10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended: May 31, 2016
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ______ to ______

Commission File Number: 0-25232

APOLLO EDUCATION GROUP, INC.

(Exact name of registrant as specified in its charter)

ARIZONA (State or other jurisdiction of incorporation or organization) 86-0419443 (I.R.S. Employer Identification No.)

4025 S. RIVERPOINT PARKWAY, PHOENIX, ARIZONA 85040

(Address of principal executive offices)

(480) 966-5394

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES þ     NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES þ     NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o (Do not check if smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o     NO þ

As of July 5, 2016, there were 108,305,152 shares of Apollo’s Class A common stock outstanding and 475,149 shares of Apollo’s Class B common stock outstanding.

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED MAY 31, 2016

TABLE OF CONTENTS

		Page
Note Regarding Forward-Looking Statements		3
Introductory Note Regarding Pending Merger		4
	PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Income (Loss)	7
	Condensed Consolidated Statements of Shareholders’ Equity and Redeemable Noncontrolling Interests	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	53
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
SIGNATURES		60

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 2

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact may be forward-looking statements. Such forward-looking statements include, among others, those statements regarding future events and future results of Apollo Education Group, Inc. that are based on current expectations, estimates, forecasts, and the beliefs and assumptions of us and our management, and speak only as of the date made and are not guarantees of future performance or results. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “predict,” “target,” “potential,” “continue,” “objectives,” or the negative of these terms or other comparable terminology. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties. Such statements should be viewed with caution. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to:

• 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.

The cautionary statements referred to above also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no obligation to publicly update or revise any forward-looking statements for any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

In this report, we refer to Apollo Education Group, Inc. as “the Company,” “Apollo Education Group,” “Apollo,” “APOL,” “we,” “us” or “our.”

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 3

Introductory Note Regarding Pending Merger

On February 7, 2016, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with AP VIII Queso Holdings, L.P., an affiliate of Apollo Management VIII, L.P., which is a fund managed by an affiliate of Apollo Global Management, LLC, none of which is, or has ever been, affiliated with us. At the effective time of the merger, which is expected to be completed by the end of calendar year 2016, each share of our issued and outstanding Class A and Class B common stock will be converted pursuant to the terms of the Merger Agreement into the right to receive $10.00 per share in cash. On May 6, 2016, the Merger Agreement was approved by the holders of our outstanding Class A and Class B common stock, each voting separately as a class. Consummation of the merger is subject to various regulatory and customary approvals, and operating and other conditions. See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Pending Merger, for additional information on the Merger Agreement and the pending merger.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 4

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	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

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 5

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	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

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 6

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	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

⁽¹⁾ The tax effect during the three and nine months ended May 31, 2016 and 2015, respectively, was not significant.

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 7

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

(Unaudited)

	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

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 8

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	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

⁽¹⁾ Refer to Note 4, Acquisitions, for liabilities assumed in acquisitions.

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of this statement.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 9

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page
Note 1.	Nature of Operations and Significant Accounting Policies	11
Note 2.	Restructuring and Impairment Charges	14
Note 3.	Discontinued Operations	16
Note 4.	Acquisitions	17
Note 5.	Financial Instruments	19
Note 6.	Accounts Receivable, Net	20
Note 7.	Goodwill and Intangibles	20
Note 8.	Fair Value Measurements	21
Note 9.	Accrued and Other Liabilities	23
Note 10.	Debt	23
Note 11.	Income Taxes	24
Note 12.	Shareholders’ Equity and Redeemable Noncontrolling Interests	24
Note 13.	Earnings Per Share	25
Note 14.	Share-Based Compensation	26
Note 15.	Commitments and Contingencies	26
Note 16.	Regulatory Matters	31
Note 17.	Segment Reporting	34

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 10

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of Operations and Significant Accounting Policies

Apollo Education Group, Inc. is one of the world’s largest private education providers, serving students since 1973. We offer undergraduate, graduate, certificate andnondegree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad. Refer toNote 17,Segment Reporting, for further information regarding our institutions and operating segments.Our fiscal year is from September 1 to August 31.

On February 7, 2016, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with AP VIII Queso Holdings, L.P., an affiliate of Apollo Management VIII, L.P., which is a fund managed by an affiliate of Apollo Global Management, LLC, none of which is, or has ever been, affiliated with us. At the effective time of the merger, which is expected to be completed by the end of calendar year 2016, each share of our issued and outstanding Class A and Class B common stock will be converted pursuant to the terms of the Merger Agreement into the right to receive $10.00 per share in cash. On May 6, 2016, the Merger Agreement was approved by the holders of our outstanding Class A and Class B common stock, each voting separately as a class.

Consummation of the merger is subject to customary and other conditions, including:

(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.

In addition, consummation of the merger is subject to our satisfying certain minimum operating metrics, measured as of the first or second month end preceding the closing date, depending on the day of the month on which closing occurs, as follows:

(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).

We currently expect to satisfy these minimum operating metrics if the closing occurs on or prior to October 9, 2016, which is the latest closing date for which the relevant operating metrics are derived from our fiscal year 2016 financial and operating results. However, our expected fiscal year 2016 enrollment and operating results have declined since our December forecast. If our enrollment or operating results continue to decline, we may not be able to satisfy one or more of these closing conditions, either before or after October 9, 2016. If we fail to satisfy one or more of these closing conditions, Parent would be entitled to terminate the Merger Agreement and elect not to consummate the merger.

The Merger Agreement may be terminated by each of us and Parent under certain circumstances, including if the merger is not consummated by 5:00 pm Eastern time on February 1, 2017. Upon termination of the Merger Agreement under certain specified circumstances, but not including a termination solely due to our failure to satisfy the minimum operating metrics described above, we will be required to pay Parent a termination fee of approximately $27.5 million, and under other specified circumstances, Parent will be required to pay us a reverse termination fee of $25.0 million.

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in our opinion, reflect all adjustments of a normal, recurring nature that are necessary for the fair presentation of our financial condition, results of operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes included in our 2015 Annual Report on Form 10-K as filed with the SEC on October 22, 2015. We consistently applied the accounting policies described in the notes to our consolidated financial statements included in our 2015 Annual Report on Form 10-K in preparing these unaudited interim condensed consolidated financial statements.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 11

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ materially from our estimates under different assumptions, judgments or conditions.

Principles of Consolidation

These financial statements include the assets, liabilities, revenues and expenses of Apollo Education Group, Inc., our wholly-owned subsidiaries, and other subsidiaries that we control. We eliminate intercompany transactions and balances in consolidation.

Seasonality

Our operations are generally subject to seasonal trends, which vary depending on the subsidiary. We have historically experienced, and expect to continue to experience, fluctuations in our results of operations as a result of seasonal variations in the level of our institutions’ enrollments including, but not limited to, the following:

• 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.

Because of the seasonal nature of our business and other factors, the results of operations for the three and nine months ended May 31, 2016 are not necessarily indicative of the results to be expected for the fiscal year ending August 31, 2016.

Reclassifications

We reclassified prior periods for the following to conform to our current presentation:

• 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.

New Accounting Standards

Accounting Standards Recently Adopted

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”(“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We early adopted ASU 2015-17 during our first quarter of fiscal year 2016 on a retrospective basis. Accordingly, we reclassified the current deferred taxes to noncurrent on our August 31, 2015 Condensed Consolidated Balance Sheet, which increased noncurrent deferred tax assets $64.7 million and decreased noncurrent deferred tax liabilities $3.7 million.

In September 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”(“ASU 2015-16”). The standard requires that adjustments made to provisional amounts recognized in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. ASU 2015-16 is effective for fiscal years, and interim periods within those years,

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 12

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

beginning after December 15, 2015, and early adoption is permitted. We early adopted ASU 2015-16 during our first quarter of fiscal year 2016, which had no impact on our consolidated financial statements, and we will apply the new standard to future adjustments to provisional amounts.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). The standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. We adopted ASU 2014-08 during our first quarter of fiscal year 2016, which had no impact on our consolidated financial statements, and we will apply the new standard to applicable components that are determined to be held for sale or disposed in future periods.

Future Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. Accordingly, the standard is effective for us on September 1, 2020 using a modified retrospective approach. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We do not plan to early adopt ASU 2016-09, and the standard is effective for us on September 1, 2017. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”(“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Accordingly, the standard is effective for us on September 1, 2019 using a modified retrospective approach. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on September 1, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”(“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”, which defers the effective dateof ASU 2014-09 by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. Accordingly, the new revenue recognition standard is effective for us on September 1, 2018 using either a full retrospective or a modified retrospective approach. The FASB has also issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard:

• 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”.

We are currently evaluating which transition approach to use and the impact that the new revenue recognition standards will have on our consolidated financial statements.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 13

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2. Restructuring and Impairment Charges

Restructuring and impairment charges include the following for the respective periods:

	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

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, for discussion of the goodwill impairment charges recorded during fiscal year 2016.

Restructuring Charges

We have implemented various restructuring activities during prior fiscal years and remain focused on reengineering our business processes and educational delivery systems to reduce costs to align with our lower enrollment and revenue, and to improve the efficiency and effectiveness of our services to students. The activities initiated in prior years and those initiated in fiscal year 2016 are described below. Additionally, we intend to further reduce costs in future periods to align with our lower enrollment and revenue, and expect to incur material charges associated with other future restructuring activities.

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	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

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 14

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following details the changes in our restructuring liabilities during the nine months ended May 31, 2016:

	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

⁽¹⁾ We have incurred $461 million of cumulative costs associated with restructuring activities initiated prior to fiscal year 2016, which include lease exit, employee separation, and other related costs of $292 million, $116 million and $53 million, respectively. These cumulative costs have been reflected in our segment reporting as follows: $339 million in University of Phoenix, $19 million in Apollo Global, and $103 million in Other.

⁽²⁾ The gross, undiscounted obligation associated with our restructuring liabilities as of May 31, 2016 was approximately $144 million, which principally represents costs for non-cancelable leases that will be paid over the respective lease terms through fiscal year 2023.

Activities Initiated in Prior Years

Our restructuring activities initiated prior to fiscal year 2016 principally included closing approximately 150 University of Phoenix ground locations, rationalizing our leased administrative office facilities, and workforce reductions. During the nine months ended May 31, 2016, we incurred $44.0 million of expense for these prior year activities. The majority of the expense represents initial charges for the estimated fair value of future contractual operating lease obligations which are recorded when we cease using the respective facility, and an increase in our estimated future cash payments associated with exiting additional space at other locations included in the rationalization plan. We measure lease obligations at fair value using a discounted cash flow approach encompassing significant unobservable inputs (Level 3). The significant unobservable inputs principally include estimated future cash flows and discount rates which have ranged between 3%-7% for our lease obligations. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considers subleases that we have executed or expect to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

As of May 31, 2016, we had approximately $51 million of remaining lease obligations associated with the locations that we expect to close as University of Phoenix obtains the necessary regulatory approvals and completes its teach-out obligations. We will incur lease obligation charges for these locations when we cease using the respective facilities. We will also continue to incur interest accretion, and may record additional adjustments in future periods for the estimated obligations associated with facilities we have already exited.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 15

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Activities Initiated in Fiscal Year 2016

During the nine months ended May 31, 2016, we incurred $29.7 million of expense for new restructuring activities initiated during fiscal year 2016. Substantially all of the expense represents severance and other employee separation costs associated with the elimination of approximately 1,400 positions. The expense associated with these activities for the nine months ended May 31, 2016 is reflected in our segment reporting as follows: $16.0 million in University of Phoenix, $1.7 million in Apollo Global and $12.0 million in Other.

Note 3. Discontinued Operations

During the first quarter of fiscal year 2016, we completed the sale of Carnegie Learning for a nominal amount resulting in a $2.8 million loss on sale. We do not have significant continuing involvement with Carnegie Learning after the sale.

During fiscal year 2015, we began presenting Carnegie Learning’s assets and liabilities as held for sale on our Condensed Consolidated Balance Sheets and its operating results as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented. Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment.

The major components of Carnegie Learning’s assets and liabilities presented separately as held for sale on our Condensed Consolidated Balance Sheets as of August 31, 2015 are as follows:

($ 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

The following summarizes Carnegie Learning’s operating results for the respective periods, which are presented in Loss from discontinued operations, net of tax on our Condensed Consolidated Statements of Operations:

	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	)

⁽¹⁾ Represents an impairment charge to write-off certain Carnegie Learning technology intangibles that were no longer being used. The associated technology had been incorporated into University of Phoenix’s academic platform and as a result of the University ceasing use of the technology, no future cash flows associated with the technology were expected over its remaining useful life. Accordingly, we recorded a $13.0 million impairment charge representing the remaining carrying value.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 16

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The operating results of our discontinued operations only includes revenues and costs directly attributable to the discontinued operations. Accordingly, no interest expense or general corporate overhead has been allocated to Carnegie Learning. Additionally, we ceased depreciation on Carnegie Learning’s property and equipment when we determined it was held for sale.

We determined cash flows from our discontinued operations are not material and are included with cash flows from continuing operations on our Condensed Consolidated Statements of Cash Flows.

Note 4. Acquisitions

Fiscal Year 2016 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. This acquisition supports our strategy to diversify and expand our global operations. We made an initial cash payment of €96 million (equivalent to approximately $105 million on the acquisition date), and the acquisition includes a potential contingent consideration payment in the future of up to €11 million (equivalent to $12.3 million as of May 31, 2016). The contingent payment is calculated principally based on Career Partner’s operating results for calendar year 2016, and its estimated fair value on the acquisition date was $10.7 million, which we determined using a discounted cash flow valuation method encompassing significant unobservable inputs. The inputs include estimated operating results for the performance period and the discount rate applied. During the third quarter of fiscal year 2016, we finalized the amount of working capital acquired at closing, which resulted in a $3.5 million reduction in the purchase price.

We incurred approximately $2.0 million of transaction costs in connection with this acquisition and these costs are included in Merger, acquisition and other related costs (credit), net on our Condensed Consolidated Statements of Operations in the nine months ended May 31, 2016.

We accounted for the acquisition as a business combination and allocated the purchase price, which includes the initial cash payment, the fair value of the contingent consideration and the working capital adjustment, to the assets acquired and liabilities assumed at fair value as summarized below:

($ in thousands)
Cash and cash equivalents	$	4,580
Property and equipment	13,682
Intangibles:
Trademarks (indefinite useful life)	30,469
Accreditations (indefinite useful life)	27,948
Student and customer relationships (5 year useful life)	9,097
Curriculum (5 year useful life)	3,726
Goodwill	92,840
Other assets	2,092
Deferred revenue	(28,380		)
Capital lease obligations	(22,734		)
Other liabilities	(20,340		)
Total assets acquired and liabilities assumed	$	112,980

We determined the fair value of assets acquired and liabilities assumed based on assumptions that reasonable market participants would use while employing the concept of highest and best use of the respective items. We used the following assumptions, the majority of which include significant unobservable inputs, and valuation methodologies to determine fair value:

• 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.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 17

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

• 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.

We recorded $92.8 million of goodwill as a result of the Career Partner acquisition, which is not expected to be deductible for tax purposes. The goodwill is principally attributable to the future earnings potential associated with enrollment growth and other intangibles that do not qualify for separate recognition such as the assembled workforce. The goodwill is included in our Apollo Global reportable segment and we have selected a July 1 annual goodwill impairment test date.

We assigned an indefinite useful life to the acquired trademarks and accreditations intangibles as we believe they have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the intangibles’ useful life and we intend to renew the intangibles, as applicable, and renewal can be accomplished at little cost. We determined all other acquired intangibles are finite-lived and we are amortizing them on either a straight-line basis or using an accelerated method to reflect the pattern in which we expect the economic benefits of the assets to be consumed. The weighted average original useful life of the acquired finite-lived intangibles was 5 years. Refer to Note 7, Goodwill and Intangibles, for the estimated future amortization of our finite-lived intangibles.

Career Partner’s operating results are included in our condensed consolidated financial statements from the acquisition date. We have not provided pro forma information or the revenue and operating results of Career Partner because its results of operations are not material to our consolidated results of operations.

Fiscal Year 2015 Acquisitions

During fiscal year 2015, we completed the following acquisitions to support our strategy to diversify and expand our professional development offerings and global operations:

• 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.

We accounted for these acquisitions as business combinations, and the operating results of The Iron Yard and FAEL are included in our consolidated financial statements from the respective acquisition dates. We have not provided pro forma information or the revenue and operating results of the acquired entities because their results of operations are not material, either individually or in the aggregate, to our consolidated results of operations in the respective periods of acquisition. The purchase price allocations are summarized below:

($ 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

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 18

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Financial Instruments

We invest our excess cash in a variety of marketable securities, which are all classified as available-for-sale. The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective period ends:

	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

⁽¹⁾ Cash and cash equivalents includes restricted cash and cash equivalents.

We measure our financial instruments at fair value on a recurring basis as follows:

• 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.

Our marketable securities have maturities that occur within three years. We may sell certain of our marketable securities prior to their stated maturities for strategic reasons including, but not limited to, investment yield and credit risk management. We have not recognized significant gains or losses related to such sales.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 19

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6. Accounts Receivable, Net

Accounts receivable, net consist of the following as of the respective period ends:

($ 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

Student accounts receivable is composed primarily of amounts due related to tuition and educational services. The following summarizes the activity in allowance for doubtful accounts for the respective periods:

	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

Note 7. Goodwill and Intangibles

The following details changes in our goodwill by reportable segment during the nine months ended May 31, 2016:

($ 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

Intangibles consist of the following as of the respective period ends:

	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

⁽¹⁾ We acquired certain intangibles during fiscal year 2016 as a result of our acquisition of Career Partner. Refer to Note 4, Acquisitions.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 20

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The estimated future amortization expense of our finite-lived intangibles as of May 31, 2016 is as follows:

($ 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

⁽¹⁾ Estimated future amortization expense may vary as acquisitions and dispositions occur in the future and as a result of foreign currency translation adjustments.

Goodwill Impairments

Our market capitalization declined significantly during the first quarter of fiscal year 2016 after we reported our fourth quarter fiscal year 2015 results and our business outlook for fiscal year 2016. We believe the decline in the first quarter of fiscal year 2016 was attributable to University of Phoenix’s lower enrollment, increasing risk associated with the proprietary education sector, and uncertainty associated with its strategy to transform into a more focused, higher retaining and less complex institution. Additionally, initiatives associated with the University’s new strategy have accelerated the enrollment decline at the University and negatively impacted its cash flows in the short-term. Based on the decline in market capitalization, we performed an interim goodwill impairment analysis for University of Phoenix in the first quarter of fiscal year 2016.

University of Phoenix represents the substantial majority of our consolidated operating results and, as discussed above, we believe our market capitalization decline in the first quarter of fiscal year 2016 was attributable to the University. Accordingly, we estimated the fair value of our University of Phoenix reporting unit using a market-based valuation approach, which incorporated assumptions that we believe would be a reasonable market participant’s view of the increased risk and uncertainty associated with the University and its expected future cash flows. The market-based approach included multiples derived from comparable companies with consideration of the University’s current operating trends and transformational strategy in relation to the other companies. Our interim step one goodwill impairment analysis resulted in a lower estimated fair value for University of Phoenix compared to its carrying value. Based on the University’s estimated fair value and a hypothetical purchase price allocation, we determined the University had no implied goodwill. Accordingly, we recorded a $71.8 million impairment charge in the first quarter of fiscal year 2016 representing the University’s entire goodwill balance. We did not record an income tax benefit associated with this charge as the University’s goodwill is not deductible for tax purposes.

During the first quarter of fiscal year 2016, we also recorded a $1.6 million goodwill impairment charge representing the entire goodwill balance for our Western International University reporting unit. Western International University operates in the same sector of the U.S. proprietary education industry as University of Phoenix.

The majority of our other reporting units have annual goodwill impairment test dates during our fourth fiscal quarter, and we have not recorded any goodwill impairments for our other reporting units during fiscal year 2016. As part of our goodwill impairment evaluations in fiscal year 2016, we compared the sum of the estimated fair values of our reporting units to our market capitalization, plus an assumed control premium to acquire a controlling interest in Apollo. We considered the purchase price associated with our pending merger in estimating an assumed control premium. Based on our evaluation, the fair values of our reporting units were reasonable in relation to our market capitalization. However, we may be required to record additional goodwill impairment charges in the future if our critical assumptions deteriorate or our market capitalization declines further.

Note 8. Fair Value Measurements

We measure and disclose certain financial instruments at fair value as described in Note 5, Financial Instruments.Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Condensed Consolidated Balance Sheets, consist of the following as of May 31, 2016 and August 31, 2015:

			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

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 21

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the respective periods:

	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

⁽¹⁾ During fiscal year 2015,we paid $34.5 million to settle the contingent consideration for our Open Colleges acquisition.

Our contingent consideration liabilities are valued using discounted cash flow valuation methods encompassing significant unobservable inputs. The inputs include estimated operating results scenarios for the applicable performance periods, probability weightings assigned to operating results scenarios and the discount rates applied. Our contingent consideration liabilities relate to the following:

• 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.

We did not change our valuation techniques associated with recurring fair value measurements from prior periods.

Liabilities measured at fair value on a nonrecurring basis during the nine months ended May 31, 2016 are included in other liabilities on our Condensed Consolidated Balance Sheets and consist of the following:

			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

During the nine months ended May 31, 2016, we recorded $24.3 million of aggregate initial lease obligations at fair value associated with our restructuring activities. We recorded obligation liabilities on the dates we ceased using the respective facilities, and we measured the liabilities at fair value using Level 3 inputs included in the valuation method. Refer to Note 2, Restructuring and Impairment Charges.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 22

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9. Accrued and Other Liabilities

Accrued and other current liabilities consist of the following as of the respective period ends:

($ 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

Other long-term liabilities consist of the following as of the respective period ends:

($ 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

Note 10. Debt

Debt and short-term borrowings consist of the following as of the respective period ends:

($ 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

In fiscal year 2012, we entered into a syndicated $625 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility is used for general corporate purposes, which may include acquisitions and share repurchases. The term is five years and will expire in April 2017. The Revolving Credit Facility may be used for borrowings in certain foreign currencies and letters of credit, in each case up to specified sublimits.

We had no outstanding borrowings under the Revolving Credit Facility as of May 31, 2016 and August 31, 2015, but we had approximately $39 million and $41 million of outstanding letters of credit as of the respective periods. We also borrowed $50 million under the Revolving Credit Facility during the second quarter of fiscal year 2016, but subsequently repaid the amount later in the same quarter.

The Revolving Credit Facility fees are determined based on a pricing grid that varies according to our leverage ratio. The Revolving Credit Facility fee ranges from 25 to 40 basis points. Incremental fees for borrowings under the facility generally range from Prime + 25 to 85 basis points.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 23

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Revolving Credit Facility contains various customary representations, covenants and other provisions, including a material adverse event clause and the following financial covenants: maximum leverage ratio, minimum interest and rent expense coverage ratio, and U.S. Department of Education financial responsibility composite score requirements. We were in compliance with all applicable covenants related to the Revolving Credit Facility at May 31, 2016 and August 31, 2015.

Other debt principally includes debt at subsidiaries of Apollo Global and other obligations. The weighted average interest rate on our outstanding other debt at May 31, 2016 and August 31, 2015 was 6.1% and 5.6%, respectively.

The carrying value of our debt, excluding capital leases, approximates fair value based on the nature of our debt, which includes consideration of the portion that is variable-rate.

Note 11. Income Taxes

We have historically determined our interim income tax provision by applying our estimated effective income tax rate expected to be applicable for the full fiscal year to our income before income taxes for the period. Our effective income tax rate is dependent upon several factors, such as tax rates in state and foreign jurisdictions and the relative amount of income we earn in such jurisdictions. In determining our full year estimate, we do not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes. We exercise significant judgment in determining our income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain.

As further discussed in Note 7, Goodwill and Intangibles, there is significant uncertainty associated with University of Phoenix’s future operating results due to competitive factors and its initiatives to transform itself into a more focused, higher retaining and less complex institution. Based primarily on this uncertainty, we used the discrete method to calculate our interim tax provision for the interim periods in fiscal year 2016. Under the discrete method, we determined our tax expense for the interim periods based on actual results as if the interim periods were an annual period, which we believe provides a more reasonable interim income tax provision than the continued use of the estimated annual effective tax rate method. Our effective income tax rate for continuing operations for the nine months ended May 31, 2016 was also significantly impacted by the goodwill impairment charge for our University of Phoenix reporting unit, which was not deductible for tax purposes.

During fiscal year 2015, the Internal Revenue Service (“IRS”) completed its review of our United States federal income tax return for fiscal year 2014. Our United States federal income tax return for fiscal year 2013 is currently open for review by the IRS and we are also participating in the IRS’s Compliance Assurance Process for fiscal years 2015 and 2016, which is a voluntary program in which taxpayers seek to resolve all or most issues with the IRS prior to or soon after filing their United States federal income tax returns. Additionally, we are subject to numerous ongoing audits by state, local and foreign tax authorities with various tax years as early as 2007 that remain subject to examination.

Although we believe our tax accruals are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from our historical income tax provisions and accruals.

Note 12. Shareholders’ Equity and Redeemable Noncontrolling Interests

Share Repurchases

Our Board of Directors has authorized us to repurchase outstanding shares of our Class A common stock from time to time depending on market conditions and other considerations. During fiscal year 2013, our Board of Directors authorized an increase in the amount available under our share repurchase program up to an aggregate amount of $250 million, of which $52.2 million remained available as of May 31, 2016. There is no expiration date on the repurchase authorizations and the amount and timing of future share repurchase authorizations and repurchases, if any, will be made as market and business conditions warrant. Repurchases occur at our discretion and may be made on the open market through various methods including but not limited to accelerated share repurchase programs, or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules, and may include repurchases pursuant to Securities and Exchange Commission Rule 10b5-1 nondiscretionary trading programs. We are prohibited from repurchasing shares under the agreements associated with our pending merger, as described further in Note 1, Nature of Operations and Significant Accounting Policies.

We also repurchase shares in connection with tax withholding requirements associated with the release of vested share-based awards, which do not fall under the repurchase program described above.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 24

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following summarizes our share repurchase activity for the respective periods:

	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

Share Reissuances

We reissue our Class A common stock from our treasury stock as a result of the release of shares associated with share-based awards and purchases under our employee stock purchase plan. Share reissuances were as follows for the respective periods:

	Three Months Ended May 31,		Nine Months Ended May 31,
(In thousands)	2016	2015	2016	2015
Number of shares reissued	38	70	359	352

Note 13. Earnings Per Share

Our outstanding shares consist of Apollo Class A and Class B common stock. Our Articles of Incorporation treat the declaration of dividends on the Class A and Class B common stock in an identical manner. As such, both the Class A and Class B common stock are included in the calculation of our earnings per share.

Diluted weighted average shares outstanding includes the incremental effect of shares that would be issued upon the assumed exercise of stock options and the vesting and release of restricted stock units and performance share awards. The components of basic and diluted earnings per share are as follows:

	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

⁽¹⁾ Due to the loss from continuing operations attributable to Apollo during the nine months ended May 31, 2016, no dilutive share-based awards were included in the calculation of diluted loss per share because they would have been anti-dilutive.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 25

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 14. Share-Based Compensation

The following details share-based compensation expense for the respective periods:

	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

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted no restricted stock units or performance share awards during the three months ended May 31, 2016 and 575,000 restricted stock units and performance share awards during the nine months ended May 31, 2016. The granted awards had a weighted average grant date fair value per share of $7.50. As of May 31, 2016, we had $39.5 million and $1.8 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested restricted stock units and performance share awards, respectively. This expense is expected to be recognized over a weighted average period of 2.2 years.

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted no stock options during the three months ended May 31, 2016 and 4,000 stock options during the nine months ended May 31, 2016. The weighted average grant date fair value and the weighted average exercise price of the options granted were $4.12 and $10.35, respectively. As of May 31, 2016, we had $6.8 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.3 years.

Note 15. Commitments and Contingencies

Surety Bonds

Our insurers issue surety bonds for us that are required by various states where we operate, or that are required for other purposes. We are obligated to reimburse our insurers for any surety bonds that are paid. As of May 31, 2016, the face amount of these surety bonds was approximately $24 million.

Letters of Credit

As of May 31, 2016, we had approximately $39 million of outstanding letters of credit, which support certain of our obligations and guarantees provided by our subsidiaries as part of our normal operations for which fair value is not material.

Litigation and Other Matters

We are subject to various claims and contingencies that arise from time to time in the ordinary course of business, including those related to regulation, litigation, business transactions, employee-related matters and taxes, among others. We do not believe any of these are material for separate disclosure.

The following is a description of pending litigation, settlements, and other proceedings that fall outside the scope of ordinary and routine litigation incidental to our business.

Merger-Related Shareholder Suits

In connection with the pending merger described in Note 1, Nature of Operations and Significant Accounting Policies, the class action lawsuits listed below have been filed in the Superior Court of the State of Arizona, Maricopa County against some or all of the following parties: us, our directors, the Apollo Class B Voting Stock Trust No. 1, AP VIII Queso Holdings, L.P., Socrates Merger Sub, Inc., and Barclays Capital Inc. and Evercore Group L.L.C. (in their capacity as our financial advisors in connection with the merger):

• 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.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 26

APOLLO EDUCATION GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The complaints generally allege that our directors have violated their fiduciary duties by, among other things, failing to properly value us and failing to maximize our value to our shareholders as well as by including purportedly preclusive deal protections in the merger agreement, and that we, AP VIII Queso Holdings, L.P. and Socrates Merger Sub, Inc. aided and abetted such alleged breaches of fiduciary duties. The Miglio, Wagner, Ladouceur and Simkhovich complaints further allege that our directors breached their fiduciary duty of candor by filing a materially incomplete and misleading preliminary proxy statement and also allege that the sale process was negatively impacted by certain conflicts with our financial advisors. The plaintiffs seek various remedies, including a declaration that the action is properly maintainable as a class action, an injunction against the consummation of the merger, an accounting of the damages sustained by the plaintiffs and the class, costs and fees of the action, including attorneys’ fees and expenses, and any other equitable relief the court may deem just and proper.

