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Press release from Business Wire

Apollo Group, Inc. Reports Fiscal 2011 Third Quarter Results

Thursday, June 30, 2011

Apollo Group, Inc. Reports Fiscal 2011 Third Quarter Results16:05 EDT Thursday, June 30, 2011 PHOENIX (Business Wire) -- Apollo Group, Inc. (NASDAQ: APOL) (“Apollo Group,” “Apollo” or the “Company”) today reported financial results for the three and nine months ended May 31, 2011. “During the third quarter, we continued to execute on our key initiatives to improve outcomes, enhance student protections, and elevate the educational experience throughout every touch point of the student lifecycle,” said Apollo Group Co-Chief Executive Officer and Apollo Global Chairman Greg Cappelli. “We are encouraged by the progress we are making in improving retention rates and continuing to shift the mix of our students toward higher degree level programs.” Apollo Group Co-Chief Executive Officer Chas Edelstein added, “We are committed to differentiating the University of Phoenix by focusing on academic quality and delivering a world class student experience. Our actions, over time, are intended to elevate the brand and reputation of our institutions, improve student outcomes, reduce enterprise risk, and position us for stable, long-term growth.” Unaudited Third Quarter of Fiscal 2011 Results of Operations Consolidated net revenue for the third quarter of fiscal 2011 totaled $1,235.8 million, which represents a 7.6% decrease from the third quarter of fiscal 2010, principally due to lower enrollments at University of Phoenix, partially offset by selective tuition price and other fee changes. For the quarter, University of Phoenix Degreed Enrollment decreased 16.4% to 398,400 compared with the prior year third quarter, primarily due to decreases in New Degreed Enrollment in recent quarters, including a 40.5% decrease in New Degreed Enrollment in the third quarter of fiscal 2011 compared with the prior year period. The Company believes the decline in New Degreed Enrollment is primarily the result of the operational changes and initiatives it has implemented to more effectively support students and improve educational outcomes, as well as the broader competitive environment. The operational changes include the manner in which admissions personnel and other employees are evaluated and compensated, the full implementation of University Orientation, and the Company's efforts to more effectively identify students who have a greater likelihood to succeed in University of Phoenix's educational programs. The Company reported income from continuing operations attributable to Apollo Group for the three months ended May 31, 2011, of $211.9 million, or $1.51 per share (140.3 million diluted weighted average shares outstanding), compared to income from continuing operations attributable to Apollo Group of $177.2 million, or $1.16 per share (152.3 million diluted weighted average shares outstanding) for the three months ended May 31, 2010. Results for the third quarter of fiscal 2011 contain special items that include a $2.0 million pre-tax charge ($1.2 million net of tax) for accrued incremental post-judgment interest and future estimated legal costs related to a securities class action lawsuit (Policeman's Annuity and Benefit Fund of Chicago) and a tax benefit of $9.6 million resulting from the resolution with the Internal Revenue Service regarding the deductibility of payments made to settle a lawsuit in fiscal 2010. The fiscal 2010 third quarter results contain special items that include a goodwill impairment charge of $8.7 million ($7.5 million net of the portion attributable to noncontrolling interest) and a $132.6 million pre-tax charge ($79.9 million net of tax) representing an accrual related to the securities class action lawsuit mentioned above. 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 three months ended May 31, 2011, was $203.5 million, or $1.45 per share (140.3 million diluted weighted average shares outstanding), compared to income from continuing operations attributable to Apollo Group for the three months ended May 31, 2010 of $264.6 million, or $1.74 per share (152.3 million diluted weighted average shares outstanding). (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 expenses increased by $16.4 million, or 3.7%, to $458.1 million for the three months ended May 31, 2011, compared to the three months ended May 31, 2010. The increase was primarily due to various strategic initiatives implemented to more effectively support students and improve their educational outcomes, which have resulted in increased compensation expense related to certain student advisory and infrastructure