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Press release from Business Wire

Apollo Group, Inc. Reports Fiscal 2012 Fourth Quarter and Year-End Results

Tuesday, October 16, 2012

Apollo Group, Inc. Reports Fiscal 2012 Fourth Quarter and Year-End Results16:00 EDT Tuesday, October 16, 2012 PHOENIX (Business Wire) -- Apollo Group, Inc. (NASDAQ: APOL) (“Apollo Group,” “Apollo” or the “Company”) today reported financial results for the three months and fiscal year ended August 31, 2012. Net revenue of $996.5 million for fourth quarter 2012 and $4.3 billion for fiscal year 2012 Earnings per share attributable to Apollo for fourth quarter 2012 of $0.46 per share, or $0.52 per share excluding special items, and $3.22 per share, or $3.56 excluding special items, for fiscal year 2012 University of Phoenix Degreed Enrollment at 328,400 and New Degreed Enrollment in the fourth quarter at 52,800 Initiatives to reengineer business processes and refine the delivery structure, including a University of Phoenix ground location realignment, are expected to favorably impact annual operating expenses by at least $300 million by fiscal 2014 “This past year, we have made great strides in executing on our strategy to differentiate University of Phoenix, diversify Apollo Group, and refine our business processes and delivery structure to be more efficient and effective, while providing a world-class student experience,” said Apollo Group Chief Executive Officer and Apollo Global Chairman Greg Cappelli. “As we build the university of the future, our priority is to connect education to careers for our students, helping them achieve their desired academic and life outcomes.” Unaudited Fourth Quarter Fiscal Year 2012 Results of Operations Net revenue for the fourth quarter of fiscal year 2012 totaled $996.5 million, which represents an 11.0% decrease compared to the fourth quarter of fiscal year 2011. The decrease was due principally to lower University of Phoenix enrollment, partially offset by selective tuition price and other fee changes. For the quarter, University of Phoenix Degreed Enrollment decreased 13.8% to 328,400 and New Degreed Enrollment decreased 13.7% compared to the fourth quarter of fiscal year 2011. The Company reported income from continuing operations attributable to Apollo Group for the three months ended August 31, 2012, of $52.6 million, or $0.46 per share (113.5 million weighted average diluted shares outstanding), compared to income from continuing operations attributable to Apollo Group of $189.7 million, or $1.38 per share (137.3 million weighted average diluted shares outstanding), for the three months ended August 31, 2011. Results for the fourth quarter of fiscal year 2012 include restructuring and other charges of $9.4 million ($6.0 million net of tax and the portion attributable to noncontrolling interests) associated with a series of restructuring activities to reengineer business processes and refine the Company's delivery structure. Results for the fourth quarter of fiscal year 2011 also contained special items, which are detailed in the reconciliation of GAAP financial information to non-GAAP financial information tables of this press release. Excluding the special items noted above, income from continuing operations attributable to Apollo Group for the three months ended August 31, 2012, was $58.6 million, or $0.52 per share, compared to income from continuing operations attributable to Apollo Group of $140.7 million, or $1.02 per share, for the three months ended August 31, 2011. (See the reconciliation of GAAP financial information to non-GAAP financial information in the tables section of this press release.) During the fourth quarter of fiscal year 2012, the Company completed the disposition of BPP Holdings Limited's (“BPP”) subsidiary Mander Portman Woodward (“MPW”), a UK secondary education institution, for £54.8 million (equivalent to $85.3 million as of the date of sale). The Company recognized a gain on sale of $26.7 million, net of transaction costs, and has reported MPW's operating results as discontinued operations in the Company's Consolidated Statements of Income for all periods presented. Operating Expenses Instructional and student advisory increased $20.4 million, or 4.7%, to $455.6 million in the fourth quarter of fiscal year 