
4,071
|
|
|
21
|
|
||||
Anti-dilutive stock options
(1)
|
3,514
|
|
|
2,513
|
|
|
3,595
|
|
|
2,329
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Instructional and student advisory
|
$
|
2,432
|
|
|
$
|
2,812
|
|
|
$
|
7,856
|
|
|
$
|
8,699
|
|
Marketing
|
413
|
|
|
705
|
|
|
1,771
|
|
|
2,324
|
|
||||
Admissions advisory
|
15
|
|
|
262
|
|
|
341
|
|
|
779
|
|
||||
General and administrative
|
5,569
|
|
|
3,456
|
|
|
16,830
|
|
|
15,960
|
|
||||
Restructuring and impairment charges
|
303
|
|
|
619
|
|
|
520
|
|
|
2,006
|
|
||||
Share-based compensation expense
|
$
|
8,732
|
|
|
$
|
7,854
|
|
|
$
|
27,318
|
|
|
$
|
29,768
|
|
•
|
Casey
v.
Apollo Education Group, Inc., et al.
, Case No. CV2016-051605 filed on February 25, 2016;
|
•
|
Miglio
v.
Apollo Education Group, Inc.
,
et al.
, Case No. CV2016-003718 filed on February 26, 2016;
|
•
|
Blanchfield
v.
Apollo Education Group, Inc.
,
et al
., Case No. CV2016-001738 filed on February 29, 2016;
|
•
|
Wagner
v.
Apollo Education Group, Inc.
,
et al.
, Case No. CV2016-001905 filed on March 9, 2016;
|
•
|
Ladouceur
v.
Apollo Education Group, Inc.
,
et al.
, Case No. CV2016-002148 filed on March 17, 2016; and
|
•
|
Simkhovich
v.
Apollo Education Group, Inc.
,
et al.
, Case No. CV2016-002339 filed on March 23, 2016.
|
•
|
Primary Reserve Ratio - measure of an institution’s financial viability and liquidity;
|
•
|
Equity Ratio - measure of an institution’s capital resources and its ability to borrow; and
|
•
|
Net Income Ratio - measure of an institution’s profitability.
|
|
Fiscal Year
|
||||
|
2015
|
|
2014
|
|
2013
|
Apollo Education Group
|
2.6
|
|
2.5
|
|
2.6
|
University of Phoenix
|
2.9
|
|
2.3
|
|
2.5
|
•
|
Our principal revolving credit facility, which expires in April 2017, requires that we maintain a composite score of at least 1.5. If our composite score falls below 1.5, it would be an event of default under the facility and any outstanding balance could be declared immediately due and payable.
|
•
|
Although not required solely due to participation in the zone alternative discussed above, we could be required by the Department of Education to submit a letter of credit in an amount of 10% or more of our annual Title IV receipts as a result of factors related to the cause of our composite score decline, which letter of credit likely would need to be cash collateralized and our revolving credit facility would not be available for this purpose.
|
•
|
If the Department places University of Phoenix on the heightened cash monitoring payment method, we would need to deploy additional working capital to conduct our business due to the delay in receipt of Title IV funding. If University of Phoenix is placed on the reimbursement payment method, our working capital needs would increase significantly, the precise amount of which increase cannot be predicted because it would depend on the average length of time required by the Department to evaluate and approve our requests for reimbursement and the amount of any required letter of credit.
|
•
|
Recognition and acceptance by employers, other higher education institutions and governmental entities of the degrees and credits earned by students;
|
•
|
Qualification to participate in Title IV programs (in combination with state higher education operating and degree granting authority); and
|
•
|
Qualification for authority to operate in certain states.
|
•
|
University of Phoenix
, which offers undergraduate and graduate degrees through its
nine
colleges in a wide range of program areas as well as various nondegree programs. A
significant majority
of the University’s students attend classes exclusively online, and the University also offers its educational programs and services at ground locations throughout the United States.
|
•
|
Apollo Global
, which includes our institutions based outside the U.S., and its corporate operations. Apollo Global acquired Career Partner and FAEL during the second quarter of fiscal year 2016 and 2015, respectively. Refer to
Note 4
,
Acquisitions
. The operating results of these entities are included in our Apollo Global operating segment from the date of each respective acquisition.
|
•
|
Other
,
which includes College for Financial Planning,
Western International University, Apollo Professional Development, and Apollo corporate activities. Apollo acquired The Iron Yard during the fourth quarter of fiscal year 2015, and its operating results are included in Other in our segment reporting from the acquisition date.