support functions and increased curriculum development and delivery costs. Marketing expenses increased by $9.4 million, or 6.2%, to $161.0 million for the three months ended May 31, 2011, compared to the three months ended May 31, 2010. The increase was primarily a result of higher advertising expenditures, driven by the increased costs associated with the Company's efforts to more effectively identify students who have a greater likelihood to succeed in its educational programs and increases in advertising rates for traditional and online media due to increased competition for higher degree level students and improving general economic conditions. Admissions advisory expenses decreased by $16.4 million, or 14.1%, to $99.9 million for the three months ended May 31, 2011, compared to the three months ended May 31, 2010. The decrease was a result of lower admissions advisory headcount primarily attributable to a strategic reduction in force implemented during the first quarter of fiscal 2011 that eliminated approximately 700 full-time positions, principally among admissions personnel. This decrease was partially offset by higher average employee compensation costs. General and administrative (“G&A”) expenses increased by $12.5 million, or 16.6%, to $87.9 million for the three months ended May 31, 2011, compared to the three months ended May 31, 2010. The increase is primarily attributable to expenses associated with higher employee compensation costs and other expenses associated with the Company's investments in its information technology resources and capabilities. The provision for uncollectible accounts receivable (“bad debt expense”) decreased by $32.8 million, or 45.5%, to $39.2 million for the three months ended May 31, 2011, compared to the three months ended May 31, 2010. The decrease is primarily attributable to reductions in gross accounts receivable as a result of decreases in New Degreed Enrollment, a shift in the mix of students from Associates to higher degree-level programs, and improvements in student retention rates, partially due to the full implementation of University Orientation. Improved collection rates at University of Phoenix, which were favorably impacted by ongoing process improvements and an initiative to address the Company's oldest receivables, also contributed to the decrease. Depreciation and amortization increased by $4.4 million, or 12.1%, to $41.1 million for the three months ended May 31, 2011, compared to the three months ended May 31, 2010. The increase was primarily due to increased depreciation related to information technology, network infrastructure and software, partially offset by a decrease in amortization of BPP intangible assets and depreciation of principal office buildings in respect of which the Company entered into a sale-leaseback arrangement. Financial and Operating Metrics Below are Apollo Group's unaudited financial data and operating metrics for the third quarter of fiscal 2011 versus the prior-year period.       Q3 2011     Q3 2010Revenues (in thousands) Degree Seeking Gross Revenues (1) $ 1,166,880 $ 1,261,258 Less: Discounts and other   (66,888 )   (60,441 ) Degree Seeking Net Revenues (1) 1,099,992 1,200,817 Non-degree Seeking Revenues (2) 11,365 12,502 Other, net of discounts (3)   124,480     124,085   $ 1,235,837   $ 1,337,404     Revenue by Degree Type (in thousands) (1) Associates $ 356,344 $ 464,373 Bachelors 592,258 551,808 Masters 194,365 221,718 Doctoral 23,913 23,359 Less: Discounts and other   (66,888 )   (60,441 ) $ 1,099,992   $ 1,200,817     Degreed Enrollment (rounded to hundreds) (4) Associates 147,900 212,100 Bachelors 184,500 186,400 Masters 58,500 70,400 Doctoral   7,500     7,600     398,400     476,500     Degree Seeking Gross Revenues per Degreed Enrollment (1), (4) Associates $ 2,409 $ 2,189 Bachelors 3,210 2,960 Masters 3,322 3,149 Doctoral 3,188 3,074 All degrees (after discounts) $ 2,761 $ 2,520   New Degreed Enrollment (rounded to hundreds) (5) Associates 23,400 50,200 Bachelors 24,000 31,700 Masters 7,900 11,300 Doctoral   700     900     56,000     94,100     (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 Nine Months of Fiscal 2011 Results of Operations Consolidated net revenue for the nine months ended May 31, 2011, was $3.6 billion, a 1.5% decrease from the comparable period of fiscal 2010. The decrease in consolidated net revenue was primarily attributable to a 6.6% decrease in University of Phoenix's average Degreed Enrollment in the first nine months of fiscal year 2011 compared to the first nine months of fiscal year 2010, partially offset by selective tuition price and other fee changes at University of Phoenix. The Company reported income from