2012 compared to the fourth quarter of fiscal year 2011. The expense increase was primarily related to the Company's initiatives to more effectively support students and enhance their educational experience and outcomes, including investments in adaptive learning, curriculum development, the new learning and service platforms, and initiatives to connect education to careers. This was partially offset by a decrease in costs that are more variable in nature such as faculty and certain student advisory functions. Marketing increased $9.7 million, or 5.7%, to $180.3 million in the fourth quarter of fiscal year 2012 compared to the fourth quarter of fiscal year 2011. The increase was principally attributable to higher employee compensation and other costs, including expense related to building employer relationships, partially offset by lower advertising costs. Admissions advisory decreased $13.6 million, or 13.7%, to $85.9 million in the fourth quarter of fiscal year 2012 compared to the fourth quarter of fiscal year 2011. The decrease was principally attributable to lower admissions advisory headcount, partially offset by higher average employee compensation costs. General and administrative decreased $6.2 million, or 6.2%, to $92.3 million in the fourth quarter of fiscal year 2012 compared to the fourth quarter of fiscal year 2011. Depreciation and amortization increased $3.2 million, or 7.7%, to $44.7 million in the fourth quarter of fiscal year 2012 compared to the fourth quarter of fiscal year 2011. The increase was principally attributable to higher intangible asset amortization as a result of acquiring Carnegie Learning in the first quarter of fiscal year 2012 and increased capital expenditures and capital leases in recent years primarily related to information technology. Provision for uncollectible accounts receivable (“bad debt expense”) decreased $0.9 million, or 2.3%, to $38.7 million in the fourth quarter of fiscal year 2012 compared to the fourth quarter of fiscal year 2011. The expense decrease was primarily attributable to reductions in gross accounts receivable principally resulting from decreases in University of Phoenix Degreed Enrollment. Financial and Operating Metrics Below are Apollo Group's unaudited financial data and operating metrics for the fourth quarter of fiscal year 2012 versus the prior-year period.       Q4 2012     Q4 2011 Revenues (in thousands) Degree Seeking Gross Revenues (1) $ 972,079 $ 1,099,572 Less: Discounts and other (62,613 ) (63,486 ) Degree Seeking Net Revenues (1) 909,466 1,036,086 Non-degree Seeking Revenues (2) 12,563 12,730 Other, net of discounts (3) 74,468   71,404   $ 996,497   $ 1,120,220     Revenue by Degree Type (in thousands) (1) Associate's $ 237,737 $ 320,985 Bachelor's 560,406 580,588 Master's 152,205 174,451 Doctoral 21,731 23,548 Less: Discounts and other (62,613 ) (63,486 ) $ 909,466   $ 1,036,086     Degreed Enrollment (rounded to hundreds) (4) Associate's 102,600 136,300 Bachelor's 172,600 183,100 Master's 46,400 54,000 Doctoral 6,800   7,400   328,400   380,800     Degree Seeking Gross Revenues per Degreed Enrollment (1), (4) Associate's $ 2,317 $ 2,355 Bachelor's 3,247 3,171 Master's 3,280 3,231 Doctoral 3,196 3,182 All degrees (after discounts) $ 2,769 $ 2,721   New Degreed Enrollment (rounded to hundreds) (5) Associate's 20,400 24,200 Bachelor's 23,500 27,200 Master's 8,200 9,000 Doctoral 700   800   52,800   61,200     (1) Represents revenue from tuition and other fees for students enrolled in University of Phoenix degree programs. Also includes revenue from tuition and other fees for students participating in University of Phoenix certificate programs of at least 18 credits in length with some course applicability into a related degree program.   (2) Represents revenue from tuition and other fees for students participating in University of Phoenix certificate programs less than 18 credits in length, certificate programs with no applicability into a related degree program, single course and continuing education courses.   (3) Represents revenues from Apollo Global 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 2012 Fiscal Year Results of Operations Net revenue for fiscal year 2012 totaled $4.3 billion, which represents a 9.7% decrease compared to fiscal year 2011. The decrease was primarily attributable to University of Phoenix's 10.2% decrease in net revenue principally due to lower University of Phoenix enrollment, partially offset by selective tuition price and other fee changes. In fiscal year 2012, University of Phoenix's Average Degreed Enrollment decreased 14.8% as compared to fiscal year 2011. The Company reported income from continuing operations attributable to Apollo Group for fiscal year 2012, of $393.7 million, or $3.22 per share (122.4 million weighted average diluted shares outstanding), compared to $566.3 million, or $4.00 per share (141.8 million weighted average diluted shares outstanding), for fiscal year 2011. Results for fiscal years 2012 and 2011 contained special items, which are detailed in the reconciliation of GAAP financial information to non-GAAP financial information tables of this press release. Excluding the special items, income from continuing operations attributable to Apollo Group for fiscal year 2012 was $435.7 million, or $3.56 per share, compared to income from continuing operations attributable to Apollo Group of $696.5 million, or $4.91 per share for fiscal year 2011. Unaudited Balance Sheet As of August 31, 2012, the Company's cash and cash equivalents, excluding restricted cash, totaled $1.3 billion, compared to $1.6 billion as of August 31, 2011. The decrease was primarily attributable to share repurchases, capital expenditures, and the purchase of Carnegie Learning, partially offset by cash provided by operations, and proceeds from the disposition of Mander Portman Woodward. As of August 31, 2012, accounts receivable decreased to $198.3 million from $215.6 million at August 31, 2011. Excluding accounts receivable and the related net revenue for Apollo Global, the Company's days sales outstanding was 22 days as of August 31, 2012, as compared to 23 days as of August 31, 2011. Total debt outstanding (including short-term borrowings and the current portion of long-term debt) increased by $120.9 million to $719.9 million as of August 31, 2012, from $599.0 million as of August 31, 2011. Subsequent to August 31, 2012, the Company repaid the $615.0 million drawn on its revolving credit facility. Share Repurchases The Company repurchased approximately 2.0 million and 19.1 million shares of its common stock at a weighted average purchase price of $31.60 and $41.82 per share for a total cost of $63.5 million and $799.5 million during the three and twelve months ended August 31, 2012, respectively. Optimization Initiatives The Company continues initiatives to reengineer business processes and refine its delivery structure, while maintaining a commitment to enhance the student educational experience and outcomes. These activities, including the actions discussed below, are expected to favorably impact annual operating expenses by at least $300 million by fiscal year 2014, when compared to fiscal year 2012. The Company expects to realize more than half of these cumulative cost savings in fiscal year 2013, with the remainder in fiscal year 2014. As part of the reengineering initiative, University of Phoenix is realigning its ground locations throughout the U.S., which will directly impact approximately 4% of total Degreed Enrollment, or around 13,000 students. These students will be offered support to continue their education at the University of Phoenix either online, through alternative on-ground arrangements or, in limited cases, at existing University of Phoenix locations. This plan includes closing 115 locations, consisting of 90 learning and student resource centers, which are generally smaller satellite locations, and 25 campuses. University of Phoenix will preserve a national coast-to-coast network of 112 locations and plans to retain a presence in 36 states, the District of Columbia and Puerto Rico. Subject to regulatory approvals, the realignment is expected to be substantially complete in fiscal year 2013. The Company expects to incur approximately $175 million of restructuring and other charges, principally for lease exit and other related costs, with most of these costs incurred in fiscal year 2013. The Company plans to continue investing in its ground locations to create state-of-the-art, technologically-integrated facilities offering academic and career support and increased mobile connectivity, while also