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
|||||
University of Phoenix
|
$
|
424,479
|
|
|
$
|
560,692
|
|
|
$
|
1,252,052
|
|
|
$
|
1,641,314
|
|
Apollo Global
|
125,007
|
|
|
109,622
|
|
|
334,135
|
|
|
305,862
|
|
||||
Other
|
8,516
|
|
|
6,044
|
|
|
23,184
|
|
|
18,810
|
|
||||
Net revenue
|
$
|
558,002
|
|
|
$
|
676,358
|
|
|
$
|
1,609,371
|
|
|
$
|
1,965,986
|
|
Operating income (loss)
(1)
:
|
|
|
|
|
|
|
|
|
|||||||
University of Phoenix
|
$
|
59,681
|
|
|
$
|
103,395
|
|
|
$
|
33,099
|
|
|
$
|
216,776
|
|
Apollo Global
(2)
|
(459
|
)
|
|
5,465
|
|
|
(29,677
|
)
|
|
(26,918
|
)
|
||||
Other
(3)
|
(27,223
|
)
|
|
(15,576
|
)
|
|
(97,488
|
)
|
|
(69,879
|
)
|
||||
Operating income (loss)
|
31,999
|
|
|
93,284
|
|
|
(94,066
|
)
|
|
119,979
|
|
||||
Reconciling items:
|
|
|
|
|
|
|
|
||||||||
Interest income
|
1,041
|
|
|
762
|
|
|
2,883
|
|
|
2,091
|
|
||||
Interest expense
|
(1,569
|
)
|
|
(1,715
|
)
|
|
(4,997
|
)
|
|
(5,116
|
)
|
||||
Other loss, net
|
(273
|
)
|
|
(2,038
|
)
|
|
(2,229
|
)
|
|
(4,480
|
)
|
||||
Income (loss) from continuing operations before income taxes
|
$
|
31,198
|
|
|
$
|
90,293
|
|
|
$
|
(98,409
|
)
|
|
$
|
112,474
|
|
($ in thousands)
|
May 31,
2016 |
|
August 31,
2015
|
||||
University of Phoenix
|
$
|
596,440
|
|
|
$
|
648,755
|
|
Apollo Global
|
714,248
|
|
|
588,434
|
|
||
Other
(1)
|
726,938
|
|
|
963,875
|
|
||
Total assets
|
$
|
2,037,626
|
|
|
$
|
2,201,064
|
|
(i)
|
the receipt of consents or approvals from certain federal, state and foreign educational governing bodies, including the Higher Learning Commission; and
|
(ii)
|
the absence of certain conditions or restrictions in the response of the U.S. Department of Education to the pre-acquisition review application filed by University of Phoenix.
|
(i)
|
Our aggregate cash, cash equivalents and marketable securities must not be less than the specified amount for the applicable month end;
|
(ii)
|
University of Phoenix fiscal year-to-date new degreed enrollments as of the applicable month end must not have declined by more than 15% from forecasted levels (which are derived from the projections we prepared in December 2015 in connection with the Merger, which we refer to as the December forecast);
|
(iii)
|
University of Phoenix trailing twelve month net revenue as of the applicable month end shall not have declined by more than 10% from forecasted levels (which are derived from the December forecast); and
|
(iv)
|
Our consolidated trailing twelve months adjusted earnings before interest, taxes, depreciation and amortization as of the applicable month end shall not have declined by more than $75 million from forecasted levels (which are derived from the December forecast).
|
•
|
Continuing the development of a college-by-college approach to strategy, marketing, admissions, staffing, program development, planning and budgeting to more effectively address the specific needs of the students and employers served by each college;
|
•
|
Piloting diagnostic tools for development of enhanced admissions guidelines expected to be implemented in fiscal year 2017 and tailoring initial course sequences to match the academic capabilities of students when they first enroll;
|
•
|
Eliminating associate degree programs which have lower retention rates and are less career relevant, and adding more career-focused pathways that offer certificates and four-year bachelor’s degrees in key growth areas of the employment market;
|
•
|
Concentrating on fewer ground locations in selected major metropolitan areas throughout the United States in order to establish a stronger regional presence for both on-ground and online students;
|
•
|
Reducing the number of student cohort start dates from approximately every week to approximately every five weeks for most programs in order to reduce complexity and improve the online classroom experience through more consistent class sizes;
|
•
|
Eliminating the use of third-party operated websites for marketing purposes in November 2015 in order to better manage the University’s marketing message, improve its ability to identify those students more likely to persist in its educational programs, and reduce cost;
|
•
|
Transitioning technology systems from proprietary and legacy systems, including the University’s online classroom, to commercial software and software as a service to reduce costs, improve operations and facilitate future systems upgrades; and
|
•
|
Developing increased student self-service capabilities, including in admissions, financial aid, academic planning and class scheduling.