On March 4, 2016, the action titled Blanchfield v. Apollo Education Group, Inc., et al. was voluntarily dismissed without prejudice.

On April 12, 2016, the Superior Court of the State of Arizona, Maricopa County consolidated the remaining Casey, Miglio, Wagner, Ladouceur and Simkhovich cases into a single action, In re Apollo Education Group, Inc. Shareholder Litigation, Lead Case No. CV2016-001905 (the “Consolidated Action”). On May 1, 2016, we reached an agreement with the plaintiffs to settle the Consolidated Action in connection with the increase in the merger consideration per share, which agreement is subject to consummation of the merger, certain confirmatory discovery and approval by the court. If the merger is consummated, we anticipate that we will be required to pay the plaintiffs’ expenses and an amount for attorneys’ fees yet to be determined and subject to court approval.

Securities Class Action (Rameses Te Lomingkit et. al.)

On March 14, 2016, a class action complaint was filed in the United States District Court for the District of Arizona, captioned Rameses Te Lomingkit et. al. v. Apollo Education Group, Inc. et. al., Case Number 2:16-CV-00689-JZB. The plaintiff, who allegedly purchased our shares during the specified class period, filed this putative class action on behalf of the plaintiff and all of our shareholders who acquired Class A shares between June 26, 2013 and October 21, 2015 and seeks certification as a class action and unspecified compensatory damages and costs. The plaintiff alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated under the Exchange Act, by us and certain of our officers for making allegedly false and misleading statements and failing to disclose material facts relating to the nature of our military recruitment activities and the status of our online classroom platform. The Court appointed the Government of Guam Retirement Fund as lead plaintiff on June 16, 2016. The lead plaintiff has until August 15, 2016 to file a consolidated or amended complaint, or to designate the previously filed complaint as the operative complaint.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Class Action under the Telephone Consumer Protection Act

On June 24, 2016, Twonesha Johnson-Hendricks filed a class action complaint, Johnson-Hendricks v. University of Phoenix, 2:16-cv-01434 (E.D. Cal.) in the United States District Court for the Eastern District of California, alleging that University of Phoenix violated the Telephone Consumer Protection Act by contacting class members without their consent. We are evaluating the complaint, which seeks to recover damages on behalf of plaintiff and other members of the putative class.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Shareholder Demand Letter

On June 10, 2016, we received a shareholder demand to commence a civil action against each of our directors and certain of our current and former officers on grounds of breach of fiduciary duty and other claims, and to make available for examination certain records. The demand is a condition precedent under applicable Arizona law to the filing of a derivative lawsuit on behalf of the Company seeking damages from directors and officers for breach of fiduciary duty. We are evaluating the demand.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Class Action Alleging Violations of Kentucky Wage and Hour Laws

On June 9, 2015, two former University of Phoenix employees filed an action in the Circuit Court of Jefferson County Kentucky alleging that they were wrongfully terminated from their positions with the University in violation of Kentucky and federal law. In

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this action, which is captioned Aldrich et al. v. The University of Phoenix, 15-C-2839 (Jefferson Cty. Circuit Court), plaintiffs also allege that the University violated Kentucky wage and hour law by failing to pay plaintiffs overtime and other required wages, and in connection with these wage and hour claims, they seek to represent a class of plaintiffs consisting of all individuals employed by the University within the past five years who performed a substantial part of their job duties in Kentucky. Plaintiffs seek to recover damages on their own behalf in connection with their alleged wrongful termination and past due wages, overtime compensation and other relief on behalf of the class in connection with the wage and hour claims. On March 4, 2016, the Court granted our motion to dismiss and compel arbitration. On March 9, 2016, plaintiffs filed a notice of their intent to appeal with the U.S. Court of Appeals for the Sixth Circuit. The appeal is currently pending.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Incentive Compensation False Claims Act Lawsuit

On May 25, 2011, we were notified that a qui tam complaint had been filed against us in the U.S. District Court, Eastern District of California, by private relators under the Federal False Claims Act and California False Claims Act, entitled USA and State of California ex rel. Hoggett and Good v. University of Phoenix, et al, Case Number 2:10-CV-02478-MCE-KJN. When the federal government declines to intervene in a qui tam action, as it has done in this case, the relators may elect to pursue the litigation on behalf of the federal government and, if successful, they are entitled to receive a portion of the federal government’s recovery.

The complaint alleges, among other things, that University of Phoenix has violated the Federal False Claims Act since December 12, 2009 and the California False Claims Act for the preceding ten years by falsely certifying to the U.S. Department of Education and the State of California that University of Phoenix was in compliance with various regulations that require compliance with federal rules regarding the payment of incentive compensation to admissions personnel, in connection with University of Phoenix’s participation in student financial aid programs. In addition to injunctive relief and fines, the relators seek significant damages on behalf of the Department of Education and the State of California, including all student financial aid disbursed by the Department to our students since December 2009 and by the State of California to our students during the preceding ten years. On July 24, 2014, the Court granted our motion to dismiss for lack of jurisdiction and dismissed relators’ complaint with prejudice. On December 14, 2014, relators filed a Notice of Appeal with the U.S. Court of Appeals for the Ninth Circuit, and their appeal remains pending before that court.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Federal False Claims Act Lawsuit

On March 3, 2016, a qui tam complaint against us filed by a private relator under the Federal False Claims Act was unsealed. The lawsuit, captioned United States of America ex rel. Arthur Green v. University of Phoenix, et al, Case Number 1:14 CV 1654, was previously filed under seal in the U.S. District Court for the Northern District of Ohio. It was unsealed by order of the District Court after the federal government notified the District Court of its decision not to intervene in the case.

The complaint alleges, among other things, that since at least July 2008, University of Phoenix has violated the Federal False Claims Act by falsely certifying to the U.S. Department of Education that the University was in compliance with various regulations under the U.S. Higher Education Act relating to preparation of student financial aid forms and other matters, including in connection with employee participation in student financial aid programs. The relator seeks unspecified damages on behalf of the federal government. On June 2, 2016, the District Court granted the motion of the relator’s counsel to withdraw, and the relator had until July 5, 2016 to either obtain new counsel or otherwise show cause why the case should not be dismissed for want of prosecution. In response to the Court’s order, the relator has filed a motion seeking an extension of time to identify new counsel.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

K.K. Modi Investment and Financial Services Pvt. Ltd.

On November 8, 2010, a suit was filed by K.K. Modi Investment and Financial Services Pvt. Ltd. (“Modi”) in the High Court of Delhi at New Delhi against defendants Apollo, Western International University, Inc., University of Phoenix, Inc., Apollo Global, Inc., Modi Apollo International Group Pvt. Ltd., Apollo International, Inc., John G. Sperling, Peter V. Sperling and Jorge Klor De Alva, seeking to permanently enjoin the defendants from making investments in the education industry in the Indian market in breach of an exclusivity and noncompete provision which plaintiff alleges is applicable to Apollo and its subsidiaries. The case is

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entitled, K.K. Modi Investment and Financial Services Pvt. Ltd. v. Apollo International, et. al. We believe that the relevant exclusivity and noncompete provision is inapplicable to us and our affiliates. On October 31, 2014, the Court denied the Apollo defendants’ initial applications to have the case dismissed, concluding that plaintiffs’ complaint raised factual issues that needed to be resolved through the submission of evidence. Defendants appealed that ruling to the Division Bench of the High Court, and that appeal was denied by the Division Bench on August 17, 2015. We then filed a Special Leave Petition before the India Supreme Court on November 21, 2015 seeking leave to appeal the decision of the Division Bench, which was denied on January 15, 2016. On February 15, 2016, we filed a petition for review of the denial of the Special Leave Petition, which was rejected by the India Supreme Court on March 31, 2016. The case will be returned to the Delhi High Court for the taking of evidence. If plaintiff ultimately obtains the requested injunctive relief, our ability to conduct business in India, including through our joint venture with HT Media Limited, may be adversely affected. It is also possible that in the future K.K. Modi may seek to expand existing litigation in India or commence litigation in the U.S. in which it may assert a significant damage claim against us.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Attorney General Investigations

In August 2015, we received an Investigative Subpoena from the Office of the Attorney General of the State of California. The Subpoena requires us to produce documents and information regarding the business and practices of University of Phoenix relating to members and former members of the U.S. military and California National Guard, including marketing, recruiting, billing, financial aid, accommodation and other services for military personnel, compliance with federal Executive Order 13607 (Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members), and use of U.S. military logos and emblems in marketing, for the time period of July 1, 2010 to the present.

In February 2016, we received a Second Investigative Subpoena from the Office of the Attorney General of the State of California in the Matter of the Investigation of For-Profit Educational Institutions, following the Investigative Subpoena we received in August 2015. The Second Investigative Subpoena, which is not limited to matters involving military students, seeks the production of documents and information regarding a broad spectrum of the business and practices of Apollo and its subsidiaries, including University of Phoenix, relating to marketing, recruiting, compensation of enrollment advisors, complaints, financial aid, compliance, accreditation, other governmental investigations, private litigation and other matters, as well as additional information relating to marketing and services to members and former members of the U.S. military and California National Guard, for the time period of July 1, 2010 to the present.

We are cooperating with the California Attorney General in these investigative proceedings. We cannot predict the eventual scope, duration or outcome of the investigations at this time.

In May 2011 and January 2013, University of Phoenix received Civil Investigative Demands from the State of Massachusetts Office of the Attorney General. The Demands relate to an investigation of possible unfair or deceptive methods, acts, or practices by proprietary educational institutions in connection with the recruitment of students and the financing of education. The Demands seek documents, information and testimony regarding a broad spectrum of the University’s business for the time period of January 1, 2002 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

In October 2010, University of Phoenix received notice that the State of Florida Office of the Attorney General in Fort Lauderdale, Florida had commenced an investigation into possible unfair and deceptive trade practices associated with certain alleged practices of the University. The notice included a subpoena to produce documents and detailed information for the time period of January 1, 2006 to the present about a broad spectrum of the University’s business. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

Because of the many questions of fact and law that may arise, the outcome of these state Attorneys General investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

In addition, from time to time, we receive requests for information from state Attorneys General, accrediting bodies, state higher education regulatory bodies and other federal and state government agencies relating to investigations or inquiries being conducted by other state or federal agencies, pending litigation or specific complaints received from students or former students. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal inquiry or investigation into our practices. We received such a request from the Wisconsin Department of Justice for information relating to programs offered by University of Phoenix to Wisconsin residents. On May 2, 2016, we accepted service of a Wisconsin

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Department of Justice subpoena in order to allow the University to lawfully produce student records to the Wisconsin Department of Justice, subject to certain notice requirements, in connection with this inquiry.

Federal Trade Commission Investigation

In July 2015, we received a Civil Investigative Demand from the U.S. Federal Trade Commission (the “FTC”) relating to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or educational accreditation products or services. The Demand requires us to produce documents and information regarding a broad spectrum of the business and practices of University of Phoenix, including in respect of marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment, and other compliance matters, for the time period of January 1, 2011 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

Because of the many questions of fact and law that may arise, the outcome of the FTC investigation is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this matter and, accordingly, we have not accrued any liability associated with this matter.

Open Colleges Investigations

In September 2015, Open Colleges received a Notice from the Australian Competition and Consumer Commission (“ACCC”) requiring Open Colleges to produce information about student refunds upon withdrawal and related matters for the period of time since July 2014. In addition, Open Colleges receives inquiries and is subject to audits from time to time from governmental regulatory authorities, including an inquiry in October 2015 from the Australian Skills Quality Authority regarding student complaints about marketing practices, refund policies and other matters (since concluded without material findings), and a notice from the Australian Skills Quality Authority in June 2016 of a compliance audit. Open Colleges is cooperating with the relevant authorities in these matters, but we cannot at this time predict their eventual scope, duration or outcome.

Because of the many questions of fact and law that may arise, the outcome of these investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

Office of the Inspector General of the U.S. Department of Education (“OIG”) Subpoena

On March 21, 2014, University of Phoenix received a subpoena from the Mid-Atlantic Region of the OIG. The subpoena seeks the production by the University of documents and detailed information regarding a broad spectrum of the activities conducted in the University’s Centralized Service Center for the Northeast Region located in Columbia, Maryland, for the time period of January 1, 2007 to the present, including information relating to marketing, recruitment, enrollment, financial aid processing, fraud prevention, student retention, personnel training, attendance, academic grading and other matters. We are cooperating with these requests, but we cannot at this time predict the eventual scope, duration or outcome of this matter.

Because of the many questions of fact and law that may arise, the outcome of this matter is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss and, accordingly, we have not accrued any liability associated with this matter.

UNIACC Investigations

UNIACC was advised by the National Accreditation Commission of Chile in November 2011 that its institutional accreditation would not be renewed and therefore had lapsed. Subsequently, in June 2012, a prosecutor’s office in Santiago, Chile requested that UNIACC provide documents relating to UNIACC’s relationship with a former employee and consultant who served as a member of the National Accreditation Commission (“CNA”) until March 2012, and we received requests for additional information in connection with this investigation. Furthermore, in August 2012, the prosecutor’s office began requesting that UNIACC provide information about UNIACC’s business structure and operations and its relationship with other Apollo entities, in connection with an additional investigation regarding UNIACC’s compliance with applicable laws concerning the generation of profit by universities such as UNIACC. The prosecutor’s office also requested additional information from UNIACC regarding certain government funding received by the institution. On April 7, 2016, the prosecutor closed the investigation related to the CNA matter.

Securities Class Action (Teamsters Local 617 Pension and Welfare Funds)

On November 2, 2006, the Teamsters Local 617 Pension and Welfare Funds filed a class action complaint alleging that we and certain of our current and former directors and officers violated the Securities Exchange Act of 1934. The complaint is entitled

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Teamsters Local 617 Pension & Welfare Funds v. Apollo Group, Inc. et al., Case Number 06-cv-02674-RCB.

The parties reached an agreement in principle to settle this matter for an immaterial amount and, on July 29, 2015, the district court entered an order approving the settlement and dismissing with prejudice the claims against defendants. Subsequent to the approval, an individual non-class member filed an untimely objection to the settlement with the district court. On December 7, 2015, the district court struck the objection.

Note 16. Regulatory Matters

All U.S. federal student financial aid programs are established by Title IV of the Higher Education Act and regulations promulgated thereunder. The U.S. Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program. The most recent reauthorization of the Higher Education Act expired September 30, 2013, but Title IV student financial aid programs remain authorized and functioning. Congress continues to engage in discussion and activity regarding Higher Education Act reauthorization, but the timing and terms of any eventual reauthorization cannot be predicted.

The Higher Education Act, as reauthorized, specifies the manner in which the U.S. Department of Education reviews institutions for eligibility and certification to participate in Title IV programs. Every educational institution involved in Title IV programs must be certified to participate and is required to periodically renew this certification, which is granted in a Program Participation Agreement with the institution.

University of Phoenix’s Title IV Program Participation Agreement expired on December 31, 2012. The University has submitted necessary documentation for recertification and its eligibility continues on a month-to-month basis until the Department issues its decision on the application. We believe that the University’s application will be renewed in due course. However, we cannot predict whether or to what extent the continued challenging political and regulatory climate and other recent developments in general relating to the proprietary education sector and our business may have on the timing or outcome of the recertification process.

In February 2016, the Department notified the University that for the duration of the month-to-month continuation of the University’s Program Participation Agreement, University of Phoenix must obtain from the Department prior approval of substantial changes, including (i) the establishment of additional locations, (ii) any increase in the level of academic offering beyond those listed in the Institution’s Eligibility and Certification Approval Report and (iii) the addition of any educational program (including degree, nondegree, or short-term training programs). Some of these substantial changes include changes that previously could be implemented by the University upon notice to the Department and without prior approval.

Additionally, in August 2014, the Department commenced an ordinary course program review of University of Phoenix’s administration of Title IV programs covering federal financial aid years 2012-2013 and 2013-2014, as well as compliance with the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, the Drug-Free Schools and Communities Act and related regulations. During fiscal year 2015, the University received a Final Program Review Determination Letter with regard to this program review. All administrative matters are deemed by the Department to be resolved and/or closed, with the exception of findings regarding compliance with the Clery Act, which have been referred to the Department’s Clery Team and to the Administrative Action and Appeals Division which is standard protocol in such matters. The outcome of this matter is uncertain at this point and, based on the information available to us at present, we have not accrued any liability associated with this matter.

Financial Responsibility Composite Score

To participate in Title IV programs, the U.S. Department of Education regulations specify that an eligible institution of higher education must satisfy specific measures of financial responsibility prescribed by the Department, or post a letter of credit in favor of the Department and accept other conditions on its participation in Title IV programs. Pursuant to the Title IV program regulations, each eligible institution must satisfy a measure of financial responsibility that is based on a weighted average of the following three annual ratios which assess the financial condition of the institution:

• 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.

These ratios provide three individual scores which are converted into a single composite score. The maximum composite score is 3.0. If an institution’s composite score is at least 1.5, it is considered financially responsible. If an institution’s composite score is less than 1.5 but is 1.0 or higher, it is still considered financially responsible, and the institution may continue to participate as a financially responsible institution for up to three years under the Department’s “zone” alternative. Under the

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zone alternative, the Department may subject the institution to various operating or other requirements, which may include 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.

If an institution does not achieve a composite score of at least 1.0, it is subject to additional requirements in order to continue its participation in the Title IV programs, including 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, and 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.

In addition, under new regulations that took effect on July 1, 2016, institutions placed on either the heightened cash monitoring payment method or the reimbursement payment method must pay Title IV credit balances to students and parents before requesting Title IV funds from the Department and may not hold Title IV credit balances on behalf of students or parents, even if such balances are expected to be applied to future tuition payments.

The composite scores for Apollo Education Group and University of Phoenix, which are calculated as of the end of our fiscal year, were as follows for the indicated periods:

	Fiscal Year
	2015	2014	2013
Apollo Education Group	2.6	2.5	2.6
University of Phoenix	2.9	2.3	2.5

As discussed in Note 7, Goodwill and Intangibles, we recorded $73.4 million of goodwill impairment charges relating to our University of Phoenix and Western International University reporting units during the first quarter of fiscal year 2016, which was primarily the result of a substantial decline in our market capitalization. These impairment charges increase our fiscal year 2016 total operating expenses, which will negatively impact our fiscal year 2016 composite scores to be calculated as of August 31, 2016. If our profitability declines further than expected, including as a result of additional goodwill impairment charges, which could result from further declines in our market capitalization, higher than expected restructuring charges, our inability to execute on our currently planned cost reduction initiatives, a more than anticipated decline in enrollment, or other unexpected changes or developments, our fiscal year 2016 composite scores could fall below 1.5.

We believe that we may be able to take certain corrective measures to maintain composite scores of 1.5 or greater, if we determine that there is increased risk that our fiscal year 2016 composite scores will fall below that level, depending on the circumstances causing the expected decline. However, such measures, if available, may require material modifications to our business and strategy that would adversely impact our future revenue and profitability and/or may involve the issuance of equity or equity-linked securities under challenging circumstances that could result in material dilution to our existing shareholders.

If our composite score falls below 1.5, our liquidity could be subject to severe stress due to the following factors:

• 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.

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The combined effect of the above factors could cause our business to no longer be sustainable without a significant infusion of equity or other funding. Under current market conditions, there is no assurance that other funding sources would be available in sufficient amounts on terms acceptable to us or at all, and any available equity funding would necessarily involve substantial dilution to our current shareholders.

Gainful Employment

Under the Higher Education Act, as reauthorized, proprietary schools are generally eligible to participate in Title IV programs only in respect of educational programs that lead to “gainful employment in a recognized occupation.” In connection with this requirement, proprietary postsecondary institutions are required to provide information to prospective students about each eligible program, including the relevant recognized occupations, cost, completion rate, job placement rate, and median loan debt of program completers.

In October 2014, the U.S. Department of Education published final regulations, effective July 1, 2015, on the metrics for determining whether an academic program prepares students for gainful employment in a recognized occupation. Under the final regulations, which apply on a program-by-program basis, students enrolled in a program will be eligible for Title IV student financial aid only if that program satisfies at least one of two tests relating to student debt service-to-earnings ratios. The two tests specify minimum debt service-to-earnings ratios calculated on the basis of the average earnings of program graduates; one test measures student loan debt service as a percentage of total earnings, and the other test measures student loan debt service as a percentage of discretionary earnings. If a program fails to meet either minimum ratio for one year, the institution will be required to provide a warning notice to prospective and enrolled students advising that the program may lose Title IV eligibility based on the final student debt service-to-earnings ratios for the next award year. Programs that fail to meet either of the minimum ratios for two out of three consecutive years will immediately cease to be Title IV eligible for a period of at least three years.

The Department has indicated that the official 2014 gainful employment debt service-to-earnings ratios will be issued sometime during calendar year 2016. The expected timing of the issuance of the 2015 ratios has not yet been announced. We believe it is likely that some of University of Phoenix’s programs will be impacted by the regulations. However, the University ceased enrolling new students in many of the programs it believes may be impacted in connection with its initiatives to transform itself into a more focused, higher retaining and less complex institution. As of August 31, 2015, students in these programs that ceased enrolling new students represented approximately 10% of the University’s Degreed Enrollment. Students who were already enrolled in such programs, and who do not elect to enroll in a different University of Phoenix program, will be taught-out in due course.

Changes in student borrowing needs and practices, student loan interest rates, labor markets and other factors outside of our control could adversely impact compliance with these regulations for some of our programs in the future. The Department has not yet announced the protocol for calculating and disseminating the debt service-to-earnings ratios. Because the ratios will be issued by the Department after the measuring period, we may not know of a program’s failure to meet the tests until well after the measuring period, and students enrolled in such a program could lose their access to federal financial aid before completing the program.

Higher Learning Commission Accreditation

University of Phoenix is regionally accredited by The Higher Learning Commission (“HLC”), which provides the following:

• 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.

In July 2013, the accreditation of University of Phoenix was reaffirmed by HLC through the 2022-2023 academic year. The University is subject to the Standard Pathway reaffirmation process, pursuant to which the University will host a comprehensive evaluation visit in 2017 and will undergo its next reaffirmation process in 2022-2023.

Military Benefit Programs

U.S. Department of Defense Tuition Assistance Program

On January 15, 2016, University of Phoenix was notified by the U.S. Department of Defense (“DoD”) that the University’s probationary status in respect of its participation in the DoD Tuition Assistance Program for active duty military personnel had been lifted, effective immediately. The University had been placed on probation in October 2015 pending a review by the

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Department of the University’s compliance with the DoD Voluntary Education Partnership Memorandum of Understanding with the University, which is the basis on which the University’s active duty military students participate in the DoD Tuition Assistance Program.

The University will be subject to a heightened compliance review for a period of one-year following the removal of probationary status. During this period, the University will continue to engage with the Department and complete the production of information and documents previously requested by the Department. In addition, the University will be subject to an enhanced compliance review in fiscal year 2017.

In fiscal year 2015, funding under the DoD Tuition Assistance Program represented less than 1% of the University’s net revenue.

U.S. Department of Veterans Affairs Educational Benefits

University of Phoenix participates in the Department of Veterans Affairs educational benefits programs (“VA Programs”) for eligible veterans. Under these VA Programs, the educational locations serving veterans are subject to a compliance survey each year. Following the notice of probation in October 2015 from the Department of Defense, which has been subsequently lifted as described above, the Veterans Administration announced the commencement of the annual compliance survey, with an accelerated schedule and increased scope relative to prior years. The annual compliance review was completed with no adverse action imposed on the University. In fiscal year 2015, funding under VA Programs represented approximately 10% of University of Phoenix’s cash basis revenue, calculated on the same basis as for the 90/10 Rule.

Note 17. Segment Reporting

We operate in the education industry and our operating segments have been determined based on the method by which our chief operating decision maker evaluates performance and allocates resources. We have not aggregated any of our operating segments, which are presented in our segment reporting as follows:

• 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.

During the fourth quarter of fiscal year 2015, we classified Carnegie Learning as held for sale and began presenting it as discontinued operations. Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment. As Carnegie Learning’s operating results are presented as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented, we have revised our segment reporting to exclude Carnegie Learning’s operating results.

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

	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

⁽¹⁾ University of Phoenix, Apollo Global and Other include restructuring and impairment charges during the periods, which includes a $71.8 million goodwill impairment charge during the first quarter of fiscal year 2016 for our University of Phoenix reporting unit. Refer to Note 2, Restructuring and Impairment Charges, and Note 7, Goodwill and Intangibles.

⁽²⁾ During the three and nine months ended May 31, 2016, Apollo Global had $0.6 million and $3.8 million of expense included in Merger, acquisition and other related costs (credit), net, respectively. During the three and nine months ended May 31, 2015, Apollo Global had a net credit of $1.0 million and $1.7 million of net expense, respectively.

⁽³⁾ During the three and nine months ended May 31, 2016, Other had $7.7 million and $21.4 million of expense included in Merger, acquisition and other related costs (credit), net, respectively, and $0.5 million and $2.8 million during the three and nine months ended May 31, 2015, respectively.

Our consolidated assets by reportable segment consist of the following as of the respective period ends:

($ 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

⁽¹⁾ The majority of the assets included in Other consists of cash and cash equivalents and marketable securities.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help provide an understanding of our results of operations, financial condition and present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended August 31, 2015 and our financial statements included in Part I, Item 1, of this Form 10-Q.

Overview

Apollo Education Group, Inc. is one of the world’s largest private education providers, serving students since 1973. We believe that our success depends on providing high quality education and career-focused pathways, tools and services to students to maximize the benefits of their educational experience. We offer undergraduate, graduate, certificate and nondegree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad.

Substantially all of our net revenue is composed of tuition and fees for educational services. In fiscal year 2015, University of Phoenix represented 84% of our consolidated net revenue, and generated more than 100% of our consolidated operating income.

Pending Merger

On February 7, 2016, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with AP VIII Queso Holdings, L.P., a Delaware limited partnership (“Parent”) and Socrates Merger Sub, Inc., an Arizona corporation and a wholly owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent. Parent is an affiliate of Apollo Management, L.P., a fund managed by an affiliate of Apollo Global Management, LLC, neither of which is, or has ever been, affiliated with us. The Vistria Group, LP is a co-investor in Parent. Najafi Companies, LLC is a potential co-investor in Parent. At the effective time of the Merger, which is expected to be completed by the end of calendar year 2016, each share of our issued and outstanding Class A and Class B common stock (other than shares owned by Parent and its subsidiaries and shares owned by us and our subsidiaries) will be converted pursuant to the terms of the Merger Agreement into the right to receive $10.00 per share in cash. On May 6, 2016, the Merger Agreement was approved by the holders of our outstanding Class A and Class B common stock, each voting separately as a class.

Consummation of the Merger is subject to customary and other conditions, including:

(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.

In addition, consummation of the Merger is subject to our satisfying certain minimum operating metrics, measured as of the first or second month end preceding the closing date, depending on the day of the month on which closing occurs, as follows:

(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 currently expect to satisfy these minimum operating metrics if the closing occurs on or prior to October 9, 2016, which is the latest closing date for which the relevant operating metrics are derived from our fiscal year 2016 financial and operating results. However, our expected fiscal year 2016 enrollment and operating results have declined since our December forecast. If our enrollment or operating results continue to decline, we may not be able to satisfy one or more of these closing conditions, either before or after October 9, 2016. If we fail to satisfy one or more of these closing conditions, Parent would be entitled to terminate the Merger Agreement and elect not to consummate the Merger.

There is no assurance that the conditions to the consummation of the Merger will be satisfied in a timely manner or at all.

The Merger Agreement may be terminated by each of us and Parent under certain circumstances, including if the Merger is not consummated by 5:00 pm Eastern time on February 1, 2017. Upon termination of the Merger Agreement under certain

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specified circumstances, but not including a termination solely due to our failure to satisfy the minimum operating metrics described above, we will be required to pay Parent 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), and under other specified circumstances, Parent will be required to pay us a reverse termination fee of $25.0 million. For additional information about some of the consequences that could arise from the failure to consummate the Merger, see Part II, Item 1A, Risk Factors - Our pending merger may not be consummated, which may adversely affect our business, and our business may suffer as a result of uncertainty surrounding the pending merger.

Assuming timely receipt of required regulatory approvals and the satisfaction or waiver of all other closing conditions, we anticipate that the Merger will be completed by the end of calendar year 2016.

On July 7, 2016, HLC formally notified us that the HLC Board of Trustees had voted to defer action on our change of control application until such time as the Department of Education provides us and HLC with a written response to the pre-acquisition applications filed by University of Phoenix and Western International University, and Parent has filed a substantive response to any requirements stipulated in the Department’s response. HLC indicated that it would consider the matter at a special meeting to be convened within 30 days of receiving the specified information, and that should such information not be received before September 28, 2016, the matter would automatically be scheduled for the November 2016 Board of Trustees meeting.

For additional information related to the Merger and the Merger Agreement, please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 8, 2016, our definitive proxy statement filed with the Commission on March 23, 2016, the supplement to the definitive proxy statement filed with the Commission on May 2, 2016, and the amendments to the Merger Agreement attached to our Current Report on Form 8-K filed with the Commission on May 2, 2016 and this Quarterly Report on Form 10-Q. The foregoing description of the Merger Agreement and the Merger does not purport to be complete and is subject to, and qualified in its entirety by the full text of the Merger Agreement attached as Exhibit 2.1 to our Current Report on Form 8-K filed with the Commission on February 8, 2016, Amendment No. 1 to the Merger Agreement attached as Exhibit 2.1 to our Current Report on Form 8-K filed with the Commission on May 2, 2016, and Amendment No. 2 to the Merger Agreement attached as Exhibit 2.2 to this Quarterly Report on Form 10-Q.

Key Trends, Developments and Challenges

The following developments and trends present opportunities, challenges and risks relating to our business. For a more detailed discussion of our business, industry and risks, refer to our 2015 Annual Report on Form 10-K.