continuing to advance its leading-edge online learning platform. The Company has also begun implementing a workforce reduction and expects to decrease total headcount, excluding faculty, by approximately 800 employees during fiscal year 2013. The Company anticipates incurring approximately $25 million of restructuring and other charges in fiscal year 2013 related to workforce reductions. Apollo Global, Inc. On October 12, 2012, the Company entered into an agreement with The Carlyle Group and closed the purchase of Carlyle's remaining 14.4% noncontrolling ownership interest in Apollo Global, Inc. for $42.5 million in cash, plus a contingent payment based on a portion of the Apollo Global operating results through the fiscal years ending August 31, 2017. Business Outlook The Company offers the following commentary regarding the outlook for fiscal year 2013 based on the business trends observed during the fourth quarter of fiscal year 2012, as well as management's current expectations of future trends. Net revenue of $3.65 - $3.80 billion; and Operating income of $525 - $575 million, excluding the impact of special items and restructuring and other charges, but including the expected expense savings associated with the realignment plan and workforce reduction. 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, Tuesday, October 16, 2012. Dial-In Numbers: 877-292-6888 (Domestic)973-200-3381 (International)Conference ID: 33161955 A live webcast of this event may be accessed by visiting the Company's website at www.apollogrp.edu. A webcast replay will be available approximately one hour following the conclusion of the call at the same link. A telephone replay will be available approximately two hours following the conclusion of the call until October 30, 2012. Dial-In Numbers: 855-859-2056 (Domestic)404-537-3406 (International)Conference ID: 33161955 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 approximately 40 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 offers programs and services throughout the United States and in 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) the impact of increased competition from traditional public universities and proprietary educational institutions, (ii) the impact of the Company's restructuring initiatives to increase operating efficiency and better align operations with student demand and business strategy, including the substantial reduction in University of Phoenix on-ground locations, (iii) the impact of changes in marketing channels and other recruiting practices to better identify students who are more likely to succeed at University of Phoenix, (iv) the impact of the Company's initiatives to improve the student experience, improve student outcomes and enhance the connection between education and careers, (v) changes in enrollment or student mix, (vi) changes in the overall U.S. or global economy, (vii) changes in law or regulation affecting the Company's eligibility to participate in or the manner in which it participates in U.S. federal and state student financial aid programs, and (viii) changes in the Company's business necessary to remain in compliance with existing, new, or amended U.S. federal student financial aid program regulations, including the so-called 90/10 Rule and the limitations on cohort default rates, and to remain in compliance with the accrediting criteria of the relevant accrediting bodies. For a discussion of the various factors that may cause actual plans implemented and actual results achieved to differ materially from those set forth in the forward-looking statements, please refer to the risk factors and other disclosures contained in Apollo Group's Form 10-K for fiscal year 2011 and subsequent Forms 10-Q, and other filings with the Securities and Exchange Commission, all of which are available on the Company's website at www.apollogrp.edu. Use of Non-GAAP Financial Information This press release and the related conference call contain non-GAAP financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management uses, and chooses to disclose to investors, these non-GAAP financial measures because (i) such measures provide an additional analytical tool to clarify the Company's results from operations and help to identify underlying trends in its results of operations, (ii) as to the non-GAAP earnings measures, such measures help compare the Company's performance on a consistent basis across time periods, and (iii) these non-GAAP measures are employed by the Company's management in its own evaluation of performance and are utilized in financial and operational decision-making processes, such as budgeting and forecasting. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently, limiting their usefulness as a comparative measure across companies.   Apollo Group, Inc. and SubsidiariesConsolidated Balance Sheets (Unaudited)     As of August 31,(In thousands)2012     2011ASSETS:Current assets Cash and cash equivalents $ 1,276,375 $ 1,571,664 Restricted cash and cash equivalents 318,334 379,407 Accounts receivable, net 198,279 215,567 Prepaid taxes 26,341 35,629 Deferred tax assets, current portion 69,052 124,137 Other current assets 49,609   44,382   Total current assets 1,937,990 2,370,786 Property and equipment, net 571,629 553,027 Marketable securities 5,946 5,946 Goodwill 103,345 133,297 Intangible assets, net 149,034 121,117 Deferred tax assets, less current portion 77,628 70,949 Other assets 22,750   14,584   Total assets $ 2,868,322   $ 3,269,706     LIABILITIES AND SHAREHOLDERS' EQUITY:Current liabilities Short-term borrowings and current portion of long-term debt $ 638,588 $ 419,318 Accounts payable 74,872 69,551 Student deposits 362,143 424,045 Deferred revenue 254,555 293,436 Accrued and other current liabilities 324,881   448,937   Total current liabilities 1,655,039 1,655,287 Long-term debt 81,323 179,691 Deferred tax liabilities 15,881 26,400 Other long-term liabilities 191,756   164,339   Total liabilities 1,943,999   2,025,717   Commitments and contingencies Shareholders' equity Preferred stock, no par value — — Apollo Group Class A nonvoting common stock, no par value 103 103 Apollo Group Class B voting common stock, no par value 1 1 Additional paid-in capital 93,770 68,724 Apollo Group Class A treasury stock, at cost (3,878,612 ) (3,125,175 ) Retained earnings 4,743,150 4,320,472 Accumulated other comprehensive loss (30,034 ) (23,761 ) Total Apollo shareholders' equity 928,378   1,240,364   Noncontrolling (deficit) interests (4,055 ) 3,625   Total equity 924,323   1,243,989   Total liabilities and shareholders' equity $ 2,868,322   $ 3,269,706         Apollo Group, Inc. and SubsidiariesConsolidated Statements of Income (Unaudited)     Three Months Ended August 31,       % of Revenue2012     20112012     2011(In thousands, except per share data)Net revenue $ 996,497   $ 1,120,220   100.0 % 100.0 % Costs and expenses: Instructional and student advisory 455,564 435,181 45.7 % 38.9 % Marketing 180,322 170,660 18.1 % 15.2 % Admissions advisory 85,852 99,428 8.6 % 8.9 % General and administrative 92,322 98,473 9.3 % 8.8 % Depreciation and amortization 44,741 41,529 4.5 % 3.7 % Provision for uncollectible accounts receivable 38,733 39,631 3.9 % 3.5 % Restructuring and other charges 9,408 19,067 0.9 % 1.7 % Litigation credit, net —   (16,454 ) — % (1.5 )% Total costs and expenses 906,942   887,515   91.0 % 79.2 % Operating income 89,555 232,705 9.0 % 20.8 % Interest income 306 498 — % — % Interest expense (5,127 ) (2,724 ) (0.5 )% (0.2 )% Other, net 520   17   0.1 % — % Income from continuing operations before income taxes 85,254 230,496 8.6 % 20.6 % Provision for income taxes (37,726 ) (45,303 ) (3.8 )% (4.1 )% Income from continuing operations 47,528 185,193 4.8 % 16.5 % Income (loss) from discontinued operations, net of tax 26,641   (1,257 ) 2.6 % (0.1 )% Net income 74,169 183,936 7.4 % 16.4 % Net loss attributable to noncontrolling interests 1,279   4,676   0.2 % 0.4 % Net income attributable to Apollo $ 75,448   $ 188,612   7.6 % 16.8 %   Earnings (loss) per share - Basic: Continuing operations attributable to Apollo $ 0.47 $ 1.39 Discontinued operations attributable to Apollo 0.20   (0.01 ) Basic income per share attributable to Apollo $ 0.67   $ 1.38     Earnings (loss) per share - Diluted: Continuing operations attributable to Apollo $ 0.46 $ 1.38 Discontinued operations attributable to Apollo 0.20   (0.01 ) Diluted income per share attributable to Apollo $ 0.66   $ 1.37     Basic weighted average shares outstanding 112,815   136,594   Diluted weighted average shares outstanding 113,539   137,295         Apollo Group, Inc. and