BRIDGEPOINT EDUCATION INC, 10-Q filed on 8/4/2015
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2015
Jul. 30, 2015
Entity Information [Line Items]
 
 
Entity Registrant Name
BRIDGEPOINT EDUCATION INC 
 
Entity Central Index Key
0001305323 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q2 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
45,732,622 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash equivalents
$ 261,023 
$ 207,003 
Restricted cash
28,134 
25,934 
Investments
14,421 
12,051 
Accounts receivable, net
28,164 
21,274 
Student loans receivable, net
913 
1,003 
Deferred income taxes
21,316 
21,301 
Prepaid expenses and other current assets
25,229 
22,818 
Total current assets
379,200 
311,384 
Property and equipment, net
71,068 
78,219 
Investments
59,088 
111,557 
Student loans receivable, net
8,191 
9,510 
Goodwill and intangibles, net
23,046 
24,775 
Deferred income taxes
19,520 
20,175 
Other long-term assets
2,435 
2,475 
Total assets
562,548 
558,095 
Current liabilities:
 
 
Accounts payable
5,491 
1,013 
Accrued liabilities
55,048 
51,403 
Deferred revenue and student deposits
98,827 
108,048 
Total current liabilities
159,366 
160,464 
Rent liability
24,496 
22,098 
Other long-term liabilities
9,573 
9,652 
Total liabilities
193,435 
192,214 
Commitments and contingencies (see Note 13)
   
   
Preferred stock, $0.01 par value:
 
 
20,000 shares authorized; zero shares issued and outstanding at both June 30, 2015, and December 31, 2014
0 
0 
Common stock, $0.01 par value:
 
 
300,000 shares authorized; 63,276 issued and 45,719 outstanding at June 30, 2015; 62,957 issued and 45,400 outstanding at December 31, 2014
633 
630 
Additional paid-in capital
184,835 
180,720 
Retained earnings
520,754 
521,775 
Accumulated other comprehensive loss
(40)
(175)
Treasury stock, 17,557 shares at cost at both June 30, 2015, and December 31, 2014
(337,069)
(337,069)
Total stockholders' equity
369,113 
365,881 
Total liabilities and stockholders' equity
$ 562,548 
$ 558,095 
Condensed Consolidated Balance Sheets - Parenthetical (USD $)
Jun. 30, 2015
Dec. 31, 2014
Stockholders' equity:
 
 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
20,000,000 
20,000,000 
Preferred stock, shares issued
0 
0 
Preferred stock, shares outstanding
0 
0 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
300,000,000 
300,000,000 
Common stock, shares issued
63,276,000 
62,957,000 
Common stock, shares outstanding
45,719,000 
45,400,000 
Treasury stock, shares at cost
17,557,000 
17,557,000 
Condensed Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Revenue
$ 147,057 
$ 171,522 
$ 289,575 
$ 328,792 
Costs and expenses:
 
 
 
 
Instructional costs and services
71,410 
76,853 
146,459 
159,934 
Admissions advisory and marketing
48,495 
55,518 
100,842 
121,296 
General and administrative
13,246 
16,737 
29,568 
33,006 
Restructuring and impairment charges
14,418 
0 
14,418 
0 
Total costs and expenses
147,569 
149,108 
291,287 
314,236 
Operating income (loss)
(512)
22,414 
(1,712)
14,556 
Other income, net
345 
712 
1,034 
1,079 
Income (loss) before income taxes
(167)
23,126 
(678)
15,635 
Income tax expense
483 
10,171 
343 
7,010 
Net income (loss)
$ (650)
$ 12,955 
$ (1,021)
$ 8,625 
Earnings (loss) per share:
 
 
 
 
Basic (in usd per share)
$ (0.01)
$ 0.29 
$ (0.02)
$ 0.19 
Diluted (in usd per share)
$ (0.01)
$ 0.28 
$ (0.02)
$ 0.19 
Weighted average number of common shares outstanding used in computing earnings per share:
 
 
 
 
Basic (in shares)
45,674 
45,233 
45,552 
45,066 
Diluted (in shares)
45,674 
46,503 
45,552 
46,524 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Net income (loss)
$ (650)
$ 12,955 
$ (1,021)
$ 8,625 
Other comprehensive income (loss), net of tax:
 
 
 
 
Unrealized gains (losses) on investments
(30)
(36)
135 
(72)
Comprehensive income (loss)
$ (680)
$ 12,919 
$ (886)
$ 8,553 
Condensed Consolidated Statement of Stockholders' Equity (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Balance at Dec. 31, 2014
$ 365,881 
$ 630 
$ 180,720 
$ 521,775 
$ (175)
$ (337,069)
Balance, shares at Dec. 31, 2014
 
62,957,000 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock-based compensation
5,635 
 
5,635 
 
 
 
Exercise of stock options, shares
 
109,000 
 
 
 
 
Exercise of stock options
227 
1 
226 
 
 
 
Excess tax benefit of option exercises and restricted stock, net of tax shortfall
(622)
 
(622)
 
 
 
Stock issued under employee stock purchase plan, shares
 
16,000 
 
 
 
 
Stock issued under employee stock purchase plan
136 
 
136 
 
 
 
Stock issued under stock incentive plan, net of shares held for taxes, shares
 
194,000 
 
 
 
 
Stock issued under stock incentive plan, net of shares held for taxes
(1,258)
2 
(1,260)
 
 
 
Net loss
(1,021)
 
 
(1,021)
 
 
Unrealized gains on investments, net of tax
135 
 
 
 
135 
 
Balance at Jun. 30, 2015
$ 369,113 
$ 633 
$ 184,835 
$ 520,754 
$ (40)
$ (337,069)
Balance, shares at Jun. 30, 2015
 
63,276,000 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Cash flows from operating activities
 
 
Net income (loss)
$ (1,021)
$ 8,625 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
Provision for bad debts
15,364 
12,921 
Depreciation and amortization
10,629 
11,972 
Amortization of premium/discount
225 
(89)
Stock-based compensation
5,635 
5,058 
Excess tax benefit of option exercises
(314)
(986)
Loss on impairment of student loans receivable
923 
1,189 
Net loss on marketable securities
38 
0 
Loss on termination of leased space
12,331 
0 
Loss on disposal of fixed assets
1,545 
52 
Changes in operating assets and liabilities:
 
 
Restricted cash
4,596 
4,518 
Accounts receivable
(22,079)
(15,755)
Prepaid expenses and other current assets
(2,704)
(1,766)
Student loans receivable
529 
480 
Other long-term assets
40 
86 
Accounts payable and accrued liabilities
595 
(8,842)
Deferred revenue and student deposits
(9,118)
(20,292)
Other liabilities
(2,446)
(1,012)
Net cash provided by (used in) operating activities
14,768 
(3,841)
Cash flows from investing activities
 
 
Capital expenditures
(2,182)
(6,203)
Purchases of investments
(192)
(72,426)
Non-operating restricted cash
(6,796)
(200)
Capitalized costs for intangible assets
(1,191)
(2,112)
Sales and maturities of investments
50,195 
20,000 
Net cash provided by (used in) investing activities
39,834 
(60,941)
Cash flows from financing activities
 
 
Proceeds from exercise of stock options
226 
2,964 
Excess tax benefit of option exercises
314 
986 
Proceeds from the issuance of stock under employee stock purchase plan
136 
0 
Tax withholdings on issuance of stock awards
(1,258)
(1,204)
Net cash provided by (used in) financing activities
(582)
2,746 
Net increase (decrease) in cash and cash equivalents
54,020 
(62,036)
Cash and cash equivalents at beginning of period
207,003 
212,526 
Cash and cash equivalents at end of period
261,023 
150,490 
Supplemental disclosure of non-cash transactions:
 
 
Purchase of equipment included in accounts payable and accrued liabilities
$ 29 
$ 468 
Nature of Business
Nature of Business
Nature of Business
Bridgepoint Education, Inc. (together with its subsidiaries, the “Company”), incorporated in 1999, is a provider of postsecondary education services. Its wholly-owned subsidiaries, Ashford University® and University of the RockiesSM, are regionally accredited academic institutions that offer associate's, bachelor's, master's and doctoral programs online, as well as at their traditional campuses located in Iowa and Colorado, respectively.
Ashford University's campus in Iowa will be closing after the 2015-2016 academic year, following the implementation of a one-year teach-out plan. For further information, refer to Note 14, “Subsequent Events.”
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2015. In the opinion of management, these financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company's condensed consolidated financial position, results of operations and cash flows as of and for the periods presented.
Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for complete annual financial statements.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.
Restricted Cash
The Company's restricted cash is primarily held in money market accounts, and is excluded from cash and cash equivalents on the Company's consolidated balance sheets and statements of cash flows. The majority of restricted cash represents funds held for students from Title IV financial aid program funds that result in credit balances on a student’s account. Changes in this restricted cash are included in the Company's condensed consolidated statements of cash flows as cash flows from operating activities. To a lesser extent, restricted cash also represents amounts held as collateral for letters of credit. Changes in this restricted cash are included in the Company's condensed consolidated statements of cash flows as cash flows from investing activities.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. This literature is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The standard is expected to be effective for the first interim period within fiscal years beginning after December 15, 2017, using one of two retrospective application methods. The Company continues to evaluate the impacts, if any, the adoption of ASU 2014-09 will have on the Company's financial position or results of operations.
In January 2015, the FASB issued ASU 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20). This update simplifies the income statement presentation requirements and eliminates from GAAP the concept of extraordinary items, and essentially deletes the requirements in Subtopic 225-20. However, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments may be applied prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company adopted ASU 2015-01 effective April 1, 2015, and such adoption does not have a material effect on the Company's consolidated financial statements.
Restructuring and Impairment Charges
Restructuring and Impairment Charges
Restructuring and Impairment Charges
During the three months ended June 30, 2015, the Company initiated a restructuring plan to better align its resources with its business strategy. The related restructuring charges are primarily comprised of estimated lease losses related to facilities vacated or consolidated under the restructuring plan, charges related to assets abandoned as part of the restructuring plan and severance costs related to headcount reductions made in connection with the restructuring plan.
As a result of its continued efforts to streamline operations, the Company vacated or consolidated properties in San Diego, and reassessed its obligations on non-cancelable leases. During the three months ended June 30, 2015, the Company recorded $12.3 million as restructuring charges relating to these lease exit costs. This amount was recorded in the restructuring and impairment charges line item on the Company's condensed consolidated statements of income for the three and six months ended June 30, 2015. The current portion of the liability is recorded within accrued liabilities and the long-term portion is recorded within rent liability in the Company's condensed consolidated balance sheets at June 30, 2015.
Also during the three months ended June 30, 2015, the Company recognized an impairment charge of $1.3 million relating to the write off of certain fixed assets. This asset impairment charge was recorded in the restructuring and impairment charges line item on the Company's condensed consolidated statements of income for the three and six months ended June 30, 2015. These write offs were primarily for furniture and office equipment, as well as for leasehold improvements.
The Company also implemented a reduction in force during the second quarter of 2015 to help better align personnel resources with the decline in enrollment. During the three months ended June 30, 2015, the Company recognized $0.8 million as restructuring charges relating to severance costs for wages and benefits resulting from the reduction in force. This amount was recorded in the restructuring and impairment charges line item on the Company's condensed consolidated statements of income for the three and six months ended June 30, 2015. The charge is recorded within accrued liabilities in the Company's condensed consolidated balance sheets at June 30, 2015, and the Company anticipates these costs will be fully paid out by the end of the third quarter of 2015 from existing cash on hand.
Investments
Investments
Investments
The following tables summarize the fair value information of short- and long-term investments as of June 30, 2015 and December 31, 2014, respectively (in thousands):
 
