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Apollo Education Group, Inc. Reports Fourth Quarter and Fiscal Year 2014 ResultsPHOENIX --(Business Wire)-- Apollo Education Group, Inc. (NASDAQ: APOL) today reported financial results for the three months and fiscal year ended August 31, 2014, with fourth quarter revenue of $709.7 million and diluted earnings per share from continuing operations of $0.29 per share, or $0.34 per share excluding special items. "In 2014, we made significant progress on our ambitious plans to differentiate the University of Phoenix, diversify Apollo Education Group, and build a more efficient organization," said Greg Cappelli, Chief Executive Officer, Apollo Education Group. "Our teams worked to realign the University of Phoenix around our distinct college-based strategy, expanded the Apollo Global network to now serve students on six continents, while maintaining a healthy balance sheet with ample capital to deploy our long-term strategic plan." Fourth Quarter 2014 Results of Operations Apollo Education Group ("the Company") reported net revenue for the fourth quarter 2014 of $709.7 million, compared to $836.4 million for the fourth quarter 2013. Fourth quarter 2014 University of Phoenix New Degreed Enrollment was 38,600, down 5.9% from fourth quarter 2013, and Degreed Enrollment decreased 13.2% to 233,500, compared to the same period from the prior year. Operating income for the fourth quarter 2014 was $42.0 million, compared to $38.6 million from the prior year fourth quarter. Income from continuing operations attributable to Apollo Education Group for the fourth quarter 2014 was $32.0 million, or $0.29 per share, compared to $23.9 million, or $0.21 per share from the prior year fourth quarter. Excluding special items, operating income was $56.7 million for the fourth quarter 2014, compared to $104.5 million for the fourth quarter 2013, and income from continuing operations attributable to Apollo Education Group for the fourth quarter 2014 was $37.2 million, or $0.34 per share, compared to $65.4 million, or $0.58 per share, for the fourth quarter 2013. (Special items for the fourth quarter 2014 and 2013 are included in the reconciliation of GAAP to non-GAAP financial information tables of this press release.) Fiscal Year 2014 Results of Operations Net revenue for fiscal year 2014 was $3.0 billion, compared to $3.6 billion in the prior year, representing a 16.8% decrease. University of Phoenix Average Degreed Enrollment for fiscal year 2014 was 251,500, a 16.5% decrease from the prior year, and Aggregate New Degreed Enrollment was 146,700, down 15.2% from the prior year. Operating income was $339.0 million, compared to $434.4 million from the prior year. Income from continuing operations attributable to Apollo Education Group was $215.9 million, or $1.92 per share, compared to $253.1 million, or $2.23 per share in fiscal year 2013. Excluding special items, operating income was $446.9 million for fiscal year 2014, compared to $606.8 million in fiscal year 2013, and income from continuing operations attributable to Apollo Education Group for fiscal year 2014 was $277.3 million, or $2.46 per share, compared to $361.7 million, or $3.19 per share, for fiscal year 2013. (Special items for fiscal year 2014 and 2013 are included in the reconciliation of GAAP to non-GAAP financial information tables of this press release.) Balance Sheet and Cash Flow As of August 31, 2014, the Company's unrestricted cash and cash equivalents and short-term marketable securities totaled $1.4 billion, compared to $1.5 billion as of August 31, 2013. The decrease was primarily attributable to $172.7 million of share repurchases (which includes $13.0 million of share repurchases for tax withholding requirements on restricted stock units), $119.5 million for acquisitions, $100.7 million for capital expenditures, a net investment of $43.9 million in long-term marketable securities, and $36.7 million of net payments on borrowings. These items were partially offset by $375.9 million of cash provided by operations. Total debt outstanding (including short-term borrowings and the current portion of long-term debt) decreased $35.0 million to $657.1 million as of August 31, 2014. Subsequent to August 31, 2014, the Company repaid the $585.0 million drawn on its principal revolving credit facility. Institute for Professional Development During the fourth quarter 2014, Apollo Education Group sold assets of its subsidiary Institute for Professional Development, resulting in recognizing an immaterial gain on sale. The Company sold the business primarily due to recent operating losses and limitations on its ability to further develop and expand the domestic business. Institute for Professional Development's operating results are presented as discontinued operations for all periods presented. Business Outlook The Company offers the following outlook for fiscal year 2015 based on the business trends observed during the fourth quarter of fiscal year 2014, as well as management's current expectations of future trends.
The Company also provides the following outlook for the first quarter of fiscal year 2015.