SubsidiariesConsolidated Statements of Income (Unaudited)     Year Ended August 31,       % of Revenue2012     20112012     2011(In thousands, except per share data)     Net revenue $ 4,253,337   $ 4,711,049   100.0 % 100.0 % Costs and expenses: Instructional and student advisory 1,800,569 1,759,986 42.3 % 37.4 % Marketing 663,442 654,399 15.6 % 13.9 % Admissions advisory 383,935 415,386 9.0 % 8.8 % General and administrative 344,300 355,548 8.1 % 7.5 % Depreciation and amortization 177,804 157,686 4.2 % 3.3 % Provision for uncollectible accounts receivable 146,742 181,297 3.5 % 3.9 % Restructuring and other charges 38,695 22,913 0.9 % 0.5 % Goodwill and other intangibles impairment 16,788 219,927 0.4 % 4.7 % Litigation charge (credit), net 4,725   (11,951 ) 0.1 % (0.3 )% Total costs and expenses 3,577,000   3,755,191   84.1 % 79.7 % Operating income 676,337 955,858 15.9 % 20.3 % Interest income 1,187 2,884 0.1 % — % Interest expense (11,745 ) (8,931 ) (0.3 )% (0.2 )% Other, net 476   (1,588 ) — % — % Income from continuing operations before income taxes 666,255 948,223 15.7 % 20.1 % Provision for income taxes (283,072 ) (419,136 ) (6.7 )% (8.9 )% Income from continuing operations 383,183 529,087 9.0 % 11.2 % Income from discontinued operations, net of tax 33,823   6,709   0.8 % 0.2 % Net income 417,006 535,796 9.8 % 11.4 % Net loss attributable to noncontrolling interests 5,672   36,631   0.1 % 0.8 % Net income attributable to Apollo $ 422,678   $ 572,427   9.9 % 12.2 %   Earnings per share - Basic: Continuing operations attributable to Apollo $ 3.24 $ 4.01 Discontinued operations attributable to Apollo 0.24   0.04   Basic income per share attributable to Apollo $ 3.48   $ 4.05     Earnings per share - Diluted: Continuing operations attributable to Apollo $ 3.22 $ 4.00 Discontinued operations attributable to Apollo 0.23   0.04   Diluted income per share attributable to Apollo $ 3.45   $ 4.04     Basic weighted average shares outstanding 121,607   141,269   Diluted weighted average shares outstanding 122,357   141,750       Apollo Group, Inc. and SubsidiariesConsolidated Statements of Cash Flows (Unaudited)     Year Ended August 31,2012     2011($ in thousands)Cash flows provided by (used in) operating activities: Net income $ 417,006 $ 535,796 Adjustments to reconcile net income to net cash provided by operating activities: Share-based compensation 78,705 70,040 Excess tax benefits from share-based compensation (1,150 ) (4,014 ) Depreciation and amortization 178,234 159,006 Amortization of lease incentives (15,510 ) (18,822 ) Amortization of deferred gains on sale-leasebacks (2,798 ) (2,221 ) Goodwill and other intangibles impairment 16,788 219,927 Non-cash foreign currency (gain) loss, net (497 ) 1,662 Gain on sale of discontinued operations (26,678 ) — Provision for uncollectible accounts receivable 146,742 181,297 Litigation charge (credit) 4,725 (11,951 ) Deferred income taxes 21,850 55,823 Changes in assets and liabilities, excluding the impact of acquisitions and business dispositions: Restricted cash and cash equivalents 61,073 64,725 Accounts receivable (129,773 ) (121,120 ) Prepaid taxes 9,303 (25,241 ) Other assets (11,568 ) (9,900 ) Accounts payable 12,525 (3,913 ) Student deposits (58,740 ) (70,120 ) Deferred revenue (39,154 ) (79,488 ) Accrued and other liabilities (109,783 ) (44,364 ) Net cash provided by operating activities 551,300   897,122   Cash flows provided by (used in) investing activities: Additions to property and equipment (115,187 ) (162,573 ) Acquisitions, net of cash acquired (73,736 ) — Maturities of marketable securities — 10,000 Proceeds from sale-leaseback, net — 169,018 Proceeds from dispositions, net 76,434 21,251 Collateralization of letter of credit — 126,615 Other investing activities (1,694 ) —   Net cash (used in) provided by investing activities (114,183 ) 164,311   Cash flows provided by (used in) financing activities: Payments on borrowings (562,269 ) (437,925 ) Proceeds from borrowings 629,145 410,051 Apollo Group Class A common stock purchased for treasury (811,913 ) (783,168 ) Issuance of Apollo Group Class A common stock 11,949 24,903 Noncontrolling interest contributions — 6,875 Excess tax benefits from share-based compensation 1,150   4,014   Net cash used in financing activities (731,938 ) (775,250 ) Exchange rate effect