|
•
|
Financial Responsibility Composite Score
|
•
|
Primary Reserve Ratio - measure of an institution’s financial viability and liquidity;
|
•
|
Equity Ratio - measure of an institution’s capital resources and its ability to borrow; and
|
•
|
Net Income Ratio - measure of an institution’s profitability.
|
|
Fiscal Year
|
||||
|
2015
|
|
2014
|
|
2013
|
Apollo Education Group
|
2.6
|
|
2.5
|
|
2.6
|
University of Phoenix
|
2.9
|
|
2.3
|
|
2.5
|
•
|
Our principal revolving credit facility, which expires in April 2017, requires that we maintain a composite score of at least 1.5. If our composite score falls below 1.5, it would be an event of default under the facility and any outstanding balance could be declared immediately due and payable.
|
•
|
Although not required solely due to participation in the zone alternative discussed above, we could be required by the Department of Education to submit a letter of credit in an amount of 10% or more of our annual Title IV receipts as a result of factors related to the cause of our composite score decline, which letter of credit likely would need to be cash collateralized and our revolving credit facility would not be available for this purpose.
|
•
|
If the Department places University of Phoenix on the heightened cash monitoring payment method, we would need to deploy additional working capital to conduct our business due to the delay in receipt of Title IV funding. If University of Phoenix is placed on the reimbursement payment method, our working capital needs would increase significantly, the precise amount of which increase cannot be predicted because it would depend on the average length of time required by the Department to evaluate and approve our requests for reimbursement and the amount of any required letter of credit.
|
•
|
Gainful Employment
|
•
|
U.S. Department of Education Rulemaking
|
•
|
a s
chool breaches contractual promises to a student;
|
•
|
certain judgments are entered against a school related to the loan or the educational services after a contested proceeding; or
|
•
|
the sc
hool makes substantial misrepresentations about the nature of its educational programs, financial charges or employability of graduates, or insubstantial misrepresentations where other factors are present, such as pressure to enroll quickly or taking advantage of students’ distress or lack of knowledge or sophistication.
|
•
|
the commencement of a major lawsuit by a state or federal government entity, such as state Attorneys General, the Consumer Financial Protection Bureau or the Federal Trade Commission;
|
•
|
the filing of a substantial number of borrower defense claims;
|
•
|
default by the school on its debt obligations;
|
•
|
failure of the school to satisfy the 90/10 Rule; and/or
|
•
|
action by the school’s accreditor that could result in the school losing its accreditation.
|
•
|
U.S. Department of Education Program Participation Agreement
|
•
|
Federal Trade Commission Investigation
|
•
|
Military Benefit Programs
|
•
|
California Attorney General Investigations
|
•
|
Financial Aid Funding Levels
|
•
|
Executive Management Changes
- Gregory J. Iverson was appointed as our Chief Financial Officer effective October 26, 2015 replacing Joseph L. D’Amico, who served as our Interim Chief Financial Officer since May 2015.
|
•
|
Career Partner GmbH Acquisition
- On December 10, 2015, we acquired all of the outstanding shares of Career Partner GmbH (“Career Partner”), a provider of education and training programs in Germany. Refer to
Note 4
,
Acquisitions
, in Item 1,
Financial Statements
.
|
•
|
Note 7
,
Goodwill and Intangibles
, for a discussion of goodwill impairment charges recorded during fiscal year 2016; and
|
•
|
Note 11
,
Income Taxes
, for a discussion of the calculation of our income tax provision for the interim periods in fiscal year 2016.
|
•
|
University of Phoenix
- University of Phoenix generally has lower net revenue in our second fiscal quarter (December through February) compared to other quarters due to holiday breaks.
|
•
|
Apollo Global
- Our Apollo Global subsidiaries experience seasonality associated with the timing of when courses begin, exam dates, the timing of their respective holidays and other factors. These factors have historically resulted in lower net revenue in our second and fourth fiscal quarters, particularly for BPP, which also results in substantially lower operating results during these quarters due to BPP’s relatively fixed cost structure.