As of June 30, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
1,285

 
$
—

 
$
—

 
$
1,285

Corporate notes and bonds
—

 
47,225

 
—

 
47,225

Certificates of deposit
—

 
25,000

 
—

 
25,000

Total
$
1,285

 
$
72,225

 
$
—

 
$
73,510

 
As of December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
1,071

 
$
—

 
$
—

 
$
1,071

Corporate notes and bonds
—

 
62,550

 
—

 
62,550

U.S. government and agency securities
—

 
34,987

 
—

 
34,987

Certificates of deposit
—

 
25,000

 
—

 
25,000

Total
$
1,071

 
$
122,537

 
$
—

 
$
123,608


The tables above include amounts related to investments classified as other investments, such as certificates of deposit, which are carried at amortized cost. The amortized cost of such investments approximated fair value at each balance sheet date. The assumptions used in these fair value estimates are considered as other observable inputs and are therefore categorized as Level 2 measurements under the accounting guidance. The Company's Level 2 investments are valued using readily available pricing sources that utilize market observable inputs, including the current interest rate for similar types of instruments.
The Company records the changes in unrealized gains and losses on its investments arising during the period in other comprehensive income. For the three months ended June 30, 2015 and 2014, the Company recorded net unrealized losses of $30,000 and $36,000, respectively, in other comprehensive income, which were net of tax benefit of $77,000 and $20,000, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded net unrealized gains of $135,000 and net unrealized losses $72,000, respectively, in other comprehensive income, which were net of tax expense of $61,000 and tax benefit of $47,000, respectively.
During the six months ended June 30, 2015, the Company reclassified $61,000 out of accumulated other comprehensive income, which was realized as a net loss on marketable securities in the consolidated statement of income for the period within other income, net. There was no such reclassification in the six months ended June 30, 2014.
Accounts Receivable
Accounts Receivable
Accounts Receivable
Accounts receivable, net, consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Accounts receivable
$
54,933

 
$
48,841

Less allowance for doubtful accounts
(26,769
)
 
(27,567
)
Accounts receivable, net
$
28,164

 
$
21,274


As of June 30, 2015 and December 31, 2014, there was an immaterial amount included within net accounts receivable with a payment due date of greater than one year.
The following table presents the changes in the allowance for doubtful accounts for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts:
 
 
 
 
 
 
 
For the six months ended June 30, 2015
$
(27,567
)
 
$
15,418

 
$
(16,216
)
 
$
(26,769
)
For the six months ended June 30, 2014
(26,901
)
 
12,872

 
(13,906
)
 
(25,867
)
(1)
Deductions represent accounts written off, net of recoveries.
Student Loan Receivables
Student Loans Receivable
Student Loans Receivable
Student loans receivable, net, consist of the following (in thousands):
Short-term:
As of
June 30, 2015
 
As of
December 31, 2014
   Student loans receivable (non-tuition related)
$
463

 
$
509

   Student loans receivable (tuition related)
554

 
626

   Current student loans receivable
1,017

 
1,135

Less allowance for doubtful accounts
(104
)
 
(132
)
Student loans receivable, net
$
913

 
$
1,003

Long-term:
As of
June 30, 2015
 
As of
December 31, 2014
   Student loans receivable (non-tuition related)
$
3,661

 
$
4,805

   Student loans receivable (tuition related)
5,867

 
6,068

   Non-current student loans receivable
9,528

 
10,873

Less allowance for doubtful accounts
(1,337
)
 
(1,363
)
Student loans receivable, net
$
8,191

 
$
9,510


Student loans receivable is presented net of any related discount, and the balances approximated fair value at each balance sheet date. The Company estimates the fair value of the student loans receivable by discounting the future cash flows using an interest rate of 4.5%, which approximates the interest rates used in similar arrangements. The assumptions used in this estimate are considered unobservable inputs and are therefore categorized as Level 3 measurements under the accounting guidance.
Revenue recognized related to student loans was immaterial during each of the three and six months ended June 30, 2015 and 2014. The following table presents the changes in the allowance for doubtful accounts for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for student loans receivable (tuition related):
 
 
 
 
 
 
 
For the six months ended June 30, 2015
$
(1,495
)
 
$
(54
)
 
$
—

 
$
(1,441
)
For the six months ended June 30, 2014
(2,144
)
 
49

 
—

 
(2,193
)
(1)
Deductions represent accounts written off, net of recoveries.
For the non-tuition related student loans receivable, the Company monitors the credit quality of the borrower using credit scores, aging history of the loan and delinquency trending. The loan reserve methodology is reviewed on a quarterly basis. Delinquency is the main factor in determining if a loan is impaired. If a loan were determined to be impaired, interest would no longer accrue. For the three and six months ended June 30, 2015, $0.6 million and $0.9 million, respectively, of student loans were impaired. As of June 30, 2015, $5.3 million of student loans had been placed on non-accrual status.
As of June 30, 2015, the delinquency status of gross student loans receivable was as follows (in thousands):
120 days and less
$
14,304

From 121 - 270 days
1,118

Greater than 270 days
3,085

Total gross student loans receivable
18,507

Less: Amounts reserved or impaired
(6,770
)
Less: Discount on student loans receivable
(2,633
)
Total student loans receivable, net
$
9,104

Other Significant Balance Sheet Accounts
Other Significant Balance Sheet Accounts
Other Significant Balance Sheet Accounts
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Prepaid expenses
$
8,249

 
$
8,500

Prepaid licenses
4,388

 
5,598

Prepaid income taxes
6,304

 
2,945

Prepaid insurance
2,482

 
1,508

Interest receivable
307

 
424

Insurance recoverable
2,704

 
3,040

Other current assets
795

 
803

Total prepaid expenses and other current assets
$
25,229

 
$
22,818


Property and Equipment, Net
Property and equipment, net, consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Land
$
7,091

 
$
7,091

Buildings
29,474

 
29,540

Furniture and office equipment
77,745

 
81,030

Software
12,546

 
12,454

Leasehold improvements
20,531

 
21,096

Vehicles
147

 
147

Total property and equipment
147,534

 
151,358

Less accumulated depreciation and amortization
(76,466
)
 
(73,139
)
Total property and equipment, net
$
71,068

 
$
78,219


Goodwill and Intangibles, Net
Goodwill and intangibles, net, consist of the following (in thousands):
 
June 30, 2015
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
19,362

 
$
(11,828
)
 
$
7,534

Purchased intangible assets
15,850

 
(2,905
)
 
12,945

     Total definite-lived intangible assets
$
35,212

 
$
(14,733
)
 
$
20,479

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
23,046

 
 
 
 
 
 
 
December 31, 2014
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
18,174

 
$
(9,526
)
 
$
8,648

Purchased intangible assets
15,850

 
(2,290
)
 
13,560

     Total definite-lived intangible assets
$
34,024

 
$
(11,816
)
 
$
22,208

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
24,775


For the three months ended June 30, 2015 and June 30, 2014, amortization expense was $1.5 million and $1.4 million, respectively. For the six months ended June 30, 2015 and June 30, 2014, amortization expense was $2.9 million and $2.8 million, respectively.
The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
Year Ended December 31,
 
 
2015
$
2,740

2016
4,425

2017
2,862

2018
1,785

2019
1,267

Thereafter
7,400

Total future amortization expense
$
20,479


Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Accrued salaries and wages
$
7,649

 
$
8,250

Accrued bonus
1,730

 
2,720

Accrued vacation
10,372

 
9,771

Accrued litigation and fees
720

 
542

Accrued expenses
16,677

 
16,623

Rent liability
13,541

 
8,528

Accrued insurance liability
4,359

 
4,520

Accrued income taxes payable
—

 
449

Total accrued liabilities
$
55,048

 
$
51,403


Deferred Revenue and Student Deposits
Deferred revenue and student deposits consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Deferred revenue
$
37,562