Rapidly Evolving and Highly Competitive Education Industry

The higher education industry is changing at an increasing pace due to technological developments, evolving needs and objectives of students and employers, economic constraints affecting educational institutions and students, price competition, increased focus on affordability and value, uneven quality of secondary education in the U.S. and other factors that challenge many of the core principles underlying the industry. In addition, one of our primary competitive advantages in the U.S. has been materially diminished as a significant and increasing number of traditional four-year and community colleges offer an increasing array of distance learning and other online education programs, including programs that are offered wholly online and geared towards the needs of working learners. In recent years we have not competed successfully with these traditional schools, and this has contributed to the substantial decline in University of Phoenix enrollment that began in late 2010. See further discussion of enrollment in Results of Operations below.

University of Phoenix Transformation

The University’s vision is to be recognized as the most trusted provider of career-relevant higher education for working adults. In furtherance of this, the University offers career focused programs and an instructional model designed specifically to meet the educational needs of working adults. Due in part to the competitive factors described above, University of Phoenix Degreed Enrollment has decreased by approximately 70% since late 2010. The University is working to stabilize enrollment in the longer term by transforming itself into a more focused, higher retaining and less complex institution through several initiatives, including:

• 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;

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• 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.

Due in part to the rapidly changing higher education environment, particularly for proprietary institutions, and the competitive factors described above, we have experienced significant challenges in accurately predicting the effects on enrollment and retention of the various initiatives that we have developed and deployed in recent years. Accordingly, there is no assurance that our current transformation plan will stabilize enrollment, improve retention or achieve the other intended results, and the broad scope and number of simultaneous changes increases the risk of unexpected challenges and unintended consequences. These initiatives have accelerated the enrollment decline at University of Phoenix, and we expect that new and total degreed enrollment will continue declining in the near term as we implement the initiatives, and that total degreed enrollment will not stabilize prior to fiscal year 2018 or 2019.

Cost Reductions

We are intensely focused on reengineering our business processes and educational delivery systems to improve efficiencies and reduce costs to align with our declining enrollment and revenue in a manner that does not adversely impact the quality of our services to students. As discussed above, we expect that our initiative to transform University of Phoenix will accelerate the near term rate of decline in the University’s enrollment and revenue, which will increase the amount of necessary cost reductions. In furtherance of this, we are closing underutilized or unnecessary University of Phoenix campus locations, reducing our workforce as necessary, streamlining and, where appropriate, automating our administrative and student facing services, outsourcing administrative and other services, evaluating the scope of our academic programs and delaying the implementation of certain of University of Phoenix’s transformation initiatives. Also, we have engaged outside advisors to assist us in identifying and effectuating these cost reduction initiatives. We have significantly reduced our operating costs over recent periods and further significant reductions are increasingly challenging. There is no assurance that we will be able to reduce costs to align with University of Phoenix’s reduced enrollment and revenue, especially if the University’s near term enrollment declines more than anticipated. Although we seek to effect these cost reductions in a manner that does not adversely impact the quality of our services to students, given the magnitude of these changes, they could result in near term disruption to our business which may further decrease our enrollment and revenues. Additionally, our fiscal year 2016 Department of Education financial responsibility composite score will be adversely impacted if we are not successful in reducing costs sufficiently during fiscal year 2016, whether due to our inability to effectuate planned cost reductions, greater than anticipated declines in our enrollment and revenue or other factors. See further discussion under Regulatory Environment - Financial Responsibility Composite Score and Results of Operations below.

Regulatory Environment

In recent years, there has been substantial and increasing focus by various members of the U.S. Congress and federal agencies, including the Department of Education, the Consumer Financial Protection Bureau and the Federal Trade Commission, on the role that proprietary educational institutions play in higher education. Congressional hearings and roundtable discussions have been held regarding various aspects of the education industry, and reports have been issued that are highly critical of proprietary institutions and include a number of recommendations to be considered by Congress in connection with the upcoming reauthorization of the Higher Education Act. A group of influential U.S. senators has strongly and repeatedly encouraged the Departments of Education, Defense and Veterans Affairs to take action to limit or terminate the participation of proprietary educational institutions, including University of Phoenix, in existing tuition assistance programs.

In addition, the Department of Education has formed an inter-agency task force focused on the proprietary sector involving multiple federal agencies and departments including the Federal Trade Commission, the U.S. Departments of Justice, Treasury and Veterans Affairs, the Consumer Financial Protection Bureau, the Securities and Exchange Commission, and numerous state Attorneys General, to coordinate activities and share information to protect students from unfair, deceptive and abusive policies and practices. We believe that the recent actions by the Federal Trade Commission, U.S. Department of Defense and the

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California Attorney General’s office described below may be related to, or coordinated with, this task force. We expect that this challenging regulatory environment will continue for proprietary educational institutions, including University of Phoenix, for the foreseeable future, and may intensify.

The following summarizes significant regulatory matters applicable to our business.

• Financial Responsibility Composite Score

To participate in Title IV programs, the U.S. Department of Education regulations specify that an eligible institution of higher education must satisfy specific measures of financial responsibility prescribed by the Department, or post a letter of credit in favor of the Department and accept other conditions on its participation in Title IV programs. Pursuant to the Title IV program regulations, each eligible institution must satisfy a measure of financial responsibility that is based on a weighted average of the following three annual ratios which assess the financial condition of the institution:

• 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.

These ratios provide three individual scores which are converted into a single composite score. The maximum composite score is 3.0. If an institution’s composite score is at least 1.5, it is considered financially responsible. If an institution’s composite score is less than 1.5 but is 1.0 or higher, it is still considered financially responsible, and the institution may continue to participate as a financially responsible institution for up to three years under the Department’s “zone” alternative. Under the zone alternative, the Department may subject the institution to various operating or other requirements, which may include 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.

If an institution does not achieve a composite score of at least 1.0, it is subject to additional requirements in order to continue its participation in the Title IV programs, including 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, and 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.

In addition, under new regulations that took effect on July 1, 2016, institutions placed on either the heightened cash monitoring payment method or the reimbursement payment method must pay Title IV credit balances to students and parents before requesting Title IV funds from the Department and may not hold Title IV credit balances on behalf of students or parents, even if such balances are expected to be applied to future tuition payments.

The composite scores for Apollo Education Group and University of Phoenix, which are calculated as of the end of our fiscal year, were as follows for the indicated periods:

	Fiscal Year
	2015	2014	2013
Apollo Education Group	2.6	2.5	2.6
University of Phoenix	2.9	2.3	2.5

As discussed in Note 7, Goodwill and Intangibles, in Item 1, Financial Statements, we recorded $73.4 million of goodwill impairment charges relating to our University of Phoenix and Western International University reporting units during the first quarter of fiscal year 2016, which was primarily the result of a substantial decline in our market capitalization. These impairment charges increase our fiscal year 2016 total operating expenses, which will negatively impact our fiscal year 2016 composite scores to be calculated as of August 31, 2016. Currently, we anticipate that our fiscal year 2016 composite scores will be above 1.5. However, if our profitability declines further than expected, including as a result of additional goodwill impairment charges, which could result from further declines in our market capitalization, higher than expected restructuring charges, our inability to execute on our currently planned cost reduction initiatives, a more than anticipated decline in enrollment, or other unexpected changes or developments, our fiscal year 2016 composite scores could fall below 1.5.

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We believe that we may be able to take certain corrective measures to maintain composite scores of 1.5 or greater, if we determine that there is increased risk that our fiscal year 2016 composite scores will fall below that level, depending on the circumstances causing the expected decline. However, such measures, if available, may require material modifications to our business and strategy that would adversely impact our future revenue and profitability and/or may involve the issuance of equity or equity-linked securities under challenging circumstances that could result in material dilution to our existing shareholders.

If our composite score falls below 1.5, our liquidity could be subject to severe stress due to the following factors:

• 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.

The combined effect of the above factors could cause our business to no longer be sustainable without a significant infusion of equity or other funding. Under current market conditions, there is no assurance that other funding sources would be available in sufficient amounts on terms acceptable to us or at all, and any available equity funding would necessarily involve substantial dilution to our current shareholders. See further discussion of the composite score requirements in Part II, Item 1A, Risk Factors, 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.

• Gainful Employment

Under the Higher Education Act, as reauthorized, proprietary schools are generally eligible to participate in Title IV programs only in respect of educational programs that lead to “gainful employment in a recognized occupation.” In connection with this requirement, proprietary postsecondary institutions are required to provide information to prospective students about each eligible program, including the relevant recognized occupations, cost, completion rate, job placement rate, and median loan debt of program completers.

In October 2014, the U.S. Department of Education published final regulations, effective July 1, 2015, on the metrics for determining whether an academic program prepares students for gainful employment in a recognized occupation. Under the final regulations, which apply on a program-by-program basis, students enrolled in a program will be eligible for Title IV student financial aid only if that program satisfies at least one of two tests relating to student debt service-to-earnings ratios. The two tests specify minimum debt service-to-earnings ratios calculated on the basis of the average earnings of program graduates; one test measures student loan debt service as a percentage of total earnings, and the other test measures student loan debt service as a percentage of discretionary earnings. If a program fails to meet either minimum ratio for one year, the institution will be required to provide a warning notice to prospective and enrolled students advising that the program may lose Title IV eligibility based on the final student debt service-to-earnings ratios for the next award year. Programs that fail to meet either of the minimum ratios for two out of three consecutive years will immediately cease to be Title IV eligible for a period of at least three years.

The Department has indicated that the official 2014 gainful employment debt service-to-earnings ratios will be issued sometime during calendar year 2016. The expected timing of the issuance of the 2015 ratios has not yet been announced. We believe it is likely that some of University of Phoenix’s programs will be impacted by the regulations. However, the University ceased enrolling new students in many of the programs it believes may be impacted in connection with its initiatives to transform itself into a more focused, higher retaining and less complex institution. As of August 31, 2015, students in these programs that ceased enrolling new students represented approximately 10% of the University’s Degreed Enrollment. Students who were already enrolled in such programs, and who do not elect to enroll in a different University of Phoenix program, will be taught-out in due course.

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Changes in student borrowing needs and practices, student loan interest rates, labor markets and other factors outside of our control could adversely impact compliance with these regulations for some of our programs in the future. The Department has not yet announced the protocol for calculating and disseminating the debt service-to-earnings ratios. Because the ratios will be issued by the Department after the measuring period, we may not know of a program’s failure to meet the tests until well after the measuring period, and students enrolled in such a program could lose their access to federal financial aid before completing the program.

• U.S. Department of Education Rulemaking

A negotiated rulemaking committee was convened by the Department in January 2016 on the topic of the process and standards for discharge of student loans, commonly known as defense to repayment, and certain other matters. The committee failed to reach consensus. In June 2016, the Department issued a Notice of Proposed Rulemaking to establish a new federal standard and a process for determining whether a borrower has a defense to repayment on federal student loans based on an act or omission of a school.

The proposed regulations would provide repayment relief to students in respect of student loans first disbursed after July 1, 2017 where:

• a school 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 school 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 proposed regulations also would allow the Department to identify and grant relief to groups of students where there are common facts, including students who have not requested relief.

As proposed, the Department would be entitled to seek reimbursement from the school in most cases in respect of loans discharged under the new procedure.

In addition, the proposed regulations specify early warning triggers regarding financial distress that would automatically require a school to post a letter of credit in the amount of at least 10% of the school’s annual Title IV disbursements upon the occurrence of specified events such as:

• 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.

If a school experiences any of these triggers, the school would be required to warn prospective and current students that it has been required to provide enhanced financial protection to the Department.

The proposed regulations also would require disclosure by proprietary institutions to prospective and enrolled students if student loan repayment rates fall below specified levels.

The proposed regulations, if adopted, could result in significant potential risks for our business, since the precise standards for student loan discharge may be unclear or subject to interpretation in a manner that is adverse to us and not fully known or predictable in advance, and certain of the potential adverse consequences could arise from the mere commencement of enforcement actions by state or federal government entities, or the filing of student claims for debt relief, even if these actions and claims ultimately are found to lack merit. Furthermore, the potential significant discretion vested in the Department to administer the regulations, including fact-finding, may result in unexpected outcomes that materially and adversely affect our business. In order to reduce the risk associated with these proposed regulations, if adopted, we may need to modify our administrative and other student-facing practices and procedures in a manner that materially increases our costs and reduces our administrative effectiveness, and our flexibility in responding to state or federal and certain private lawsuits may be materially reduced because of the possible significant ancillary consequences of an adverse judgment or finding.

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The effective date of the proposed regulations, if adopted, cannot be determined at this time, but the proposed regulations could be effective as early as July 1, 2017. More information can be found at http://www2.ed.gov/policy/highered/reg/hearulemaking/2016/index.html.

• U.S. Department of Education Program Participation Agreement

University of Phoenix’s Title IV Program Participation Agreement expired on December 31, 2012. The University has submitted necessary documentation for recertification and its eligibility continues on a month-to-month basis until the Department issues its decision on the application. We believe that the University’s application will be renewed in due course. However, we cannot predict whether or to what extent the continued challenging political and regulatory climate and other recent developments in general relating to the proprietary education sector and our business may have on the timing or outcome of the recertification process.

In February 2016, the Department notified the University that for the duration of the month-to-month continuation of the University’s Program Participation Agreement, University of Phoenix must obtain from the Department prior approval of substantial changes, including (i) the establishment of additional locations, (ii) any increase in the level of academic offering beyond those listed in the Institution’s Eligibility and Certification Approval Report and (iii) the addition of any educational program (including degree, nondegree, or short-term training programs). Some of these substantial changes include changes that previously could be implemented by the University upon notice to the Department and without prior approval.

Continued Title IV program eligibility is critical to the operation of our business. If University of Phoenix becomes ineligible to participate in Title IV programs, or participation is materially limited, our business would be unsustainable.

• Federal Trade Commission Investigation

In July 2015, we received a Civil Investigative Demand from the U.S. Federal Trade Commission (the “FTC”) relating to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or educational accreditation products or services. The Demand requires us to produce documents and information regarding a broad spectrum of the business and practices of University of Phoenix, including in respect of marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment, and other compliance matters, for the time period of January 1, 2011 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

• Military Benefit Programs

U.S. Department of Defense Tuition Assistance Program

On January 15, 2016, University of Phoenix was notified by the U.S. Department of Defense (“DoD”) that the University’s probationary status in respect of its participation in the DoD Tuition Assistance Program for active duty military personnel had been lifted, effective immediately. The University had been placed on probation in October 2015 pending a review by the Department of the University’s compliance with the DoD Voluntary Education Partnership Memorandum of Understanding with the University, which is the basis on which the University’s active duty military students participate in the DoD Tuition Assistance Program.

The University will be subject to a heightened compliance review for a period of one-year following the removal of probationary status. During this period, the University will continue to engage with the Department and complete the production of information and documents previously requested by the Department. In addition, the University will be subject to an enhanced compliance review in fiscal year 2017.

In fiscal year 2015, funding under the DoD Tuition Assistance Program represented less than 1% of the University’s net revenue.

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U.S. Department of Veterans Affairs Educational Benefits

University of Phoenix participates in the Department of Veterans Affairs educational benefits programs (“VA Programs”) for eligible veterans. Under these VA Programs, the educational locations serving veterans are subject to a compliance survey each year. Following the notice of probation in October 2015 from the Department of Defense, which has been subsequently lifted as described above, the Veterans Administration announced the commencement of the annual compliance survey, with an accelerated schedule and increased scope relative to prior years. The annual compliance review was completed with no adverse action imposed on the University. In fiscal year 2015, funding under VA Programs represented approximately 10% of University of Phoenix’s cash basis revenue, calculated on the same basis as for the 90/10 Rule.

• California Attorney General Investigations

In August 2015, we received an Investigative Subpoena from the Office of the Attorney General of the State of California. The Subpoena requires us to produce documents and information regarding the business and practices of University of Phoenix relating to members and former members of the U.S. military and California National Guard, including marketing, recruiting, billing, financial aid, accommodation and other services for military personnel, compliance with federal Executive Order 13607 (Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members), and use of U.S. military logos and emblems in marketing, for the time period of July 1, 2010 to the present.

In February 2016, we received a Second Investigative Subpoena from the Office of the Attorney General of the State of California in the Matter of the Investigation of For-Profit Educational Institutions, following the Investigative Subpoena we received in August 2015. The Second Investigative Subpoena, which is not limited to matters involving military students, seeks the production of documents and information regarding a broad spectrum of the business and practices of Apollo and its subsidiaries, including University of Phoenix, relating to marketing, recruiting, compensation of enrollment advisors, complaints, financial aid, compliance, accreditation, other governmental investigations, private litigation and other matters, as well as additional information relating to marketing and services to members and former members of the U.S. military and California National Guard, for the time period of July 1, 2010 to the present.

We are cooperating with the California Attorney General in these investigative proceedings. We cannot predict the eventual scope, duration or outcome of the investigations at this time.

• Financial Aid Funding Levels

The most recent reauthorization of the Higher Education Act expired September 30, 2013, but Title IV student financial aid programs remain authorized and functioning. Congress continues to engage in discussion and activity regarding Higher Education Act reauthorization, but the timing and terms of any eventual reauthorization cannot be predicted.

Title IV program funding is a potential target for reduction by Congress. Because the majority of our revenue is derived from Title IV programs, any action by Congress that reduces Title IV program funding, or which alters the eligibility of our institutions or students to participate in Title IV programs could have a material adverse effect on our enrollment and financial condition. Action by Congress or federal agencies could also require us to modify our practices in ways that increase our administrative costs and reduce our operating income.

In addition to possible reductions in Title IV program funding, military benefit programs may be reduced as military branches address decreased funding. Reductions and/or changes in military benefit programs, or changes in our eligibility to participate in such programs, could result in increased student borrowing, decreased enrollment and adverse impacts on our 90/10 Rule percentage.

Expansion of Global Operations

We have operations on six continents and recently expanded our global operations through the acquisition of Career Partner in the second quarter of fiscal year 2016 as discussed below. The integration and operation of acquired businesses in foreign jurisdictions entails substantial regulatory, market and execution risks and, consistent with our experience to date, such acquisitions may not be accretive for an extended period of time.

Professional Development

Although degree programs represent the substantial majority of our revenue, we are increasing our professional development and other nondegree programs, which includes business-to-business product and service offerings. We are expanding these programs both domestically and internationally through our subsidiaries, including through the nondegree bootcamp programs.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 43

Other Events

In addition to the above items, we experienced the following other events during fiscal year 2016:

• 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.

Critical Accounting Policies and Estimates

Refer to our 2015 Annual Report on Form 10-K for our critical accounting policies and estimates and refer to the following 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.

New Accounting Standards

For discussion of new accounting standards, refer to Note 1, Nature of Operations and Significant Accounting Policies, in Item 1, Financial Statements.

Results of Operations

We have included below a discussion of our operating results and significant items explaining the material changes in our operating results during the three and nine months ended May 31, 2016 compared to the three and nine months ended May 31, 2015.

As discussed in the Overview of this MD&A, the U.S. higher education industry continues to experience rapidly developing changes, including significant and increasing competition for the proprietary sector from public and private colleges and universities as these institutions continue to expand their online education programs. These developments have contributed to the substantial decline in University of Phoenix enrollment that began in late 2010.

Our operations are generally subject to seasonal trends, which vary depending on the subsidiary. We have historically experienced, and expect to continue to experience, fluctuations in our results of operations as a result of seasonal variations in the level of our institutions’ enrollments including, but not limited to, the following:

• 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.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 44

Analysis of Condensed Consolidated Statements of Operations

The following details our consolidated results of operations. For a more detailed discussion of our operating results by reportable segment, refer to Analysis of Operating Results by Reportable Segment below.

	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	%

Net Revenue

Our net revenue decreased $118.4 million and $356.6 million, or 17.5% and 18.1%, in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. The decreases were attributable to net revenue declines at University of Phoenix of 24.3% and 23.7% during the respective periods, principally due to lower enrollment. See discussion of the enrollment decline in Analysis of Operating Results by Reportable Segment - University of Phoenix below. This was partially offset by increases in Apollo Global net revenue.

Instructional and Student Advisory

Instructional and student advisory decreased $20.4 million and $70.9 million, or 6.9% and 7.8%, in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. This represented increases as a percentage of net revenue of 560 and 590 basis points, respectively. The decreases in expense were primarily due to lower costs that are more variable in nature such as faculty and curriculum associated with University of Phoenix’s enrollment decline, and lower costs including rent and compensation attributable to our restructuring activities. This was partially offset by costs attributable to our acquisitions, including Career Partner acquired during the second quarter of fiscal year 2016.

Marketing

Marketing decreased $29.3 million and $90.0 million, or 25.1% and 24.4%, in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. This represented decreases as a percentage of net revenue of 160 and 150 basis points, respectively. The decreases in expense and declines as a percentage of net revenue were principally attributable to lower advertising and related costs associated with University of Phoenix eliminating the use of third-party operated websites for marketing purposes in November 2015, which is discussed further in the Overview of this MD&A. The decrease was also

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 45

attributable to lower headcount as a result of our restructuring activities.

Admissions Advisory

Admissions advisory decreased $22.8 million and $73.4 million, or 43.0% and 43.7%, in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. This represented decreases as a percentage of net revenue of 250 and 260 basis points, respectively. The decreases in expense and declines as a percentage of net revenue were principally attributable to lower University of Phoenix headcount as a result of our restructuring activities.

General and Administrative

General and administrative decreased$5.4 million and $13.9 million, or 8.3% and 6.7%, in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. This represented increases as a percentage of net revenue of 110 and 140 basis points, respectively. The decreases in expense were primarily due to lower costs attributable to our restructuring activities. This was partially offset by an increase in expenses in connection with legal and regulatory matters, and costs attributable to our acquisitions, including Career Partner.

Depreciation and Amortization

Depreciation and amortization decreased $1.6 million and $13.2 million, or 5.5% and 13.8%, in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. This represented increases as a percentage of net revenue of 70 and 20 basis points, respectively. The decreases in expense were principally attributable to lower depreciation expense resulting from a decline in depreciable assets due in part to our restructuring activities.

Provision for Uncollectible Accounts Receivable

Provision for uncollectible accounts receivable increased $2.7 million and $1.4 million, or 20.8% and 3.4%, in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. This represented increases as a percentage of net revenue of 90 and 50 basis points, respectively. The increases in expense reflect our current estimate of receivables that will become uncollectible based on most recent trends.

Restructuring and Impairment Charges

Restructuring and impairment charges include the following for the respective periods:

	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

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, in Item 1, Financial Statements, for a discussion of goodwill impairment charges recorded during fiscal year 2016.

We have implemented various restructuring activities during prior fiscal years and remain focused on reengineering our business processes and educational delivery systems to reduce costs to align with our lower enrollment and revenue, and to improve the efficiency and effectiveness of our services to students. The activities initiated in prior years and those initiated in fiscal year 2016 are described below. Additionally, we intend to further reduce costs in future periods to align with our lower enrollment and revenue, and expect to incur material charges associated with other future restructuring activities.

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	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

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 46

Activities Initiated in Prior Years

Our restructuring activities initiated prior to fiscal year 2016 principally included closing approximately 150 University of Phoenix ground locations, rationalizing our leased administrative office facilities, and workforce reductions. During the nine months ended May 31, 2016, we incurred $44.0 million of expense for these prior year activities. The majority of the expense represents initial charges for the estimated fair value of future contractual operating lease obligations which are recorded when we cease using the respective facility, and an increase in our estimated future cash payments associated with exiting additional space at other locations included in the rationalization plan. We measure lease obligations at fair value using a discounted cash flow approach encompassing significant unobservable inputs (Level 3). The significant unobservable inputs principally include estimated future cash flows and discount rates which have ranged between 3%-7% for our lease obligations. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considers subleases that we have executed or expect to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

As of May 31, 2016, we had approximately $51 million of remaining lease obligations associated with the locations that we expect to close as University of Phoenix obtains the necessary regulatory approvals and completes its teach-out obligations. We will incur lease obligation charges for these locations when we cease using the respective facilities. We will also continue to incur interest accretion, and may record additional adjustments in future periods for the estimated obligations associated with facilities we have already exited.

Activities Initiated in Fiscal Year 2016

During the nine months ended May 31, 2016, we incurred $29.7 million of expense for new restructuring activities initiated during fiscal year 2016. Substantially all of the expense represents severance and other employee separation costs associated with the elimination of approximately 1,400 positions. The expense associated with these activities for the nine months ended May 31, 2016 is reflected in our segment reporting as follows: $16.0 million in University of Phoenix, $1.7 million in Apollo Global and $12.0 million in Other.

Refer to Note 2, Restructuring and Impairment Charges, in Item 1, Financial Statements, which is incorporated herein by reference, for further information on our restructuring activities.

Merger, Acquisition and Other Related Costs (Credit), Net

We recorded $8.3 million and $25.2 million of expense during the three and nine months ended May 31, 2016, respectively, which principally represents professional fees associated with our pending merger discussed further in the Overview of this MD&A. We also incurred transaction costs associated with our acquisition of Career Partner completed in December 2015.

We recorded $4.5 million of net expense during the nine months ended May 31, 2015, which includes transaction costs to complete the FAEL acquisition, costs related to other potential acquisitions that were not completed and changes in the fair value of contingent consideration associated with our acquisitions.

Provision for Income Taxes

Our effective income tax rate for continuing operations was 36.5% and 45.0% for the three months ended May 31, 2016 and 2015, respectively. Our lower pre-tax income in the third quarter of fiscal year 2016 causes items included in our tax provision to have a more significant impact on our effective income tax rate. The decrease in our effective income tax rate compared to the prior year period was primarily due to changes in the relative composition of our pre-tax income from domestic and foreign operations.

We generated a pre-tax loss for the nine months ended May 31, 2016, and our corresponding effective income tax rate for continuing operations was significantly impacted by the $71.8 million University of Phoenix goodwill impairment charge. This impairment charge was not deductible for tax purposes.

Loss from Discontinued Operations, Net of Tax

Loss from discontinued operations, net of tax represents Carnegie Learning, Inc., and includes a $13.0 million intangible asset impairment charge recorded during the second quarter of fiscal year 2015. Refer to Note 3, Discontinued Operations, in Item 1, Financial Statements.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 47

Analysis of Operating Results by Reportable Segment

The following details our operating results by reportable segment for the respective periods:

	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	)	*

* Not meaningful

University of Phoenix

University of Phoenix’s net revenue decreased$136.2 million and $389.3 million, or 24.3% and 23.7%, during the three and nine months ended May 31, 2016 compared to the prior year periods. The decreases were principally attributable to lower Average Degreed Enrollment as discussed below. The University’s revenue also decreased due to its transition to a reduced number of student cohort start dates, which resulted in students taking fewer courses during fiscal year 2016 as the new start dates were phased in, and the University’s increased use of discounts, grants and scholarships. Discounts, grants and scholarships increased 20 and 140 basis points as a percentage of the University’s gross revenue in the three and nine months ended May 31, 2016, respectively, compared to the prior year periods.

The University’s future net revenue will be impacted by pricing changes, changes in enrollment and student mix within programs, and discounts, grants and scholarships.

The following details University of Phoenix student enrollment for the respective periods:

	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	)%

⁽¹⁾ Represents students enrolled in a 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 (e.g., a graduate of an associate’s degree program returns for a bachelor’s degree); and students participating in certain certificate programs of at least 18 credits with some course applicability into a related degree program.

⁽²⁾ As described in Footnote 1, Degreed Enrollment includes students who attended a credit bearing course during the quarter and had not graduated as of the end of the quarter. The proportion of students included in Degreed Enrollment who have completed their academic work but not yet formally graduated (“academically complete students”) increased during the third quarter of fiscal year 2016 compared to the prior year period due to changes in the manner in which graduation applications are processed. We estimate that the number of academically complete students reflected in this increase is approximately 2,000 - 3,000.

⁽³⁾ Represents new students and students who have been out of attendance for more than 12 months who enroll in a 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.

⁽⁴⁾ Represents the average of quarterly Degreed Enrollment from the beginning to the end of the respective periods.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 48

University of Phoenix Average Degreed Enrollment decreased 22.2% in the nine months ended May 31, 2016 compared to the prior year period primarily due to the continued decline in New Degreed Enrollment. We believe the following factors, some of which are discussed in more detail in the Overview of this MD&A, contributed to the decrease:

• 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.

University of Phoenix had operating income of $59.7 million and $33.1 million during the three and nine months ended May 31, 2016, respectively, which were impacted by restructuring and impairment charges of $15.8 million and $118.2 million for the respective periods. The University had operating income of $103.4 million and $216.8 million during the three and nine months ended May 31, 2015, respectively, which were impacted by restructuring and impairment charges of $6.0 million and $34.2 million for the respective periods. The University’s operating results declined compared to the prior year periods due to lower net revenue, which was partially offset by lower costs attributable to our restructuring activities, lower advertising expense, and decreases in costs that are more variable in nature.

Apollo Global

Apollo Global’s net revenue increased $15.4 million and $28.3 million during the three and nine months ended May 31, 2016 compared to the prior year periods. The increases were due to revenue from the Career Partner acquisition and higher enrollment at international institutions, which was partially offset by the impact of foreign exchange rates (approximately $9 million and $32 million for the respective periods).

Apollo Global had an operating loss of $0.5 million in the third quarter of fiscal year 2016 compared to $5.5 million of operating income in the prior year period. Apollo Global had operating losses of $29.7 million and $26.9 million during the nine months ended May 31, 2016 and 2015, respectively. Apollo Global’s operating results include the following during the respective periods:

	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

Other

Other net revenue increased $2.5 million and $4.4 million during the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. The increases were primarily due to revenue from The Iron Yard, which we acquired during the fourth quarter of fiscal year 2015.

Other operating losses increased $11.6 million and $27.6 million during the three and nine months ended May 31, 2016, respectively, compared to the prior year periods. The increases were principally attributable to costs associated with our pending merger and restructuring charges.