|
|
Three Months Ended
May 31,
|
|
Nine Months Ended
May 31,
|
||||||||||||||||||||||||
|
2016
|
|
2015
|
|
% of Net Revenue
|
|
2016
|
|
2015
|
|
% of Net Revenue
|
||||||||||||||||
($ in thousands)
|
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
||||||||||||||||
Net revenue
|
$
|
558,002
|
|
|
$
|
676,358
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
$
|
1,609,371
|
|
|
$
|
1,965,986
|
|
|
100.0
|
%
|
|
100.0
|
%
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Instructional and student advisory
|
274,486
|
|
|
294,841
|
|
|
49.2
|
%
|
|
43.6
|
%
|
|
836,453
|
|
|
907,348
|
|
|
52.0
|
%
|
|
46.1
|
%
|
||||
Marketing
|
87,530
|
|
|
116,839
|
|
|
15.7
|
%
|
|
17.3
|
%
|
|
279,128
|
|
|
369,120
|
|
|
17.3
|
%
|
|
18.8
|
%
|
||||
Admissions advisory
|
30,192
|
|
|
52,994
|
|
|
5.4
|
%
|
|
7.9
|
%
|
|
94,500
|
|
|
167,919
|
|
|
5.9
|
%
|
|
8.5
|
%
|
||||
General and administrative
|
59,066
|
|
|
64,437
|
|
|
10.6
|
%
|
|
9.5
|
%
|
|
192,300
|
|
|
206,215
|
|
|
11.9
|
%
|
|
10.5
|
%
|
||||
Depreciation and amortization
|
28,330
|
|
|
29,969
|
|
|
5.1
|
%
|
|
4.4
|
%
|
|
82,478
|
|
|
95,705
|
|
|
5.1
|
%
|
|
4.9
|
%
|
||||
Provision for uncollectible accounts receivable
|
15,716
|
|
|
13,005
|
|
|
2.8
|
%
|
|
1.9
|
%
|
|
43,812
|
|
|
42,372
|
|
|
2.7
|
%
|
|
2.2
|
%
|
||||
Restructuring and impairment charges
|
22,366
|
|
|
11,444
|
|
|
4.0
|
%
|
|
1.7
|
%
|
|
149,578
|
|
|
52,722
|
|
|
9.3
|
%
|
|
2.7
|
%
|
||||
Merger, acquisition and other related costs (credit), net
|
8,317
|
|
|
(455
|
)
|
|
1.5
|
%
|
|
(0.1
|
)%
|
|
25,188
|
|
|
4,506
|
|
|
1.6
|
%
|
|
0.2
|
%
|
||||
Litigation charge
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
100
|
|
|
—
|
%
|
|
—
|
%
|
||||
Total costs and expenses
|
526,003
|
|
|
583,074
|
|
|
94.3
|
%
|
|
86.2
|
%
|
|
1,703,437
|
|
|
1,846,007
|
|
|
105.8
|
%
|
|
93.9
|
%
|
||||
Operating income (loss)
|
31,999
|
|
|
93,284
|
|
|
5.7
|
%
|
|
13.8
|
%
|
|
(94,066
|
)
|
|
119,979
|
|
|
(5.8
|
)%
|
|
6.1
|
%
|
||||
Interest income
|
1,041
|
|
|
762
|
|
|
0.2
|
%
|
|
0.1
|
%
|
|
2,883
|
|
|
2,091
|
|
|
0.2
|
%
|
|
0.1
|
%
|
||||
Interest expense
|
(1,569
|
)
|
|
(1,715
|
)
|
|
(0.3
|
)%
|
|
(0.3
|
)%
|
|
(4,997
|
)
|
|
(5,116
|
)
|
|
(0.3
|
)%
|
|
(0.3
|
)%
|
||||
Other loss, net
|
(273
|
)
|
|
(2,038
|
)
|
|
—
|
%
|
|
(0.3
|
)%
|
|
(2,229
|
)
|
|
(4,480
|
)
|
|
(0.2
|
)%
|
|
(0.2
|
)%
|
||||
Income (loss) from continuing operations before income taxes
|
31,198
|
|
|
90,293
|
|
|
5.6
|
%
|
|
13.3
|
%
|
|
(98,409
|
)
|
|
112,474
|
|
|
(6.1
|
)%
|
|
5.7
|
%
|
||||
Provision for income taxes
|
(11,399
|
)
|
|
(40,667
|
)
|
|
(2.1
|
)%
|
|
(6.0
|
)%
|
|
(3,796
|
)
|
|
(53,797
|
)
|
|
(0.3
|
)%
|
|
(2.7
|
)%
|
||||
Income (loss) from continuing operations
|
19,799
|
|
|
49,626
|
|
|
3.5
|
%
|
|
7.3
|
%
|
|
(102,205
|
)
|
|
58,677
|
|
|
(6.4
|
)%
|
|
3.0
|
%
|
||||
Loss from discontinued operations, net of tax
|
—
|
|
|
(2,186
|
)
|
|
—
|
%
|
|
(0.3
|
)%
|
|
(3,259
|
)
|
|
(14,906
|
)
|
|
(0.2
|
)%
|
|
(0.8
|
)%
|
||||
Net income (loss)
|
19,799
|
|
|
47,440
|
|
|
3.5
|
%
|
|
7.0
|
%
|
|
(105,464
|
)
|
|
43,771
|
|
|
(6.6
|
)%
|
|
2.2
|
%
|
||||
Net loss attributable to noncontrolling interests
|
945
|
|
|
624
|
|
|
0.2
|
%
|
|
0.1
|
%
|
|
5,047
|
|
|
4,468
|
|
|
0.4
|
%
|
|
0.3
|
%
|
||||
Net income (loss) attributable to Apollo
|
$
|
20,744
|
|
|
$
|
48,064
|
|
|
3.7
|
%
|
|
7.1
|
%
|
|
$
|
(100,417
|
)
|
|
$
|
48,239
|
|
|
(6.2
|
)%
|
|