 
$
26,445

Student deposits
61,265

 
81,603

Total deferred revenue and student deposits
$
98,827

 
$
108,048


Other Long-Term Liabilities
Other long-term liabilities consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Uncertain tax positions
$
7,895

 
$
7,586

Legal settlements
408

 
1,000

Other long-term liabilities
1,270

 
1,066

Total other long-term liabilities
$
9,573

 
$
9,652

Credit Facilities
Credit Facilities
Credit Facilities
The Company previously had a $50 million revolving line of credit (the “Facility”) pursuant to an Amended and Restated Revolving Credit Agreement (the “Revolving Credit Agreement”) with the lenders signatory thereto and Comerica Bank (“Comerica”). The Facility had an original term of three years and expired on April 13, 2015. The Revolving Credit Agreement amended, restated and superseded any prior loan documents. Up through the date of expiration of the Facility, the Company had no borrowings outstanding under the Facility.
Under the Revolving Credit Agreement and the documents executed in connection therewith (collectively, the “Facility Loan Documents”), the lenders also agreed to make loans to the Company and issue letters of credit on the Company's behalf, subject to specific terms and conditions. The Company had previously used the availability under the Facility to issue letters of credit, but subsequent to the expiration of the Facility, the Company collateralized the letters of credit with cash in the aggregate amount of $6.6 million, which is included as restricted cash as of June 30, 2015.
Interest and fees accruing under the Facility were payable quarterly in arrears and principal was payable at maturity. For any advance under the Facility, interest would accrue at either the “Base Rate” or the “Eurodollar-based Rate,” at the Company's option.
The Facility Loan Documents contained other customary affirmative, negative and financial maintenance covenants, representations and warranties, events of default, and remedies upon an event of default, including the acceleration of debt and the right to foreclose on the collateral securing the Facility. Up through the date of expiration of the Facility, the Company had no outstanding financial covenants in the Facility Loan Documents.
Surety Bond Facility
As part of its normal business operations, the Company is required to provide surety bonds in certain states in which the Company does business. In May 2009, the Company entered into a surety bond facility with an insurance company to provide such bonds when required. As of June 30, 2015, the Company's total available surety bond facility was $12.0 million and the surety had issued bonds totaling $3.5 million on the Company's behalf under such facility.
Earnings (Loss) Per Share
Earnings (Loss) Per Share
Earnings (Loss) Per Share
Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period.
Diluted earnings per share is calculated by dividing net income available to common stockholders by the sum of (i) the weighted average number of common shares outstanding for the period and (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive securities for the periods presented may include incremental shares of common stock issuable upon the exercise of stock options and upon the settlement of restricted stock units (“RSUs”) and performance stock units (“PSUs”).
The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods indicated (in thousands, except per share data):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Net income (loss)
$
(650
)
 
$
12,955

 
$
(1,021
)
 
$
8,625

Denominator:
 
 
 
 
 
 
 
Weighted average number of common shares outstanding
45,674

 
45,233

 
45,552

 
45,066

Effect of dilutive options and stock units
—

 
1,270

 
—

 
1,458

Diluted weighted average number of common shares outstanding
45,674

 
46,503

 
45,552

 
46,524

Earnings (loss) per share:
 
 
 
 
 
 
 
Basic earnings (loss) per share
$
(0.01
)
 
$
0.29

 
$
(0.02
)
 
$
0.19

Diluted earnings (loss) per share
$
(0.01
)
 
$
0.28

 
$
(0.02
)
 
$
0.19


For the periods indicated below, the computation of diluted common shares outstanding excludes stock options, RSUs and PSUs, as applicable, because their effect was anti-dilutive (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Options
5,246