Conference Call Information The Company will hold a conference call to discuss these earnings results at 8:30 a.m. (ET), 5:30 a.m. (PT), today, Tuesday, October 21, 2014. Dial-In Numbers:
877-292-6888 (Domestic) A live webcast of this event may be accessed by visiting the Company's website at www.apollo.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 October 28, 2014. Dial-In Numbers:
855-859-2056 (Domestic) About Apollo Education Group, Inc. Apollo Education Group, Inc. is one of the world's largest private education providers and has been in the education business since 1973. Through its subsidiaries: Apollo Global, College for Financial Planning, University of Phoenix, and Western International University, Apollo Education Group offers innovative and distinctive educational programs and services, online and on-campus, at the undergraduate, masters and doctoral levels. Its educational programs and services are offered throughout the United States and in Europe, Australia, Latin America, Africa and Asia, as well as online throughout the world. For more information about Apollo Education Group, Inc. and its subsidiaries, call (800) 990-APOL or visit the Company's website at www.apollo.edu.
(1) Institute for Professional Development's operating results are presented as discontinued operations for all periods presented.
(1) This gain is included in instructional and student advisory on the Company's Condensed Consolidated Statements of Income. In fiscal year 2013, the Company recognized a charge of $10.7 million for the foreign indirect tax assessment that was not classified as a special item.
(1) In fiscal year 2013, the Company recognized a charge of $10.7 million for the foreign indirect tax assessment that was not classified as a special item. (2) Excluding losses from Open Colleges, Adjusted Apollo Global Operating Loss would have been approximately $15 million and $6 million during the three months and year ended August 31, 2014, respectively. (3) Open Colleges' educational offerings generally extend beyond one year and the associated revenue is recognized over the contractual period that students are provided access to complete their program, or the time period it takes students to complete their program, as applicable. However, Open Colleges' operating costs are period costs that are expensed as incurred and a substantial portion are incurred before, or soon after, the students begin their programs. Accordingly, as a result of Open Colleges' rapid growth, service model, and cost structure, Apollo Global's operating results are negatively impacted in the near term. However, these factors do not have the same adverse impact on cash flows generated from Open Colleges. Additionally, Apollo Global's deferred revenue has increased substantially from approximately $50 million as of August 31, 2013 to $127 million as of August 31, 2014, and this amount is expected to continue to increase, perhaps rapidly, as Open Colleges continues to grow. (4) Apollo Global's 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 adjusted operating results in the second and fourth quarters because of lower net revenue, particularly for BPP, and due to BPP's relatively fixed cost structure. The following summarizes the Adjusted Apollo Global Operating Income (Loss) for the respective periods in fiscal year 2014:
Use of Non-GAAP Financial Information The Company's non-GAAP financial measures 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 and Apollo Global'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. Adjusted Apollo Global Operating Income (Loss) represents Apollo Global's operating income (loss) excluding depreciation and amortization and certain items that the Company believes provides a meaningful indicator of operating performance across time periods principally due to the impact of acquisitions. Forward-Looking Statements Safe Harbor Statements about Apollo Education Group and its business in this release which are not statements of historical fact, including statements regarding Apollo Education Group's future strategy and plans and commentary regarding future results of operations and prospects, are forward-looking statements and are subject to the Safe Harbor provisions created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual plans implemented and actual results achieved may differ materially from those set forth in or implied by such statements due to various factors, including without limitation: (i) the impact of increased competition from traditional public universities and proprietary educational institutions; (ii) the costs and effectiveness of University of Phoenix initiatives to improve student retention, improve student outcomes and demonstrate a compelling and cost effective relationship between a student's education and career; (iii) changes in law or regulation affecting the University of Phoenix's eligibility to participate in or the manner in which it participates in U.S. federal and state student financial aid programs, including changes that may be included in the reauthorization of the federal Higher Education Act and the proposed Department of Education regulations relating to gainful employment and state authorization; (iv) any adverse impact on University of Phoenix's business arising from the Notice sanction imposed by the University's principal accreditor, and any associated impact on the University's pending recertification by the U.S. Department of Education for participation in Title IV student financial aid programs; (v) the impact of the Company's restructuring initiatives; (vi) the impact of the operational and governance changes made to increase University of Phoenix autonomy in response to governance concerns expressed by its principal accreditor; (vii) the impact of any reduction in financial aid available to students, including active and retired military personnel, due to the U.S. government deficit reduction proposals, debt ceiling limitations, budget sequestration or otherwise; (viii) the impact of changes in marketing channels and other recruiting practices; (ix) changes in University of Phoenix's business necessary to remain in compliance with U.S. federal student financial aid program regulations, including the so-called 90/10 Rule and the limitations on student loan cohort default rates, and to remain in compliance with the accrediting criteria of the relevant accrediting bodies; (x) changes in University of Phoenix enrollment or student mix; (xi) unexpected expenses or other challenges in integrating acquired businesses, consumer or regulatory impact arising from consummation of the acquired businesses, and unexpected changes or developments in the acquired businesses, and (xii) unexpected changes in the U.S. or global economy. For a discussion of the various factors that may cause actual plans implemented and actual results achieved to differ materially from those set forth in the forward-looking statements, please refer to the risk factors and other disclosures contained in Apollo Education Group's Form 10-K for fiscal year 2014, and other filings with the Securities and Exchange Commission which are available at www.apollo.edu.
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