Liquidity, Capital Resources, and Financial Position

We believe that our cash and cash equivalents and available liquidity will be adequate to satisfy our working capital and other liquidity requirements associated with our existing operations through at least the next 12 months, provided that our U.S. Department of Education financial responsibility composite scores calculated as of August 31, 2016 do not fall below 1.5. Our ability to deploy currently available liquidity is constrained by our need to maintain composite scores of at least 1.5 and, if the scores fall below 1.5, to finance the operation of our business, and the fact that our existing $625 million Revolving Credit Facility described below expires in April 2017. If our fiscal year 2016 composite scores fall below 1.5, we would be in default under our Revolving Credit Facility, and we would be subject to heightened cash monitoring by the Department of Education and other requirements, including possibly the requirement to submit 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 we received during our most recently completed fiscal year, as conditions to our continued participation in Title IV student financial aid programs. In addition, under new regulations that took effect on July 1, 2016, institutions placed on heightened cash monitoring must pay Title IV credit balances to students and parents before requesting Title IV funds from the Department and may not hold Title IV credit

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 49

balances on behalf of students or parents, which would require a significant change in the manner in which we process disbursements of Title IV funds. The collective impact of the consequences of a fiscal year 2016 composite score of less than 1.5 could significantly increase the amount of working capital necessary to operate our business at a time when our Revolving Credit Facility is no longer available, and, as a result, could render our business unsustainable without a significant infusion of equity or other funding. Under current market conditions, there is no assurance that other funding sources would be available in sufficient amounts on terms acceptable to us or at all, and any available equity funding would necessarily involve substantial dilution to our current shareholders. See further discussion of the composite score requirements in the Overview of this MD&A and Part II, Item 1A, Risk Factors, 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.

Furthermore, access to the credit markets and other sources of liquidity, including utilization of our Revolving Credit Facility described below, may be adversely affected if we experience other regulatory compliance challenges, reduced availability of Title IV program funding, or other adverse effects on our business from regulatory or legislative changes. For a detailed discussion of the regulatory environment and related risks, refer to Part I, Item 1A, Risk Factors, in our 2015 Annual Report on Form 10-K.

Our existing syndicated $625 million credit facility expires in April 2017. Due to the current challenging business and regulatory climate for the proprietary education sector and the continued decline in our operating performance, we expect that any subsequent credit facility, if one can be arranged, will be substantially smaller and more expensive than our current facility. We believe that a number of lenders, including certain members of our Revolving Credit Facility syndicate, have made a decision to exit the proprietary education sector, and initial discussions regarding renewal of our credit facility have not been encouraging. Accordingly, if our pending merger is not consummated, there is no assurance that we will be able to arrange a replacement credit facility on terms acceptable to us or at all, and much will depend on near-term developments in our business and the proprietary education sector generally.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents and Marketable Securities

The substantial majority of our cash and cash equivalents, including restricted cash and cash equivalents, are held by our domestic operations and placed with high-credit-quality financial institutions. The following provides a summary of these financial instruments as of the respective period ends:

							% 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	%

Cash and cash equivalents (excluding restricted cash) decreased $142.2 million primarily due to $101.2 million paid to acquire Career Partner, and $51.4 million for capital expenditures. This was partially offset by $9.6 million of cash provided by operations.

We consider the unremitted earnings attributable to certain of our foreign subsidiaries to be permanently reinvested. As of May 31, 2016, the unremitted earnings from these operations were not significant.

As of May 31, 2016, our cash and restricted cash equivalents included $111.2 million of money market funds that we measure at fair value. We determine fair value of these funds using a market approach with Level 1 inputs that primarily consist of real-time quotes for transactions in active exchange markets involving identical assets. Our remaining cash and cash equivalents approximate fair value because of the short-term nature of the financial instruments.

Our marketable securities, which principally include corporate bonds, tax-exempt municipal bonds, and time deposits, have original maturities to us greater than three months, and contractual maturities that will occur within three years. Our marketable securities are classified as available-for-sale and are measured at fair value. We determine the fair value of these investments using a market approach with Level 2 observable inputs including quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active. Refer to Note 5, Financial Instruments, in Item 1, Financial Statements.

Apollo Education Group, Inc. | Third Quarter 2016 Form 10-Q | 50

Debt

In fiscal year 2012, we entered into a syndicated $625 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility is used for general corporate purposes, which may include acquisitions and share repurchases. The term is five years and will expire in April 2017. The Revolving Credit Facility may be used for borrowings in certain foreign currencies and letters of credit, in each case up to specified sublimits.

We had no outstanding borrowings under the Revolving Credit Facility as of May 31, 2016 and August 31, 2015, but we had approximately $39 million and $41 million of outstanding letters of credit as of the respective periods. We also borrowed $50 million under the Revolving Credit Facility during the second quarter of fiscal year 2016, but subsequently repaid the amount later in the same quarter.

The Revolving Credit Facility fees are determined based on a pricing grid that varies according to our leverage ratio. The Revolving Credit Facility fee ranges from 25 to 40 basis points. Incremental fees for borrowings under the facility generally range from Prime + 25 to 85 basis points.

The Revolving Credit Facility contains various customary representations, covenants and other provisions, including a material adverse event clause and the following financial covenants: maximum leverage ratio, minimum interest and rent expense coverage ratio, and U.S. Department of Education financial responsibility composite score requirements. We were in compliance with all applicable covenants related to the Revolving Credit Facility at May 31, 2016 and August 31, 2015.

Other debt principally includes debt at subsidiaries of Apollo Global and other obligations. The weighted average interest rate on our outstanding other debt at May 31, 2016 and August 31, 2015 was 6.1% and 5.6%, respectively.

The carrying value of our debt, excluding capital leases, approximates fair value based on the nature of our debt, which includes consideration of the portion that is variable-rate.

Cash Flows

Operating Activities

The following provides a summary of our operating cash flows during the respective periods:

	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

Nine Months Ended May 31, 2016 - Our non-cash items primarily consisted of $82.5 million of depreciation and amortization, $76.5 million of impairment charges and losses on asset dispositions, a $43.8 million provision for uncollectible accounts receivable, and $27.3 million of share-based compensation. The changes in assets and liabilities, excluding the impact of acquisitions, primarily consisted of the following:

• 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.

We monitor University of Phoenix accounts receivable through a variety of metrics, including days sales outstanding. We calculate the University’s days sales outstanding by determining average daily student revenue based on a rolling twelve month analysis and divide it into its gross student accounts receivable balance as of the end of the period. As of May 31, 2016, University of Phoenix’s days sales outstanding was 22 days compared to 20 days as of May 31, 2015.

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Nine Months Ended May 31, 2015 - Our non-cash items primarily consisted of $101.8 million of depreciation and amortization, a $42.4 million provision for uncollectible accounts receivable, $29.8 million of share-based compensation, and $22.2 million for impairment charges and losses on asset dispositions. The changes in assets and liabilities, excluding the impact of acquisitions, primarily consisted of the following:

• 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.

The above changes were partially offset by a $22.7 million increase in deferred revenue principally attributable to increased enrollment at Open Colleges, and a $21.0 million decrease in prepaid taxes principally attributable to the timing and method of calculating our quarterly estimated income tax payments.

Investing Activities

The following provides a summary of our investing cash flows during the respective periods:

	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	)

Cash paid for acquisitions in fiscal year 2016 represents Apollo Global’s acquisition of Career Partner, and the prior year represents Apollo Global’s acquisition of FAEL.

Financing Activities

The following provides a summary of our financing cash flows during the respective periods:

	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	)

Nine Months Ended May 31, 2016 - The share repurchases during fiscal year 2016 related to tax withholding requirements on share-based awards. We did not repurchase shares under our share repurchase program during the nine months ended May 31, 2016.

As of May 31, 2016, we had $52.2 million available under our share repurchase authorization. There is no expiration date on the repurchase authorization and the amount and timing of future share repurchase authorizations and repurchases, if any, will be made as market and business conditions warrant. Repurchases occur at our discretion and may be made on the open market through various methods including but not limited to accelerated share repurchase programs, or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules, and may include repurchases pursuant to Securities and Exchange Commission Rule 10b5-1 nondiscretionary trading programs. We are prohibited from repurchasing shares under the agreements associated with our pending merger, as described in the Overview of this MD&A.

Nine Months Ended May 31, 2015 - Cash used in financing activities primarily consisted of $600.7 million used for payments on borrowings (net of proceeds from borrowings), $40.7 million used for share repurchases, and $21.4 million representing the financing portion of our Open Colleges contingent consideration payment. Share repurchases consisted of $38.1 million used to repurchase 1.4 million shares at a weighted average purchase price of $26.45 per share, and additional repurchases related to tax withholding requirements on share-based awards.

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Contractual Obligations and Other Commercial Commitments

On February 7, 2016, we entered into a merger agreement which is expected to be completed by the end of calendar year 2016. Refer to the Overview of this MD&A for additional information.

There have been no other material changes in our contractual obligations and other commercial commitments other than in the ordinary course of business since the end of fiscal year 2015 through May 31, 2016.

Information regarding our contractual obligations and other commercial commitments is provided in our 2015 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes to our market risk since August 31, 2015. For a discussion of our exposure to market risk, refer to our 2015 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We intend to maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our Chief Executive Officer (“Principal Executive Officer”) and our Chief Financial Officer (“Principal Financial Officer”), as appropriate, to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. Our Disclosure Committee meets on a quarterly basis and more often if necessary.

Our management, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act), as of the end of the period covered by this report. Based on that evaluation, management concluded that, as of that date, our disclosure controls and procedures were effective at the reasonable assurance level.

Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of our Principal Executive Officer and Principal Financial Officer, which are required in accordance with Rule 13a-14 of the Securities Exchange Act. This Disclosure Controls and Procedures section includes information concerning management’s evaluation of disclosure controls and procedures referred to in those certifications and, as such, should be read in conjunction with the certifications of our Principal Executive Officer and Principal Financial Officer.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting during the quarter ended May 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Note 15, Commitments and Contingencies, in Part I, Item 1, Financial Statements, for legal proceedings, which is incorporated into this Item 1 of Part II by this reference.

Item 1A. Risk Factors

In addition to the risk factors set forth below, see the risk factors included in our 2015 Annual Report on Form 10-K and the discussion in Key Trends, Developments and Challenges in Management’s Discussion and Analysis of Financial Condition and Results of Operations above.

Our pending merger may not be consummated, which may adversely affect our business, and our business may suffer as a result of uncertainty surrounding the pending merger.

As described above in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Pending Merger, on February 7, 2016, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with AP VIII Queso Holdings, L.P. (“Parent”), an affiliate of Apollo Management VIII, L.P., which is a fund managed by an affiliate of Apollo Global Management, LLC, none of which is, or has ever been, affiliated with us. At the effective time of the merger, which is expected to be completed by the end of calendar year 2016, each share of our issued and outstanding Class A and Class B common stock will be converted pursuant to the terms of the Merger Agreement into the right to receive $10.00 per share in cash. On May 6, 2016, the Merger Agreement was approved by the holders of our outstanding Class A and Class B common stock, each voting separately as a class.

Consummation of the merger is subject to customary and other conditions, including:

(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.

In addition, consummation of the merger is subject to our satisfying certain minimum operating metrics, measured as of the first or second month end preceding the closing date, depending on the day of the month on which closing occurs, as follows:

(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 currently expect to satisfy these minimum operating metrics if the closing occurs on or prior to October 9, 2016, which is the latest closing date for which the relevant operating metrics are derived from our fiscal year 2016 financial and operating results. However, our expected fiscal year 2016 enrollment and operating results have declined since our December forecast. If our enrollment or operating results continue to decline, we may not be able to satisfy one or more of these closing conditions, either before or after October 9, 2016. If we fail to satisfy one or more of these closing conditions, Parent would be entitled to terminate the Merger Agreement and elect not to consummate the merger.

There is no assurance that the conditions to the consummation of the merger will be satisfied in a timely manner or at all.

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If the merger is not consummated, our stock price could fall to the extent that the current price reflects an assumption that the merger will be consummated. Furthermore, if the merger is not consummated, we may suffer other consequences that could adversely affect our business and financial condition, including the following:

• 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.

We may suffer additional consequences in connection with the announcement and pendency of the merger which could adversely impact our business and financial condition, whether or not the merger is consummated, including the following:

• 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.

In addition, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services, other transaction costs and employee retention costs in connection with the merger, and these fees and costs are payable by us regardless of whether the merger is consummated.

For additional information related to the merger and the Merger Agreement, please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 8, 2016, our definitive proxy statement filed with the Commission on March 23, 2016, the supplement to the definitive proxy statement filed with the Commission on May 2, 2016, and the amendments to the Merger Agreement attached to our Current Report on Form 8-K filed with the Commission on May 2, 2016 and this Quarterly Report on Form 10-Q. The foregoing description of the Merger Agreement and the merger does not purport to be complete and is subject to, and qualified in its entirety by the full text of the Merger Agreement attached as Exhibit 2.1 to our Current Report on Form 8-K filed with the Commission on February 8, 2016, Amendment No. 1 to the Merger Agreement attached as Exhibit 2.1 to our Current Report on Form 8-K filed with the Commission on May 2, 2016, and Amendment No. 2 to the Merger Agreement attached as Exhibit 2.2 to this Quarterly Report on Form 10-Q.

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.

To participate in Title IV programs, the U.S. Department of Education regulations specify that an eligible institution of higher education must satisfy specific measures of financial responsibility prescribed by the Department, or post a letter of credit in favor of the Department and accept other conditions on its participation in Title IV programs. Pursuant to the Title IV program

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regulations, each eligible institution must satisfy a measure of financial responsibility that is based on a weighted average of the following three annual ratios which assess the financial condition of the institution:

• 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.

These ratios provide three individual scores which are converted into a single composite score. The maximum composite score is 3.0. If an institution’s composite score is at least 1.5, it is considered financially responsible. If an institution’s composite score is less than 1.5 but is 1.0 or higher, it is still considered financially responsible, and the institution may continue to participate as a financially responsible institution for up to three years under the Department’s “zone” alternative. Under the zone alternative, the Department may subject the institution to various operating or other requirements, which may include:

(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.

If an institution does not achieve a composite score of at least 1.0, it is subject to additional requirements in order to continue its participation in the Title IV programs, including:

(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.

In addition, under new regulations that took effect on July 1, 2016, institutions placed on either the heightened cash monitoring payment method or the reimbursement payment method must pay Title IV credit balances to students and parents before requesting Title IV funds from the Department and may not hold Title IV credit balances on behalf of students or parents, even if such balances are expected to be applied to future tuition payments.

The composite scores for Apollo Education Group and University of Phoenix, which are calculated as of the end of our fiscal year, were as follows for the indicated periods:

	Fiscal Year
	2015	2014	2013
Apollo Education Group	2.6	2.5	2.6
University of Phoenix	2.9	2.3	2.5

As discussed in Note 7, Goodwill and Intangibles, in Item 1, Financial Statements, we recorded $73.4 million of goodwill impairment charges relating to our University of Phoenix and Western International University reporting units during the first quarter of fiscal year 2016, which was primarily the result of a substantial decline in our market capitalization. These impairment charges increase our fiscal year 2016 total operating expenses, which will negatively impact our fiscal year 2016 composite scores to be calculated as of August 31, 2016. Currently, we anticipate that our fiscal year 2016 composite scores will be above 1.5. However, if our profitability declines further than expected, including as a result of additional goodwill impairment charges, which could result from further declines in our market capitalization, higher than expected restructuring charges, our inability to execute on our currently planned cost reduction initiatives, a more than anticipated decline in enrollment, or other unexpected changes or developments, our fiscal year 2016 composite scores could fall below 1.5.

We believe that we may be able to take certain corrective measures to maintain composite scores of 1.5 or greater, if we

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determine that there is increased risk that our fiscal year 2016 composite scores will fall below that level, depending on the circumstances causing the expected decline. However, such measures, if available, may require material modifications to our business and strategy that would adversely impact our future revenue and profitability and/or may involve the issuance of equity or equity-linked securities under challenging circumstances that could result in material dilution to our existing shareholders.

If our composite score falls below 1.5, our liquidity could be subject to severe stress due to the following factors:

• 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.

The combined effect of the above factors could cause our business to no longer be sustainable without a significant infusion of equity or other funding. Under current market conditions, there is no assurance that other funding sources would be available in sufficient amounts on terms acceptable to us or at all, and any available equity funding would necessarily involve substantial dilution to our current shareholders.

In addition to the composite score requirements, the Department regulations specify extensive criteria an institution must satisfy to establish that it has the requisite administrative capability to participate in Title IV programs. The failure of an institution to satisfy any of the criteria used to assess administrative capability may cause the Department to determine that the institution lacks administrative capability and, therefore, subject the institution to additional scrutiny or deny eligibility for Title IV programs. These criteria require, among other things, that the institution:

• 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.

If we, or our schools eligible to participate in Title IV programs fail to maintain administrative capability or financial responsibility, as defined by the Department, our schools could lose their eligibility to participate in Title IV programs or have that eligibility adversely conditioned, which could significantly reduce the enrollments and revenues of our schools eligible to participate in Title IV programs and materially and adversely affect our business and financial condition.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchase of Equity Securities

Our Board of Directors has authorized us to repurchase outstanding shares of our Class A common stock from time to time depending on market conditions and other considerations. During fiscal year 2013, our Board of Directors authorized an increase in the amount available under our share repurchase program up to an aggregate amount of $250 million, of which $52.2 million remained available as of May 31, 2016. There is no expiration date on the repurchase authorizations and repurchases occur at our discretion. We are prohibited from repurchasing shares under the agreements associated with our pending merger, as described further in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Pending Merger.

We did not repurchase shares of our Class A common stock during the three months ended May 31, 2016, and the following details changes in our treasury stock during the three months ended May 31, 2016:

(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

Resales by Directors and Officers

From time to time, our directors and officers enter into written trading plans under Securities and Exchange Commission Rule 10b5-1(c) for the resale of shares of our common stock, including shares to be acquired upon the vesting of restricted stock units and performance share awards, and shares to be acquired pursuant to the exercise of stock options. These plans, which must be entered into during an open trading window and at a time when the director or officer is not in possession of material nonpublic information, provide for sales in accordance with a formula, algorithm or other instructions such that the seller cannot exercise any influence over how, when or whether to effect sales. After adopted, sales may occur in accordance with the plans regardless of whether or not the seller subsequently possesses material nonpublic information or otherwise would then be permitted to trade in our securities. Our insider trading policy permits the adoption of these types of trading plans, and we encourage our directors and officers to utilize such plans, where practical. We do not announce, via Form 8-K or otherwise, the adoption or any termination of such trading plans, if any. Sales under these plans generally must be reported within two business days on Form 4 filed with the SEC, pursuant to Section 16 of the Securities Exchange Act of 1934, as amended.

Sales of Unregistered Securities

We did not have any sales of unregistered equity securities during the three months ended May 31, 2016.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Exhibit Description
2.1	Amendment No. 1 to the Agreement and Plan of Merger, dated as of May 1, 2016(1)
2.2	Amendment No. 2 to the Agreement and Plan of Merger, dated as of June 17, 2016
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

⁽¹⁾ Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 2, 2016.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

APOLLO EDUCATION GROUP, INC.

An Arizona Corporation

Date: July 7, 2016

By:	/s/  Gregory J. Iverson
	Gregory J. Iverson Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer (Principal Financial and Accounting Officer)

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EX-2.2

EXECUTION VERSION

Exhibit 2.2

AMENDMENT NO. 2 TO THE AGREEMENT AND PLAN OF MERGER

This AMENDMENT NO. 2 (this “Amendment No. 2”), dated as of June 17, 2016, to the Agreement and Plan of Merger, dated as of February 7, 2016 (as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of May 1, 2016, the “Merger Agreement”), by and among Apollo Education Group, Inc., an Arizona corporation (the “Company”), AP VIII Queso Holdings, L.P., a Delaware limited partnership (“Parent”), and Socrates Merger Sub, Inc., an Arizona corporation and wholly owned subsidiary of Parent (“Merger Sub”) is made and entered into by and among Parent, Merger Sub and the Company. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement.

RECITALS

WHEREAS, Parent, Merger Sub and the Company entered into the Merger Agreement on February 7, 2016;

WHEREAS, Section 9.2 of the Merger Agreement provides that at any time prior to the Effective Time, the parties thereto may modify, supplement or amend the Merger Agreement, by a written agreement authorized by the board of directors and executed and delivered by duly authorized officers of the respective parties;

WHEREAS, each of Parent, Merger Sub and the Company desires to amend certain terms of the Merger Agreement as set forth this Amendment No. 2 and to make certain representations, warranties, covenants and agreements in connection with this Amendment No. 2; and

WHEREAS, the respective boards of directors or other governing body of each of Parent, Merger Sub and the Company and the holders of Class A Shares and Class B Shares have approved the Merger on the terms and subject to the conditions set forth in the Merger Agreement and have approved and declared advisable the Merger Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows:

1.     College for Financial Planning, University of Phoenix and Western International University Governance.   Section 6.18 of the Merger Agreement is hereby amended and restated in its entirety to read as follows:

“6.18    College for Financial Planning, University of Phoenix and Western International University Governance. After the Closing Date, but subject to the

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terms hereof, the independent members of the board of trustees of the College for Financial Planning (“CFP”), the independent members of the board of trustees of the University of Phoenix, Inc. (“UOPX”) and the independent members of the board of trustees of Western International University, Inc. (“WIU”) shall continue to serve in such capacity. None of Parent, any Subsidiary or Affiliate of Parent or their respective directors, officers, employees or other agents, shall (i) cause the termination or resignation of, or otherwise involuntarily dismiss, any independent member of the board of trustees of CFP, UOPX or WIU prior to the expiration of the term of any such independent member of the board of trustees, except as consistent with the organizational and governance documents of CFP, UOPX or WIU, as applicable, and permitted by applicable law; (ii) amend, alter, or modify in any material respect (A) the Master Services Agreement, dated as of March 22, 2013, by and between the Company and UOPX, and any statements of work related thereto or (B) the Master Services Agreement, dated as of September 1, 2014, by and between the Company and certain Subsidiaries of the Company and any statements of work between the Company and WIU, and the Company and CFP, related thereto, in the case of each of clause (A) and (B), as in effect as of the date of this Agreement, except as may be required in the ordinary course; or (iii) amend, alter or modify the organizational and governance documents of CFP, UOPX or WIU that are in place as of the date hereof, except as may be required in the ordinary course, provided that any such changes remain consistent and compliant with standards regarding institutional governance as established by the Higher Learning Commission.

2.    Form of Bylaws of Surviving Corporation. Exhibit B of the Merger Agreement is hereby amended and restated in its entirety to read as set forth in Annex A to this Amendment No. 2.

3.    Definitions.Annex A of the Merger Agreement is hereby amended to add the following as a defined term:

CFP        6.18

4.     Interpretation; Construction.Subsection (d) of Section 9.13 of the Merger Agreement is hereby amended and restated in its entirety to read as follows:

“(d)    Each reference to “herein”, “hereof,” “hereunder,” “hereby,” and “this Agreement” shall, from and after the date of Amendment No. 2, refer to the Merger Agreement, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of May 1, 2016 and Amendment No. 2 to the Agreement and Plan of Merger dated as of June 17, 2016. Each reference herein to “the date of this Amendment” shall refer to May 1, 2016, each reference to the “date of this Amendment No. 2” shall refer to June 17, 2016 and each reference to the “date of this Agreement”, the “date hereof”, “concurrently with the execution and delivery of this Agreement” and similar references shall refer to February 7, 2016.”

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5.    Representations and Warranties. 

(a) Company. The Company hereby represents and warrants to Parent and Merger Sub that (i) the Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute and deliver this Amendment No. 2 and perform its obligations under this Amendment No. 2 and (ii) this Amendment No. 2 has been duly executed and delivered by the Company and, assuming the due execution and delivery of this Amendment No. 2 by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to the Bankruptcy and Equity Exception.

(b) Parent and Merger Sub. Parent and Merger Sub each hereby represent and warrant to the Company that (i) each of Parent and Merger Sub has all requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform its obligations under this Amendment No. 2 and (ii) this Amendment No. 2 has been duly executed and delivered by each of Parent and Merger Sub and, assuming due execution and delivery of this Amendment No. 2 by the Company, constitutes a legal, valid and binding agreement of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its term, subject to the Bankruptcy and Equity Exception.

6.    Confirmation of Merger Agreement.  Other than as expressly modified pursuant to this Amendment No. 2, all of the terms, covenants and other provisions of the Merger Agreement are hereby ratified and confirmed and shall continue to be in full force and effect in accordance with their respective terms.

7.     Counterparts.  This Amendment No. 2 may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute one and the same agreement.

8.    Miscellaneous. The provisions of Article IX of the Merger Agreement shall apply mutatis mutandis to this Amendment No. 2, and to the Merger Agreement as modified by this Amendment No. 2, taken together as a single agreement, reflecting the terms therein as modified by this Amendment No. 2.

[Signature page follows]

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IN WITNESS WHEREOF, this Amendment No. 2 has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above.

APOLLO EDUCATION GROUP, INC.
By:	/s/ Jeff Langenbach
	Name: Jeff Langenbach
	Title: Senior Vice President

[Signature Page to Amendment No. 2 to Agreement and Plan of Merger]

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AP VIII QUESO HOLDINGS, L.P.
By:	Apollo Advisors VIII, L.P.,
	its general partner
By:	Apollo Capital Management VIII, LLC,
	its general partner
By:	/s/ Laurie D. Medley
	Name: Laurie D. Medley
	Title: Vice President

SOCRATES MERGER SUB, INC.
By:	/s/ Laurie D. Medley
	Name: Laurie D. Medley
	Title: Vice President

[Signature Page to Amendment No. 2 to Agreement and Plan of Merger]

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Annex A

Form of Bylaws of the Surviving Corporation

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SECOND AMENDED & RESTATED BYLAWS

OF

APOLLO EDUCATION GROUP, INC.

(Adopted [ • ], 2016)

ARTICLE I

Offices

Section 1.    Known Place of Business; Statutory Agent. The name and address of the statutory agent of Apollo Education Group, Inc. (the “Corporation”) in the State of Arizona shall be as set forth in the Second Amended and Restated Articles of Incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Articles of Incorporation”). The known place of business of the Corporation in the State of Arizona shall be as set forth in the Articles of Incorporation. The Corporation’s known place of business and its statutory agent in the State of Arizona may be changed from time to time by or under the authority of the board of directors of the Corporation (the “Board of Directors”) in the manner provided in the Arizona Revised Statutes (the “ARS”).

Section 2.     Other Offices.     The Corporation may have a principal or other office or offices at such other place or places, either within or without the State of Arizona, as the Board of Directors may from time to time determine or as shall be necessary or appropriate for the conduct of the business of the Corporation.

ARTICLE II

Shareholders

Section 1.    Place of Meetings. All meetings of shareholders shall be held at the principal office of the Corporation or at such other place, if any, within or without the State of Arizona, or by means of remote communication, as may be designated by the Board of Directors and stated in the notice of the meeting.

Section 2.    Annual Meetings. An annual meeting of shareholders for the election of directors and the transaction of such other business as may properly come before the meeting shall be held on such day and at such hour, as shall be fixed by the Board of Directors and designated in the notice of the meeting. At each annual meeting, the shareholders entitled to vote shall elect a Board of Directors and may transact such other corporate business as may properly be brought before the meeting.

Section 3.    Special Meetings. A special meeting of the shareholders (or of any class thereof) for any purpose or purposes may be called at any time by the Chairman of the Board, if any, the President or by order of the Board of Directors and shall be called by the President or the Secretary upon the written request therefor delivered to the President or Secretary signed by shareholders holding of record more than 50% of the outstanding shares of the Corporation entitled to vote at such meeting. Such written request shall state the purpose or purposes for which such meeting is to be called and the call therefor shall be issued within sixty (60) days after the receipt of said request. Business transacted at all special meetings shall be confined to the objects specifically stated in the call therefor.

Section 4.    Notice of Meetings. Except as otherwise expressly required by law, written notice of each meeting of shareholders, whether annual or special, shall be given at least ten (10) and not more

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than sixty (60) days before the date on which the meeting is to be held to each shareholder of record entitled to vote thereat by delivering a notice thereof to such shareholder personally or by mailing such notice in a postage prepaid envelope directed to such shareholder at such shareholder’s address as it appears on the share ledger of the Corporation, unless such shareholder shall have filed with the Secretary of the Corporation a written request that notices intended for such shareholder be directed to another address, in which case such notice shall be directed to such shareholder at the address designated in such request. Notices of each meeting of shareholders, whether annual or special, shall set forth the date, time, place, if any, the means of remote communications, if any, by which shareholders or proxy holders may be deemed to be present in person and vote at such meeting, and the record date for determining the shareholders entitled to vote at such meeting (if such date is different from the record date for shareholders entitled to notice of the meeting). Notices of each special meeting of shareholders shall also set forth the purpose or purposes for which the meeting is called. “Notice” includes notice given by facsimile or other form of wire or wireless communication if permitted by applicable law and if given in compliance therewith. If electronically transmitted by means of facsimile or other form of wire or wireless communication, including electronic mail, then notice is deemed given when transmitted and directed to a facsimile number or electronic mail address, as the case may be, at which the shareholder has consented to receive notice. If mailed, notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the shareholder in the manner set forth herein. An affidavit of the Secretary or of the transfer agent or other agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Section 5.    List of Shareholders. The Secretary or any Assistant Secretary of the Corporation shall produce, beginning two (2) business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, a complete list of the shareholders entitled to vote thereat (provided, however, if the record date for determining the shareholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the shareholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of such shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting for a period beginning two (2) business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, either at the principal place of business of the Corporation during ordinary business hours, the office of the Corporation’s transfer agent if specified in the meeting notice or at another place identified in the meeting notice in the city where the meeting will be held. If the meeting is to be held at a place, such list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any shareholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any shareholder during the whole time of the meeting on a reasonably accessible electronic network (provided that the information required to access such list shall be provided with the notice of the meeting). Except as otherwise provided by law, the original or duplicate share ledger shall be the only evidence as to the shareholders entitled to examine such list or to vote in person or by proxy at such meeting.