 
2,769

 
5,110

 
2,351

Stock units
605

 
—

 
631

 
—

Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation
The Company recorded $3.4 million and $3.2 million of stock-based compensation expense for the three months ended June 30, 2015 and 2014, respectively, and $5.6 million and $5.1 million of stock-based compensation expense for the six months ended June 30, 2015 and 2014, respectively.
The related income tax benefit was $1.3 million and $1.2 million for the three months ended June 30, 2015 and 2014, respectively, and $2.1 million and $1.9 million for the six months ended June 30, 2015 and 2014, respectively.
The Company granted 91,061 RSUs during the three months ended June 30, 2015 at a grant date fair value of $9.57. During the three months ended June 30, 2015, 8,425 RSUs vested.
The Company granted 45,719 PSUs during the three months ended June 30, 2015 at a weighted grant date fair value of $4.12. No PSUs vested during the three months ended June 30, 2015.
The Company granted 39,597 options to purchase shares of common stock during the three months ended June 30, 2015. During the three months ended June 30, 2015, options to purchase 32,447 shares of common stock were exercised.
As of June 30, 2015, there was unrecognized compensation cost of $23.4 million related to the combined unvested stock options, RSUs and PSUs.
Income Taxes
Income Taxes
Income Taxes
The Company's estimated annual effective income tax rate that was applied to normal, recurring operations for the six months ended June 30, 2015 was 30.9%. The Company's actual effective income tax rate was (50.5)% for the six months ended June 30, 2015. The actual effective income tax rate for the six months ended June 30, 2015 differed from the Company's estimated annual effective income tax rate due to the effect of a pre-tax loss on relatively constant nondeductible expenses year over year, as well as an increase in reserves for unrecognized tax benefits and related accrued interest in the current year. The negative effective income tax rate is due to income tax expense on a pre-tax loss.
At June 30, 2015 and December 31, 2014, the Company had $20.6 million and $20.9 million, respectively, of gross unrecognized tax benefits, of which $13.4 million and $13.6 million, respectively, would impact the effective income tax rate if recognized.
The tax years 2002 through 2014 are open to examination by major taxing jurisdictions to which the Company is subject. The California Franchise Tax Board is auditing the Company's 2008 through 2012 California income tax returns. The Company is also subject to various other state audits. With respect to all audits, the Company does not expect any significant adjustments to amounts already reserved.
In connection with the California Franchise Tax Board audit, in 2014 the Company filed a refund claim for years 2008 through 2010 for approximately $12.6 million. However, the Company will not recognize any income statement benefit in its financial statements related to the refund claim until the final resolution of the audit.
It is reasonably possible that the total amount of the unrecognized tax benefit will change during the next 12 months. However, the Company does not expect any potential change to have a material effect on the Company's results of operations or financial position in the next year.
The Company's continuing practice is to recognize interest and penalties related to uncertain tax positions in income tax expense. Accrued interest and penalties related to uncertain tax positions as of June 30, 2015 and December 31, 2014 was $2.1 million and $1.9 million, respectively.
Each reporting period, the Company estimates the likelihood that it will be able to recover its deferred tax assets. The realization of deferred tax assets is dependent upon future taxable income. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income given current business conditions affecting the Company, and the feasibility of ongoing tax planning strategies. As of June 30, 2015, the Company believes that its deferred tax assets are more likely than not to be realized through sufficient levels of future taxable income. However, if it becomes more likely than not that the deferred tax assets will not be utilized due to insufficient future taxable income, or will not otherwise be realizable, the Company will recognize a valuation allowance at that time.
Regulatory
Regulatory
Regulatory
The Company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (the “Higher Education Act”), and the regulations promulgated thereunder by the U.S. Department of Education (the “Department”) subject the Company to significant regulatory scrutiny on the basis of numerous standards that institutions of higher education must satisfy in order to participate in the various federal student financial assistance programs under Title IV of the Higher Education Act.
Ashford University is regionally accredited by WASC Senior College and University Commission (“WSCUC”), formerly referred to as WASC. University of the Rockies is regionally accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools.
Department of Education Program Review of Ashford University
On July 31, 2014, the Company and Ashford University received notification from the Department that it intended to conduct an ordinary course program review of Ashford University’s administration of federal student financial aid (Title IV) programs in which the university participates. The review, which commenced on August 25, 2014 and is currently ongoing, covers 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 “Clery Act”), the Drug-Free Schools and Communities Act and related regulations.
WSCUC Grant of Initial Accreditation of Ashford University
In July 2013, WSCUC granted Initial Accreditation to Ashford University for five years, until July 15, 2018. In December 2013, Ashford University effected its transition to WSCUC accreditation and designated its San Diego, California facilities as its main campus and its Clinton, Iowa campus as an additional location. As part of a continuing monitoring process, Ashford University hosted a visiting team from WSCUC in a special visit in April 2015. In July 2015, Ashford University received an Action Letter from WSCUC outlining the findings arising out of its team's special visit. The Action Letter stated that the WSCUC visiting team found substantial evidence that Ashford University continues to make sustained progress in all six areas recommended by WSCUC in 2013.
WSCUC also performs Mid-Cycle Reviews of its accredited institutions near the midpoint of their periods of accreditation, as required by the Department. The purpose of the Mid-Cycle Review is to identify problems with an institution’s or program’s continued compliance with agency standards while taking into account institutional or program strengths and stability. The Mid-Cycle Review report will focus particularly on student achievement, including indicators of educational effectiveness, retention and graduation data.
Licensure by California BPPE
To be eligible to participate in Title IV programs, an institution must be legally authorized to offer its educational programs by the states in which it is physically located. Effective July 1, 2011, the Department established new requirements to determine if an institution is considered to be legally authorized by a state. In connection with its transition to WSCUC accreditation, Ashford University designated its San Diego, California facilities as its main campus for Title IV purposes and submitted an Application for Approval to Operate an Accredited Institution to the State of California, Department of Consumer Affairs, Bureau for Private Postsecondary Education (“BPPE”) on September 10, 2013.
In April 2014, the application was granted, and the university was approved by BPPE to operate in California until July 15, 2018. As a result, Ashford University is no longer exempt from certain laws and regulations applicable to private, post-secondary educational institutions. These laws and regulations entail certain California reporting requirements, including but not limited to, graduation, employment and licensing data, certain changes of ownership and control, faculty and programs, and student refund policies, as well as the triggering of other state and federal student employment data reporting and disclosure requirements.
Negotiated Rulemaking and Other Executive Action
The Department held Program Integrity and Improvement negotiated rulemaking sessions in February, March, April and May 2014 that focused on topics including, but not limited to, cash management of Title IV program funds, state authorization for programs offering distance or correspondence education, credit and clock hour conversions, the retaking of coursework, and the definition of “adverse credit” for PLUS loan borrowers. No consensus resulted from the rulemaking sessions. As a result, the Department had discretion to propose Program Integrity regulations in these areas.
On August 8, 2014, the Department published a Notice of Proposed Rulemaking proposing new regulations regarding the federal Direct PLUS loan program. The final regulations, effective July 1, 2015, update the standard for determining if a potential parent or student borrower has an adverse credit history for purposes of eligibility for a PLUS loan. Specifically, the regulations revise the definition of “adverse credit history” and require that parents and students who have an adverse credit history, but who are approved for a PLUS loan on the basis of extenuating circumstances or who obtain an endorser for the PLUS loan, must receive loan counseling before receiving the loan.
Three negotiated rulemaking sessions between January and March of 2014 resulted in draft regulations to enact changes to the Clery Act required by the enactment of the Violence Against Women Act (“VAWA”). The Department published final regulations in the Federal Register on Monday, October 20, 2014, effective July 1, 2015. Among other things, VAWA requires institutions to compile statistics for additional incidents to those currently required by the Clery Act and include certain policies, procedures and programs pertaining to these incidents in annual security reports.
On September 3, 2014, the Department published a notice in the Federal Register to announce its intention to establish a negotiated rulemaking committee to prepare proposed regulations for the William D. Ford Federal Direct Loan Program authorized by the Higher Education Act. Two public hearings were held in October and November of 2014. On December 19, 2014, the Department published a notice to announce its intention to establish the committee to (i) prepare proposed regulations to establish a new Pay as You Earn repayment plan for those not covered by the existing Federal Direct Loan Program and (ii) establish procedures for Federal Family Education Loan Program (“FFEL Program”) loan holders to use to identify U.S. military services members who may be eligible for a lower interest rate on their FFEL Program loans. The committee met in February, March and April of 2015. On July 9, 2015, the Department published a Notice of Proposed Rulemaking proposing to amend the regulations governing the Federal Direct Loan Program to create a new income-contingent repayment plan in accordance with President Obama's initiative to allow more Federal Direct Loan Program borrowers to cap their loan payments at 10% of their monthly income.
On October 30, 2014, the Obama administration announced that the Department will lead an effort to formalize an interagency task force to conduct oversight of for-profit institutions of higher education, especially regarding alleged unfair, deceptive, and abusive policies and practices. The task force will include the Departments of Justice, Treasury and Veterans Affairs, as well as the Consumer Financial Protection Bureau, Federal Trade Commission, Securities and Exchange Commission, and state Attorneys General. The stated purpose of the task force is to “coordinate...activities and promote information sharing to protect students from unfair, deceptive, and abusive policies and practices.”
On March 24, 2015, the Department's Office of Inspector General (the “OIG”) issued a final audit report titled “Federal Student Aid's Oversight of Schools' Compliance with the Incentive Compensation Ban.” In its report, the OIG concluded that the Department's Office of Federal Student Aid (the “FSA”) failed to (i) revise its enforcement procedures and guidance after the Department eliminated the incentive compensation safe harbors in 2010, (ii) develop procedures and guidance on appropriate enforcement action and (iii) properly resolve incentive compensation ban findings. In response to the report, the OIG and the FSA agreed on corrective action that may increase scrutiny and enforcement action related to payment of incentive compensation.
On May 18, 2015, the Department published a Notice of Proposed Rulemaking to amend cash management regulations related to Title IV program funds. The proposed regulations address student access to Title IV program funds, financial account fees and the opening of financial accounts. The proposed regulations also clarify how the Department treats previously passed coursework for Title IV eligibility purposes, and streamline the requirements for converting clock hours to credit hours.
On June 8, 2015, the Department held a press conference and released a document entitled “Fact Sheet: Protecting Students from Abusive Career Colleges” in which the Department announced processes that will be established to assist students who may have been the victims of fraud in gaining relief under the “defense to repayment” provisions of the federal Direct Loan program regulations. Rarely used in the past, the defense to repayment provisions allow a student to assert as a defense against repayment of federal Direct Loans any commission of fraud or other violation of applicable state law by the school related to such loans or the educational services paid for. The processes outlined by the Department on June 8 include (i) extending debt relief eligibility to groups of students where possible, (ii) providing loan forbearance and pausing payments while claims are being resolved, (iii) appointing a Special Master dedicated to borrower defense issues for students who believe they have a defense to repayment, (iv) establishing a streamlined process and (v) building a better system for debt relief for the future. The Department noted that building a better system for debt relief would involve developing new regulations to clarify and streamline loan forgiveness under the defense to repayment provisions, while maintaining or enhancing current consumer protection standards and strengthening provisions that hold schools accountable for actions that result in loan discharges.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Litigation
From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. When the Company becomes aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. Below is a list of material legal proceedings to which the Company or its subsidiaries is a party.
Compliance Audit by the Department's Office of the Inspector General
In January 2011, Ashford University received a final audit report from the OIG regarding the compliance audit commenced in May 2008 and covering the period July 1, 2006 through June 30, 2007. The audit covered Ashford University's administration of Title IV program funds, including compliance with regulations governing institutional and student eligibility, awards and disbursements of Title IV program funds, verification of awards and returns of unearned funds during that period, and its compensation of financial aid and recruiting personnel during the period May 10, 2005 through June 30, 2009.
The final audit report contained audit findings, in each case for the period July 1, 2006 through June 30, 2007, which are applicable to award year 2006-2007. Each finding was accompanied by one or more recommendations to the FSA. Ashford University provided the FSA a detailed response to the OIG’s final audit report in February 2011. In June 2011, in connection with two of the six findings, the FSA requested that Ashford University conduct a file review of the return to Title IV fund calculations for all Title IV recipients who withdrew from distance education programs during the 2006-2007 award year. The institution cooperated with the request and supplied the information within the time frame required. If the FSA were to determine to assess a monetary liability or commence other administrative action, Ashford University would have an opportunity to contest the assessment or proposed action through administrative proceedings, with the right to seek review of any final administrative action in the federal courts.
The outcome of this audit is uncertain at this point because of the many questions of fact and law that may arise. At present, the Company cannot reasonably estimate a range of loss for this action based on the information available to the Company. Accordingly, the Company has not accrued any liability associated with this matter.
Iowa Attorney General Civil Investigation of Ashford University
In February 2011, Ashford University received from the Attorney General of the State of Iowa (the “Iowa Attorney General”) a Civil Investigative Demand and Notice of Intent to Proceed (the “CID”) relating to the Iowa Attorney General’s investigation of whether certain of the university's business practices comply with Iowa consumer laws. Pursuant to the CID, the Iowa Attorney General requested documents and detailed information for the time period January 1, 2008 to present. On numerous occasions, representatives from the Company and Ashford University met with the Iowa Attorney General to discuss the status of the investigation and the Iowa Attorney General’s allegations against the Company that had been communicated to the Company in June 2013. As a result of these meetings, on May 15, 2014, the Iowa Attorney General, the Company and Ashford University entered into an Assurance of Voluntary Compliance (the “AVC”) in full resolution of the CID and the Iowa Attorney General’s allegations. The AVC, in which the Company and Ashford University do not admit any liability, contains several components including injunctive relief, nonmonetary remedies and a payment to the Iowa Attorney General to be used for restitution to Iowa consumers, costs and fees. The AVC also provides for the appointment of a settlement administrator for a period of three years to review the Company’s and Ashford University’s compliance with the terms of the AVC. The Company had originally accrued $9.0 million back in 2013 related to this matter, which represented its best estimate of the total restitution, cost of non-monetary remedies and future legal costs. The remaining accrual of $1.1 million as of June 30, 2015 is split between both current and long-term liabilities.
New York Attorney General Investigation of Bridgepoint Education, Inc.
In May 2011, the Company received from the Attorney General of the State of New York (the “NY Attorney General”) a subpoena relating to the NY Attorney General's investigation of whether the Company and its academic institutions have complied with certain New York state consumer protection, securities and finance laws. Pursuant to the subpoena, the NY Attorney General has requested from the Company and its academic institutions documents and detailed information for the time period March 17, 2005 to present. The Company is cooperating with the investigation and cannot predict the eventual scope, duration or outcome of the investigation at this time.
North Carolina Attorney General Investigation of Ashford University
In September 2011, Ashford University received from the Attorney General of the State of North Carolina (the “NC Attorney General”) an Investigative Demand relating to the NC Attorney General's investigation of whether the university's business practices complied with North Carolina consumer protection laws. Pursuant to the Investigative Demand, the NC Attorney General has requested from Ashford University documents and detailed information for the time period January 1, 2008 to present. Ashford University is cooperating with the investigation and cannot predict the eventual scope, duration or outcome of the investigation at this time.
California Attorney General Investigation of For-Profit Educational Institutions
In January 2013, the Company received from the Attorney General of the State of California (the “CA Attorney General”) an Investigative Subpoena relating to the CA Attorney General’s investigation of for-profit educational institutions. Pursuant to the Investigative Subpoena, the CA Attorney General has requested documents and detailed information for the time period March 1, 2009 to present. On July 24, 2013, the CA Attorney General filed a petition to enforce certain categories of the Investigative Subpoena related to recorded calls and electronic marketing data. On September 25, 2013, the Company reached an agreement with the CA Attorney General to produce certain categories of the documents requested in the petition and stipulated to continue the hearing on the petition to enforce from October 3, 2013 to January 9, 2014. On January 13, 2014 and June 19, 2014, the Company received additional Investigative Subpoenas from the CA Attorney General each requesting additional documents and information for the time period March 1, 2009 through the current date. On October 24, 2014 and February 12, 2015, representatives from the Company met with the CA Attorney General’s office to discuss the status of the investigation, additional information requests, and specific concerns related to possible unfair business practices in connection with the Company’s recruitment of students and debt collection practices. The Company cannot predict the eventual scope, duration or outcome of the investigation at this time. As a result, the Company cannot reasonably estimate a range of loss for this action and accordingly has not accrued any liability associated with this action.
Massachusetts Attorney General Investigation of Bridgepoint Education, Inc. and Ashford University