continuing operations attributable to Apollo Group of $381.3 million, or $2.66 per share, (143.2 million diluted weighted average shares outstanding), and $520.9 million, or $3.37 per share, (154.5 million diluted weighted average shares outstanding) for the nine months ended May 31, 2011, and May 31, 2010, respectively. Results for the nine months ended May 31, 2011 contain special items that include goodwill and other intangibles 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 $4.5 million charge for accrued incremental post-judgment interest and future estimated legal costs related to a securities class action lawsuit (Policeman's Annuity and Benefit Fund of Chicago), and a $3.8 million restructuring charge associated with a strategic reduction in force, primarily at University of Phoenix. The Company recorded a tax benefit of $7.7 million, net of noncontrolling interests, associated with these charges, along with a tax benefit of $9.6 million resulting from the resolution with the Internal Revenue Service regarding the deductibility of payments made to settle a lawsuit in fiscal 2010. Results for the nine months ended May 31, 2010 included a goodwill impairment charge of $8.7 million ($7.5 million net of the portion attributable to noncontrolling interest), a $177.1 million pre-tax charge ($106.8 million net of tax) representing an accrual related to the securities class action lawsuit mentioned above, and a tax benefit of $11.4 million resulting from the settlement of disputed tax issues with the Internal Revenue Service. The Company did not record a net tax benefit associated with the goodwill impairment in either period, as it is not deductible for tax purposes. Excluding these special items, income from continuing operations attributable to Apollo Group for the nine months ended May 31, 2011 was $560.6 million, or $3.91 per share, compared to income from continuing operations attributable to Apollo Group of $623.8 million, or $4.04 per share, for the nine months ended May 31, 2010. (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 May 31, 2011, the Company's cash and cash equivalents, excluding restricted cash, totaled $1,426.3 million as compared to $1,284.8 million as of August 31, 2010. The increase is attributable to cash generated from operations, a decrease in restricted cash, and proceeds from the sale-leaseback of the Company's principal office buildings in Phoenix, Arizona, partially offset by repayments on borrowings, share repurchases and capital expenditures. Restricted cash and cash equivalents (including long-term) decreased by $194.3 million compared to August 31, 2010, primarily due to the return of funds associated with the release of the Company's cash-collateralized letter of credit in the amount of approximately $126 million in connection with a previous program review of University of Phoenix by the U.S. Department of Education. At May 31, 2011, accounts receivable decreased to $227.2 million from $264.4 million at August 31, 2010. Excluding accounts receivable and the associated net revenue for Apollo Global, the Company's days sales outstanding (“DSO”) was 23 days at May 31, 2011, compared to 30 days at August 31, 2010 and May 31, 2010. The decrease in DSO versus a year ago is primarily attributable to reductions in gross accounts receivable as a result of decreases in New Degreed Enrollment, a shift in the mix of students from associates to higher degree-level programs, and improvements in student retention, partially due to the full implementation of University Orientation. Improved collection rates at University of Phoenix also contributed to the decrease. Total debt outstanding (including short-term borrowings and the current portion of long-term debt) decreased by $389.1 million to $195.3 million at May 31, 2011, from $584.4 million at August 31, 2010. The decrease is due to the repayment of U.S. denominated borrowings on the Company's $500 million credit facility. Share Repurchases The Company repurchased approximately 4.1 million and 10.6 million shares of its common stock at a weighted average purchase price of $40.26 and $39.48 per share for a total expenditure of $167.3 million and $418.7 million during the three and nine months ended May 31, 2011, respectively. At May 31, 2011, $11.8 million was recorded in accrued liabilities in the Condensed Consolidated Balance Sheets for repurchased shares that settled subsequent to May 31, 2011. As of May 31, 2011, approximately $357.7 million remained available under the Company's current share repurchase authorization. Business Outlook The Company offers the following commentary regarding the outlook for fiscal 2011 and fiscal 2012 based on the business