2.5
|
%
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Restructuring charges
|
$
|
22,366
|
|
|
$
|
11,444
|
|
|
$
|
73,673
|
|
|
$
|
46,772
|
|
Goodwill impairments
(1)
|
—
|
|
|
—
|
|
|
73,393
|
|
|
—
|
|
||||
Property and equipment impairments
|
—
|
|
|
—
|
|
|
2,512
|
|
|
5,950
|
|
||||
Restructuring and impairment charges
|
$
|
22,366
|
|
|
$
|
11,444
|
|
|
$
|
149,578
|
|
|
$
|
52,722
|
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
University of Phoenix
|
$
|
15,787
|
|
|
$
|
6,043
|
|
|
$
|
46,380
|
|
|
$
|
28,292
|
|
Apollo Global
|
1,183
|
|
|
41
|
|
|
1,902
|
|
|
142
|
|
||||
Other
|
5,396
|
|
|
5,360
|
|
|
25,391
|
|
|
18,338
|
|
||||
Restructuring charges
|
$
|
22,366
|
|
|
$
|
11,444
|
|
|
$
|
73,673
|
|
|
$
|
46,772
|
|
|
Three Months Ended
May 31,
|
|
Nine Months Ended
May 31,
|
||||||||||||||||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
$
Change
|
|
%
Change
|
|
2016
|
|
2015
|
|
$
Change
|
|
%
Change
|
||||||||||||||
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
University of Phoenix
|
$
|
424,479
|
|
|
$
|
560,692
|
|
|
$
|
(136,213
|
)
|
|
(24.3
|
)%
|
|
$
|
1,252,052
|
|
|
$
|
1,641,314
|
|
|
$
|
(389,262
|
)
|
|
(23.7
|
)%
|
Apollo Global
|
125,007
|
|
|
109,622
|
|
|
15,385
|
|
|
14.0
|
%
|
|
334,135
|
|
|
305,862
|
|
|
28,273
|
|
|
9.2
|
%
|
||||||
Other
|
8,516
|
|
|
6,044
|
|
|
2,472
|
|
|
40.9
|
%
|
|
23,184
|
|
|
18,810
|
|
|
4,374
|
|
|
23.3
|
%
|
||||||
Net revenue
|
$
|
558,002
|
|
|
$
|
676,358
|
|
|
$
|
(118,356
|
)
|
|
(17.5
|
)%
|
|
$
|
1,609,371
|
|
|
$
|
1,965,986
|
|
|
$
|
(356,615
|
)
|
|
(18.1
|
)%
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
University of Phoenix
|
$
|
59,681
|
|
|
$
|
103,395
|
|
|
$
|
(43,714
|
)
|
|
(42.3
|
)%
|
|
$
|
33,099
|
|
|
$
|
216,776
|
|
|
$
|
(183,677
|
)
|
|
(84.7
|
)%
|
Apollo Global
|
(459
|
)
|
|
5,465
|
|
|
(5,924
|
)
|
|
(108.4
|
)%
|
|
(29,677
|
)
|
|
(26,918
|
)
|
|
(2,759
|
)
|
|
(10.2
|
)%
|
||||||
Other
|
(27,223
|
)
|
|
(15,576
|
)
|
|
(11,647
|
)
|
|
(74.8
|
)%
|
|
(97,488
|
)
|
|
(69,879
|
)
|
|
(27,609
|
)
|
|
(39.5
|
)%
|
||||||
Operating income (loss)
|
$
|
31,999
|
|
|
$
|
93,284
|
|
|
$
|
(61,285
|
)
|
|
(65.7
|
)%
|
|
$
|
(94,066
|
)
|
|
$
|
119,979
|
|
|
$
|
(214,045
|
)
|
|
*
|
|
|
Three Months Ended
May 31,
|
|
|
|
Nine Months Ended
May 31,
|
||||||||||||||
(Rounded to the nearest hundred)
|
2016
|
|
2015
|
|
% Change
|
|
|
|
2016
|
|
2015
|
|
% Change
|
||||||
Degreed Enrollment
(1), (2)
|
155,600
|
|
|
206,900
|
|
|
(24.8
|
)%
|
|
|
Average Degreed Enrollment
(2), (4)
|
171,400
|
|
|
220,400
|
|
|
(22.2
|
)%
|
New Degreed Enrollment
(3)
|
17,900
|
|
|
29,400
|
|
|
(39.1
|
)%
|
|
|
Aggregate New Degreed Enrollment
|
59,600
|
|
|
97,300
|
|
|
(38.7
|
)%
|
•
|
University of Phoenix enrollment continues to be adversely impacted by the rapidly evolving and highly competitive education industry, which includes adverse publicity associated with the challenging regulatory environment, particularly for the proprietary education sector; and
|
•
|
Recently launched initiatives as part of the University’s transformation strategy, including eliminating the use of third-party operated websites for marketing purposes and the discontinuation of a number of lower retaining associate’s degree programs. These initiatives have accelerated the enrollment decline at University of Phoenix, and we expect new and total degreed enrollment to continue declining in the near term.