On July 21, 2014, the Company and Ashford University received from the Attorney General of the State of Massachusetts (the “MA Attorney General”) a Civil Investigative Demand relating to the MA Attorney General's investigation of for-profit educational institutions and whether the university's business practices complied with Massachusetts consumer protection laws. Pursuant to the Civil Investigative Demand, the MA Attorney General has requested from the Company and Ashford University documents and information for the time period January 1, 2006, to present. The Company is cooperating with the investigation and cannot predict the eventual scope, duration or outcome of the investigation at this time.
Securities & Exchange Commission Subpoena of Bridgepoint Education, Inc.
On July 22, 2014, the Company received from the SEC a subpoena relating to certain of the Company’s accounting practices, including revenue recognition, receivables and other matters relating to the Company’s previously disclosed intention to restate its financial statements for fiscal year ended December 31, 2013 and revise its financial statements for the years ended December 31, 2011 and 2012, and the prior revision of the Company’s financial statements for the fiscal year ended December 31, 2012. Pursuant to the subpoena, the SEC has requested from the Company documents and detailed information for the time period January 1, 2009 to present. The Company is cooperating with the investigation and cannot predict the eventual scope, duration or outcome of the investigation at this time. As a result, the Company cannot reasonably estimate a range of loss for this action and accordingly has not accrued any liability associated with this action.
Securities Class Actions
Consolidated Securities Class Action
On July 13, 2012, a securities class action complaint was filed in the U.S. District Court for the Southern District of California by Donald K. Franke naming the Company, Andrew Clark, Daniel Devine and Jane McAuliffe as defendants for allegedly making false and materially misleading statements regarding the Company’s business and financial results, specifically the concealment of accreditation problems at Ashford University. The complaint asserts a putative class period stemming from May 3, 2011 to July 6, 2012. A substantially similar complaint was also filed in the same court by Luke Sacharczyk on July 17, 2012 making similar allegations against the Company, Andrew Clark and Daniel Devine. The Sacharczyk complaint asserts a putative class period stemming from May 3, 2011 to July 12, 2012. On July 26, 2012, another purported securities class action complaint was filed in the same court by David Stein against the same defendants based upon the same general set of allegations and class period. The complaints allege violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder and seek unspecified monetary relief, interest, and attorneys’ fees.
On October 22, 2012, the Sacharczyk and Stein actions were consolidated with the Franke action and the Court appointed the City of Atlanta General Employees' Pension Fund and the Teamsters Local 677 Health Services & Insurance Plan as lead plaintiffs. A consolidated complaint was filed on December 21, 2012 and the Company filed a motion to dismiss on February 19, 2013. On September 13, 2013, the Court granted the motion to dismiss with leave to amend for alleged misrepresentations relating to Ashford University’s quality of education, the WSCUC accreditation process and the Company’s financial forecasts. The Court denied the motion to dismiss for alleged misrepresentations concerning Ashford University’s persistence rates. The plaintiff did not file an amended complaint by the October 31, 2013 deadline and therefore the case is now in discovery. On August 6, 2014, the plaintiff filed a motion for class certification, which was granted by the Court on January 15, 2015.
The outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. Based on information available to the Company at present, it cannot reasonably estimate a range of loss for this action. Accordingly, the Company has not accrued any liability associated with this action.
Zamir v. Bridgepoint Education, Inc., et al.
On February 24, 2015, a securities class action complaint was filed in the U.S. District Court for the Southern District of California by Nelda Zamir naming the Company, Andrew Clark and Daniel Devine as defendants. The complaint asserts violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, claiming that the defendants made false and materially misleading statements and failed to disclose material adverse facts regarding the Company's business, operations and prospects, specifically regarding the Company’s improper application of revenue recognition methodology to assess collectibility of funds owed by students. The complaint asserts a putative class period stemming from August 7, 2012 to May 30, 2014 and seeks unspecified monetary relief, interest and attorneys' fees. On July 15, 2015, the Court granted plaintiff's motion for appointment as lead plaintiff and for appointment of lead counsel.
The Company has not yet responded to the complaint and anticipates that an amended complaint will be filed in September 2015. The Company intends to vigorously defend against this action. However, the outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. Based on information available to the Company at present, it cannot reasonably estimate a range of loss for this action. Accordingly, the Company has not accrued any liability associated with this action.
Shareholder Derivative Actions
In re Bridgepoint, Inc. Shareholder Derivative Action
On July 24, 2012, a shareholder derivative complaint was filed in California Superior Court by Alonzo Martinez. In the complaint, the plaintiff asserts a derivative claim on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Martinez v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement on behalf of the Company, as well as other equitable relief and attorneys' fees. On September 28, 2012, a substantially similar shareholder derivative complaint was filed in California Superior Court by David Adolph-Laroche. In the complaint, the plaintiff asserts a derivative claim on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Adolph-Laroche v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched.
On October 11, 2012, the Adolph-Laroche action was consolidated with the Martinez action and the case is now captioned In re Bridgepoint, Inc. Shareholder Derivative Action. A consolidated complaint was filed on December 18, 2012 and the defendants filed a motion to stay the case while the underlying securities class action is pending. The motion was granted by the Court on April 11, 2013. A status conference was held on October 10, 2013, during which the Court ordered the stay continued for the duration of discovery in the securities class action, but permitted the plaintiff to receive copies of any discovery responses served in the underlying securities class action.
Cannon v. Clark, et al.
On November 1, 2013, a shareholder derivative complaint was filed in the U.S. District Court for the Southern District of California by James Cannon. In the complaint, the plaintiff asserts a derivative claim on the Company's behalf against certain of its current officers and directors. The complaint is captioned Cannon v. Clark, et al. and is substantially similar to the previously filed California State Court derivative action now captioned In re Bridgepoint, Inc. Shareholder Derivative Action. In the complaint, plaintiff generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement on behalf of the Company, as well as other equitable relief and attorneys' fees. Pursuant to a stipulation among the parties, on January 6, 2014, the Court ordered the case stayed during discovery in the underlying securities class action, but permitted the plaintiff to receive copies of any discovery responses served in the underlying securities class action.
Di Giovanni v. Clark, et al., and Craig-Johnston v. Clark, et al.
On December 9, 2013, two nearly identical shareholder derivative complaints were filed in the United States District Court for the Southern District of California. The complaints assert derivative claims on the Company's behalf against the members of the Company's board of directors as well as against Warburg Pincus & Co., Warburg Pincus LLC, Warburg Pincus Partners LLC, and Warburg Pincus Private Equity VIII, L.P. The two complaints are captioned Di Giovanni v. Clark, et al. and Craig-Johnston v. Clark, et al. The complaints generally allege that all of the defendants breached their fiduciary duties and were unjustly enriched and that the individual defendants wasted corporate assets in connection with the tender offer commenced by the Company on November 13, 2013. The lawsuits seek unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. On February 28, 2014, the defendants filed motions to dismiss, which were granted by the Court on October 17, 2014. The plaintiffs filed a notice of appeal on December 8, 2014 and the case is currently under appeal with the United States Court of Appeals for the Ninth Circuit.
Klein v. Clark, et al.
On January 9, 2014, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company's behalf against the members of the Company's board of directors as well as against Warburg Pincus & Co., Warburg Pincus LLC, Warburg Pincus Partners LLC, and Warburg Pincus Private Equity VIII, L.P. The complaint is captioned Klein v. Clark, et al. and generally alleges that all of the defendants breached their fiduciary duties and were unjustly enriched and that the individual defendants wasted corporate assets in connection with the tender offer commenced by the Company on November 13, 2013. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. On March 21, 2014, the Court granted the parties' stipulation to stay the case until the motions to dismiss in the related federal derivative action were decided. On November 14, 2014, the Court dismissed the case but retained jurisdiction in the event the dismissal in the federal case is reversed on appeal by the United States Court of Appeals for the Ninth Circuit.
Reardon v. Clark, et al.
On March 18, 2015, a shareholder derivative complaint was filed in the Superior Court of the State of California in San Diego. The complaint asserts derivative claims on the Company's behalf against certain of its current and former officers and directors. The complaint is captioned Reardon v. Clark, et al. and generally alleges that the individual defendants breached their fiduciary duties of candor, good faith and loyalty, wasted corporate assets and were unjustly enriched. The lawsuit seeks unspecified monetary relief and disgorgement, as well as other equitable relief and attorneys’ fees. Pursuant to a stipulation among the parties, on May 27, 2015, the Court ordered the case stayed during discovery in the underlying Zamir securities class action, but permitted the plaintiff to receive copies of any discovery conducted in the underlying Zamir securities class action.
Guzman v. Bridgepoint Education, Inc.
In January 2011, Betty Guzman filed a class action lawsuit against the Company, Ashford University and University of the Rockies in the U.S. District Court for the Southern District of California. The complaint is captioned Guzman v. Bridgepoint Education, Inc., et al. and generally alleges that the defendants engaged in misrepresentation and other unlawful behavior in their efforts to recruit and retain students. The complaint asserts a putative class period of March 1, 2005 through the present. In March 2011, the defendants filed a motion to dismiss the complaint, which was granted by the Court with leave to amend in October 2011.
In January 2012, the plaintiff filed a first amended complaint asserting similar claims and the same class period, and the defendants filed another motion to dismiss. In May 2012, the Court granted University of the Rockies’ motion to dismiss and granted in part and denied in part the motion to dismiss filed by the Company and Ashford University. The Court also granted the plaintiff leave to file a second amended complaint. In August 2012, the plaintiff filed a second amended complaint asserting similar claims and the same class period. The second amended complaint seeks unspecified monetary relief, disgorgement of all profits, various other equitable relief, and attorneys’ fees. The defendants filed a motion to strike portions of the second amended complaint, which was granted in part and denied in part. On April 30, 2014, the plaintiff filed a motion for class certification, which was denied by the Court on March 26, 2015. On April 9, 2015, the plaintiff filed a petition for permission to appeal the denial of class certification with the United States Court of Appeals for the Ninth Circuit, which was denied by the Court of Appeals on June 9, 2015.
The outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. At present, the Company cannot reasonably estimate a range of loss for this action based on the information available to the Company. Accordingly, the Company has not accrued any liability associated with this action.
Qui Tam Complaints
In December 2012, the Company received notice that the U.S. Department of Justice had declined to intervene in a qui tam complaint filed in the U.S. District Court for the Southern District of California by Ryan Ferguson and Mark T. Pacheco under the federal False Claims Act on March 10, 2011 and unsealed on December 26, 2012. The complaint is captioned United States of America, ex rel., Ryan Ferguson and Mark T. Pacheco v. Bridgepoint Education, Inc., Ashford University and University of the Rockies. The qui tam complaint alleges, among other things, that since March 10, 2005, the Company caused its institutions, Ashford University and University of the Rockies, to violate the federal False Claims Act by falsely certifying to the U.S. Department of Education that the institutions were in compliance with various regulations governing the Title IV programs, including those that require compliance with federal rules regarding the payment of incentive compensation to enrollment personnel, student disclosures, and misrepresentation in connection with the institutions' participation in the Title IV programs. The complaint seeks significant damages, penalties and other relief. On April 30, 2013, the relators petitioned the Court for voluntary dismissal of the complaint without prejudice. The U.S. Department of Justice filed a notice stipulating to the dismissal and the Court granted the dismissal on June 12, 2013.
In January 2013, the Company received notice that the U.S. Department of Justice had declined to intervene in a qui tam complaint filed in the U.S. District Court for the Southern District of California by James Carter and Roger Lengyel under the federal False Claims Act on July 2, 2010 and unsealed on January 2, 2013. The complaint is captioned United States of America, ex rel., James Carter and Roger Lengyel v. Bridgepoint Education, Inc., Ashford University. The qui tam complaint alleges, among other things, that since March 2005, the Company and Ashford University have violated the federal False Claims Act by falsely certifying to the U.S. Department of Education that Ashford University was in compliance with federal rules regarding the payment of incentive compensation to enrollment personnel in connection with the institution's participation in Title IV programs. Pursuant to a stipulation between the parties, the relators filed an amended complaint on May 10, 2013. The amended complaint is substantially similar to the original complaint and seeks significant damages, penalties and other relief. On January 8, 2014, the Court denied the Company's motion to dismiss and the case is currently in discovery.
The outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. Based on information available to the Company at present, it cannot reasonably estimate a range of loss for this action. Accordingly, the Company has not accrued any liability associated with this action.
Cavazos v. Ashford University
On June 22, 2015, Diamond Cavazos filed a purported class action against Ashford University in the Superior Court of the State of California in San Diego. The complaint is captioned Diamond Cavazos v. Ashford University, LLC and generally alleges various wage and hour claims under California law for failure to pay overtime, failure to pay minimum wages and failure to provide rest and meal breaks. The lawsuit seeks back pay, the cost of benefits, penalties and interest on behalf of the putative class members, as well as other equitable relief and attorneys' fees. The Company has not yet responded to the complaint and intends to vigorously defend against it. The outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. Based on information available to the Company at present, it cannot reasonably estimate a range of loss for this action. Accordingly, the Company has not accrued any liability associated with this action.
Coleman et al. v. Ashford University
On June 4, 2015, Brandy Coleman and a group of seven other former employees filed a purported class action against Ashford University in the Superior Court of the State of California in San Diego. The complaint is captioned Brandy Coleman v. Ashford University, LLC and generally alleges violations of the California WARN Act for back pay and benefits associated with the termination of the plaintiffs' employment in May 2015. The lawsuit seeks unpaid wages, penalties and interest on behalf of the putative class members, as well as other equitable relief and attorneys' fees. The Company has not yet responded to the complaint and intends to vigorously defend against it. The outcome of this legal proceeding is uncertain at this point because of the many questions of fact and law that may arise. Based on information available to the Company at present, it cannot reasonably estimate a range of loss for this action. Accordingly, the Company has not accrued any liability associated with this action.
Subsequent Events
Subsequent Events
Subsequent Events
On July 7, 2015, the Company committed to the implementation of a plan to close Ashford University's campus in Clinton, Iowa (the “Clinton Campus”) after the 2015-2016 academic year, at the end of May 2016. The Ashford University Board of Trustees made the decision to close the Clinton Campus following an ongoing review of the University's strategic direction and as a result of the University's inability to meet campus enrollment requirements despite its best efforts to continue maintaining and operating the Clinton Campus. The closure of the Clinton Campus is intended to realign the Company's operations to focus on its core mission of leveraging technology to create innovative solutions that advance learning.
The Company estimates recording a total of approximately $49.0 million to $55.0 million in restructuring and asset impairment charges related to the closure of the Clinton Campus. This estimate consists of non-cash impairment of asset charges of approximately $40.0 million and future cash expenditures relating to (i) student transfer agreement costs of approximately $8.0 million, (ii) severance and retention charges of approximately $3.0 million and (iii) other contract cancellation costs and professional service fees of approximately $1.0 million. The above estimates are based upon several assumptions that are subject to change, including student decisions regarding transfer and the circumstances surrounding the disposition of the campus.
Summary of Significant Accounting Policies (Policies)
Principles of Consolidation 
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation.
Unaudited Interim Financial Information 
Unaudited Interim Financial Information
The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2015. In the opinion of management, these financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary to present a fair statement of the Company's condensed consolidated financial position, results of operations and cash flows as of and for the periods presented.
Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for complete annual financial statements.
Use of Estimates 
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates.
Reclassifications 
Reclassifications
Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.
Restricted Cash 
Restricted Cash
The Company's restricted cash is primarily held in money market accounts, and is excluded from cash and cash equivalents on the Company's consolidated balance sheets and statements of cash flows. The majority of restricted cash represents funds held for students from Title IV financial aid program funds that result in credit balances on a student’s account. Changes in this restricted cash are included in the Company's condensed consolidated statements of cash flows as cash flows from operating activities. To a lesser extent, restricted cash also represents amounts held as collateral for letters of credit. Changes in this restricted cash are included in the Company's condensed consolidated statements of cash flows as cash flows from investing activities
Recent Accounting Pronouncements 
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. This literature is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The standard is expected to be effective for the first interim period within fiscal years beginning after December 15, 2017, using one of two retrospective application methods. The Company continues to evaluate the impacts, if any, the adoption of ASU 2014-09 will have on the Company's financial position or results of operations.
In January 2015, the FASB issued ASU 2015-01, Income Statement—Extraordinary and Unusual Items (Subtopic 225-20). This update simplifies the income statement presentation requirements and eliminates from GAAP the concept of extraordinary items, and essentially deletes the requirements in Subtopic 225-20. However, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments may be applied prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company adopted ASU 2015-01 effective April 1, 2015, and such adoption does not have a material effect on the Company's consolidated financial statements.
Investments (Tables)
Fair Value Information of Short and Long-term Investments
The following tables summarize the fair value information of short- and long-term investments as of June 30, 2015 and December 31, 2014, respectively (in thousands):
 