Section 6.     Quorum; Adjournment of Meetings. Except as otherwise provided by law, the Articles of Incorporation or these Second Amended & Restated Bylaws of the Corporation (“Bylaws”), the presence in person or by proxy of the holders of a majority in voting power of the outstanding shares entitled to vote at the meeting shall constitute a quorum for the transaction of business at all meetings of the shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum. If less than a quorum shall be present or represented at the time for which the meeting shall have been called, the shareholders so present in person or by proxy at such meeting may, by a majority in voting power thereof, adjourn the meeting from time to time without any notice or call other than by an announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall attend. Any

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meeting or adjournment thereof at which a quorum is present may also be adjourned in like manner without notice or call or upon such notice or call as may be determined by vote of the holders of a majority in voting power voting thereon. If, however, the adjournment is for more than one-hundred twenty (120) days, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at such meeting. If after the adjournment a new record date for determination of shareholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix as the record date for determining shareholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of shareholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each shareholder of record as of the record date so fixed for notice of such adjourned meeting. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted if the meeting had been held as originally called.

Section 7.    Voting.     Except as otherwise provided in the Articles of Incorporation, at every meeting of shareholders, each holder of record of the issued and outstanding shares of the Corporation entitled to vote at such meeting shall be entitled to one (1) vote in person or by proxy for each such share having voting power upon the matter in question held by such shareholder, provided, that with respect to elections of directors, each holder of record of the issued and outstanding shares of the Corporation entitled to vote at such meeting shall be entitled to cumulate their votes by multiplying the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and casting the product for a single candidate or distributing the product among two or more candidates. Each shareholder entitled to vote at a meeting of shareholders or to express consent to corporate action in writing without a meeting may authorize another person or persons to act for such shareholder by proxy, but no proxy shall be voted after twelve (12) months from its date (unless a longer duration is permitted by the ARS and the shareholder designates a longer duration). A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may remain irrevocable regardless of whether the interest with which it is coupled is an interest in the share itself or an interest in the Corporation generally. Shares of the Corporation belonging to the Corporation directly or indirectly shall not be voted directly or indirectly; provided, however, that the foregoing shall not limit the right of the Corporation to vote any shares of the Corporation held by it in a fiduciary capacity (and to count such shares for purposes of determining a quorum). Except as otherwise required by the laws of the State of Arizona or the Articles of Incorporation, and except for the election of directors, at all meetings of the shareholders, a quorum being present, all matters shall be decided by the affirmative vote of the holders of a majority in voting power of the shares entitled to vote thereon which are present in person or by proxy. On any vote by ballot, each ballot shall be signed by the shareholder voting, or in such shareholder’s name by such shareholder’s proxy, if there be such a proxy, and shall state the number of shares voted by such shareholder and the number of votes to which each share is entitled.

Section 8.    Organization of Meeting. The Chairman of the Board, if any, shall preside at all meetings of shareholders, or in his or her absence, the Vice Chairman of the Board, if any, shall preside, or in his or her absence, the President of the Corporation shall preside. If neither the Chairman of the Board, the Vice Chairman of the Board or the President is present at the meeting, the holders of a majority of the shares present at the meeting and entitled to vote, in person or by proxy, shall select a person to preside at the meeting. Subject to the requirements of any applicable law or the rules and regulations of any national securities exchange, national securities association or interdealer quotation system upon which the Corporation’s securities may be listed, the person presiding at a meeting of shareholders shall determine the order of business and the procedure at the meeting, including, without limitation, the regulation of the manner of voting and the conduct of any discussion, as he or she believes to be in order. The Secretary of the Corporation shall act as secretary of all meetings of shareholders, or in his or her absence, any Assistant Secretary of the Corporation

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who is present shall act as secretary of the meeting, or if no Assistant Secretary shall be present, the person presiding at such meeting shall appoint a secretary for that particular meeting.

Section 9.    Action Without a Meeting. Unless otherwise restricted by the Articles of Incorporation, any action required or permitted to be taken at any annual or special meeting of the shareholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by all the holders of outstanding shares entitled to vote thereon and shall be delivered to the Corporation in accordance with applicable law. In the event that the action which is consented to is such as would have required the filing of a certificate with any governmental body, if such action had been voted on by shareholders at a meeting thereof, the certificate filed shall state, in lieu of any statement required by law concerning any vote of shareholders, that consent had been given in accordance with the provisions of Section 10-704 of the ARS. Without limiting the manner by which consent may be given, written consent may be given by means of electronic transmission to the fullest extent permissible under the ARS.

Section 10.    Ratification of Acts of Directors and Officers. Except as otherwise provided by law or by the Articles of Incorporation, any transaction or contract or act of the Corporation or of the directors or the officers of the Corporation may be ratified by the affirmative vote of the holders of the number of shares which would have been necessary to approve such transaction, contract or act at a meeting of shareholders, or by the written consent of shareholders in lieu of a meeting.

ARTICLE III

Board of Directors

Section 1.    General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by the ARS or the Articles of Incorporation.

Section 2.    Number of Directors; Term of Office. The Board of Directors shall consist of nine (9) members but may be increased or decreased as hereinafter provided. Each director shall hold office until the annual meeting of the shareholders next following his or her election and until his or her successor shall have been elected and shall qualify, or until his or her death, resignation or removal from office or a decrease in the number of directors. At any time or from time to time at a special meeting called for that purpose, the Board of Directors, by the vote of a majority of the entire Board, may increase the number of directors of the Corporation, or may decrease the number of directors of the Corporation; provided, however, that in no event shall the number of directors of the Corporation be less than one (1). Directors shall be elected at the annual meeting of shareholders. Directors need not be shareholders or residents of the State of Arizona.

Section 3.    Quorum; Manner of Acting; Telephonic Participation. Unless otherwise provided by law, the presence of a majority of the entire Board of Directors shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum, the directors present shall adjourn the meeting from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. At all meetings of the directors, a quorum being present, all matters shall be decided by the affirmative vote of a majority of the directors present, except as otherwise required by the laws of the State of Arizona or the Articles of Incorporation. All or any one or more directors may participate in a meeting of the Board of Directors or of any committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to such communications equipment shall constitute presence in person at such meeting. The minutes

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of any meeting of the Board of Directors or of any committee thereof held by telephone shall be prepared in the same manner as a meeting of the Board of Directors or of such committee held in person.

Section 4.     Place of Meetings. The Board of Directors may hold its meetings at such place or places, within or without the State of Arizona, as the Board of Directors may from time to time determine.

Section 5.    Annual Meeting. As promptly as practicable after each annual meeting of the shareholders for the election of directors, the Board of Directors shall meet for the purpose of the appointment of officers and the transaction of such other business as may properly come before the meeting. Notice of such meeting need not be given if held immediately after the annual meeting of shareholders. Such meeting may be held at any other time or place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors or in a waiver of notice thereof signed by all the directors.

Section 6.    Regular Meetings. Regular meetings of the Board of Directors may be held at such time and place, within or without the State of Arizona, as shall from time to time be determined by the Board of Directors. After there has been such determination, and notice thereof has been given to each member of the Board of Directors, regular meetings may be held without further notice being given.

Section 7.    Special Meetings and Notice Thereof. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President or by a majority of the directors. Notice of the time, date and place of each such meeting shall be mailed to each director, addressed to him or her at his or her residence or usual place of business, at least four (4) days before the date on which the meeting is to be held, or shall be given to him or her by telegraph, teletype, facsimile or other form of wire or wireless communication, or be delivered personally or by telephone, not later than the day before the day on which such meeting is to be held. Such notice shall state the time and place of the meeting, but need not state the purposes thereof. In lieu of the notice to be given as set forth above, a waiver thereof in writing, signed by the director or directors entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto for purposes of this Section 7. If mailed, such notice shall be deemed to be delivered at the earliest of (i) when received, (ii) five (5) days after its deposit in the United States mail as evidenced by the postmark, if mailed postpaid and correctly addressed or (iii) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and if the receipt is signed by or on behalf of the addressee. If sent by any other means (including facsimile, courier, electronic mail or express mail, etc.), such notice shall be deemed to be delivered when actually delivered to the home or business address, electronic address or facsimile number of the director. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, and objects at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Arizona, as the place for holding any special meeting of the Board of Directors called by them.

Section 8.     Removal. Except as otherwise provided by the Articles of Incorporation or applicable law, the entire Board of Directors or any individual director may be removed from office with or without cause by the holders of a majority in voting power of the outstanding shares entitled to vote at an election of directors. In case the Board of Directors or any one or more directors be so removed, one or more individuals may be appointed at the same meeting at which such director or directors have been so removed to fill the vacancy or vacancies created thereby, to serve for the remainder of the terms, respectively, of the director or directors so removed.

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Section 9.    Resignation. Any director of the Corporation may resign at any time by giving written notice thereof to the Board of Directors, the Chairman of the Board, if any, or the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 10.    Vacancies on Board of Directors. If any vacancy occurs in the Board of Directors caused by the death, resignation, retirement, disqualification or removal from office of any director or otherwise, or any new directorship is created by any increase in the authorized number of directors, a majority of the directors then in office, though less than a quorum, may fill the vacancy or newly created directorship, as the case may be, or such vacancy or newly created directorship may be filled at an annual meeting or at a special meeting of the shareholders called for that purpose. Each director so elected shall hold office until the next meeting of shareholders at which directors are elected and until his or her successor shall be elected and shall be qualified or until his or her death, resignation or removal from office.                         

Section 11    Waiver of Notice and Consent. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though such meeting had been duly held after a regular call and notice, if a quorum be present and if, before or after the meeting, each of the directors not present signs or electronically transmits a written waiver of notice of such meeting whether before or after the date stated therein. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of directors or members of a committee of directors need be specified in any written waiver of notice. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 12.    Committees. The Board of Directors may, by resolution of the Board of Directors, designate one or more committees, each committee to consist of one or more directors of the Corporation, which, to the extent provided in the resolution or in these Bylaws, shall have and may exercise such powers of the Board of Directors in the management of the business and affairs of the Corporation, as the Board of Directors may by resolution determine and specify in the respective resolutions appointing them, subject to such restrictions as may be contained in the Articles of Incorporation or the laws of the State of Arizona. Such committee or committees shall have such name or names as may be determined from time to time by resolutions adopted by the Board of Directors. The committees shall keep regular minutes of their proceedings and report the same to the Board of Directors when required. A majority of all the members of any such committee may, subject to ARS § 10-825(C), fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Arizona, of its meetings and specify what notice thereof, if any, shall be given, unless the Board of Directors shall otherwise by resolution provide. The Board of Directors shall have the power to change the membership of any such committee at any time, to fill vacancies thereon and to discharge any such committee, either with or without cause, at any time. Each member of any such committee shall be paid such fee, if any, as shall be fixed by the Board of Directors for each meeting of such committee which he or she shall attend and for his or her expenses, if any, of attendance at each regular or special meeting of such committee as shall be determined by the Board of Directors.

Section 13.     Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors, or committee.

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Section 14.    Fees and Compensation. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, the Board of Directors may, if it so desires, authorize members of the Board of Directors to be compensated for their expenses, if any, of attendance at each regular or special meeting of the Board of Directors. Such compensation may, in the Board of Directors’ discretion, also include a fixed sum for each meeting and an annual fee for serving as a director, such as may be allowed by resolution of the Board of Directors. Directors who are officers or employees of the Corporation may receive, if the Board of Directors desires, fees for serving as directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

ARTICLE IV

Officers

Section 1.    Officers. The principal officers of the Corporation shall be chosen by the Board of Directors and may include a President, one or more Vice Presidents, a Treasurer and a Secretary. The Board of Directors may also choose such other officers, including, without limitation, a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer and one or more Senior or Executive Vice Presidents, as may be appointed in accordance with the provisions of these Bylaws. One person may hold the offices and perform the duties of any two or more of said officers.

Section 2.     Election or Appointment and Term of Office. The principal officers of the Corporation shall be appointed annually by the Board of Directors at the annual meeting thereof. Each such officer shall hold office until his or her successor shall have been duly chosen and shall qualify, or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided.

Section 3.     Subordinate Officers. In addition to the principal officers enumerated in Section 1 of this Article IV, the Corporation may have one or more Assistant Treasurers, one or more Assistant Secretaries and such other officers, agents and employees as the Board of Directors may deem necessary, each of whom shall hold office for such period, have such authority, and perform such duties as the President, the Chief Executive Officer, if any, or the Board of Directors may from time to time designate. The Board of Directors may delegate to any principal officer the power to appoint and to remove any such subordinate officers, agents or employees.

Section 4.    Removal. Any officer may be removed, either with or without cause, at any time, by resolution adopted by the Board of Directors at any regular meeting of the Board of Directors or at any special meeting of the Board of Directors called for that purpose at which a quorum is present, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.

Section 5.    Resignations. Any officer may resign at any time by giving written notice to the Corporation. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 6.    Vacancies. A vacancy in any office may be filled for the unexpired portion of the term in the manner prescribed in these Bylaws for appointment to such office for such term.

Section 7.     Powers and Duties. The officers shall each have such authority and perform such duties in the management of the Corporation as from time to time may be prescribed by the Board of

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Directors and as may be delegated by the President or the Chief Executive Officer, if any, without limiting the foregoing:

(a)     Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors and he or she shall have and perform such other duties as from time to time may be assigned to him or her by the Board of Directors.

(b)     Vice Chairman of the Board. The Vice Chairman of the Board shall be the assistant to the Chairman of the Board of Directors and shall assume the Chairman’s responsibilities in the event of his or her absence or disability or as directed by the Chairman of the Board.

(c)     President; Chief Executive Officer. Unless a separate Chief Executive Officer is appointed, the President shall serve as the Chief Executive Officer of the Corporation. The Chief Executive Officer shall, subject to the direction of the Board of Directors, have general and active control of the affairs and business of the Corporation and general supervision of its officers, officials, employees and agents. In the absence of a Chairman of the Board or Vice Chairman of the Board, he or she shall preside at all meetings of the shareholders, at all meetings of the Board of Directors and any committee thereof of which he or she is a member, unless the Board of Directors or such committee shall have chosen another chairman. He or she shall see that all orders and resolutions of the Board of Directors are carried into effect, and in addition he or she shall have all the powers and perform all the duties generally pertaining to the office of the Chief Executive Officer of a corporation. If a separate Chief Executive Officer is appointed, the President shall have and perform such duties as otherwise generally pertain to such office and as may be assigned to him or her by the Board of Directors. Subject to the control and direction of the Board of Directors, the President may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation.

(d)    Executive Vice President. The Executive Vice Presidents in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Chief Executive Officer or the Board of Directors may from time to time prescribe.

(e)    Senior Vice President. The Senior Vice Presidents in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President and the Executive Vice Presidents, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Chief Executive Officer or the Board of Directors may from time to time prescribe.

(f)     Vice President. The Vice Presidents in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, the Executive Vice Presidents and the Senior Vice Presidents, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Chief Executive Officer or the Board of Directors may from time to time prescribe.

(g)     Treasurer. The principal financial officer of the Corporation shall be the Treasurer of the Corporation unless the Board of Directors has designated another officer to serve as principal financial officer. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation and shall deposit all such funds in the name of the Corporation in such banks or other depositories as shall be selected by the Board of Directors. He or she shall exhibit at all reasonable times his or her books of account and records to any of the directors of the Corporation during business hours at the office of the Corporation where such books and records shall be kept; when requested by the Board of Directors or any

14

committee thereof, he or she shall render a statement of the condition of the finances of the Corporation at any meeting of the Board of Directors or any committee thereof or at the annual meeting of shareholders; he or she shall receive, and give receipt for, monies due and payable to the Corporation from any source whatsoever; and, in general, he or she shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer or the Board of Directors. The Treasurer shall give such bond, if any, for the faithful discharge of his or her duties as the Board of Directors may require.

(h)    Secretary. The Secretary, if present, shall act as secretary at all meetings of the Board of Directors or any committee thereof and of the shareholders and keep the minutes thereof in a book or books to be provided for that purpose. He or she shall see that all notices required to be given by the Corporation are duly given and served; he or she shall have charge of the share records of the Corporation; he or she shall see that all reports, statements and other documents required by law are properly kept and filed; and in general, he or she shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Chief Executive Officer or the Board of Directors

Section 8.    Salaries. The salaries of the principal officers shall be fixed from time to time by the Board of Directors or a committee thereof appointed for such purpose, and the salaries of any other officers may be fixed by the Chief Executive Officer.

ARTICLE V

Shares

Section 1.    Certificates of Shares. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its shares shall be uncertificated. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of shares represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, or the President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation representing the number of shares registered in certificate form; provided, however, that, where any such certificate is signed (a) by a transfer agent or an assistant transfer agent, or (b) by a transfer clerk acting on behalf of the Corporation and a registrar, if the Board of Directors shall by resolution so authorize, the signature of such Chairman of the Board, President, Vice President, Treasurer, Secretary, Assistant Treasurer or Assistant Secretary may be facsimiles thereof. In case any officer or officers of the Corporation who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate shall cease to be such officer or officers, whether by reason of death, resignation or otherwise, before such certificate shall have been delivered by the Corporation, such certificate may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate, or whose facsimile signature or signatures shall have been affixed thereto, had not ceased to be such officer or officers.

Section 2.    Share Ledger. A record shall be kept by the Secretary, transfer agent or by any other officer, employee or agent designated by the Board of Directors of the name of the person, firm or corporation holding the shares represented by such certificate, the number of shares represented by such certificate, and the date of issuance thereof, and in case of cancellation, the date of cancellation.

15

Section 3.    Cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 6 of this Article V.

Section 4.    Transfers of Shares. Transfers of shares of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation or with a transfer clerk or a transfer agent appointed as provided in Section 5 of this Article V, and on surrender of the certificate or certificates, if any, for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided, however, that whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact, if known to the Secretary of the Corporation, shall be so expressed in the entry of transfer.

Section 5.    Regulations. The Board of Directors may make such rules and regulations as it may deem expedient, not inconsistent with the Articles of Incorporation or these Bylaws, concerning the issue, transfer and registration of shares of the Corporation. It may appoint, or authorize any principal officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates of shares to bear the signature or signatures of any of them.

Section 6.    Lost, Stolen, Mutilated or Destroyed Certificates. As a condition to the issuance of a new certificate or uncertificated shares in the place of any certificate theretofore issued and alleged to have been lost, stolen, mutilated or destroyed, the Board of Directors, in its discretion, may require the owner of any such certificate, or his legal representatives, to give the Corporation a bond in such sum and in such form as it may direct or to otherwise indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft, mutilation or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. Proper evidence of such loss, theft, mutilation or destruction shall be procured for the Board of Directors, if required. The Board of Directors, in its discretion, may authorize the issuance of such new certificate or uncertificated shares without any bond when in its judgment it is proper to do so.

Section 7.     Record Date.

(a)    In order that the Corporation may determine the shareholders entitled to notice of any meeting of shareholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, unless otherwise required by law, not be more than seventy (70) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the shareholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of shareholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for shareholders entitled to

16

notice of such adjourned meeting the same or an earlier date as that fixed for determination of shareholders entitled to vote in accordance herewith at the adjourned meeting.

(b)    In order that the Corporation may determine the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than seventy (70) days prior to such action. If no such record date is fixed, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

(c)    Unless otherwise restricted by the Articles of Incorporation, in order that the Corporation may determine the shareholders entitled to express consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than seventy (70) days before the meeting or action requiring a determination of shareholders. If no record date for determining shareholders entitled to express consent to corporate action in writing without a meeting is fixed by the Board of Directors, (i) when no prior action of the Board of Directors is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, and (ii) if prior action by the Board of Directors is required by law, the record date for such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

ARTICLE VI

Amendments

Section 1.    Amendments by Shareholders. These Bylaws may be altered, amended or repealed and new Bylaws may be added by the shareholders at any annual meeting of the shareholders or at any special meeting thereof if notice of the proposed alteration, amendment, repeal or addition be contained in the notice of such special meeting, by the affirmative vote of the holders of a majority in voting power of the shares entitled to vote thereon.

Section 2.    Amendments by the Board of Directors. The Board of Directors may adopt, amend or repeal these Bylaws by the affirmative vote of the Board of Directors at any regular or special meeting of the Board of Directors (except to the extent provided in ARS § 10-1020(A)(2)). If the power to adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the Articles of Incorporation it shall not divest or limit the power of the shareholders to adopt, amend or repeal Bylaws.

ARTICLE VII

Miscellaneous Provisions

Section 1.     Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 2.    Voting of Securities Owned by the Corporation. The Board of Directors may authorize any person on behalf of the Corporation to attend, waive notice, vote or consent and grant proxies

17

(with or without power of substitution), with respect to the securities of any other entity which may be held by this Corporation.

Section 3.    Dividends; Reserves.

(a)    Subject to any restrictions contained in the Articles of Incorporation, the Board of Directors may declare and pay dividends upon the Corporation’s shares from the Corporation’s surplus, or if there be none, out of its net profits for the current fiscal year and/or the preceding fiscal year. Dividends may be paid in cash, in property or in shares of the Corporation, subject to the provisions of the Articles of Incorporation. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. Dividends shall be payable upon such dates as the Board of Directors may designate.

(b)    If the dividend is to be paid in shares of the theretofore unissued shares of the Corporation, the Board of Directors shall, by resolution, direct that there be designated as capital in respect of such shares such amount as shall be determined by the Board of Directors; provided, however, that no such designation as capital shall be necessary if shares are being distributed by the Corporation pursuant to a split-up or division of its shares.

(c)    The Board of Directors may set apart out of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

Section 4.    Corporate Seal. The Board of Directors may adopt a corporate seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Arizona.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

18

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory W. Cappelli, certify that:

1. I have reviewed this Form 10-Q of Apollo Education Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 7, 2016

/s/ Gregory W. Cappelli  

Gregory W. Cappelli 

Chief Executive Officer and Director

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory J. Iverson, certify that:

1. I have reviewed this Form 10-Q of Apollo Education Group, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 7, 2016

/s/ Gregory J. Iverson

Gregory J. Iverson

Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Apollo Education Group, Inc. (the “Company”) on Form 10-Q for the quarter ended May 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory W. Cappelli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 7, 2016

/s/ Gregory W. Cappelli  

Gregory W. Cappelli 

Chief Executive Officer and Director

(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to Apollo Education Group, Inc. and will be retained by Apollo Education Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Apollo Education Group, Inc. (the “Company”) on Form 10-Q for the quarter ended May 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory J. Iverson, Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 7, 2016

/s/ Gregory J. Iverson

Gregory J. Iverson

Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer

(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to Apollo Education Group, Inc. and will be retained by Apollo Education Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	May 31, 2016	Jul. 05, 2016
Entity Information [Line Items]
Document Type	10-Q
Document Period End Date	May 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Registrant Name	Apollo Education Group Inc
Entity Central Index Key	0000929887
Current Fiscal Year End Date	--08-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Apollo Class A nonvoting common stock [Member]
Entity Information [Line Items]
Entity Common Stock Outstanding (in shares)		108,305,152
Apollo Class B voting common stock [Member]
Entity Information [Line Items]
Entity Common Stock Outstanding (in shares)		475,149

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	May 31, 2016	Aug. 31, 2015
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	0	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
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	0	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
Additional paid-in capital	0	0
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
Common stock [Member] | Apollo Class A nonvoting common stock [Member]
Shareholders’ equity:
Apollo common stock	103	103
Total equity	103	103
Common stock [Member] | Apollo Class B voting common stock [Member]
Shareholders’ equity:
Apollo common stock	1	1
Total equity	$ 1	$ 1

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015
Income Statement [Abstract]
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	0	0	0	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	0	(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 [Abstract]
Continuing operations attributable to Apollo	$ 0.19	$ 0.47	$ (0.89)	$ 0.59
Discontinued operations attributable to Apollo	0.00	(0.02)	(0.03)	(0.14)
Basic income (loss) per share attributable to Apollo (in dollars per share)	0.19	0.45	(0.92)	0.45
Earnings (loss) per share, Diluted [Abstract]
Continuing operations attributable to Apollo	0.19	0.46	(0.89)	0.58
Discontinued operations attributable to Apollo	0.00	(0.02)	(0.03)	(0.14)
Diluted income (loss) per share attributable to Apollo (in dollars per share)	$ 0.19	$ 0.44	$ (0.92)	$ 0.44
Basic weighted average shares outstanding (in shares)	108,658	107,678	108,567	108,140
Diluted weighted average shares outstanding (in shares)	109,444	108,623	108,567	109,124

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015
Statement of Comprehensive Income [Abstract]
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

[1] The tax effect during the three and nine months ended May 31, 2016 and 2015, respectively, was not significant.

XML

Condensed Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interests - USD ($) shares in Thousands, $ in Thousands	Total		Redeemable noncontrolling interests [Member]	Apollo Class A nonvoting common stock [Member]	Apollo Class B voting common stock [Member]	Permanent Equity [Member]	Common stock [Member] Apollo Class A nonvoting common stock [Member]	Common stock [Member] Apollo Class B voting common stock [Member]	Additional paid-in capital [Member]	Apollo Class A treasury stock [Member]	Retained earnings [Member]	Accumulated other comprehensive loss [Member]	Total Apollo shareholders' equity [Member]	Noncontrolling interests [Member]
Balance at Aug. 31, 2014	$ 1,180,802						$ 103	$ 1	$ 0	$ (3,936,607)	$ 5,143,949	$ (27,320)	$ 1,180,126	$ 676
Shares at Aug. 31, 2014				188,007	475
Redeemable noncontrolling interests at Aug. 31, 2014			$ 64,527
Treasury stock outstanding (in shares) at Aug. 31, 2014										79,585
Share repurchases (in shares)				0	0					1,549
Share repurchases	(40,700)		0	$ 0	$ 0				0	$ (40,700)	0	0	(40,700)	0
Share reissuances (in shares)				0	0					(352)
Share reissuances	995		0	$ 0	$ 0				27,593	$ 14,590	13,998	0	995	0
Net tax effect for stock incentive plans	(3,839)		0	0	0				(3,839)	0	0	0	(3,839)	0
Share-based compensation	29,768		0	0	0				29,768	0	0	0	29,768	0
Currency translation adjustment	(44,923)		(11,975)	0	0	$ (32,948)			0	0	0	(32,893)	(32,893)	(55)
Available-for-sale securities adjustment, net of tax	290	[1]	0	0	0				0	0	0	290	290	0
Acquisitions	0		3,437	0	0				0	0	0	0	0	0
Redemption value adjustments			(4,948)	0	0	(4,948)			0	0	(4,948)	0	(4,948)	0
Net (loss) income	48,363			0	0				0	0	48,239	0	48,239	124
Net (loss) income			(4,592)
Other	1,664		0	$ 0	$ 0				1,664	$ 0	0	0	1,664	0
Treasury stock outstanding (in shares) at May. 31, 2015										80,782
Balance at May. 31, 2015	1,179,447						103	1	0	$ (3,962,717)	5,201,238	(59,923)	1,178,702	745
Redeemable noncontrolling interests at May. 31, 2015			56,345
Shares at May. 31, 2015				188,007	475
Balance at Aug. 31, 2015	1,145,058						103	1	0	$ (3,928,419)	5,153,452	(80,579)	1,144,558	500
Shares at Aug. 31, 2015				188,007	475
Redeemable noncontrolling interests at Aug. 31, 2015	11,915		11,915
Treasury stock outstanding (in shares) at Aug. 31, 2015										80,082
Share repurchases (in shares)				0	0					91
Share repurchases	(732)		0	$ 0	$ 0				0	$ (732)	0	0	(732)	0
Share reissuances (in shares)				0	0					(359)
Share reissuances	638		0	$ 0	$ 0				23,219	$ 13,872	9,985	0	638	0
Net tax effect for stock incentive plans	(4,099)		0	0	0				(4,099)	0	0	0	(4,099)	0
Share-based compensation	27,318		0	0	0				27,318	0	0	0	27,318	0
Currency translation adjustment	(2,794)		(949)	0	0	(1,845)			0	0	0	(1,796)	(1,796)	(49)
Available-for-sale securities adjustment, net of tax	89	[1]	0	0	0				0	0	0	89	89	0
Redemption value adjustments			(1,389)	0	0	$ (1,389)			0	0	(1,389)	0	(1,389)	0
Net (loss) income	(100,313)			$ 0	$ 0				0	$ 0	(100,417)	0	(100,417)	104
Net (loss) income			(5,151)
Treasury stock outstanding (in shares) at May. 31, 2016										79,814
Balance at May. 31, 2016	1,064,725						$ 103	$ 1	$ 0	$ (3,915,279)	$ 5,061,631	$ (82,286)	$ 1,064,170	$ 555
Redeemable noncontrolling interests at May. 31, 2016	$ 7,204		$ 7,204
Shares at May. 31, 2016				188,007	475

[1] The tax effect during the three and nine months ended May 31, 2016 and 2015, respectively, was not significant.

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	May 31, 2016	May 31, 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	0	(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	0	(236)
Payment for contingent consideration	0	(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:
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

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Nature of Operations and Significant Accounting Policies

9 Months Ended

May 31, 2016

Accounting Policies [Abstract]

Nature of Operations and Significant Accounting Policies

Nature of Operations and Significant Accounting Policies

Apollo Education Group, Inc. is one of the world’s largest private education providers, serving students since 1973. We offer undergraduate, graduate, certificate andnondegree educational programs and services, online and on-campus, principally to working learners in the U.S. and abroad. Refer toNote 17,Segment Reporting, for further information regarding our institutions and operating segments.Our fiscal year is from September 1 to August 31.