|
|
Three Months Ended
May 31, |
|
Nine Months Ended
May 31, |
||||||||||||
($ in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Depreciation and amortization
|
$
|
10,266
|
|
|
$
|
9,528
|
|
|
$
|
28,467
|
|
|
$
|
29,677
|
|
Merger, acquisition and other related costs (credit), net
|
601
|
|
|
(1,040
|
)
|
|
3,843
|
|
|
1,658
|
|
||||
Restructuring and impairment charges
|
1,183
|
|
|
41
|
|
|
1,902
|
|
|
142
|
|
|
|
|
|
|
|
|
% of Total Assets at
|
|||||||||
($ in thousands)
|
May 31,
2016 |
|
August 31,
2015 |
|
% Change
|
|
May 31,
2016 |
|
August 31,
2015 |
|||||||
Cash and cash equivalents
|
$
|
361,526
|
|
|
$
|
503,705
|
|
|
(28.2
|
)%
|
|
17.8
|
%
|
|
22.9
|
%
|
Restricted cash and cash equivalents
|
185,320
|
|
|
198,369
|
|
|
(6.6
|
)%
|
|
9.1
|
%
|
|
9.0
|
%
|
||
Current marketable securities
|
242,301
|
|
|
194,676
|
|
|
24.5
|
%
|
|
11.9
|
%
|
|
8.8
|
%
|
||
Noncurrent marketable securities
|
39,323
|
|
|
95,815
|
|
|
(59.0
|
)%
|
|
1.9
|
%
|
|
4.4
|
%
|
||
Total
|
$
|
828,470
|
|
|
$
|
992,565
|
|
|
(16.5
|
)%
|
|
40.7
|
%
|
|
45.1
|
%
|
|
Nine Months Ended
May 31,
|
||||||
($ in thousands)
|
2016
|
|
2015
|
||||
Net (loss) income
|
$
|
(105,464
|
)
|
|
$
|
43,771
|
|
Non-cash items
|
236,657
|
|
|
192,369
|
|
||
Changes in assets and liabilities, excluding the impact of acquisitions
|
(121,560
|
)
|
|
(112,437
|
)
|
||
Net cash provided by operating activities
|
$
|
9,633
|
|
|
$
|
123,703
|
|
•
|
A
$37.3 million
use of cash related to the change in accounts receivable, excluding the provision for uncollectible accounts receivable;
|
•
|
A
$35.8 million
decrease in accrued and other liabilities principally attributable to the timing of our payroll cycle;
|
•
|
A
$32.0 million
decrease in student deposits principally attributable to the enrollment decline at University of Phoenix and the timing of course starts at BPP; and
|
•
|
A
$28.6 million
decrease in deferred revenue principally attributable to the enrollment decline at University of Phoenix.
|
•
|
A
$90.0 million
decrease in accrued and other liabilities principally attributable to the payment of accrued bonuses and payments for our restructuring obligations, the timing of our payroll cycle, and the payment of the Open Colleges contingent consideration;
|
•
|
A
$51.6 million
use of cash related to the change in accounts receivable, excluding the provision for uncollectible accounts receivable; and
|
•
|
A
$25.9 million
decrease in student deposits principally attributable to the timing of course starts at BPP.