As of June 30, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
1,285

 
$
—

 
$
—

 
$
1,285

Corporate notes and bonds
—

 
47,225

 
—

 
47,225

Certificates of deposit
—

 
25,000

 
—

 
25,000

Total
$
1,285

 
$
72,225

 
$
—

 
$
73,510

 
As of December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
Mutual funds
$
1,071

 
$
—

 
$
—

 
$
1,071

Corporate notes and bonds
—

 
62,550

 
—

 
62,550

U.S. government and agency securities
—

 
34,987

 
—

 
34,987

Certificates of deposit
—

 
25,000

 
—

 
25,000

Total
$
1,071

 
$
122,537

 
$
—

 
$
123,608

Accounts Receivable (Tables) (Allowance for Doubtful Accounts, Current)
Schedule of Accounts Receivable, Net 
Accounts receivable, net, consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Accounts receivable
$
54,933

 
$
48,841

Less allowance for doubtful accounts
(26,769
)
 
(27,567
)
Accounts receivable, net
$
28,164

 
$
21,274

Changes in Allowance for Doubtful Accounts, Accounts Receivable 
The following table presents the changes in the allowance for doubtful accounts for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts:
 
 
 
 
 
 
 
For the six months ended June 30, 2015
$
(27,567
)
 
$
15,418

 
$
(16,216
)
 
$
(26,769
)
For the six months ended June 30, 2014
(26,901
)
 
12,872

 
(13,906
)
 