On February 7, 2016, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with AP VIII Queso Holdings, L.P., an affiliate of Apollo Management VIII, L.P., which is a fund managed by an affiliate of Apollo Global Management, LLC, none of which is, or has ever been, affiliated with us. At the effective time of the merger, which is expected to be completed by the end of calendar year 2016, each share of our issued and outstanding Class A and Class B common stock will be converted pursuant to the terms of the Merger Agreement into the right to receive $10.00 per share in cash. On May 6, 2016, the Merger Agreement was approved by the holders of our outstanding Class A and Class B common stock, each voting separately as a class.

Consummation of the merger is subject to customary and other conditions, including:

(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.

In addition, consummation of the merger is subject to our satisfying certain minimum operating metrics, measured as of the first or second month end preceding the closing date, depending on the day of the month on which closing occurs, as follows:

(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).

We currently expect to satisfy these minimum operating metrics if the closing occurs on or prior to October 9, 2016, which is the latest closing date for which the relevant operating metrics are derived from our fiscal year 2016 financial and operating results. However, our expected fiscal year 2016 enrollment and operating results have declined since our December forecast. If our enrollment or operating results continue to decline, we may not be able to satisfy one or more of these closing conditions, either before or after October 9, 2016. If we fail to satisfy one or more of these closing conditions, Parent would be entitled to terminate the Merger Agreement and elect not to consummate the merger.

The Merger Agreement may be terminated by each of us and Parent under certain circumstances, including if the merger is not consummated by 5:00 pm Eastern time on February 1, 2017. Upon termination of the Merger Agreement under certain specified circumstances, but not including a termination solely due to our failure to satisfy the minimum operating metrics described above, we will be required to pay Parent a termination fee of approximately $27.5 million, and under other specified circumstances, Parent will be required to pay us a reverse termination fee of $25.0 million.

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in our opinion, reflect all adjustments of a normal, recurring nature that are necessary for the fair presentation of our financial condition, results of operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes included in our 2015 Annual Report on Form 10-K as filed with the SEC on October 22, 2015. We consistently applied the accounting policies described in the notes to our consolidated financial statements included in our 2015 Annual Report on Form 10-K in preparing these unaudited interim condensed consolidated financial statements.

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ materially from our estimates under different assumptions, judgments or conditions.

Principles of Consolidation

These financial statements include the assets, liabilities, revenues and expenses of Apollo Education Group, Inc., our wholly-owned subsidiaries, and other subsidiaries that we control. We eliminate intercompany transactions and balances in consolidation.

Seasonality

Our operations are generally subject to seasonal trends, which vary depending on the subsidiary. We have historically experienced, and expect to continue to experience, fluctuations in our results of operations as a result of seasonal variations in the level of our institutions’ enrollments including, but not limited to, the following:

• 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.

Because of the seasonal nature of our business and other factors, the results of operations for the three and nine months ended May 31, 2016 are not necessarily indicative of the results to be expected for the fiscal year ending August 31, 2016.

Reclassifications

We reclassified prior periods for the following to conform to our current presentation:

• 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.

New Accounting Standards

Accounting Standards Recently Adopted

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”(“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. We early adopted ASU 2015-17 during our first quarter of fiscal year 2016 on a retrospective basis. Accordingly, we reclassified the current deferred taxes to noncurrent on our August 31, 2015 Condensed Consolidated Balance Sheet, which increased noncurrent deferred tax assets $64.7 million and decreased noncurrent deferred tax liabilities $3.7 million.

In September 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”(“ASU 2015-16”). The standard requires that adjustments made to provisional amounts recognized in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. ASU 2015-16 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and early adoption is permitted. We early adopted ASU 2015-16 during our first quarter of fiscal year 2016, which had no impact on our consolidated financial statements, and we will apply the new standard to future adjustments to provisional amounts.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). The standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. We adopted ASU 2014-08 during our first quarter of fiscal year 2016, which had no impact on our consolidated financial statements, and we will apply the new standard to applicable components that are determined to be held for sale or disposed in future periods.

Future Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. Accordingly, the standard is effective for us on September 1, 2020 using a modified retrospective approach. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We do not plan to early adopt ASU 2016-09, and the standard is effective for us on September 1, 2017. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”(“ASU 2016-02”). The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Accordingly, the standard is effective for us on September 1, 2019 using a modified retrospective approach. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on September 1, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”(“ASU 2014-09”). The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”, which defers the effective dateof ASU 2014-09 by one year to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. Accordingly, the new revenue recognition standard is effective for us on September 1, 2018 using either a full retrospective or a modified retrospective approach. The FASB has also issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard:

• 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”.

We are currently evaluating which transition approach to use and the impact that the new revenue recognition standards will have on our consolidated financial statements.

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Restructuring and Impairment Charges

9 Months Ended

May 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Impairment Charges

Restructuring and Impairment Charges

Restructuring and impairment charges include the following for the respective periods:

	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

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, for discussion of the goodwill impairment charges recorded during fiscal year 2016.

Restructuring Charges

We have implemented various restructuring activities during prior fiscal years and remain focused on reengineering our business processes and educational delivery systems to reduce costs to align with our lower enrollment and revenue, and to improve the efficiency and effectiveness of our services to students. The activities initiated in prior years and those initiated in fiscal year 2016 are described below. Additionally, we intend to further reduce costs in future periods to align with our lower enrollment and revenue, and expect to incur material charges associated with other future restructuring activities.

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	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

The following details the changes in our restructuring liabilities during the nine months ended May 31, 2016:

	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

⁽¹⁾ We have incurred $461 million of cumulative costs associated with restructuring activities initiated prior to fiscal year 2016, which include lease exit, employee separation, and other related costs of $292 million, $116 million and $53 million, respectively. These cumulative costs have been reflected in our segment reporting as follows: $339 million in University of Phoenix, $19 million in Apollo Global, and $103 million in Other.

⁽²⁾ The gross, undiscounted obligation associated with our restructuring liabilities as of May 31, 2016 was approximately $144 million, which principally represents costs for non-cancelable leases that will be paid over the respective lease terms through fiscal year 2023.

Activities Initiated in Prior Years

Our restructuring activities initiated prior to fiscal year 2016 principally included closing approximately 150 University of Phoenix ground locations, rationalizing our leased administrative office facilities, and workforce reductions. During the nine months ended May 31, 2016, we incurred $44.0 million of expense for these prior year activities. The majority of the expense represents initial charges for the estimated fair value of future contractual operating lease obligations which are recorded when we cease using the respective facility, and an increase in our estimated future cash payments associated with exiting additional space at other locations included in the rationalization plan. We measure lease obligations at fair value using a discounted cash flow approach encompassing significant unobservable inputs (Level 3). The significant unobservable inputs principally include estimated future cash flows and discount rates which have ranged between 3%-7% for our lease obligations. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considers subleases that we have executed or expect to execute, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

As of May 31, 2016, we had approximately $51 million of remaining lease obligations associated with the locations that we expect to close as University of Phoenix obtains the necessary regulatory approvals and completes its teach-out obligations. We will incur lease obligation charges for these locations when we cease using the respective facilities. We will also continue to incur interest accretion, and may record additional adjustments in future periods for the estimated obligations associated with facilities we have already exited.

Activities Initiated in Fiscal Year 2016

During the nine months ended May 31, 2016, we incurred $29.7 million of expense for new restructuring activities initiated during fiscal year 2016. Substantially all of the expense represents severance and other employee separation costs associated with the elimination of approximately 1,400 positions. The expense associated with these activities for the nine months ended May 31, 2016 is reflected in our segment reporting as follows: $16.0 million in University of Phoenix, $1.7 million in Apollo Global and $12.0 million in Other.

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Discontinued Operations

9 Months Ended

May 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

During the first quarter of fiscal year 2016, we completed the sale of Carnegie Learning for a nominal amount resulting in a $2.8 million loss on sale. We do not have significant continuing involvement with Carnegie Learning after the sale.

During fiscal year 2015, we began presenting Carnegie Learning’s assets and liabilities as held for sale on our Condensed Consolidated Balance Sheets and its operating results as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented. Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment.

The major components of Carnegie Learning’s assets and liabilities presented separately as held for sale on our Condensed Consolidated Balance Sheets as of August 31, 2015 are as follows:

($ 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

The following summarizes Carnegie Learning’s operating results for the respective periods, which are presented in Loss from discontinued operations, net of tax on our Condensed Consolidated Statements of Operations:

	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	)

⁽¹⁾ Represents an impairment charge to write-off certain Carnegie Learning technology intangibles that were no longer being used. The associated technology had been incorporated into University of Phoenix’s academic platform and as a result of the University ceasing use of the technology, no future cash flows associated with the technology were expected over its remaining useful life. Accordingly, we recorded a $13.0 million impairment charge representing the remaining carrying value.

The operating results of our discontinued operations only includes revenues and costs directly attributable to the discontinued operations. Accordingly, no interest expense or general corporate overhead has been allocated to Carnegie Learning. Additionally, we ceased depreciation on Carnegie Learning’s property and equipment when we determined it was held for sale.

We determined cash flows from our discontinued operations are not material and are included with cash flows from continuing operations on our Condensed Consolidated Statements of Cash Flows.

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Acquisitions

9 Months Ended

May 31, 2016

Business Combinations [Abstract]

Acquisitions

Acquisitions

Fiscal Year 2016 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. This acquisition supports our strategy to diversify and expand our global operations. We made an initial cash payment of €96 million (equivalent to approximately $105 million on the acquisition date), and the acquisition includes a potential contingent consideration payment in the future of up to €11 million (equivalent to $12.3 million as of May 31, 2016). The contingent payment is calculated principally based on Career Partner’s operating results for calendar year 2016, and its estimated fair value on the acquisition date was $10.7 million, which we determined using a discounted cash flow valuation method encompassing significant unobservable inputs. The inputs include estimated operating results for the performance period and the discount rate applied. During the third quarter of fiscal year 2016, we finalized the amount of working capital acquired at closing, which resulted in a $3.5 million reduction in the purchase price.

We incurred approximately $2.0 million of transaction costs in connection with this acquisition and these costs are included in Merger, acquisition and other related costs (credit), net on our Condensed Consolidated Statements of Operations in the nine months ended May 31, 2016.

We accounted for the acquisition as a business combination and allocated the purchase price, which includes the initial cash payment, the fair value of the contingent consideration and the working capital adjustment, to the assets acquired and liabilities assumed at fair value as summarized below:

($ in thousands)
Cash and cash equivalents	$	4,580
Property and equipment	13,682
Intangibles:
Trademarks (indefinite useful life)	30,469
Accreditations (indefinite useful life)	27,948
Student and customer relationships (5 year useful life)	9,097
Curriculum (5 year useful life)	3,726
Goodwill	92,840
Other assets	2,092
Deferred revenue	(28,380		)
Capital lease obligations	(22,734		)
Other liabilities	(20,340		)
Total assets acquired and liabilities assumed	$	112,980

We determined the fair value of assets acquired and liabilities assumed based on assumptions that reasonable market participants would use while employing the concept of highest and best use of the respective items. We used the following assumptions, the majority of which include significant unobservable inputs, and valuation methodologies to determine fair value:

• 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.

We recorded $92.8 million of goodwill as a result of the Career Partner acquisition, which is not expected to be deductible for tax purposes. The goodwill is principally attributable to the future earnings potential associated with enrollment growth and other intangibles that do not qualify for separate recognition such as the assembled workforce. The goodwill is included in our Apollo Global reportable segment and we have selected a July 1 annual goodwill impairment test date.

We assigned an indefinite useful life to the acquired trademarks and accreditations intangibles as we believe they have the ability to generate cash flows indefinitely. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the intangibles’ useful life and we intend to renew the intangibles, as applicable, and renewal can be accomplished at little cost. We determined all other acquired intangibles are finite-lived and we are amortizing them on either a straight-line basis or using an accelerated method to reflect the pattern in which we expect the economic benefits of the assets to be consumed. The weighted average original useful life of the acquired finite-lived intangibles was 5 years. Refer to Note 7, Goodwill and Intangibles, for the estimated future amortization of our finite-lived intangibles.

Career Partner’s operating results are included in our condensed consolidated financial statements from the acquisition date. We have not provided pro forma information or the revenue and operating results of Career Partner because its results of operations are not material to our consolidated results of operations.

Fiscal Year 2015 Acquisitions

During fiscal year 2015, we completed the following acquisitions to support our strategy to diversify and expand our professional development offerings and global operations:

• 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.

We accounted for these acquisitions as business combinations, and the operating results of The Iron Yard and FAEL are included in our consolidated financial statements from the respective acquisition dates. We have not provided pro forma information or the revenue and operating results of the acquired entities because their results of operations are not material, either individually or in the aggregate, to our consolidated results of operations in the respective periods of acquisition. The purchase price allocations are summarized below:

($ 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

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Financial Instruments

9 Months Ended

May 31, 2016

Financial Instruments [Abstract]

Financial Instruments

Financial Instruments

We invest our excess cash in a variety of marketable securities, which are all classified as available-for-sale. The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective period ends:

	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

⁽¹⁾ Cash and cash equivalents includes restricted cash and cash equivalents.

We measure our financial instruments at fair value on a recurring basis as follows:

• 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.

Our marketable securities have maturities that occur within three years. We may sell certain of our marketable securities prior to their stated maturities for strategic reasons including, but not limited to, investment yield and credit risk management. We have not recognized significant gains or losses related to such sales.

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Accounts Receivable, Net

9 Months Ended

May 31, 2016

Receivables [Abstract]

Accounts Receivable, Net

Accounts Receivable, Net

Accounts receivable, net consist of the following as of the respective period ends:

($ 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

Student accounts receivable is composed primarily of amounts due related to tuition and educational services. The following summarizes the activity in allowance for doubtful accounts for the respective periods:

	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

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Goodwill and Intangibles

9 Months Ended

May 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangibles

Goodwill and Intangibles

The following details changes in our goodwill by reportable segment during the nine months ended May 31, 2016:

($ 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

Intangibles consist of the following as of the respective period ends:

	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

⁽¹⁾ We acquired certain intangibles during fiscal year 2016 as a result of our acquisition of Career Partner. Refer to Note 4, Acquisitions.

The estimated future amortization expense of our finite-lived intangibles as of May 31, 2016 is as follows:

($ 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

⁽¹⁾ Estimated future amortization expense may vary as acquisitions and dispositions occur in the future and as a result of foreign currency translation adjustments.

Goodwill Impairments

Our market capitalization declined significantly during the first quarter of fiscal year 2016 after we reported our fourth quarter fiscal year 2015 results and our business outlook for fiscal year 2016. We believe the decline in the first quarter of fiscal year 2016 was attributable to University of Phoenix’s lower enrollment, increasing risk associated with the proprietary education sector, and uncertainty associated with its strategy to transform into a more focused, higher retaining and less complex institution. Additionally, initiatives associated with the University’s new strategy have accelerated the enrollment decline at the University and negatively impacted its cash flows in the short-term. Based on the decline in market capitalization, we performed an interim goodwill impairment analysis for University of Phoenix in the first quarter of fiscal year 2016.

University of Phoenix represents the substantial majority of our consolidated operating results and, as discussed above, we believe our market capitalization decline in the first quarter of fiscal year 2016 was attributable to the University. Accordingly, we estimated the fair value of our University of Phoenix reporting unit using a market-based valuation approach, which incorporated assumptions that we believe would be a reasonable market participant’s view of the increased risk and uncertainty associated with the University and its expected future cash flows. The market-based approach included multiples derived from comparable companies with consideration of the University’s current operating trends and transformational strategy in relation to the other companies. Our interim step one goodwill impairment analysis resulted in a lower estimated fair value for University of Phoenix compared to its carrying value. Based on the University’s estimated fair value and a hypothetical purchase price allocation, we determined the University had no implied goodwill. Accordingly, we recorded a $71.8 million impairment charge in the first quarter of fiscal year 2016 representing the University’s entire goodwill balance. We did not record an income tax benefit associated with this charge as the University’s goodwill is not deductible for tax purposes.

During the first quarter of fiscal year 2016, we also recorded a $1.6 million goodwill impairment charge representing the entire goodwill balance for our Western International University reporting unit. Western International University operates in the same sector of the U.S. proprietary education industry as University of Phoenix.

The majority of our other reporting units have annual goodwill impairment test dates during our fourth fiscal quarter, and we have not recorded any goodwill impairments for our other reporting units during fiscal year 2016. As part of our goodwill impairment evaluations in fiscal year 2016, we compared the sum of the estimated fair values of our reporting units to our market capitalization, plus an assumed control premium to acquire a controlling interest in Apollo. We considered the purchase price associated with our pending merger in estimating an assumed control premium. Based on our evaluation, the fair values of our reporting units were reasonable in relation to our market capitalization. However, we may be required to record additional goodwill impairment charges in the future if our critical assumptions deteriorate or our market capitalization declines further.

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Fair Value Measurements

9 Months Ended

May 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We measure and disclose certain financial instruments at fair value as described in Note 5, Financial Instruments.Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Condensed Consolidated Balance Sheets, consist of the following as of May 31, 2016 and August 31, 2015:

			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

The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the respective periods:

	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

⁽¹⁾ During fiscal year 2015,we paid $34.5 million to settle the contingent consideration for our Open Colleges acquisition.

Our contingent consideration liabilities are valued using discounted cash flow valuation methods encompassing significant unobservable inputs. The inputs include estimated operating results scenarios for the applicable performance periods, probability weightings assigned to operating results scenarios and the discount rates applied. Our contingent consideration liabilities relate to the following:

• 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.

We did not change our valuation techniques associated with recurring fair value measurements from prior periods.

Liabilities measured at fair value on a nonrecurring basis during the nine months ended May 31, 2016 are included in other liabilities on our Condensed Consolidated Balance Sheets and consist of the following:

			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

During the nine months ended May 31, 2016, we recorded $24.3 million of aggregate initial lease obligations at fair value associated with our restructuring activities. We recorded obligation liabilities on the dates we ceased using the respective facilities, and we measured the liabilities at fair value using Level 3 inputs included in the valuation method. Refer to Note 2, Restructuring and Impairment Charges.

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Accrued and Other Liabilities

9 Months Ended

May 31, 2016

Payables and Accruals [Abstract]

Accrued and Other Liabilities

Accrued and Other Liabilities

Accrued and other current liabilities consist of the following as of the respective period ends:

($ 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

Other long-term liabilities consist of the following as of the respective period ends:

($ 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

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Debt

9 Months Ended

May 31, 2016

Debt Disclosure [Abstract]

Debt

Debt

Debt and short-term borrowings consist of the following as of the respective period ends:

($ 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

In fiscal year 2012, we entered into a syndicated $625 million unsecured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility is used for general corporate purposes, which may include acquisitions and share repurchases. The term is five years and will expire in April 2017. The Revolving Credit Facility may be used for borrowings in certain foreign currencies and letters of credit, in each case up to specified sublimits.

We had no outstanding borrowings under the Revolving Credit Facility as of May 31, 2016 and August 31, 2015, but we had approximately $39 million and $41 million of outstanding letters of credit as of the respective periods. We also borrowed $50 million under the Revolving Credit Facility during the second quarter of fiscal year 2016, but subsequently repaid the amount later in the same quarter.

The Revolving Credit Facility fees are determined based on a pricing grid that varies according to our leverage ratio. The Revolving Credit Facility fee ranges from 25 to 40 basis points. Incremental fees for borrowings under the facility generally range from Prime + 25 to 85 basis points.

The Revolving Credit Facility contains various customary representations, covenants and other provisions, including a material adverse event clause and the following financial covenants: maximum leverage ratio, minimum interest and rent expense coverage ratio, and U.S. Department of Education financial responsibility composite score requirements. We were in compliance with all applicable covenants related to the Revolving Credit Facility at May 31, 2016 and August 31, 2015.

Other debt principally includes debt at subsidiaries of Apollo Global and other obligations. The weighted average interest rate on our outstanding other debt at May 31, 2016 and August 31, 2015 was 6.1% and 5.6%, respectively.

The carrying value of our debt, excluding capital leases, approximates fair value based on the nature of our debt, which includes consideration of the portion that is variable-rate.

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Income Taxes

9 Months Ended

May 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We have historically determined our interim income tax provision by applying our estimated effective income tax rate expected to be applicable for the full fiscal year to our income before income taxes for the period. Our effective income tax rate is dependent upon several factors, such as tax rates in state and foreign jurisdictions and the relative amount of income we earn in such jurisdictions. In determining our full year estimate, we do not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes. We exercise significant judgment in determining our income tax provision due to transactions, credits and calculations where the ultimate tax determination is uncertain.

As further discussed in Note 7, Goodwill and Intangibles, there is significant uncertainty associated with University of Phoenix’s future operating results due to competitive factors and its initiatives to transform itself into a more focused, higher retaining and less complex institution. Based primarily on this uncertainty, we used the discrete method to calculate our interim tax provision for the interim periods in fiscal year 2016. Under the discrete method, we determined our tax expense for the interim periods based on actual results as if the interim periods were an annual period, which we believe provides a more reasonable interim income tax provision than the continued use of the estimated annual effective tax rate method. Our effective income tax rate for continuing operations for the nine months ended May 31, 2016 was also significantly impacted by the goodwill impairment charge for our University of Phoenix reporting unit, which was not deductible for tax purposes.

During fiscal year 2015, the Internal Revenue Service (“IRS”) completed its review of our United States federal income tax return for fiscal year 2014. Our United States federal income tax return for fiscal year 2013 is currently open for review by the IRS and we are also participating in the IRS’s Compliance Assurance Process for fiscal years 2015 and 2016, which is a voluntary program in which taxpayers seek to resolve all or most issues with the IRS prior to or soon after filing their United States federal income tax returns. Additionally, we are subject to numerous ongoing audits by state, local and foreign tax authorities with various tax years as early as 2007 that remain subject to examination.

Although we believe our tax accruals are reasonable, the final determination of tax returns under review or returns that may be reviewed in the future and any related litigation could result in tax liabilities that materially differ from our historical income tax provisions and accruals.

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Shareholders' Equity and Redeemable Noncontrolling Interests

9 Months Ended

May 31, 2016

Equity [Abstract]

Shareholders' Equity and Redeemable Noncontrolling Interests

Shareholders’ Equity and Redeemable Noncontrolling Interests

Share Repurchases

Our Board of Directors has authorized us to repurchase outstanding shares of our Class A common stock from time to time depending on market conditions and other considerations. During fiscal year 2013, our Board of Directors authorized an increase in the amount available under our share repurchase program up to an aggregate amount of $250 million, of which $52.2 million remained available as of May 31, 2016. There is no expiration date on the repurchase authorizations and the amount and timing of future share repurchase authorizations and repurchases, if any, will be made as market and business conditions warrant. Repurchases occur at our discretion and may be made on the open market through various methods including but not limited to accelerated share repurchase programs, or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules, and may include repurchases pursuant to Securities and Exchange Commission Rule 10b5-1 nondiscretionary trading programs. We are prohibited from repurchasing shares under the agreements associated with our pending merger, as described further in Note 1, Nature of Operations and Significant Accounting Policies.

We also repurchase shares in connection with tax withholding requirements associated with the release of vested share-based awards, which do not fall under the repurchase program described above.

The following summarizes our share repurchase activity for the respective periods:

	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

Share Reissuances

We reissue our Class A common stock from our treasury stock as a result of the release of shares associated with share-based awards and purchases under our employee stock purchase plan. Share reissuances were as follows for the respective periods:

	Three Months Ended May 31,		Nine Months Ended May 31,
(In thousands)	2016	2015	2016	2015
Number of shares reissued	38	70	359	352

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Earnings Per Share

9 Months Ended

May 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Our outstanding shares consist of Apollo Class A and Class B common stock. Our Articles of Incorporation treat the declaration of dividends on the Class A and Class B common stock in an identical manner. As such, both the Class A and Class B common stock are included in the calculation of our earnings per share.

Diluted weighted average shares outstanding includes the incremental effect of shares that would be issued upon the assumed exercise of stock options and the vesting and release of restricted stock units and performance share awards. The components of basic and diluted earnings per share are as follows:

	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

⁽¹⁾ Due to the loss from continuing operations attributable to Apollo during the nine months ended May 31, 2016, no dilutive share-based awards were included in the calculation of diluted loss per share because they would have been anti-dilutive.

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Share-Based Compensation

9 Months Ended

May 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

The following details share-based compensation expense for the respective periods:

	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

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted no restricted stock units or performance share awards during the three months ended May 31, 2016 and 575,000 restricted stock units and performance share awards during the nine months ended May 31, 2016. The granted awards had a weighted average grant date fair value per share of $7.50. As of May 31, 2016, we had $39.5 million and $1.8 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested restricted stock units and performance share awards, respectively. This expense is expected to be recognized over a weighted average period of 2.2 years.

In accordance with our Amended and Restated 2000 Stock Incentive Plan, we granted no stock options during the three months ended May 31, 2016 and 4,000 stock options during the nine months ended May 31, 2016. The weighted average grant date fair value and the weighted average exercise price of the options granted were $4.12 and $10.35, respectively. As of May 31, 2016, we had $6.8 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.3 years.

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Commitments and Contingencies

9 Months Ended

May 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Surety Bonds

Our insurers issue surety bonds for us that are required by various states where we operate, or that are required for other purposes. We are obligated to reimburse our insurers for any surety bonds that are paid. As of May 31, 2016, the face amount of these surety bonds was approximately $24 million.

Letters of Credit

As of May 31, 2016, we had approximately $39 million of outstanding letters of credit, which support certain of our obligations and guarantees provided by our subsidiaries as part of our normal operations for which fair value is not material.

Litigation and Other Matters

We are subject to various claims and contingencies that arise from time to time in the ordinary course of business, including those related to regulation, litigation, business transactions, employee-related matters and taxes, among others. We do not believe any of these are material for separate disclosure.

The following is a description of pending litigation, settlements, and other proceedings that fall outside the scope of ordinary and routine litigation incidental to our business.

Merger-Related Shareholder Suits

In connection with the pending merger described in Note 1, Nature of Operations and Significant Accounting Policies, the class action lawsuits listed below have been filed in the Superior Court of the State of Arizona, Maricopa County against some or all of the following parties: us, our directors, the Apollo Class B Voting Stock Trust No. 1, AP VIII Queso Holdings, L.P., Socrates Merger Sub, Inc., and Barclays Capital Inc. and Evercore Group L.L.C. (in their capacity as our financial advisors in connection with the merger):

• 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.

The complaints generally allege that our directors have violated their fiduciary duties by, among other things, failing to properly value us and failing to maximize our value to our shareholders as well as by including purportedly preclusive deal protections in the merger agreement, and that we, AP VIII Queso Holdings, L.P. and Socrates Merger Sub, Inc. aided and abetted such alleged breaches of fiduciary duties. The Miglio, Wagner, Ladouceur and Simkhovich complaints further allege that our directors breached their fiduciary duty of candor by filing a materially incomplete and misleading preliminary proxy statement and also allege that the sale process was negatively impacted by certain conflicts with our financial advisors. The plaintiffs seek various remedies, including a declaration that the action is properly maintainable as a class action, an injunction against the consummation of the merger, an accounting of the damages sustained by the plaintiffs and the class, costs and fees of the action, including attorneys’ fees and expenses, and any other equitable relief the court may deem just and proper.

On March 4, 2016, the action titled Blanchfield v. Apollo Education Group, Inc., et al. was voluntarily dismissed without prejudice.

On April 12, 2016, the Superior Court of the State of Arizona, Maricopa County consolidated the remaining Casey, Miglio, Wagner, Ladouceur and Simkhovich cases into a single action, In re Apollo Education Group, Inc. Shareholder Litigation, Lead Case No. CV2016-001905 (the “Consolidated Action”). On May 1, 2016, we reached an agreement with the plaintiffs to settle the Consolidated Action in connection with the increase in the merger consideration per share, which agreement is subject to consummation of the merger, certain confirmatory discovery and approval by the court. If the merger is consummated, we anticipate that we will be required to pay the plaintiffs’ expenses and an amount for attorneys’ fees yet to be determined and subject to court approval.

Securities Class Action (Rameses Te Lomingkit et. al.)

On March 14, 2016, a class action complaint was filed in the United States District Court for the District of Arizona, captioned Rameses Te Lomingkit et. al. v. Apollo Education Group, Inc. et. al., Case Number 2:16-CV-00689-JZB. The plaintiff, who allegedly purchased our shares during the specified class period, filed this putative class action on behalf of the plaintiff and all of our shareholders who acquired Class A shares between June 26, 2013 and October 21, 2015 and seeks certification as a class action and unspecified compensatory damages and costs. The plaintiff alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated under the Exchange Act, by us and certain of our officers for making allegedly false and misleading statements and failing to disclose material facts relating to the nature of our military recruitment activities and the status of our online classroom platform. The Court appointed the Government of Guam Retirement Fund as lead plaintiff on June 16, 2016. The lead plaintiff has until August 15, 2016 to file a consolidated or amended complaint, or to designate the previously filed complaint as the operative complaint.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Class Action under the Telephone Consumer Protection Act

On June 24, 2016, Twonesha Johnson-Hendricks filed a class action complaint, Johnson-Hendricks v. University of Phoenix, 2:16-cv-01434 (E.D. Cal.) in the United States District Court for the Eastern District of California, alleging that University of Phoenix violated the Telephone Consumer Protection Act by contacting class members without their consent. We are evaluating the complaint, which seeks to recover damages on behalf of plaintiff and other members of the putative class.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Shareholder Demand Letter

On June 10, 2016, we received a shareholder demand to commence a civil action against each of our directors and certain of our current and former officers on grounds of breach of fiduciary duty and other claims, and to make available for examination certain records. The demand is a condition precedent under applicable Arizona law to the filing of a derivative lawsuit on behalf of the Company seeking damages from directors and officers for breach of fiduciary duty. We are evaluating the demand.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Class Action Alleging Violations of Kentucky Wage and Hour Laws

On June 9, 2015, two former University of Phoenix employees filed an action in the Circuit Court of Jefferson County Kentucky alleging that they were wrongfully terminated from their positions with the University in violation of Kentucky and federal law. In this action, which is captioned Aldrich et al. v. The University of Phoenix, 15-C-2839 (Jefferson Cty. Circuit Court), plaintiffs also allege that the University violated Kentucky wage and hour law by failing to pay plaintiffs overtime and other required wages, and in connection with these wage and hour claims, they seek to represent a class of plaintiffs consisting of all individuals employed by the University within the past five years who performed a substantial part of their job duties in Kentucky. Plaintiffs seek to recover damages on their own behalf in connection with their alleged wrongful termination and past due wages, overtime compensation and other relief on behalf of the class in connection with the wage and hour claims. On March 4, 2016, the Court granted our motion to dismiss and compel arbitration. On March 9, 2016, plaintiffs filed a notice of their intent to appeal with the U.S. Court of Appeals for the Sixth Circuit. The appeal is currently pending.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Incentive Compensation False Claims Act Lawsuit

On May 25, 2011, we were notified that a qui tam complaint had been filed against us in the U.S. District Court, Eastern District of California, by private relators under the Federal False Claims Act and California False Claims Act, entitled USA and State of California ex rel. Hoggett and Good v. University of Phoenix, et al, Case Number 2:10-CV-02478-MCE-KJN. When the federal government declines to intervene in a qui tam action, as it has done in this case, the relators may elect to pursue the litigation on behalf of the federal government and, if successful, they are entitled to receive a portion of the federal government’s recovery.