on cash and cash equivalents (468 ) 712   Net (decrease) increase in cash and cash equivalents (295,289 ) 286,895 Cash and cash equivalents, beginning of year 1,571,664   1,284,769   Cash and cash equivalents, end of year $ 1,276,375   $ 1,571,664   Supplemental disclosure of cash flow and non-cash information Cash paid for income taxes, net of refunds $ 246,824 $ 464,701 Cash paid for interest $ 9,794 $ 10,972 Capital lease additions $ 44,145 $ 31,818 Restricted stock units vested and released $ 36,182 $ 21,470 Credits received for tenant improvements $ 27,009 $ 25,538 Debt incurred for acquired technology $ 14,389 $ —       Apollo Group, Inc. and SubsidiariesReconciliation of GAAP financial information to non-GAAP financial information (Unaudited)       Three Months Ended August 31,       Year Ended August 31,2012     20112012     2011(In thousands, except per share data) Net income attributable to Apollo, as reported $ 75,448 $ 188,612 $ 422,678 $ 572,427 Income (loss) from discontinued operations, net of tax and noncontrolling interest 22,805   (1,076 ) 28,952   6,102   Income from continuing operations attributable to Apollo 52,643 189,688 393,726 566,325 Reconciling items: Restructuring and other charges, net of noncontrolling interest(1) 8,942 19,067 37,843 22,913 Goodwill and other intangibles impairment, net of noncontrolling interest(2) — — 14,370 188,258 Litigation (credit) charge, net(3) —   (16,454 ) 4,725   (11,951 ) 8,942 2,613 56,938 199,220 Less: tax effects, net of noncontrolling interest (2,986 ) (1,022 ) (14,940 ) (8,737 ) Tax benefit from sales apportionment resolution(4) — (43,319 ) — (43,319 ) Tax benefit from Meritus University closure(5) — (7,306 ) — (7,306 ) Tax benefit from IRS settlement(6) —   —   —   (9,646 ) Income from continuing operations attributable to Apollo, adjusted to exclude special items $ 58,599   $ 140,654   $ 435,724   $ 696,537     Diluted income per share from continuing operations attributable to Apollo, as reported $ 0.46   $ 1.38   $ 3.22   $ 4.00     Diluted income per share from continuing operations attributable to Apollo, adjusted to exclude special items $ 0.52   $ 1.02   $ 3.56   $ 4.91     Diluted weighted average shares outstanding 113,539   137,295   122,357   141,750     (1) Restructuring and other charges represent charges associated with the Company's series of restructuring activities to reengineer business processes and refine its delivery structure, net of noncontrolling interest.   (2) The charges for the fiscal year ended August 31, 2012 represent impairments of UNIACC's goodwill and other intangibles, net of noncontrolling interest, with no income tax benefit as UNIACC's goodwill and other intangibles are not deductible for tax purposes. The charges for the fiscal year ended August 31, 2011 represent impairments of BPP's goodwill and other intangibles, net of noncontrolling interest. The Company did not record a tax benefit associated with BPP's goodwill impairment because the goodwill is not deductible for tax purposes.   (3) The charges for the fiscal year ended August 31, 2012 represent a rejected settlement offer the Company made in connection with a legal matter and estimated future legal costs. The credits for the quarter and fiscal year ended August 31, 2011 are principally the result of the Company's agreement in principle to settle the Policeman's Annuity and Benefit Fund of Chicago securities class action. This was partially offset in both periods by a charge recorded in the fourth quarter of fiscal year 2011 associated with another legal matter.   (4) The $43.3 million tax benefit for the quarter and fiscal year ended August 31, 2011 resulted from the Company's resolution of an income tax apportionment matter with the Arizona Department of Revenue.   (5) The $7.3 million tax benefit for the quarter and fiscal year ended August 31, 2011 represents a benefit associated with the closure of Meritus University.   (6) The $9.6 million tax benefit for the year ended August 31, 2011 resulted from resolution with the Internal Revenue Service regarding the deductibility of payments made to settle a lawsuit in fiscal year 2010. Apollo Group, Inc.Investor Relations Contacts:Beth Coronelli, 312-660-2059beth.coronelli@apollogrp.eduMedia Contact:Media Relations Hotline, 602-254-0086media@apollogrp.edu