(25,867
)
(1)
Deductions represent accounts written off, net of recoveries.
Student Loans Receivable (Tables)
Delinquency Status of Gross Student Loans Receivable 
As of June 30, 2015, the delinquency status of gross student loans receivable was as follows (in thousands):
120 days and less
$
14,304

From 121 - 270 days
1,118

Greater than 270 days
3,085

Total gross student loans receivable
18,507

Less: Amounts reserved or impaired
(6,770
)
Less: Discount on student loans receivable
(2,633
)
Total student loans receivable, net
$
9,104

Schedule of Student Loans Receivable, Net 
Student loans receivable, net, consist of the following (in thousands):
Short-term:
As of
June 30, 2015
 
As of
December 31, 2014
   Student loans receivable (non-tuition related)
$
463

 
$
509

   Student loans receivable (tuition related)
554

 
626

   Current student loans receivable
1,017

 
1,135

Less allowance for doubtful accounts
(104
)
 
(132
)
Student loans receivable, net
$
913

 
$
1,003

Long-term:
As of
June 30, 2015
 
As of
December 31, 2014
   Student loans receivable (non-tuition related)
$
3,661

 
$
4,805

   Student loans receivable (tuition related)
5,867

 
6,068

   Non-current student loans receivable
9,528

 
10,873

Less allowance for doubtful accounts
(1,337
)
 
(1,363
)
Student loans receivable, net
$
8,191

 
$
9,510

Changes in Allowance for Doubtful Accounts, Student Loans Receivable 
The following table presents the changes in the allowance for doubtful accounts for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for student loans receivable (tuition related):
 
 
 
 
 
 
 
For the six months ended June 30, 2015
$
(1,495
)
 
$
(54
)
 
$
—

 
$
(1,441
)
For the six months ended June 30, 2014
(2,144
)
 
49

 
—

 
(2,193
)
(1)
Deductions represent accounts written off, net of recoveries.
Other Significant Balance Sheet Accounts (Tables)
Prepaid Expenses and Other Current Assets 
Prepaid expenses and other current assets consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Prepaid expenses
$
8,249

 
$
8,500

Prepaid licenses
4,388

 
5,598

Prepaid income taxes
6,304

 
2,945

Prepaid insurance
2,482

 
1,508

Interest receivable
307

 
424

Insurance recoverable
2,704

 
3,040

Other current assets
795

 
803

Total prepaid expenses and other current assets
$
25,229

 
$
22,818

Property and Equipment, Net 
Property and equipment, net, consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Land
$
7,091

 
$
7,091

Buildings
29,474

 
29,540

Furniture and office equipment
77,745

 
81,030

Software
12,546

 
12,454

Leasehold improvements
20,531

 
21,096

Vehicles
147

 
147

Total property and equipment
147,534

 
151,358

Less accumulated depreciation and amortization
(76,466
)
 
(73,139
)
Total property and equipment, net
$
71,068

 
$
78,219

Goodwill and Intangibles, Net 
Goodwill and intangibles, net, consist of the following (in thousands):
 
June 30, 2015
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
19,362

 
$
(11,828
)
 
$
7,534

Purchased intangible assets
15,850

 
(2,905
)
 
12,945

     Total definite-lived intangible assets
$
35,212

 
$
(14,733
)
 
$
20,479

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
23,046

 
 
 
 
 
 
 
December 31, 2014
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
18,174

 
$
(9,526
)
 
$
8,648

Purchased intangible assets
15,850

 
(2,290
)
 
13,560

     Total definite-lived intangible assets
$
34,024

 
$
(11,816
)
 
$
22,208

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
24,775

Intangibles, Estimated Remaining Amortization Expense 
The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
Year Ended December 31,
 
 
2015
$
2,740

2016
4,425

2017
2,862

2018
1,785

2019
1,267

Thereafter
7,400

Total future amortization expense
$
20,479

Accrued Liabilities 
Accrued liabilities consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Accrued salaries and wages
$
7,649

 
$
8,250

Accrued bonus
1,730

 
2,720

Accrued vacation
10,372

 
9,771

Accrued litigation and fees
720

 
542

Accrued expenses
16,677

 
16,623

Rent liability
13,541

 
8,528

Accrued insurance liability
4,359

 
4,520

Accrued income taxes payable
—

 
449

Total accrued liabilities
$
55,048

 
$
51,403

Deferred Revenue and Student Deposits 
Deferred revenue and student deposits consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Deferred revenue
$
37,562

 
$
26,445

Student deposits
61,265

 
81,603

Total deferred revenue and student deposits
$
98,827

 
$
108,048

Other Long-Term Liabilities 
Other long-term liabilities consist of the following (in thousands):
 
As of
June 30, 2015
 
As of
December 31, 2014
Uncertain tax positions
$
7,895

 
$
7,586

Legal settlements
408

 
1,000

Other long-term liabilities
1,270

 
1,066

Total other long-term liabilities
$
9,573

 
$
9,652

Earnings (Loss) Per Share (Tables)
Computation of Basic and Diluted Earnings Per Common Share 
The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods indicated (in thousands, except per share data):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Numerator:
 
 
 
 
 
 
 
Net income (loss)
$
(650
)
 
$
12,955

 
$
(1,021
)
 
$
8,625

Denominator:
 
 
 
 
 
 
 
Weighted average number of common shares outstanding
45,674

 
45,233

 
45,552

 
45,066

Effect of dilutive options and stock units
—

 
1,270

 
—

 
1,458

Diluted weighted average number of common shares outstanding
45,674

 
46,503

 
45,552

 
46,524

Earnings (loss) per share:
 
 
 
 
 
 
 
Basic earnings (loss) per share
$
(0.01
)
 
$
0.29

 
$
(0.02
)
 
$
0.19

Diluted earnings (loss) per share
$
(0.01
)
 
$
0.28

 
$
(0.02
)
 
$
0.19

Antidilutive Securities 
For the periods indicated below, the computation of diluted common shares outstanding excludes stock options, RSUs and PSUs, as applicable, because their effect was anti-dilutive (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Options
5,246

 
2,769

 
5,110

 
2,351

Stock units
605

 
—

 
631

 
—

Restructuring and Impairment Charges (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and impairment charges
$ 14,418 
$ 0 
$ 14,418 
$ 0 
Lease Agreements [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and impairment charges
12,300 
 
 
 
Asset Impairment for Regulatory Action [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and impairment charges
1,300 
 
 
 
Employee Severance [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring and impairment charges
$ 800 
 
 
 
Investments (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
$ 73,510 
 
$ 73,510 
 
$ 123,608 
Unrealized gains (losses) on investments
(30)
(36)
135 
(72)
 
Unrealized gains (losses) on investments, tax expense (benefit)
77 
20 
(61)
47 
 
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax
 
 
61 
 
 
Level 1
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
1,285 
 
1,285 
 
1,071 
Level 2
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
72,225 
 
72,225 
 
122,537 
Level 3
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
0 
 
0 
 
0 
Mutual funds
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
1,285 
 
1,285 
 
1,071 
Mutual funds |
Level 1
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
1,285 
 
1,285 
 
1,071 
Mutual funds |
Level 2
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
0 
 
0 
 
0 
Mutual funds |
Level 3
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
0 
 
0 
 
0 
Corporate notes and bonds
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
47,225 
 
47,225 
 
62,550 
Corporate notes and bonds |
Level 1
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
0 
 
0 
 
0 
Corporate notes and bonds |
Level 2
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
47,225 
 
47,225 
 
62,550 
Corporate notes and bonds |
Level 3
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
0 
 
0 
 
0 
U.S. government and agency securities
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
 
 
 
 
34,987 
U.S. government and agency securities |
Level 1
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
 
 
 
 
0 
U.S. government and agency securities |
Level 2
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
 
 
 
 
34,987 
U.S. government and agency securities |
Level 3
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
 
 
 
 
0 
Certificates of deposit
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
25,000 
 
25,000 
 
25,000 
Certificates of deposit |
Level 1
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
0 
 
0 
 
0 
Certificates of deposit |
Level 2
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
25,000 
 
25,000 
 
25,000 
Certificates of deposit |
Level 3
 
 
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
 
 
Available-for-sale securities
$ 0 
 
$ 0 
 
$ 0 
Accounts Receivable (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Receivables [Abstract]
 
 
Accounts receivable
$ 54,933 
$ 48,841 
Less allowance for doubtful accounts
(26,769)
(27,567)
Accounts receivable, net
$ 28,164 
$ 21,274 
Student Loans Receivable (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Jun. 30, 2015
Student Loans Receivable (Non-tuition Related)
Dec. 31, 2014
Student Loans Receivable (Non-tuition Related)
Jun. 30, 2015
Student Loans Receivable (Tuition Related)
Dec. 31, 2014
Student Loans Receivable (Tuition Related)
Jun. 30, 2015
Repayment Plan One [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
 
 
 
 
 
 
 
Student loans receivable, short-term
$ 1,017 
$ 1,135 
$ 463 
$ 509 
$ 554 
$ 626 
 
Less allowance for doubtful accounts, short-term
(104)
(132)
 
 
 
 
 
Student loans receivable, net, short-term
913 
1,003 
 
 
 
 
 
Student loans receivable, long-term
9,528 
10,873 
3,661 
4,805 
5,867 
6,068 
 
Less allowance for doubtful accounts, long-term
(1,337)
(1,363)
 
 
 
 
 
Student loans receivable, net, long-term
$ 8,191 
$ 9,510 
 
 
 
 
 
Loans Receivable, Interest Rate, Stated Percentage
 
 
 
 
 