The complaint alleges, among other things, that University of Phoenix has violated the Federal False Claims Act since December 12, 2009 and the California False Claims Act for the preceding ten years by falsely certifying to the U.S. Department of Education and the State of California that University of Phoenix was in compliance with various regulations that require compliance with federal rules regarding the payment of incentive compensation to admissions personnel, in connection with University of Phoenix’s participation in student financial aid programs. In addition to injunctive relief and fines, the relators seek significant damages on behalf of the Department of Education and the State of California, including all student financial aid disbursed by the Department to our students since December 2009 and by the State of California to our students during the preceding ten years. On July 24, 2014, the Court granted our motion to dismiss for lack of jurisdiction and dismissed relators’ complaint with prejudice. On December 14, 2014, relators filed a Notice of Appeal with the U.S. Court of Appeals for the Ninth Circuit, and their appeal remains pending before that court.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Federal False Claims Act Lawsuit

On March 3, 2016, a qui tam complaint against us filed by a private relator under the Federal False Claims Act was unsealed. The lawsuit, captioned United States of America ex rel. Arthur Green v. University of Phoenix, et al, Case Number 1:14 CV 1654, was previously filed under seal in the U.S. District Court for the Northern District of Ohio. It was unsealed by order of the District Court after the federal government notified the District Court of its decision not to intervene in the case.

The complaint alleges, among other things, that since at least July 2008, University of Phoenix has violated the Federal False Claims Act by falsely certifying to the U.S. Department of Education that the University was in compliance with various regulations under the U.S. Higher Education Act relating to preparation of student financial aid forms and other matters, including in connection with employee participation in student financial aid programs. The relator seeks unspecified damages on behalf of the federal government. On June 2, 2016, the District Court granted the motion of the relator’s counsel to withdraw, and the relator had until July 5, 2016 to either obtain new counsel or otherwise show cause why the case should not be dismissed for want of prosecution. In response to the Court’s order, the relator has filed a motion seeking an extension of time to identify new counsel.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

K.K. Modi Investment and Financial Services Pvt. Ltd.

On November 8, 2010, a suit was filed by K.K. Modi Investment and Financial Services Pvt. Ltd. (“Modi”) in the High Court of Delhi at New Delhi against defendants Apollo, Western International University, Inc., University of Phoenix, Inc., Apollo Global, Inc., Modi Apollo International Group Pvt. Ltd., Apollo International, Inc., John G. Sperling, Peter V. Sperling and Jorge Klor De Alva, seeking to permanently enjoin the defendants from making investments in the education industry in the Indian market in breach of an exclusivity and noncompete provision which plaintiff alleges is applicable to Apollo and its subsidiaries. The case is entitled, K.K. Modi Investment and Financial Services Pvt. Ltd. v. Apollo International, et. al. We believe that the relevant exclusivity and noncompete provision is inapplicable to us and our affiliates. On October 31, 2014, the Court denied the Apollo defendants’ initial applications to have the case dismissed, concluding that plaintiffs’ complaint raised factual issues that needed to be resolved through the submission of evidence. Defendants appealed that ruling to the Division Bench of the High Court, and that appeal was denied by the Division Bench on August 17, 2015. We then filed a Special Leave Petition before the India Supreme Court on November 21, 2015 seeking leave to appeal the decision of the Division Bench, which was denied on January 15, 2016. On February 15, 2016, we filed a petition for review of the denial of the Special Leave Petition, which was rejected by the India Supreme Court on March 31, 2016. The case will be returned to the Delhi High Court for the taking of evidence. If plaintiff ultimately obtains the requested injunctive relief, our ability to conduct business in India, including through our joint venture with HT Media Limited, may be adversely affected. It is also possible that in the future K.K. Modi may seek to expand existing litigation in India or commence litigation in the U.S. in which it may assert a significant damage claim against us.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this action and, accordingly, we have not accrued any liability associated with this action.

Attorney General Investigations

In August 2015, we received an Investigative Subpoena from the Office of the Attorney General of the State of California. The Subpoena requires us to produce documents and information regarding the business and practices of University of Phoenix relating to members and former members of the U.S. military and California National Guard, including marketing, recruiting, billing, financial aid, accommodation and other services for military personnel, compliance with federal Executive Order 13607 (Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members), and use of U.S. military logos and emblems in marketing, for the time period of July 1, 2010 to the present.

In February 2016, we received a Second Investigative Subpoena from the Office of the Attorney General of the State of California in the Matter of the Investigation of For-Profit Educational Institutions, following the Investigative Subpoena we received in August 2015. The Second Investigative Subpoena, which is not limited to matters involving military students, seeks the production of documents and information regarding a broad spectrum of the business and practices of Apollo and its subsidiaries, including University of Phoenix, relating to marketing, recruiting, compensation of enrollment advisors, complaints, financial aid, compliance, accreditation, other governmental investigations, private litigation and other matters, as well as additional information relating to marketing and services to members and former members of the U.S. military and California National Guard, for the time period of July 1, 2010 to the present.

We are cooperating with the California Attorney General in these investigative proceedings. We cannot predict the eventual scope, duration or outcome of the investigations at this time.

In May 2011 and January 2013, University of Phoenix received Civil Investigative Demands from the State of Massachusetts Office of the Attorney General. The Demands relate to an investigation of possible unfair or deceptive methods, acts, or practices by proprietary educational institutions in connection with the recruitment of students and the financing of education. The Demands seek documents, information and testimony regarding a broad spectrum of the University’s business for the time period of January 1, 2002 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

In October 2010, University of Phoenix received notice that the State of Florida Office of the Attorney General in Fort Lauderdale, Florida had commenced an investigation into possible unfair and deceptive trade practices associated with certain alleged practices of the University. The notice included a subpoena to produce documents and detailed information for the time period of January 1, 2006 to the present about a broad spectrum of the University’s business. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

Because of the many questions of fact and law that may arise, the outcome of these state Attorneys General investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

In addition, from time to time, we receive requests for information from state Attorneys General, accrediting bodies, state higher education regulatory bodies and other federal and state government agencies relating to investigations or inquiries being conducted by other state or federal agencies, pending litigation or specific complaints received from students or former students. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal inquiry or investigation into our practices. We received such a request from the Wisconsin Department of Justice for information relating to programs offered by University of Phoenix to Wisconsin residents. On May 2, 2016, we accepted service of a Wisconsin Department of Justice subpoena in order to allow the University to lawfully produce student records to the Wisconsin Department of Justice, subject to certain notice requirements, in connection with this inquiry.

Federal Trade Commission Investigation

In July 2015, we received a Civil Investigative Demand from the U.S. Federal Trade Commission (the “FTC”) relating to an investigation to determine if certain unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing, or sale of secondary or postsecondary educational products or services or educational accreditation products or services. The Demand requires us to produce documents and information regarding a broad spectrum of the business and practices of University of Phoenix, including in respect of marketing, recruiting, enrollment, financial aid, tuition and fees, academic programs, academic advising, student retention, billing and debt collection, complaints, accreditation, training, military recruitment, and other compliance matters, for the time period of January 1, 2011 to the present. We are cooperating with the investigation. We cannot predict the eventual scope, duration or outcome of the investigation at this time.

Because of the many questions of fact and law that may arise, the outcome of the FTC investigation is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for this matter and, accordingly, we have not accrued any liability associated with this matter.

Open Colleges Investigations

In September 2015, Open Colleges received a Notice from the Australian Competition and Consumer Commission (“ACCC”) requiring Open Colleges to produce information about student refunds upon withdrawal and related matters for the period of time since July 2014. In addition, Open Colleges receives inquiries and is subject to audits from time to time from governmental regulatory authorities, including an inquiry in October 2015 from the Australian Skills Quality Authority regarding student complaints about marketing practices, refund policies and other matters (since concluded without material findings), and a notice from the Australian Skills Quality Authority in June 2016 of a compliance audit. Open Colleges is cooperating with the relevant authorities in these matters, but we cannot at this time predict their eventual scope, duration or outcome.

Because of the many questions of fact and law that may arise, the outcome of these investigative proceedings is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss for these matters and, accordingly, we have not accrued any liability associated with these matters.

Office of the Inspector General of the U.S. Department of Education (“OIG”) Subpoena

On March 21, 2014, University of Phoenix received a subpoena from the Mid-Atlantic Region of the OIG. The subpoena seeks the production by the University of documents and detailed information regarding a broad spectrum of the activities conducted in the University’s Centralized Service Center for the Northeast Region located in Columbia, Maryland, for the time period of January 1, 2007 to the present, including information relating to marketing, recruitment, enrollment, financial aid processing, fraud prevention, student retention, personnel training, attendance, academic grading and other matters. We are cooperating with these requests, but we cannot at this time predict the eventual scope, duration or outcome of this matter.

Because of the many questions of fact and law that may arise, the outcome of this matter is uncertain at this point. Based on the information available to us at present, we cannot reasonably estimate a range of loss and, accordingly, we have not accrued any liability associated with this matter.

UNIACC Investigations

UNIACC was advised by the National Accreditation Commission of Chile in November 2011 that its institutional accreditation would not be renewed and therefore had lapsed. Subsequently, in June 2012, a prosecutor’s office in Santiago, Chile requested that UNIACC provide documents relating to UNIACC’s relationship with a former employee and consultant who served as a member of the National Accreditation Commission (“CNA”) until March 2012, and we received requests for additional information in connection with this investigation. Furthermore, in August 2012, the prosecutor’s office began requesting that UNIACC provide information about UNIACC’s business structure and operations and its relationship with other Apollo entities, in connection with an additional investigation regarding UNIACC’s compliance with applicable laws concerning the generation of profit by universities such as UNIACC. The prosecutor’s office also requested additional information from UNIACC regarding certain government funding received by the institution. On April 7, 2016, the prosecutor closed the investigation related to the CNA matter.

Securities Class Action (Teamsters Local 617 Pension and Welfare Funds)

On November 2, 2006, the Teamsters Local 617 Pension and Welfare Funds filed a class action complaint alleging that we and certain of our current and former directors and officers violated the Securities Exchange Act of 1934. The complaint is entitled Teamsters Local 617 Pension & Welfare Funds v. Apollo Group, Inc. et al., Case Number 06-cv-02674-RCB.

The parties reached an agreement in principle to settle this matter for an immaterial amount and, on July 29, 2015, the district court entered an order approving the settlement and dismissing with prejudice the claims against defendants. Subsequent to the approval, an individual non-class member filed an untimely objection to the settlement with the district court. On December 7, 2015, the district court struck the objection.

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Regulatory Matters

9 Months Ended

May 31, 2016

Regulatory Matters [Abstract]

Regulatory Matters

Regulatory Matters

All U.S. federal student financial aid programs are established by Title IV of the Higher Education Act and regulations promulgated thereunder. The U.S. Congress must periodically reauthorize the Higher Education Act and annually determine the funding level for each Title IV program. The most recent reauthorization of the Higher Education Act expired September 30, 2013, but Title IV student financial aid programs remain authorized and functioning. Congress continues to engage in discussion and activity regarding Higher Education Act reauthorization, but the timing and terms of any eventual reauthorization cannot be predicted.

The Higher Education Act, as reauthorized, specifies the manner in which the U.S. Department of Education reviews institutions for eligibility and certification to participate in Title IV programs. Every educational institution involved in Title IV programs must be certified to participate and is required to periodically renew this certification, which is granted in a Program Participation Agreement with the institution.

University of Phoenix’s Title IV Program Participation Agreement expired on December 31, 2012. The University has submitted necessary documentation for recertification and its eligibility continues on a month-to-month basis until the Department issues its decision on the application. We believe that the University’s application will be renewed in due course. However, we cannot predict whether or to what extent the continued challenging political and regulatory climate and other recent developments in general relating to the proprietary education sector and our business may have on the timing or outcome of the recertification process.

In February 2016, the Department notified the University that for the duration of the month-to-month continuation of the University’s Program Participation Agreement, University of Phoenix must obtain from the Department prior approval of substantial changes, including (i) the establishment of additional locations, (ii) any increase in the level of academic offering beyond those listed in the Institution’s Eligibility and Certification Approval Report and (iii) the addition of any educational program (including degree, nondegree, or short-term training programs). Some of these substantial changes include changes that previously could be implemented by the University upon notice to the Department and without prior approval.

Additionally, in August 2014, the Department commenced an ordinary course program review of University of Phoenix’s administration of Title IV programs covering federal financial aid years 2012-2013 and 2013-2014, as well as compliance with the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, the Drug-Free Schools and Communities Act and related regulations. During fiscal year 2015, the University received a Final Program Review Determination Letter with regard to this program review. All administrative matters are deemed by the Department to be resolved and/or closed, with the exception of findings regarding compliance with the Clery Act, which have been referred to the Department’s Clery Team and to the Administrative Action and Appeals Division which is standard protocol in such matters. The outcome of this matter is uncertain at this point and, based on the information available to us at present, we have not accrued any liability associated with this matter.

Financial Responsibility Composite Score

To participate in Title IV programs, the U.S. Department of Education regulations specify that an eligible institution of higher education must satisfy specific measures of financial responsibility prescribed by the Department, or post a letter of credit in favor of the Department and accept other conditions on its participation in Title IV programs. Pursuant to the Title IV program regulations, each eligible institution must satisfy a measure of financial responsibility that is based on a weighted average of the following three annual ratios which assess the financial condition of the institution:

• 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.

These ratios provide three individual scores which are converted into a single composite score. The maximum composite score is 3.0. If an institution’s composite score is at least 1.5, it is considered financially responsible. If an institution’s composite score is less than 1.5 but is 1.0 or higher, it is still considered financially responsible, and the institution may continue to participate as a financially responsible institution for up to three years under the Department’s “zone” alternative. Under the zone alternative, the Department may subject the institution to various operating or other requirements, which may include 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.

If an institution does not achieve a composite score of at least 1.0, it is subject to additional requirements in order to continue its participation in the Title IV programs, including 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, and 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.

In addition, under new regulations that took effect on July 1, 2016, institutions placed on either the heightened cash monitoring payment method or the reimbursement payment method must pay Title IV credit balances to students and parents before requesting Title IV funds from the Department and may not hold Title IV credit balances on behalf of students or parents, even if such balances are expected to be applied to future tuition payments.

The composite scores for Apollo Education Group and University of Phoenix, which are calculated as of the end of our fiscal year, were as follows for the indicated periods:

	Fiscal Year
	2015	2014	2013
Apollo Education Group	2.6	2.5	2.6
University of Phoenix	2.9	2.3	2.5

As discussed in Note 7, Goodwill and Intangibles, we recorded $73.4 million of goodwill impairment charges relating to our University of Phoenix and Western International University reporting units during the first quarter of fiscal year 2016, which was primarily the result of a substantial decline in our market capitalization. These impairment charges increase our fiscal year 2016 total operating expenses, which will negatively impact our fiscal year 2016 composite scores to be calculated as of August 31, 2016. If our profitability declines further than expected, including as a result of additional goodwill impairment charges, which could result from further declines in our market capitalization, higher than expected restructuring charges, our inability to execute on our currently planned cost reduction initiatives, a more than anticipated decline in enrollment, or other unexpected changes or developments, our fiscal year 2016 composite scores could fall below 1.5.

We believe that we may be able to take certain corrective measures to maintain composite scores of 1.5 or greater, if we determine that there is increased risk that our fiscal year 2016 composite scores will fall below that level, depending on the circumstances causing the expected decline. However, such measures, if available, may require material modifications to our business and strategy that would adversely impact our future revenue and profitability and/or may involve the issuance of equity or equity-linked securities under challenging circumstances that could result in material dilution to our existing shareholders.

If our composite score falls below 1.5, our liquidity could be subject to severe stress due to the following factors:

• 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.

The combined effect of the above factors could cause our business to no longer be sustainable without a significant infusion of equity or other funding. Under current market conditions, there is no assurance that other funding sources would be available in sufficient amounts on terms acceptable to us or at all, and any available equity funding would necessarily involve substantial dilution to our current shareholders.

Gainful Employment

Under the Higher Education Act, as reauthorized, proprietary schools are generally eligible to participate in Title IV programs only in respect of educational programs that lead to “gainful employment in a recognized occupation.” In connection with this requirement, proprietary postsecondary institutions are required to provide information to prospective students about each eligible program, including the relevant recognized occupations, cost, completion rate, job placement rate, and median loan debt of program completers.

In October 2014, the U.S. Department of Education published final regulations, effective July 1, 2015, on the metrics for determining whether an academic program prepares students for gainful employment in a recognized occupation. Under the final regulations, which apply on a program-by-program basis, students enrolled in a program will be eligible for Title IV student financial aid only if that program satisfies at least one of two tests relating to student debt service-to-earnings ratios. The two tests specify minimum debt service-to-earnings ratios calculated on the basis of the average earnings of program graduates; one test measures student loan debt service as a percentage of total earnings, and the other test measures student loan debt service as a percentage of discretionary earnings. If a program fails to meet either minimum ratio for one year, the institution will be required to provide a warning notice to prospective and enrolled students advising that the program may lose Title IV eligibility based on the final student debt service-to-earnings ratios for the next award year. Programs that fail to meet either of the minimum ratios for two out of three consecutive years will immediately cease to be Title IV eligible for a period of at least three years.

The Department has indicated that the official 2014 gainful employment debt service-to-earnings ratios will be issued sometime during calendar year 2016. The expected timing of the issuance of the 2015 ratios has not yet been announced. We believe it is likely that some of University of Phoenix’s programs will be impacted by the regulations. However, the University ceased enrolling new students in many of the programs it believes may be impacted in connection with its initiatives to transform itself into a more focused, higher retaining and less complex institution. As of August 31, 2015, students in these programs that ceased enrolling new students represented approximately 10% of the University’s Degreed Enrollment. Students who were already enrolled in such programs, and who do not elect to enroll in a different University of Phoenix program, will be taught-out in due course.

Changes in student borrowing needs and practices, student loan interest rates, labor markets and other factors outside of our control could adversely impact compliance with these regulations for some of our programs in the future. The Department has not yet announced the protocol for calculating and disseminating the debt service-to-earnings ratios. Because the ratios will be issued by the Department after the measuring period, we may not know of a program’s failure to meet the tests until well after the measuring period, and students enrolled in such a program could lose their access to federal financial aid before completing the program.

Higher Learning Commission Accreditation

University of Phoenix is regionally accredited by The Higher Learning Commission (“HLC”), which provides the following:

• 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.

In July 2013, the accreditation of University of Phoenix was reaffirmed by HLC through the 2022-2023 academic year. The University is subject to the Standard Pathway reaffirmation process, pursuant to which the University will host a comprehensive evaluation visit in 2017 and will undergo its next reaffirmation process in 2022-2023.

Military Benefit Programs

U.S. Department of Defense Tuition Assistance Program

On January 15, 2016, University of Phoenix was notified by the U.S. Department of Defense (“DoD”) that the University’s probationary status in respect of its participation in the DoD Tuition Assistance Program for active duty military personnel had been lifted, effective immediately. The University had been placed on probation in October 2015 pending a review by the Department of the University’s compliance with the DoD Voluntary Education Partnership Memorandum of Understanding with the University, which is the basis on which the University’s active duty military students participate in the DoD Tuition Assistance Program.

The University will be subject to a heightened compliance review for a period of one-year following the removal of probationary status. During this period, the University will continue to engage with the Department and complete the production of information and documents previously requested by the Department. In addition, the University will be subject to an enhanced compliance review in fiscal year 2017.

In fiscal year 2015, funding under the DoD Tuition Assistance Program represented less than 1% of the University’s net revenue.

U.S. Department of Veterans Affairs Educational Benefits

University of Phoenix participates in the Department of Veterans Affairs educational benefits programs (“VA Programs”) for eligible veterans. Under these VA Programs, the educational locations serving veterans are subject to a compliance survey each year. Following the notice of probation in October 2015 from the Department of Defense, which has been subsequently lifted as described above, the Veterans Administration announced the commencement of the annual compliance survey, with an accelerated schedule and increased scope relative to prior years. The annual compliance review was completed with no adverse action imposed on the University. In fiscal year 2015, funding under VA Programs represented approximately 10% of University of Phoenix’s cash basis revenue, calculated on the same basis as for the 90/10 Rule.

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Segment Reporting

9 Months Ended

May 31, 2016

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We operate in the education industry and our operating segments have been determined based on the method by which our chief operating decision maker evaluates performance and allocates resources. We have not aggregated any of our operating segments, which are presented in our segment reporting as follows:

• 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.

During the fourth quarter of fiscal year 2015, we classified Carnegie Learning as held for sale and began presenting it as discontinued operations. Carnegie Learning’s operating results were previously included in Other in our segment reporting, and certain additional Carnegie Learning expenses associated with University of Phoenix’s use of Carnegie Learning technology were included in our University of Phoenix reportable segment. As Carnegie Learning’s operating results are presented as discontinued operations on our Condensed Consolidated Statements of Operations for all periods presented, we have revised our segment reporting to exclude Carnegie Learning’s operating results.

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

	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

⁽¹⁾ University of Phoenix, Apollo Global and Other include restructuring and impairment charges during the periods, which includes a $71.8 million goodwill impairment charge during the first quarter of fiscal year 2016 for our University of Phoenix reporting unit. Refer to Note 2, Restructuring and Impairment Charges, and Note 7, Goodwill and Intangibles.

⁽²⁾ During the three and nine months ended May 31, 2016, Apollo Global had $0.6 million and $3.8 million of expense included in Merger, acquisition and other related costs (credit), net, respectively. During the three and nine months ended May 31, 2015, Apollo Global had a net credit of $1.0 million and $1.7 million of net expense, respectively.

⁽³⁾ During the three and nine months ended May 31, 2016, Other had $7.7 million and $21.4 million of expense included in Merger, acquisition and other related costs (credit), net, respectively, and $0.5 million and $2.8 million during the three and nine months ended May 31, 2015, respectively.

Our consolidated assets by reportable segment consist of the following as of the respective period ends:

($ 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

⁽¹⁾ The majority of the assets included in Other consists of cash and cash equivalents and marketable securities.

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Nature of Operations and Significant Accounting Policies (Policies)

9 Months Ended

May 31, 2016

Accounting Policies [Abstract]

Basis of Presentation Policy

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in our opinion, reflect all adjustments of a normal, recurring nature that are necessary for the fair presentation of our financial condition, results of operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes included in our 2015 Annual Report on Form 10-K as filed with the SEC on October 22, 2015. We consistently applied the accounting policies described in the notes to our consolidated financial statements included in our 2015 Annual Report on Form 10-K in preparing these unaudited interim condensed consolidated financial statements.

Use of Estimates Policy

Use of Estimates

The preparation of these financial statements in accordance with GAAP requires management to make certain estimates, assumptions and judgments that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although we believe our estimates, assumptions and judgments are reasonable, actual results may differ materially from our estimates under different assumptions, judgments or conditions.

Principles of Consolidation Policy

Principles of Consolidation

These financial statements include the assets, liabilities, revenues and expenses of Apollo Education Group, Inc., our wholly-owned subsidiaries, and other subsidiaries that we control. We eliminate intercompany transactions and balances in consolidation.

Reclassifications Policy

Reclassifications

We reclassified prior periods for the following to conform to our current presentation:

• 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.

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Restructuring and Impairment Charges (Tables)

9 Months Ended

May 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and impairment charges

Restructuring and impairment charges include the following for the respective periods:

	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

⁽¹⁾ Refer to Note 7, Goodwill and Intangibles, for discussion of the goodwill impairment charges recorded during fiscal year 2016.

Changes in restructuring liabilities

The following summarizes the restructuring charges in our segment reporting format for the respective periods:

	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

The following details the changes in our restructuring liabilities during the nine months ended May 31, 2016:

	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

⁽¹⁾ We have incurred $461 million of cumulative costs associated with restructuring activities initiated prior to fiscal year 2016, which include lease exit, employee separation, and other related costs of $292 million, $116 million and $53 million, respectively. These cumulative costs have been reflected in our segment reporting as follows: $339 million in University of Phoenix, $19 million in Apollo Global, and $103 million in Other.

⁽²⁾ The gross, undiscounted obligation associated with our restructuring liabilities as of May 31, 2016 was approximately $144 million, which principally represents costs for non-cancelable leases that will be paid over the respective lease terms through fiscal year 2023.

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Discontinued Operations (Tables)

9 Months Ended

May 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued operations

The major components of Carnegie Learning’s assets and liabilities presented separately as held for sale on our Condensed Consolidated Balance Sheets as of August 31, 2015 are as follows:

($ 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

The following summarizes Carnegie Learning’s operating results for the respective periods, which are presented in Loss from discontinued operations, net of tax on our Condensed Consolidated Statements of Operations:

	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	)

⁽¹⁾ Represents an impairment charge to write-off certain Carnegie Learning technology intangibles that were no longer being used. The associated technology had been incorporated into University of Phoenix’s academic platform and as a result of the University ceasing use of the technology, no future cash flows associated with the technology were expected over its remaining useful life. Accordingly, we recorded a $13.0 million impairment charge representing the remaining carrying value.

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Acquisitions (Tables)

9 Months Ended

May 31, 2016

Career Partner GmbH [Member]

Purchase price allocation [Line Items]

Purchase price allocation

We accounted for the acquisition as a business combination and allocated the purchase price, which includes the initial cash payment, the fair value of the contingent consideration and the working capital adjustment, to the assets acquired and liabilities assumed at fair value as summarized below:

($ in thousands)
Cash and cash equivalents	$	4,580
Property and equipment	13,682
Intangibles:
Trademarks (indefinite useful life)	30,469
Accreditations (indefinite useful life)	27,948
Student and customer relationships (5 year useful life)	9,097
Curriculum (5 year useful life)	3,726
Goodwill	92,840
Other assets	2,092
Deferred revenue	(28,380		)
Capital lease obligations	(22,734		)
Other liabilities	(20,340		)
Total assets acquired and liabilities assumed	$	112,980

The Iron Yard [Member]

Purchase price allocation [Line Items]

Purchase price allocation

The purchase price allocations are summarized below:

($ 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

FAEL [Member]

Purchase price allocation [Line Items]

Purchase price allocation

The purchase price allocations are summarized below:

($ 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

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Financial Instruments (Tables)

9 Months Ended

May 31, 2016

Financial Instruments [Abstract]

Financial instruments

The following summarizes our cash and cash equivalents, restricted cash and cash equivalents and marketable securities by financial instrument category as of the respective period ends:

	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

⁽¹⁾ Cash and cash equivalents includes restricted cash and cash equivalents.

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Accounts Receivable, Net (Tables)

9 Months Ended

May 31, 2016

Receivables [Abstract]

Accounts receivable, net

Accounts receivable, net consist of the following as of the respective period ends:

($ 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

Allowance for doubtful accounts

The following summarizes the activity in allowance for doubtful accounts for the respective periods:

	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

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Goodwill and Intangibles (Tables)

9 Months Ended

May 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in goodwill

The following details changes in our goodwill by reportable segment during the nine months ended May 31, 2016:

($ 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

Intangible assets

Intangibles consist of the following as of the respective period ends:

	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

⁽¹⁾ We acquired certain intangibles during fiscal year 2016 as a result of our acquisition of Career Partner. Refer to Note 4, Acquisitions.

Estimated future intangibles amortization

The estimated future amortization expense of our finite-lived intangibles as of May 31, 2016 is as follows:

($ 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

⁽¹⁾ Estimated future amortization expense may vary as acquisitions and dispositions occur in the future and as a result of foreign currency translation adjustments.

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Fair Value Measurements (Tables)

9 Months Ended

May 31, 2016

Fair Value Disclosures [Abstract]

Fair value liabilities measured on recurring basis

Liabilities measured at fair value on a recurring basis, all of which are included in other liabilities on our Condensed Consolidated Balance Sheets, consist of the following as of May 31, 2016 and August 31, 2015:

			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

Fair value liabilities measured on recurring basis, unobservable input reconciliation

The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the respective periods:

	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

⁽¹⁾ During fiscal year 2015,we paid $34.5 million to settle the contingent consideration for our Open Colleges acquisition.