trends observed during the third quarter of fiscal 2011, as well as management's current expectations of future trends, which could change. Fiscal 2011: Consolidated net revenue of $4.65-$4.75 billion; and Operating income, excluding the impact of special items, of $1.15-$1.20 billion. Fiscal 2012: Consolidated net revenue of $4.00-$4.25 billion; and Operating income, excluding the impact of special items, of $675-$800 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, Thursday, June 30, 2011. The call may be accessed by dialing (877) 292-6888 (domestic) or (973) 200-3381 (international) and entering the conference ID number 71264066. A live webcast of this event may be accessed by visiting the Company's website at www.apollogrp.edu. A replay of the call will be available on the website or by dialing (800) 642-1687 (domestic) or (706) 645-9291 (international) and entering the conference ID number 71264066 until July 9, 2011. 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's programs and services are provided in 40 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, (ii) changes in enrollment or student mix, including as a result of the roll-out of the Company's University Orientation program to all eligible students in November 2010, (iii) the impact of recent changes in the manner in which the Company evaluates and compensates its counselors that advise and enroll students, (iv) changes in law or regulation affecting the Company's eligibility to participate in or the manner in which it participates in U.S. federal student financial aid programs, including, specifically, the impact on the Company's business of the operational and other changes necessary to comply with the final program integrity regulations published by the U.S. Department of Education on October 29, 2010, and the final gainful employment regulations published by the Department on June 13, 2011, (v) changes in the Company'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 cohort default rates, and to remain in compliance with the accrediting criteria of the relevant accrediting bodies, and (vi) other regulatory developments. 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 2010 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 http://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 SubsidiariesCondensed Consolidated Balance Sheets (Unaudited)     As ofMay 31,     August 31,($ in thousands)20112010ASSETS:Current assets Cash and cash equivalents $ 1,426,346 $ 1,284,769 Restricted cash and cash equivalents 376,474 444,132 Accounts receivable, net 227,171 264,377 Deferred tax assets, current portion 148,052 166,549 Prepaid taxes 15,605 39,409 Other current assets 47,215 38,031 Assets held for sale from discontinued operations   -     15,945   Total current assets 2,240,863 2,253,212 Property and equipment, net 520,225 619,537 Long-term restricted cash and cash equivalents - 126,615 Marketable securities 5,946 15,174 Goodwill 132,872 322,159 Intangible assets, net 123,525 150,593 Deferred tax assets, less current portion 112,643 99,071 Other assets   15,778     15,090   Total assets $ 3,151,852   $ 3,601,451     LIABILITIES AND SHAREHOLDERS' EQUITY:Current liabilities Short-term borrowings and current portion of long-term debt $ 24,153 $ 416,361 Accounts payable 60,071 90,830 Accrued liabilities 438,205 375,461 Student deposits 404,155 493,245 Deferred revenue 311,445 359,724 Other current liabilities 40,730 53,416 Liabilities held for sale from discontinued operations   -     4,474   Total current liabilities 1,278,759 1,793,511 Long-term debt 171,121 168,039 Deferred tax liabilities 32,882 38,875 Other long-term liabilities   275,732     212,286   Total liabilities   1,758,494     2,212,711     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 82,572 46,865 Apollo Group Class A treasury stock, at cost (2,805,711 ) (2,407,788 ) Retained earnings 4,131,860 3,748,045 Accumulated other comprehensive loss   (23,940 )   (31,176 ) Total Apollo shareholders' equity   1,384,885     1,356,050   Noncontrolling interests   8,473     32,690   Total equity   1,393,358     1,388,740   Total liabilities and shareholders' equity $ 3,151,852   $ 3,601,451   Apollo Group, Inc. and SubsidiariesCondensed Consolidated Statements of Income (Unaudited)             Three Months Ended May 31,% of Revenue2011201020112010(in thousands, except per share data)Net revenue $ 1,235,837   $ 1,337,404   100.0 % 100.0 % Costs and expenses: Instructional and student advisory 458,145 441,700 37.1 % 33.0 % Marketing 161,034 151,668 13.0 % 11.3 % Admissions advisory 99,923 116,344 8.1 % 8.7 % General and administrative 87,857 75,362 7.1 % 5.6 % Provision for uncollectible accounts receivable 