 
4.50% 
Accounts Receivable (Change in Allowance) (Details) (Allowance for Doubtful Accounts, Current, USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Allowance for Doubtful Accounts, Current
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
Beginning Balance
$ (27,567)
$ (26,901)
Charged to Expense
15,418 
12,872 
Deductions(1)
(16,216)
(13,906)
Ending Balance
$ (26,769)
$ (25,867)
Student Loans Receivable (Change in Allowance) (Details) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2015
Jun. 30, 2015
Allowance for Notes Receivable
Jun. 30, 2014
Allowance for Notes Receivable
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
 
Beginning Balance
 
 
$ (1,495,000)
$ (2,144,000)
Charged to Expense
 
 
(54,000)
49,000 
Deductions(1)
 
 
0 
0 
Ending Balance
 
 
(1,441,000)
(2,193,000)
Provision for Loan and Lease Losses
$ 600,000 
$ 900,000 
 
 
Student Loans Receivable (Delinquency Status) (Details) (USD $)
Jun. 30, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
Loans placed on non-accrual status
$ 5,300,000 
Allowance for Notes Receivable
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
120 days and less
14,304,000 
From 121 - 270 days
1,118,000 
Greater than 270 days
3,085,000 
Total gross student loans receivable
18,507,000 
Less: Amounts reserved or impaired
(6,770,000)
Less: Discount on student loans receivable
(2,633,000)
Total student loans receivable, net
$ 9,104,000 
Other Significant Balance Sheet Accounts (Prepaid Expenses and Other Current Assets) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Prepaid Expense and Other Assets, Current [Abstract]
 
 
Prepaid expenses
$ 8,249 
$ 8,500 
Prepaid licenses
4,388 
5,598 
Prepaid income taxes
6,304 
2,945 
Prepaid insurance
2,482 
1,508 
Interest receivable
307 
424 
Insurance recoverable
2,704 
3,040 
Other current assets
795 
803 
Total prepaid expenses and other current assets
$ 25,229 
$ 22,818 
Other Significant Balance Sheet Accounts (Property and Equipment, Net) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 147,534 
$ 151,358 
Less accumulated depreciation and amortization
(76,466)
(73,139)
Total property and equipment, net
71,068 
78,219 
Land
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
7,091 
7,091 
Buildings
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
29,474 
29,540 
Furniture and office equipment
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
77,745 
81,030 
Software
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
12,546 
12,454 
Leasehold improvements
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
20,531 
21,096 
Vehicles
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 147 
$ 147 
Other Significant Balance Sheet Accounts (Goodwill and Intangibles, Net) (Details) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Dec. 31, 2014
Goodwill and Intangibles, Net
 
 
 
 
 
Definite-lived intangible assets, gross carrying amount
$ 35,212,000 
 
$ 35,212,000 
 
$ 34,024,000 
Definite-lived intangible assets, accumulated amortization
(14,733,000)
 
(14,733,000)
 
(11,816,000)
Definite-lived intangible assets, net carrying amount
20,479,000 
 
20,479,000 
 
22,208,000 
Goodwill and indefinite-lived intangibles
2,567,000 
 
2,567,000 
 
2,567,000 
Total goodwill and intangibles, net
23,046,000 
 
23,046,000 
 
24,775,000 
Amortization expense
1,500,000 
1,400,000 
2,900,000 
2,800,000 
 
Future Amortization Expense
 
 
 
 
 
2015
2,740,000 
 
2,740,000 
 
 
2016
4,425,000 
 
4,425,000 
 
 
2017
2,862,000 
 
2,862,000 
 
 
2018
1,785,000 
 
1,785,000 
 
 
2019
1,267,000 
 
1,267,000 
 
 
Thereafter
7,400,000 
 
7,400,000 
 
 
Total future amortization expense
20,479,000 
 
20,479,000 
 
 
Capitalized Curriculum Costs
 
 
 
 
 
Goodwill and Intangibles, Net
 
 
 
 
 
Definite-lived intangible assets, gross carrying amount
19,362,000 
 
19,362,000 
 
18,174,000 
Definite-lived intangible assets, accumulated amortization
(11,828,000)
 
(11,828,000)
 
(9,526,000)
Definite-lived intangible assets, net carrying amount
7,534,000 
 
7,534,000 
 
8,648,000 
Purchased Intangible Assets
 
 
 
 
 
Goodwill and Intangibles, Net
 
 
 
 
 
Definite-lived intangible assets, gross carrying amount
15,850,000 
 
15,850,000 
 
15,850,000 
Definite-lived intangible assets, accumulated amortization
(2,905,000)
 
(2,905,000)
 
(2,290,000)
Definite-lived intangible assets, net carrying amount
$ 12,945,000 
 
$ 12,945,000 
 
$ 13,560,000 
Other Significant Balance Sheet Accounts (Accrued Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Significant Balance Sheet Accounts [Abstract]
 
 
Accrued salaries and wages
$ 7,649 
$ 8,250 
Accrued bonus
1,730 
2,720 
Accrued vacation
10,372 
9,771 
Accrued litigation and fees
720 
542 
Accrued expenses
16,677 
16,623 
Rent liability
13,541 
8,528 
Accrued insurance liability
4,359 
4,520 
Accrued income taxes payable
0 
449 
Total accrued liabilities
$ 55,048 
$ 51,403 
Other Significant Balance Sheet Accounts (Deferred Revenue) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Deferred Revenue [Abstract]
 
 
Deferred revenue
$ 37,562 
$ 26,445 
Student deposits
61,265 
81,603 
Total deferred revenue and student deposits
$ 98,827 
$ 108,048 
Other Significant Balance Sheet Accounts (Other Long-term Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Other Long-Term Liabilities [Abstract]
 
 
Uncertain tax positions
$ 7,895 
$ 7,586 
Legal settlements
408 
1,000 
Other long-term liabilities
1,270 
1,066 
Total other long-term liabilities
$ 9,573 
$ 9,652 
Credit Facilities (Details) (USD $)
0 Months Ended
Apr. 13, 2012
Jun. 30, 2015
Surety Bond Facility [Abstract]
 
 
Surety bond facility, available amount
 
$ 12,000,000 
Surety bond facility, issued amount
 
3,500,000 
April 2012 Credit Facility
 
 
Line of Credit Facility [Line Items]
 
 
Revolving line of credit, current borrowing capacity
50,000,000 
 
Revolving line of credit, term
3 years 
 
Revolving line of credit, amount outstanding
 
0 
Revolving line of credit, letters of credit outstanding
 
$ 6,600,000 
Earnings (Loss) Per Share (Basic and Diluted Earnings Per Share) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Numerator:
 
 
 
 
Net income (loss)
$ (650)
$ 12,955 
$ (1,021)
$ 8,625 
Denominator:
 
 
 
 
Weighted average number of common shares outstanding (in shares)
45,674 
45,233 
45,552 
45,066 
Effect of dilutive options and restricted stock units (in shares)
0 
1,270 
0 
1,458 
Diluted weighted average number of common shares outstanding (in shares)
45,674 
46,503 
45,552 
46,524 
Earnings (loss) per share:
 
 
 
 
Basic (in usd per share)
$ (0.01)
$ 0.29 
$ (0.02)
$ 0.19 
Diluted (in usd per share)
$ (0.01)
$ 0.28 
$ (0.02)
$ 0.19 
Earnings (Loss) Per Share (Anti-dilutive Securities) (Details)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Options
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of dilutive common shares outstanding
5,246 
2,769 
5,110 
2,351 
Stock units
 
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
 
Antidilutive securities excluded from computation of dilutive common shares outstanding
605 
0 
631 
0 
Stock-Based Compensation (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation expense
$ 3.4 
$ 3.2 
$ 5.6 
$ 5.1 
Income tax benefit of stock-based compensation expense
1.3 
1.2 
2.1 
1.9 
Unrecognized compensation cost related to unvested options and RSUs
$ 23.4 
 
$ 23.4 
 
Restricted Stock Units
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Non-option equity instruments granted during the period
91,061 
 
 
 
Grant date fair value
$ 9.57 
 
 
 
Equity instruments other than options vested during period
8,425 
 
 
 
Performance Shares [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Non-option equity instruments granted during the period
45,719 
 
 
 
Grant date fair value
$ 4.12 
 
 
 
Equity instruments other than options vested during period
0 
 
 
 
Options
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Number of shares available for grant
39,597 
 
39,597 
 
Stock options exercised
32,447 
 
 
 
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Income Tax Disclosure [Abstract]
 
 
Estimated annual effective tax rate
30.90% 
 
Effective income tax rate
(50.50%)
 
Gross unrecognized tax benefits
$ 20.6 
$ 20.9 
Gross unrecognized tax benefits that would impact effective tax rate if recognized
13.4 
13.6 
Income Tax Examination, Liability (Refund) Adjustment from Settlement with Taxing Authority
 
12.6 
Accrued interest and penalties related to uncertain tax positions
$ 2.1 
$ 1.9 
Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2013
Loss Contingencies [Line Items]
 
 
Estimated litigation liability
$ 1.1 
$ 9.0 
Subsequent Events (Details) (Subsequent Event [Member], USD $)
In Millions, unless otherwise specified
0 Months Ended
Jul. 7, 2015
Subsequent Event [Line Items]
 
Restructuring Costs and Asset Impairment Charges
$ 40.0 
Minimum [Member]
 
Subsequent Event [Line Items]
 
Restructuring Costs and Asset Impairment Charges
49.0 
Maximum [Member]
 
Subsequent Event [Line Items]
 
Restructuring Costs and Asset Impairment Charges
55.0 
Service Agreements [Member]
 
Subsequent Event [Line Items]
 
Restructuring Costs and Asset Impairment Charges
8.0 
Employee Severance [Member]
 
Subsequent Event [Line Items]
 
Restructuring Costs and Asset Impairment Charges
3.0 
Contract Termination [Member]
 
Subsequent Event [Line Items]
 
Restructuring Costs and Asset Impairment Charges
$ 1.0