Fair value liabilities measured on nonrecurring basis

Liabilities measured at fair value on a nonrecurring basis during the nine months ended May 31, 2016 are included in other liabilities on our Condensed Consolidated Balance Sheets and consist of the following:

			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

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Accrued and Other Liabilities (Tables)

9 Months Ended

May 31, 2016

Payables and Accruals [Abstract]

Accrued and other current liabilities

Accrued and other current liabilities consist of the following as of the respective period ends:

($ 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

Other long-term liabilities

Other long-term liabilities consist of the following as of the respective period ends:

($ 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

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Debt (Tables)

9 Months Ended

May 31, 2016

Debt Disclosure [Abstract]

Debt

Debt and short-term borrowings consist of the following as of the respective period ends:

($ 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

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Shareholders' Equity and Redeemable Noncontrolling Interests (Tables)

9 Months Ended

May 31, 2016

Equity [Abstract]

Share repurchases

The following summarizes our share repurchase activity for the respective periods:

	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

Share reissuances

Share reissuances were as follows for the respective periods:

	Three Months Ended May 31,		Nine Months Ended May 31,
(In thousands)	2016	2015	2016	2015
Number of shares reissued	38	70	359	352

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Earnings Per Share (Tables)

9 Months Ended

May 31, 2016

Earnings Per Share [Abstract]

Earnings per share

The components of basic and diluted earnings per share are as follows:

	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

⁽¹⁾ Due to the loss from continuing operations attributable to Apollo during the nine months ended May 31, 2016, no dilutive share-based awards were included in the calculation of diluted loss per share because they would have been anti-dilutive.

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Share-Based Compensation (Tables)

9 Months Ended

May 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based compensation expense

The following details share-based compensation expense for the respective periods:

	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

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Regulatory Matters (Tables)

9 Months Ended

May 31, 2016

Regulatory Matters [Abstract]

Composite score

The composite scores for Apollo Education Group and University of Phoenix, which are calculated as of the end of our fiscal year, were as follows for the indicated periods:

	Fiscal Year
	2015	2014	2013
Apollo Education Group	2.6	2.5	2.6
University of Phoenix	2.9	2.3	2.5

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Segment Reporting (Tables)

9 Months Ended

May 31, 2016

Segment Reporting [Abstract]

Segment reporting information

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

	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

⁽¹⁾ University of Phoenix, Apollo Global and Other include restructuring and impairment charges during the periods, which includes a $71.8 million goodwill impairment charge during the first quarter of fiscal year 2016 for our University of Phoenix reporting unit. Refer to Note 2, Restructuring and Impairment Charges, and Note 7, Goodwill and Intangibles.

⁽²⁾ During the three and nine months ended May 31, 2016, Apollo Global had $0.6 million and $3.8 million of expense included in Merger, acquisition and other related costs (credit), net, respectively. During the three and nine months ended May 31, 2015, Apollo Global had a net credit of $1.0 million and $1.7 million of net expense, respectively.

⁽³⁾ During the three and nine months ended May 31, 2016, Other had $7.7 million and $21.4 million of expense included in Merger, acquisition and other related costs (credit), net, respectively, and $0.5 million and $2.8 million during the three and nine months ended May 31, 2015, respectively.

Our consolidated assets by reportable segment consist of the following as of the respective period ends:

($ 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

⁽¹⁾ The majority of the assets included in Other consists of cash and cash equivalents and marketable securities.

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Nature of Operations and Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Aug. 31, 2015	May 31, 2016	Feb. 07, 2016
Apollo Merger [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash to be received by shareholders, per share			$ 10.00
Termination fee		$ 27.5
Reverse termination fee		$ 25.0
Adjustments for New Accounting Principle, Early Adoption [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Increase (Decrease) In Noncurrent Deferred Tax Assets	$ 64.7
Increase (Decrease) In Noncurrent Deferred Tax Liabilities	$ (3.7)

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Restructuring and Impairment Charges (Details) $ in Thousands	3 Months Ended				9 Months Ended
	May 31, 2016 USD ($)	Feb. 29, 2016 USD ($)	Nov. 30, 2015 USD ($)	May 31, 2015 USD ($)	May 31, 2016 USD ($) Positions	May 31, 2015 USD ($)
Restructuring [Line Items]
Restructuring charges	$ 22,366	$ 26,877	$ 24,430	$ 11,444	$ 73,673	$ 46,772
Goodwill impairments	0			0	73,393	0
Property and equipment impairments	0			0	2,512	5,950
Restructuring and impairment charges	22,366			11,444	149,578	52,722
Balance	81,129	84,179	83,290		83,290
Other	(1,855)	(5,412)	(1,651)
Payments	(22,298)	(24,515)	(21,890)
Balance	79,342	81,129	84,179		79,342
Restructuring gross obligation	144,000				$ 144,000
Minimum [Member]
Restructuring [Line Items]
Discount rate					3.00%
Maximum [Member]
Restructuring [Line Items]
Discount rate					7.00%
2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges					$ 29,700
Number of positions eliminated | Positions					1,400
Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges					$ 44,000
Cumulative costs for restructuring activities	461,000				461,000
University Of Phoenix [Member]
Restructuring [Line Items]
Restructuring charges	15,787			6,043	46,380	28,292
Goodwill impairments					71,812
University Of Phoenix [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges					16,000
University Of Phoenix [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Cumulative costs for restructuring activities	339,000				$ 339,000
Number of facilities					150
Apollo Global [Member]
Restructuring [Line Items]
Restructuring charges	1,183			41	$ 1,902	142
Goodwill impairments					0
Apollo Global [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges					1,700
Apollo Global [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Cumulative costs for restructuring activities	19,000				19,000
Other [Member]
Restructuring [Line Items]
Restructuring charges	5,396			$ 5,360	25,391	$ 18,338
Goodwill impairments					1,581
Other [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges					12,000
Other [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Cumulative costs for restructuring activities	103,000				103,000
Lease and related costs, net [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	0	0	0
Balance	0	0	0		0
Other	0	0	0
Payments	0	0	0
Balance	0	0	0		0
Lease and related costs, net [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges	8,973	16,178	10,479
Balance	74,122	72,420	74,990		74,990
Other	(73)	(3,705)	(387)
Payments	(11,597)	(10,771)	(12,662)
Balance	71,425	74,122	72,420		71,425
Cumulative costs for restructuring activities	292,000				292,000
Severance and other employee separation costs [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	10,468	7,133	10,380
Balance	3,109	7,169	0		0
Other	(303)	(164)	(53)
Payments	(8,452)	(11,029)	(3,158)
Balance	4,822	3,109	7,169		4,822
Severance and other employee separation costs [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges	802	696	1,058
Balance	2,919	4,011	8,210		8,210
Other	0	0	0
Payments	(1,426)	(1,788)	(5,257)
Balance	2,295	2,919	4,011		2,295
Cumulative costs for restructuring activities	116,000				116,000
Other restructuring related costs [Member] | 2016 restructuring [Member]
Restructuring [Line Items]
Restructuring charges	444	1,058	210
Balance	863	210	0		0
Other	(141)	0	0
Payments	(525)	(405)	0
Balance	641	863	210		641
Other restructuring related costs [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring charges	1,679	1,812	2,303
Balance	116	369	90		90
Other	(1,338)	(1,543)	(1,211)
Payments	(298)	(522)	(813)
Balance	159	$ 116	$ 369		159
Cumulative costs for restructuring activities	53,000				53,000
Lease abandonment [Member] | University Of Phoenix [Member] | Prior year restructuring [Member]
Restructuring [Line Items]
Restructuring gross obligation	$ 51,000				$ 51,000

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Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	May 31, 2016	Nov. 30, 2015	May 31, 2015	May 31, 2016	May 31, 2015	Aug. 31, 2015
Discontinued Operations [Line Items]
Total assets	$ 0			$ 0		$ 40,897
Total liabilities	0			0		40,897
Loss from discontinued operations, net of tax	0		$ (2,186)	(3,259)	$ (14,906)
Carnegie Learning [Member]
Discontinued Operations [Line Items]
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
Net revenue	0		5,123	2,993	13,119
Intangibles impairment	0		0	0	12,999
Loss on sale	0	$ 2,773	0	2,773	0
Other	0		(7,756)	(4,519)	(23,469)
Loss from discontinued operations before income taxes	0		(2,633)	(4,299)	(23,349)
Benefit from income taxes	0		447	1,040	8,443
Loss from discontinued operations, net of tax	$ 0		$ (2,186)	$ (3,259)	$ (14,906)

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Acquisitions (Details) $ in Thousands, € in Millions, BRL in Millions	1 Months Ended					3 Months Ended		9 Months Ended
	Dec. 31, 2015 USD ($)	Dec. 31, 2015 EUR (€)	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2014 BRL	May 31, 2016 USD ($)	May 31, 2015 USD ($)	May 31, 2016 USD ($)	May 31, 2015 USD ($)	May 31, 2016 BRL	May 31, 2016 EUR (€)	Dec. 10, 2015 USD ($)	Aug. 31, 2015 USD ($)	Jun. 11, 2015 USD ($)	Dec. 04, 2014 USD ($)
Purchase price allocation [Line Items]
Fair value of contingent consideration							$ 0		$ 0
Goodwill						$ 265,765		$ 265,765					$ 247,190
Cash paid for acquisition, net of cash acquired								101,196	$ 21,166
Career Partner GmbH [Member]
Purchase price allocation [Line Items]
Initial cash payment	$ 105,000	€ 96
Contingent consideration maximum						12,300		12,300			€ 11
Fair value of contingent consideration	$ (10,700)					0		(10,717)
Purchase price reduction						3,500
Transaction costs						2,000		2,000
Property and equipment												$ 13,682
Goodwill												92,840
Other assets												2,092
Deferred revenue												28,380
Capital lease obligations												22,734
Other liabilities												(20,340)
Total assets acquired and liabilities assumed, net												112,980
Cash acquired												(4,580)
Finite-lived intangible assets, weighted average useful life	5 years	5 years
Career Partner GmbH [Member] | Trademarks [Member]
Purchase price allocation [Line Items]
Indefinite-lived intangibles												30,469
Career Partner GmbH [Member] | Accreditations [Member]
Purchase price allocation [Line Items]
Indefinite-lived intangibles												27,948
Career Partner GmbH [Member] | Student and customer relationships [Member]
Purchase price allocation [Line Items]
Finite-lived Intangibles												9,097
Finite-lived intangible asset, useful life	5 years	5 years
Career Partner GmbH [Member] | Curriculum [Member]
Purchase price allocation [Line Items]
Finite-lived Intangibles												$ 3,726
Finite-lived intangible asset, useful life	5 years	5 years
The Iron Yard [Member]
Purchase price allocation [Line Items]
Percentage of shares acquired														62.00%
Initial cash payment			$ 15,900
Tangible assets (net of acquired liabilities)														$ 5,262
Indefinite-lived intangibles														0
Finite-lived Intangibles														4,690
Goodwill														15,888
Total assets acquired and liabilities assumed, net														25,840
Fair value of redeemable noncontrolling interests														(9,900)
Total fair value of consideration transferred														15,940
Cash acquired														$ (5,401)
Cash paid for acquisition, net of cash acquired			$ 10,539
FAEL [Member]
Purchase price allocation [Line Items]
Percentage of shares acquired															75.00%
Initial cash payment				$ 28,900	BRL 73.8
Contingent consideration maximum						$ 9,500		$ 9,500		BRL 34.0
Tangible assets (net of acquired liabilities)															$ (2,807)
Indefinite-lived intangibles															15,163
Finite-lived Intangibles															5,394
Goodwill															14,538
Total assets acquired and liabilities assumed, net															32,288
Fair value of redeemable noncontrolling interests															(3,437)
Total fair value of consideration transferred															28,851
Cash acquired															$ (7,685)
Cash paid for acquisition, net of cash acquired				$ 21,166

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Financial Instruments (Details) - USD ($) $ in Thousands	9 Months Ended
	May 31, 2016	Aug. 31, 2015
Financial Instruments [Line Items]
Amortized cost	$ 828,599	$ 992,839
Unrealized gains	75	94
Unrealized losses	(204)	(368)
Fair value	828,470	992,565
Cash and cash equivalents	546,846	702,074
Current marketable securities	242,301	194,676
Noncurrent marketable securities	$ 39,323	95,815
Maximum [Member]
Financial Instruments [Line Items]
Marketable securities maturities	3 years
Cash [Member]
Financial Instruments [Line Items]
Amortized cost	$ 408,823	564,225
Unrealized gains	0	0
Unrealized losses	0	0
Fair value	408,823	564,225
Cash and cash equivalents	408,823	564,225
Current marketable securities	0	0
Noncurrent marketable securities	0	0
Money market funds [Member]
Financial Instruments [Line Items]
Amortized cost	111,236	107,408
Unrealized gains	0	0
Unrealized losses	0	0
Cash and cash equivalents	111,236	107,408
Current marketable securities	0	0
Noncurrent marketable securities	0	0
Corporate bonds [Member]
Financial Instruments [Line Items]
Amortized cost	113,004	137,283
Unrealized gains	30	16
Unrealized losses	(155)	(271)
Cash and cash equivalents	0	1,823
Current marketable securities	96,531	82,047
Noncurrent marketable securities	16,348	53,158
Tax-exempt municipal bonds [Member]
Financial Instruments [Line Items]
Amortized cost	104,281	97,022
Unrealized gains	33	68
Unrealized losses	(43)	(60)
Cash and cash equivalents	600	2,408
Current marketable securities	84,324	61,530
Noncurrent marketable securities	19,347	33,092
Time deposits [Member]
Financial Instruments [Line Items]
Amortized cost	50,458	50,267
Unrealized gains	0	0
Unrealized losses	0	0
Cash and cash equivalents	25,187	25,110
Current marketable securities	25,271	25,157
Noncurrent marketable securities	0	0
Other [Member]
Financial Instruments [Line Items]
Amortized cost	40,797	36,634
Unrealized gains	12	10
Unrealized losses	(6)	(37)
Cash and cash equivalents	1,000	1,100
Current marketable securities	36,175	25,942
Noncurrent marketable securities	3,628	9,565
Level 1 [Member] | Money market funds [Member]
Financial Instruments [Line Items]
Fair value	111,236	107,408
Level 2 [Member] | Corporate bonds [Member]
Financial Instruments [Line Items]
Fair value	112,879	137,028
Level 2 [Member] | Tax-exempt municipal bonds [Member]
Financial Instruments [Line Items]
Fair value	104,271	97,030
Level 2 [Member] | Time deposits [Member]
Financial Instruments [Line Items]
Fair value	50,458	50,267
Level 2 [Member] | Other [Member]
Financial Instruments [Line Items]
Fair value	$ 40,803	$ 36,607

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Accounts Receivable, Net (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015	May 31, 2016	Aug. 31, 2015
Accounts receivable, net [Abstract]
Student accounts receivable					$ 225,379	$ 234,204
Less allowance for doubtful accounts	$ (48,125)	$ (49,891)	$ (42,259)	$ (50,145)	(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
Allowance for doubtful accounts [Abstract]
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)
Allowance for doubtful accounts	$ 44,871	$ 46,891	$ 44,871	$ 46,891

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Goodwill and Intangibles (Details) - USD ($)	3 Months Ended		9 Months Ended
	May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015	Aug. 31, 2015
Goodwill [Line Items]
Goodwill beginning balance			$ 247,190,000
Career Partner acquisition			92,840,000
Goodwill impairment	$ 0	$ 0	(73,393,000)	$ 0
Currency translation adjustment			(872,000)
Goodwill ending balance	265,765,000		265,765,000
Intangible assets, net	200,756,000		200,756,000		$ 143,244,000
Future intangible amortization [Abstract]
Remainder of 2016	3,831,000		3,831,000
2017	14,074,000		14,074,000
2018	10,103,000		10,103,000
2019	4,937,000		4,937,000
2020	3,041,000		3,041,000
2021	2,127,000		2,127,000
Thereafter	4,845,000		4,845,000
Total estimated future amortization expense	42,958,000		42,958,000
University Of Phoenix [Member]
Goodwill [Line Items]
Goodwill beginning balance			71,812,000
Career Partner acquisition			0
Goodwill impairment			(71,812,000)
Currency translation adjustment			0
Goodwill ending balance	0		0
Tax benefit on goodwill impairment			0
Apollo Global [Member]
Goodwill [Line Items]
Goodwill beginning balance			142,599,000
Career Partner acquisition			92,840,000
Goodwill impairment			0
Currency translation adjustment			(872,000)
Goodwill ending balance	234,567,000		234,567,000
Other [Member]
Goodwill [Line Items]
Goodwill beginning balance			32,779,000
Career Partner acquisition			0
Goodwill impairment			(1,581,000)
Currency translation adjustment			0
Goodwill ending balance	$ 31,198,000		31,198,000
Western International University [Member]
Goodwill [Line Items]
Goodwill impairment			$ (1,581,000)

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Goodwill and Intangibles (Details 2) - USD ($) $ in Thousands	May 31, 2016	Aug. 31, 2015
Intangible Assets [Line Items]
Gross carrying amount	$ 257,520	$ 187,732
Accumulated amortization	(29,229)	(20,504)
Effect of foreign currency translation	(27,535)	(23,984)
Intangible assets, net	200,756	143,244
Finite-Lived Intangible Assets [Member]
Intangible Assets [Line Items]
Gross carrying amount	82,996	71,625
Accumulated amortization	(29,229)	(20,504)
Effect of foreign currency translation	(10,809)	(11,265)
Intangible assets, net	42,958	39,856
Finite-Lived Intangible Assets [Member] | Accreditations and designations [Member]
Intangible Assets [Line Items]
Gross carrying amount	21,628	21,628
Accumulated amortization	(9,648)	(6,972)
Effect of foreign currency translation	(3,024)	(3,153)
Intangible assets, net	8,956	11,503
Finite-Lived Intangible Assets [Member] | Trademarks [Member]
Intangible Assets [Line Items]
Gross carrying amount	21,019	21,019
Accumulated amortization	(4,274)	(2,942)
Effect of foreign currency translation	(2,910)	(3,034)
Intangible assets, net	13,835	15,043
Finite-Lived Intangible Assets [Member] | Curriculum [Member]
Intangible Assets [Line Items]
Gross carrying amount	22,238	19,715
Accumulated amortization	(9,645)	(7,361)
Effect of foreign currency translation	(2,349)	(2,470)
Intangible assets, net	10,244	9,884
Finite-Lived Intangible Assets [Member] | Student and customer relationships [Member]
Intangible Assets [Line Items]
Gross carrying amount	14,534	5,517
Accumulated amortization	(4,910)	(2,632)
Effect of foreign currency translation	(1,864)	(1,975)
Intangible assets, net	7,760	910
Finite-Lived Intangible Assets [Member] | Other [Member]
Intangible Assets [Line Items]
Gross carrying amount	3,577	3,746
Accumulated amortization	(752)	(597)
Effect of foreign currency translation	(662)	(633)
Intangible assets, net	2,163	2,516
Indefinite-lived Intangible Assets [Member]
Intangible Assets [Line Items]
Gross carrying amount	174,524	116,107
Accumulated amortization	0	0
Effect of foreign currency translation	(16,726)	(12,719)
Intangible assets, net	157,798	103,388
Indefinite-lived Intangible Assets [Member] | Accreditations and designations [Member]
Intangible Assets [Line Items]
Gross carrying amount	42,418	14,470
Accumulated amortization	0	0
Effect of foreign currency translation	(2,659)	(2,813)
Intangible assets, net	39,759	11,657
Indefinite-lived Intangible Assets [Member] | Trademarks [Member]
Intangible Assets [Line Items]
Gross carrying amount	132,106	101,637
Accumulated amortization	0	0
Effect of foreign currency translation	(14,067)	(9,906)
Intangible assets, net	$ 118,039	$ 91,731

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Fair Value Measurements (Details) $ in Thousands, € in Millions	1 Months Ended	3 Months Ended				9 Months Ended
	Dec. 31, 2015 USD ($)	May 31, 2016 USD ($)	Feb. 29, 2016 USD ($)	Nov. 30, 2015 USD ($)	May 31, 2015 USD ($)	May 31, 2016 USD ($)	May 31, 2015 USD ($)	May 31, 2016 USD ($)	May 31, 2016 EUR (€)
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration				$ 0		$ 0
Balance				0		0
Initial contingent consideration at fair value					$ 0		$ 0
Change in fair value included in net income		$ 973			154	897	(843)
Payment for contingent consideration		0			0	0
Currency translation adjustment		153			0	213	0
Losses for period		22,366	$ 26,877	24,430	11,444	73,673	46,772
Career Partner GmbH [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		11,500				11,500		$ 11,500
Initial contingent consideration at fair value	$ 10,700	0				10,717
Balance		11,500				11,500
Contingent consideration maximum								12,300	€ 11
Open Colleges [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Payment for contingent consideration							(34,480)
Recurring Fair Value Measurement [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		19,326		7,499		7,499		19,326
Balance				7,499		7,499
Balance		19,326				19,326
Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Initial lease obligations								24,275
Losses for period						24,275
Level 1 [Member] | Recurring Fair Value Measurement [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		0		0		0		0
Balance				0		0
Balance		0				0
Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Initial lease obligations								0
Level 2 [Member] | Recurring Fair Value Measurement [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		0		0		0		0
Balance				0		0
Balance		0				0
Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Initial lease obligations								0
Level 3 [Member] | Recurring Fair Value Measurement [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		18,200	18,200	7,499	6,416	7,499	41,893	19,326
Balance		18,200		$ 7,499	6,416	7,499	41,893
Balance		19,326	$ 18,200		$ 6,570	19,326	$ 6,570
Level 3 [Member] | Recurring Fair Value Measurement [Member] | Noncontrolling Interest in Apollo Global [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		7,800				7,800		7,800
Balance		7,800				7,800
Level 3 [Member] | Recurring Fair Value Measurement [Member] | Career Partner GmbH [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Contingent consideration		11,500				11,500		11,500
Balance		$ 11,500				$ 11,500
Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Assets and liabilities measured on a recurring basis [Line Items]
Initial lease obligations								$ 24,275

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Accrued and Other Liabilities (Details) - USD ($) $ in Thousands	May 31, 2016	Aug. 31, 2015
Other liabilities, current [Abstract]
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
Advertising	9,865	21,931
Contingent consideration		0
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
Other Long-Term Liabilities [Abstract]
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
Career Partner GmbH [Member]
Other liabilities, current [Abstract]
Contingent consideration	$ 11,500

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Debt (Details) - USD ($)	3 Months Ended	9 Months Ended
	Feb. 29, 2016	May 31, 2016	Aug. 31, 2015
Debt [Line Items]
Total debt		$ 62,111,000	$ 45,646,000
Less short-term borrowings and current portion of long-term debt		(19,514,000)	(14,080,000)
Long-term debt		42,597,000	31,566,000
Letters of credit outstanding		39,000,000	41,000,000
Revolving credit facility [Member]
Debt [Line Items]
Total debt		0	0
Borrowing capacity		$ 625,000,000
Debt term		5 years
Revolving credit facility borrowing	$ 50,000,000
Debt repaid	$ 50,000,000
Revolving credit facility [Member] | Minimum [Member]
Debt [Line Items]
Fees		0.25%
Revolving credit facility [Member] | Minimum [Member] | Prime Rate [Member]
Debt [Line Items]
Fees for borrowings		0.25%
Revolving credit facility [Member] | Maximum [Member]
Debt [Line Items]
Fees		0.40%
Revolving credit facility [Member] | Maximum [Member] | Prime Rate [Member]
Debt [Line Items]
Fees for borrowings		0.85%
Capital Lease Obligations [Member]
Debt [Line Items]
Total debt		$ 30,804,000	16,863,000
Notes Payable, Other Payables [Member]
Debt [Line Items]
Total debt		$ 31,307,000	$ 28,783,000
Weighted average interest rate		6.10%	5.60%

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Shareholders' Equity and Redeemable Noncontrolling Interests (Details) - USD ($) $ / shares in Units, shares in Thousands	3 Months Ended		9 Months Ended
	May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015	Aug. 31, 2013
Share Repurchases [Line Items]
Share repurchases			$ 732,000	$ 40,700,000
Apollo Class A nonvoting common stock [Member]
Share Repurchases [Line Items]
Aggregate share repurchase program					$ 250,000,000
Share repurchase program, remaining authorized repurchased amount	$ 52,200,000		$ 52,200,000
Share repurchases (in shares)			0	0
Share repurchases			$ 0	$ 0
Share reissuances (in shares)	38	70	359	352
Apollo Class A nonvoting common stock [Member] | Share Repurchases [Member]
Share Repurchases [Line Items]
Share repurchases (in shares)	0	0	0	1,440
Share repurchases, weighted average price per share	$ 0.00	$ 0.00	$ 0.00	$ 26.45
Share repurchases	$ 0	$ 0	$ 0	$ 38,092,000
Apollo Class A nonvoting common stock [Member] | Repurchases Related To Restricted Stock Units [Member]
Share Repurchases [Line Items]
Share repurchases (in shares)	13	22	91	109
Share repurchases	$ 106,000	$ 382,000	$ 732,000	$ 2,608,000

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015
Earnings Per Share [Abstract]
Net income (loss) attributable to Apollo (basic and diluted)	$ 20,744	$ 48,064	$ (100,417)	$ 48,239
Basic weighted average shares outstanding (in shares)	108,658	107,678	108,567	108,140
Anti-dilutive securities [Line Items]
Diluted weighted average shares outstanding (in shares)	109,444	108,623	108,567	109,124
Basic income (loss) per share attributable to Apollo (in dollars per share)	$ 0.19	$ 0.45	$ (0.92)	$ 0.45
Diluted income (loss) per share attributable to Apollo (in dollars per share)	$ 0.19	$ 0.44	$ (0.92)	$ 0.44
Restricted stock units and performance share awards [Member]
Anti-dilutive securities [Line Items]
Dilutive effect of share-based awards (in shares)	786	828	0	818
Anti-dilutive securities excluded from diluted loss per share computation (in shares)	2,984	33	4,071	21
Stock options [Member]
Anti-dilutive securities [Line Items]
Dilutive effect of share-based awards (in shares)	0	117	0	166
Anti-dilutive securities excluded from diluted loss per share computation (in shares)	3,514	2,513	3,595	2,329

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Share-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	May 31, 2016	May 31, 2015	May 31, 2016	May 31, 2015
Share-based compensation expense [Line Items]
Share-based compensation expense	$ 8,732	$ 7,854	$ 27,318	$ 29,768
Instructional and student advisory [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	2,432	2,812	7,856	8,699
Marketing [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	413	705	1,771	2,324
Admissions advisory [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	15	262	341	779
General and administrative [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	5,569	3,456	16,830	15,960
Restructuring and impairment charges [Member]
Share-based compensation expense [Line Items]
Share-based compensation expense	$ 303	$ 619	$ 520	$ 2,006

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Share-Based Compensation (Details 2) $ / shares in Units, $ in Millions	3 Months Ended	9 Months Ended
	May 31, 2016 USD ($) $ / shares shares	May 31, 2016 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted | shares	0	4,000
Restricted stock units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized shared-based compensation cost | $	$ 39.5	$ 39.5
Performance share awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized shared-based compensation cost | $	$ 1.8	$ 1.8
Restricted stock units and performance share awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted | shares	0	575,000
Weighted average fair value of granted awards | $ / shares		$ 7.50
Weighted average period unrecognized share-based compensation expected to be recognized		2 years 2 months
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value of options | $ / shares		$ 4.12
Weighted average exercise price of options | $ / shares	$ 10.35	$ 10.35
Unrecognized shared-based compensation cost | $	$ 6.8	$ 6.8
Weighted average period unrecognized share-based compensation expected to be recognized		2 years 4 months 6 days

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Commitments and Contingencies (Details) - USD ($) $ in Millions	May 31, 2016	Aug. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Outstanding surety bonds	$ 24
Letters of credit outstanding	$ 39	$ 41

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Regulatory Matters (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	May 31, 2016 USD ($)	May 31, 2015 USD ($)	May 31, 2016 USD ($)	May 31, 2015 USD ($)	Aug. 31, 2015	Aug. 31, 2014	Aug. 31, 2013
Composite score					2.60	2.50	2.60
Zone maximum time period			3 years
Goodwill impairments	$ 0	$ 0	$ 73,393	$ 0
Maximum [Member]
Composite score			3.0
Maximum [Member] | Letter of credit requirement [Member]
Percentage of Title IV funds			50.00%
Minimum [Member] | Financial responsibility [Member]
Composite score			1.5
Minimum [Member] | Zone alternative [Member]
Composite score			1.0
Minimum [Member] | Letter of credit requirement [Member]
Percentage of Title IV funds			10.00%
University Of Phoenix [Member]
Composite score					2.90	2.30	2.50
Goodwill impairments			$ 71,812
Percentage of degreed enrollment					10.00%
Percent of cash basis revenue					10.00%
University Of Phoenix [Member] | Maximum [Member]
Percent of net revenue					1.00%

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Segment Reporting (Details) $ in Thousands	3 Months Ended		9 Months Ended
	May 31, 2016 USD ($)	May 31, 2015 USD ($)	May 31, 2016 USD ($)	May 31, 2015 USD ($)	Aug. 31, 2015 USD ($)
Segment reporting [Line Items]
Net revenue	$ 558,002	$ 676,358	$ 1,609,371	$ 1,965,986
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
Goodwill impairments	0	0	73,393	0
Total assets	2,037,626		2,037,626		$ 2,201,064
Merger, acquisition and other related costs (credit), net	$ (8,317)	455	$ (25,188)	(4,506)
University Of Phoenix [Member]
Segment reporting [Line Items]
Number of colleges	9		9
Net revenue	$ 424,479	560,692	$ 1,252,052	1,641,314
Operating income (loss)	59,681	103,395	33,099	216,776
Goodwill impairments			71,812
Total assets	596,440		596,440		648,755
Apollo Global [Member]
Segment reporting [Line Items]
Net revenue	125,007	109,622	334,135	305,862
Operating income (loss)	(459)	5,465	(29,677)	(26,918)
Goodwill impairments			0
Total assets	714,248		714,248		588,434
Merger, acquisition and other related costs (credit), net	(600)	1,000	(3,800)	(1,700)
Other [Member]
Segment reporting [Line Items]
Net revenue	8,516	6,044	23,184	18,810
Operating income (loss)	(27,223)	(15,576)	(97,488)	(69,879)
Goodwill impairments			1,581
Total assets	726,938		726,938		$ 963,875
Merger, acquisition and other related costs (credit), net	$ (7,700)	$ (500)	$ (21,400)	$ (2,800)