39,217 72,011 3.2 % 5.4 % Depreciation and amortization 41,125 36,701 3.3 % 2.8 % Estimated litigation loss 2,048 132,600 0.2 % 9.9 % Goodwill and other intangibles impairment   -     8,712   -   0.7 % Total costs and expenses   889,349     1,035,098   72.0 % 77.4 % Operating income 346,488 302,306 28.0 % 22.6 % Interest income 867 827 0.1 % 0.1 % Interest expense (2,383 ) (1,979 ) (0.2 %) (0.2 %) Other, net   (1,862 )   (1,312 ) (0.1 %) (0.1 %) Income from continuing operations before income taxes 343,110 299,842 27.8 % 22.4 % Provision for income taxes   (130,385 )   (122,390 ) (10.6 %) (9.1 %) Income from continuing operations 212,725 177,452 17.2 % 13.3 % Income from discontinued operations, net of tax   540     2,084   0.1 % 0.1 % Net income 213,265 179,536 17.3 % 13.4 % Net income attributable to noncontrolling interests   (825 )   (253 ) (0.1 %) -   Net income attributable to Apollo $ 212,440   $ 179,283   17.2 % 13.4 %   Earnings per share - Basic: Continuing operations attributable to Apollo $ 1.52 $ 1.17 Discontinued operations attributable to Apollo   -     0.02   Basic income per share attributable to Apollo $ 1.52   $ 1.19     Earnings per share - Diluted: Continuing operations attributable to Apollo $ 1.51 $ 1.16 Discontinued operations attributable to Apollo   -     0.02   Diluted income per share attributable to Apollo $ 1.51   $ 1.18     Basic weighted average shares outstanding   139,856     151,127   Diluted weighted average shares outstanding   140,343     152,291   Apollo Group, Inc. and SubsidiariesCondensed Consolidated Statements of Income (Unaudited)             Nine Months Ended May 31,% of Revenue2011201020112010(in thousands, except per share data)Net revenue $ 3,610,901   $ 3,666,399   100.0 % 100.0 % Costs and expenses: Instructional and student advisory 1,335,601 1,287,833 37.0 % 35.1 % Marketing 484,392 444,593 13.4 % 12.1 % Admissions advisory 315,958 349,767 8.8 % 9.6 % General and administrative 257,075 214,821 7.1 % 5.9 % Provision for uncollectible accounts receivable 141,666 208,593 3.9 % 5.7 % Depreciation and amortization 117,369 106,625 3.3 % 2.9 % Estimated litigation loss 4,503 177,100 0.1 % 4.8 % Goodwill and other intangibles impairment 219,927 8,712 6.1 % 0.2 % Restructuring   3,846     -   0.1 % -   Total costs and expenses   2,880,337     2,798,044   79.8 % 76.3 % Operating income 730,564 868,355 20.2 % 23.7 % Interest income 2,635 2,284 0.1 % 0.1 % Interest expense (6,207 ) (8,107 ) (0.2 %) (0.2 %) Other, net   (1,603 )   (2,061 ) -   (0.1 %) Income from continuing operations before income taxes 725,389 860,471 20.1 % 23.5 % Provision for income taxes   (376,016 )   (341,435 ) (10.4 %) (9.3 %) Income from continuing operations 349,373 519,036 9.7 % 14.2 % Income (loss) from discontinued operations, net of tax   2,487     (8,854 ) -   (0.3 %) Net income 351,860 510,182 9.7 % 13.9 % Net loss attributable to noncontrolling interests   31,955     1,849   0.9 % 0.1 % Net income attributable to Apollo $ 383,815   $ 512,031   10.6 % 14.0 %   Earnings (loss) per share - Basic: Continuing operations attributable to Apollo $ 2.67 $ 3.40 Discontinued operations attributable to Apollo   0.02     (0.06 ) Basic income per share attributable to Apollo $ 2.69   $ 3.34         Earnings (loss) per share - Diluted: Continuing operations attributable to Apollo $ 2.66 $ 3.37 Discontinued operations attributable to Apollo   0.02     (0.06 ) Diluted income per share attributable to Apollo $ 2.68   $ 3.31     Basic weighted average shares outstanding   142,845     153,345   Diluted weighted average shares outstanding   143,222     154,506   Apollo Group, Inc. and SubsidiariesCondensed Consolidated Statements of Cash Flows From Continuing and Discontinued Operations (Unaudited)         Nine Months Ended May 31,20112010($ in thousands)Cash flows provided by (used in) operating activities: Net income $ 351,860 $ 510,182 Adjustments to reconcile net income to net cash provided by operating activities: Share-based compensation 50,453 46,236 Excess tax benefits from share-based compensation (1,214 ) (6,427 ) Depreciation and amortization 117,369 108,033 Amortization of lease incentives (10,523 ) (9,942 ) Impairment of discontinued operations - 9,400 Goodwill and other intangibles impairment 219,927 8,712 Amortization of deferred gains on sale-leasebacks (1,491 ) (1,294 ) Non-cash foreign currency loss, net 1,767 931 Provision for uncollectible accounts receivable 141,666 208,593 Estimated litigation loss 4,503 177,100 Deferred income taxes (3,327 ) (69,571 ) Changes in certain assets and liabilities, excluding the impact of disposition: Accounts receivable (81,215 ) (175,845 ) Prepaid taxes 21,218 35,203 Other assets (13,955 ) (8,223 ) Accounts payable and accrued liabilities 13,117 (59,413 ) Student deposits (89,944 ) 897 Deferred revenue (60,763 ) 5,796 Other liabilities   21,446     24,412   Net cash provided by operating activities   680,894     804,780   Cash flows provided by (used in) investing activities: Additions to property and equipment (119,726 ) (108,316 ) Maturities of marketable securities 10,000 - Change in restricted cash and cash equivalents 194,273 (49,924 ) Proceeds from sale-leaseback 169,018 - Proceeds from disposition   9,612     -   Net cash provided by (used in) investing activities   263,177     (158,240 ) Cash flows provided by (used in) financing activities: Payments on borrowings (425,325 ) (424,775 ) Proceeds from borrowings 11,682 17,824 Issuance of Apollo Group Class A common stock 10,240 18,209 Apollo Group Class A common stock purchased for treasury (408,220 ) (341,161 ) Noncontrolling interest contributions 6,875 2,460 Excess tax benefits from share-based compensation   1,214     6,427   Net cash used in financing activities   (803,534 )   (721,016 ) Exchange rate effect on cash and cash equivalents   1,040     (1,789 ) Net increase (decrease) in cash and cash equivalents 141,577 (76,265 ) Cash and cash equivalents, beginning of period   1,284,769     968,246   Cash and cash equivalents, end of period $ 1,426,346   $ 891,981   Supplemental disclosure of cash flow information Cash paid for income taxes, net of refunds $ 326,999 $ 356,570 Cash paid for interest $ 8,063 $ 5,292 Supplemental disclosure of non-cash investing and financing activities Credits received for tenant improvements $ 12,047 $ 16,026 Unsettled purchase of Class A common stock for treasury $ 11,802 $ - Accrued purchases of property and equipment $ 6,585 $ 9,190 Restricted stock units vested and released $ 3,614 $ 4,938       Apollo Group, Inc. and SubsidiariesReconciliation of GAAP financial information to non-GAAP financial information (Unaudited)         Three Months Ended May 31,Nine Months Ended May 31,2011   20102011   2010(in thousands, except per share data) Net income attributable to Apollo, as reported $ 212,440 $ 179,283 $ 383,815 $ 512,031 Income (loss) from discontinued operations, net of tax   540     2,084     2,487     (8,854 ) Income from continuing operations attributable to Apollo 211,900 177,199 381,328 520,885   Reconciling items: Estimated litigation loss (1) 2,048 132,600 4,503 177,100 Goodwill and other intangibles impairment, net of noncontrolling interest (2) - 7,457 188,258 7,457 Restructuring (3)   -     -     3,846     -   2,048 140,057 196,607 184,557 Less: tax effects, net of noncontrolling interest (801 ) (52,700 ) (7,715 ) (70,328 ) Tax benefit from IRS settlement (4)   (9,646 )   -     (9,646 )   (11,356 ) Income from continuing operations attributable to Apollo, adjusted to exclude special items $ 203,501   $ 264,556   $ 560,574   $ 623,758     Diluted income per share from continuing operations attributable to Apollo, as reported $ 1.51   $ 1.16   $ 2.66   $ 3.37     Diluted income per share from continuing operations attributable to Apollo, adjusted to exclude special items $ 1.45   $ 1.74   $ 3.91   $ 4.04     Diluted weighted average shares outstanding   140,343     152,291     143,222     154,506     (1) These charges represent estimated losses associated with the Securities Class Action (Policeman's Annuity and Benefit Fund of Chicago). (2) The $188.3 million charge for the nine months ended May 31, 2011 represents impairments of BPP's goodwill and other intangible assets, net of noncontrolling interest. The $7.5 million charge for the three and nine months ended May 31, 2010 represents an impairment of ULA's goodwill, net of noncontrolling interest. The Company did not record a tax benefit associated with either goodwill impairment because the goodwill is not deductible for tax purposes. (3) The $3.8 million charge for the nine months ended May 31, 2011 represents a charge associated with a strategic reduction in force at University of Phoenix during the first quarter of fiscal year 2011. (4) The $9.6 million tax benefit for the three and nine months ended May 31, 2011 resulted from resolution with the Internal Revenue Service regarding the deductibility of payments made to settle a lawsuit in fiscal year 2010. The $11.4 million tax benefit during the nine months ended May 31, 2010 resulted from a settlement of disputed tax issues with the Internal Revenue Service during the first quarter of fiscal year 2010. Apollo Group, Inc.Investor Relations Contacts:Beth Coronelli, 312-660-2059beth.coronelli@apollogrp.eduJeremy Davis, 312-660-2071jeremy.davis@apollogrp.eduMedia Contact:Media Relations Hotline, 602-254-0086media@apollogrp.edu