Segment Reporting

12 Months Ended

Aug. 31, 2011

Notes to Consolidated Financial Statements [Abstract]

Segment Reporting

Segment Reporting

We operate primarily in the education industry. We have organized our segments using a combination of factors primarily focusing on the type of educational services provided and products delivered. Our five operating segments are managed in the following four reportable segments:

1. University of Phoenix;

2. Apollo Global - BPP

3. Apollo Global - Other; and

4. Other Schools.

The University of Phoenix segment offers associate’s, bachelor’s, master’s and doctoral degrees in a variety of program areas. University of Phoenix offers its educational programs worldwide through its online education delivery system and at its campus locations and learning centers.

The Apollo Global — BPP segment offers professional training and education through schools located in the United Kingdom, a European network of BPP offices, and the sale of books and other publications globally. We began reporting Apollo Global — BPP as a separate reportable segment during the fourth quarter of fiscal year 2009 following Apollo Global’s acquisition of BPP on July 30, 2009.

The Apollo Global — Other segment includes Western International University, UNIACC, ULA and the Apollo Global corporate operations. Western International University offers associate’s, bachelor’s and master’s degrees in a variety of program areas as well as certificate programs at its Arizona campus locations and online at Western International University Interactive Online. UNIACC offers bachelor’s and master’s programs on campuses in Chile and online. ULA offers degree programs at its four campuses throughout Mexico.

The Other Schools segment includes IPD and CFFP, as well as Meritus until its closure in fiscal year 2011, which is discussed further below. IPD provides program development, administration and management consulting services to private colleges and universities to establish or expand their programs for working learners. CFFP provides financial services education programs, including the Master of Science in three majors and certification programs in retirement, asset management, and other financial planning areas.

In the third quarter of fiscal year 2011, we ceased operations at Meritus and provided the opportunity for Meritus students to enroll in University of Phoenix. Based on our continuing involvement with Meritus’ students, we have not presented Meritus as discontinued operations. In connection with our closure of Meritus, we recorded an insignificant charge in fiscal year 2011 and we do not expect significant charges in future periods resulting from the closure.

Our reportable segments have been determined based on the method by which management evaluates performance and allocates resources. Management evaluates performance based on reportable segment profit. This measure of profit includes allocating corporate support costs to each segment as part of transfer pricing arrangements and/or a general allocation, but excludes taxes, interest income and expense, and certain revenue and unallocated corporate charges. At the discretion of management, certain corporate costs are not allocated to the subsidiaries due to their designation as special charges because of their infrequency of occurrence, the non-cash nature of the expense and/or the determination that the allocation of these costs to the subsidiaries will not result in an appropriate measure of the subsidiaries’ results. These costs include such items as unscheduled or significant management bonuses, unusual severance pay and share-based compensation expense attributed to corporate management and administrative employees. The Corporate caption includes adjustments to reconcile segment results to consolidated results which primarily consist of net revenue and corporate charges that are not allocated to our reportable segments.

During fiscal years 2011, 2010 and 2009, no individual customer accounted for more than 10% of our consolidated net revenue.

A summary of financial information by reportable segment is as follows:

	Year Ended August 31,
($ in thousands)	2011			2010			2009
Net revenue
University of Phoenix	$	4,322,670		$	4,498,325		$	3,766,600
Apollo Global:
BPP	244,181			251,743			13,062
Other	75,800			78,253			76,083
Total Apollo Global	319,981			329,996			89,145
Other Schools	88,517			95,706			95,045
Corporate	1,854			1,792			2,776
Net revenue	$	4,733,022		$	4,925,819		$	3,953,566
Operating income (loss):
University of Phoenix(1)	$	1,270,468		$	1,447,636		$	1,131,331
Apollo Global:
BPP(2)	(224,335		)	(186,552		)	(6,607		)
Other(3)	(37,750		)	(31,147		)	(11,431		)
Total Apollo Global	(262,085		)	(217,699		)	(18,038		)
Other Schools	6,870			9,201			6,931
Corporate(4)	(54,009		)	(228,414		)	(54,289		)
Total operating income	961,244			1,010,724			1,065,935
Reconciling items:
Interest income	3,222			2,920			12,591
Interest expense	(8,931		)	(11,891		)	(4,448		)
Other, net	(1,588		)	(685		)	(7,151		)
Income from continuing operations before income taxes	$	953,947		$	1,001,068		$	1,066,927
Depreciation and amortization
University of Phoenix	$	53,681		$	50,770		$	59,337
Apollo Global:
BPP	22,976			32,917			3,115
Other	7,570			7,998			6,801
Total Apollo Global	30,546			40,915			9,916
Other Schools	1,082			982			1,405
Corporate	73,697			54,368			42,692
Total depreciation and amortization	$	159,006		$	147,035		$	113,350
Capital expenditures
University of Phoenix	$	53,801		$	39,623		$	49,031
Apollo Global:
BPP	11,896			10,287			504
Other	8,943			5,994			6,490
Total Apollo Global	20,839			16,281			6,994
Other Schools	72			456			639
Corporate	87,861			111,817			70,692
Total capital expenditures	$	162,573		$	168,177		$	127,356

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⁽¹⁾  University of Phoenix’s fiscal year 2011 operating income includes $22.9 million of restructuring and other charges associated with our real estate rationalization plan and a strategic reduction in force. Refer to Note 4, Restructuring and Other Charges. Operating income for fiscal year 2009 includes an $80.5 million charge resulting from our agreement in principle to settle a qui tam lawsuit pertaining to alleged violations of the False Claims Act. The settlement was finalized by all parties in fiscal year 2010.

⁽²⁾  The operating loss for BPP in fiscal years 2011 and 2010 includes a $219.9 million and $175.9 million, respectively, of goodwill and other intangibles impairment charges. Refer to Note 10, Goodwill and Intangible Assets.

⁽³⁾  Apollo Global - Other’s operating loss in fiscal year 2010 includes an $8.7 million goodwill impairment charge for ULA.

⁽⁴⁾  The operating loss for Corporate in fiscal years 2011 and 2010 includes a net credit of $16.2 million and charges of $178.0 million, respectively, associated with the Securities Class Action (Policeman’s Annuity and Benefit Fund of Chicago). See Note 20, Commitments and Contingencies.

A summary of our consolidated assets by reportable segment is as follows:

	As of August 31,
($ in thousands)	2011		2010		2009
Assets
University of Phoenix	$	1,016,005	$	1,263,024	$	1,112,002
Apollo Global:
BPP(1)	303,107		511,124		778,416
Other	146,490		116,483		148,125
Total Apollo Global	449,597		627,607		926,541
Insight Schools(2)	—		—		26,590
Other Schools	24,073		33,114		37,590
Corporate	1,780,031		1,677,706		1,160,654
Total assets	$	3,269,706	$	3,601,451	$	3,263,377

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⁽¹⁾  We recorded a $219.9 million and a $175.9 million impairment charge for BPP’s goodwill and other intangibles during fiscal years 2011 and 2010, respectively. Refer to Note 10, Goodwill and Intangible Assets.

⁽²⁾  Insight Schools’ assets were held for sale and included in our Corporate caption as of August 31, 2010. Refer to Note 5, Discontinued Operations.

A summary of financial information by geographical area based on country of domicile for our respective operating locations is as follows:

	Year Ended August 31,
($ in thousands)	2011		2010		2009
Net revenue
United States	$	4,437,079	$	4,617,533	$	3,879,615
United Kingdom	222,732		228,177		13,062
Latin America	50,725		53,765		54,536
Other	22,486		26,344		6,353
Net revenue	$	4,733,022	$	4,925,819	$	3,953,566

	As of August 31,
($ in thousands)	2011		2010		2009
Long-lived assets(1)
United States	$	471,703	$	547,715	$	496,493
United Kingdom	214,073		430,475		698,273
Latin America	86,103		81,870		86,137
Other	35,562		32,229		2,633
Total long-lived assets	$	807,441	$	1,092,289	$	1,283,536

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⁽¹⁾  Long-lived assets include property and equipment, net, goodwill, and intangible assets, net.