|
|
Nine Months Ended
May 31,
|
||||||
($ in thousands)
|
2016
|
|
2015
|
||||
Acquisitions, net of cash acquired
|
$
|
(101,196
|
)
|
|
$
|
(21,166
|
)
|
Capital expenditures
|
(51,414
|
)
|
|
(74,254
|
)
|
||
Maturities (purchases) of marketable securities, net
|
4,856
|
|
|
(128
|
)
|
||
Other
|
(727
|
)
|
|
(14,216
|
)
|
||
Net cash used in investing activities
|
$
|
(148,481
|
)
|
|
$
|
(109,764
|
)
|
|
Nine Months Ended
May 31,
|
||||||
($ in thousands)
|
2016
|
|
2015
|
||||
Payments on borrowings, net
|
$
|
(6,824
|
)
|
|
$
|
(600,699
|
)
|
Share repurchases
|
(732
|
)
|
|
(40,700
|
)
|
||
Payment for contingent consideration
|
—
|
|
|
(21,371
|
)
|
||
Other
|
638
|
|
|
1,231
|
|
||
Net cash used in financing activities
|
$
|
(6,918
|
)
|
|
$
|
(661,539
|
)
|
(i)
|
the receipt of consents or approvals from certain federal, state and foreign educational governing bodies, including the Higher Learning Commission; and
|
(ii)
|
the absence of certain conditions or restrictions in the response of the U.S. Department of Education to the pre-acquisition review application filed by University of Phoenix.
|
(i)
|
Our aggregate cash, cash equivalents and marketable securities must not be less than the specified amount for the applicable month end;
|
(ii)
|
University of Phoenix fiscal year-to-date new degreed enrollments as of the applicable month end must not have declined by more than 15% from forecasted levels (which are derived from the projections we prepared in December 2015 in connection with the merger, which we refer to as the December forecast);
|
(iii)
|
University of Phoenix trailing twelve month net revenue as of the applicable month end shall not have declined by more than 10% from forecasted levels (which are derived from the December forecast); and
|
(iv)
|
Our consolidated trailing twelve months adjusted earnings before interest, taxes, depreciation and amortization as of the applicable month end shall not have declined by more than $75 million from forecasted levels (which are derived from the December forecast).
|
•
|
we could be required to pay a termination fee of 2.75% of the aggregate per share merger consideration that would have been payable to the Company’s shareholders upon closing of the merger (approximately $27.5 million) under certain specified circumstances, but not including a termination solely due to our failure to satisfy the minimum operating metrics described above, as provided in the Merger Agreement;
|
•
|
a fall in our stock price could result in additional goodwill impairment charges causing our U.S. Department of Education financial responsibility composite scores to fall below 1.5, including possibly our fiscal year 2016 composite score whether or not the merger is abandoned prior to the end of our fiscal year, which could severely stress our liquidity due to various regulatory consequences, would be an event of default under our principal revolving credit facility, and could materially and adversely impact our strategy, operations and future profitability, as discussed in more detail in the risk factor below,
A failure to demonstrate “financial responsibility” or “administrative capability” may result in the loss of eligibility to participate in Title IV programs and limit our access to liquidity, which would materially and adversely affect our business
;
|
•
|
our ability to enroll and retain new students could be impaired because potential students may perceive the termination of the merger as a sign of financial distress or as otherwise raising questions about the future of University of Phoenix;
|
•
|
we may not be able to take advantage of alternative business opportunities that we may have been able to pursue absent entering into the Merger Agreement;
|
•
|
we may experience a decrease in employee morale and an increase in employee departures; and
|
•
|
the failure of the merger to be consummated may result in negative publicity and may embolden the critics of the proprietary higher education sector generally and University of Phoenix specifically.
|
•
|
the restrictions imposed on our business and operations pursuant to certain covenants set forth in the merger agreement may prevent us from pursuing certain opportunities without approval of AP VIII Queso Holdings, L.P.;
|
•
|
the challenging regulatory environment we face may intensify;
|
•
|
we may suffer potential adverse effects on our ability to retain and motivate current employees, and attract and recruit prospective employees who may be uncertain about their future roles and relationships with us following the consummation of the merger;
|
•
|
our relationships with current students and employers could be adversely affected due to concern about our future;
|
•
|
due to activities related to the merger, the attention of our employees and management may be diverted from other opportunities that may have been beneficial to us; and
|
•
|
expenses and liability arising from the various legal proceedings related to the merger that have been instituted against us, our directors and others.
|
•
|
Primary Reserve Ratio - measure of an institution’s financial viability and liquidity;
|
•
|
Equity Ratio - measure of an institution’s capital resources and its ability to borrow; and
|
•
|
Net Income Ratio - measure of an institution’s profitability.
|
(i)
|
Being transferred from the “advance” method of payment of Title IV program funds to the heightened cash monitoring payment method under which the institution is required to make Title IV disbursements to eligible students and parents before it requests or receives funds from the Department for the amount of those disbursements, or being transferred to the more onerous reimbursement payment method under which an institution must submit to the Department documentation demonstrating the eligibility for each Title IV disbursement and wait for the Department’s approval before drawing down Title IV funds;
|
(ii)
|
The imposition of additional reporting requirements regarding certain oversight and financial events;
|
(iii)
|
Being required to submit to the Department its annual financial statements and Title IV compliance audits earlier than would otherwise be required;
|
(iv)
|
Being required to submit information about current operations and future plans; and
|
(v)
|
The imposition of additional obligations imposed by the Department.
|
(i)
|
Submitting to the Department a letter of credit in an amount equal to at least ten percent, and at the Department’s discretion up to 50%, of the Title IV funds received by the institution during its most recently completed fiscal year;
|
(ii)
|
Complying with the “zone” alternative requirements described above;
|
(iii)
|
Being placed on provisional certification status, under which the institution must receive Department approval before implementing new locations or educational programs and comply with other restrictions, including reduced due process rights in subsequent proceedings before the Department;
|
(iv)
|
Demonstrating that it is current on its outstanding debt obligations, as defined by the Department; and
|
(v)
|
Complying with other requirements imposed by the Department.
|
|
Fiscal Year
|
||||
|
2015
|
|
2014
|
|
2013
|
Apollo Education Group
|
2.6
|
|
2.5
|
|
2.6
|
University of Phoenix
|
2.9
|
|
2.3
|
|
2.5
|
•
|
Our principal revolving credit facility, which expires in April 2017, requires that we maintain a composite score of at least 1.5. If our composite score falls below 1.5, it would be an event of default under the facility and any outstanding balance could be declared immediately due and payable.
|
•
|
Although not required solely due to participation in the zone alternative discussed above, we could be required by the Department of Education to submit a letter of credit in an amount of 10% or more of our annual Title IV receipts as a result of factors related to the cause of our composite score decline, which letter of credit likely would need to be cash collateralized and our revolving credit facility would not be available for this purpose.
|
•
|
If the Department places University of Phoenix on the heightened cash monitoring payment method, we would need to deploy additional working capital to conduct our business due to the delay in receipt of Title IV funding. If University of Phoenix is placed on the reimbursement payment method, our working capital needs would increase significantly, the precise amount of which increase cannot be predicted because it would depend on the average length of time required by the Department to evaluate and approve our requests for reimbursement and the amount of any required letter of credit. In addition, under the new regulations that became effective July 1, 2016 regarding students’ Title IV fund credit balances, we would be required to significantly alter the manner in which we process and disburse Title IV funds, which would increase our operating costs and could have unexpected and material negative impacts on our operations.
|
•
|
Comply with all applicable Title IV program regulations;
|
•
|
Have capable and sufficient personnel to administer the Title IV programs;
|
•
|
Have acceptable methods of defining and measuring the satisfactory academic progress of its students;
|
•
|
Not have student loan cohort default rates above specified levels;
|
•
|
Have procedures in place for safeguarding federal funds;
|
•
|
Not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;
|
•
|
Provide financial aid counseling to its students;
|
•
|
Refer to the Office of Inspector General any credible information indicating that any applicant, student, employee or agent of the institution has been engaged in any fraud or other illegal conduct involving Title IV programs;
|
•
|
Submit in a timely manner all reports and financial statements required by the regulations; and
|
•
|
Not otherwise appear to lack administrative capability.
|
(In thousands, except per share data)
|
Total Number
of Shares
Repurchased
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Repurchased
as Part of Publicly
Announced Plans or
Programs
|
|
Maximum Value of Shares Available for Repurchase Under the Plans or Programs
|
||||||
Treasury stock as of February 29, 2016
|
79,839
|
|
|
$
|
49.06
|
|
|
79,839
|
|
|
$
|
52,224
|
|
New authorizations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Share reissuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Treasury stock as of March 31, 2016
|
79,839
|
|
|
$
|
49.06
|
|
|
79,839
|
|
|
$
|
52,224
|
|
New authorizations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Share reissuances
|
(25
|
)
|
|
49.06
|
|
|
(25
|
)
|
|
—
|
|
||
Treasury stock as of April 30, 2016
|
79,814
|
|
|
$
|
49.06
|
|
|
79,814
|
|
|
$
|
52,224
|
|
New authorizations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Share repurchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Share reissuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Treasury stock as of May 31, 2016
|
79,814
|
|
|
$
|
49.06
|
|
|
79,814
|
|
|
$
|
52,224
|
|
|
APOLLO EDUCATION GROUP, INC.
An Arizona Corporation
|
|
|
|
|
By:
|
/s/ Gregory J. Iverson
|
|
|
Gregory J. Iverson
Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer
(Principal Financial and Accounting Officer)
|
1 Year Apollo Education Group, Inc. Chart |
1 Month Apollo Education Group, Inc. Chart |
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