BRIDGEPOINT EDUCATION INC, 10-K filed on 3/10/2015
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Mar. 4, 2015
Jun. 30, 2014
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-K 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
45,431,206 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 220.7 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 207,003 
$ 212,526 
Restricted cash
25,934 
36,946 
Investments
12,051 
65,901 
Accounts receivable, net
21,274 
22,953 
Student loans receivable, net
1,003 
1,043 
Deferred income taxes
21,301 
16,683 
Prepaid expenses and other current assets
22,818 
21,563 
Total current assets
311,384 
377,615 
Property and equipment, net
78,219 
91,425 
Investments
111,557 
41,062 
Student loans receivable, net
9,510 
11,785 
Goodwill and intangibles, net
24,775 
26,878 
Deferred income taxes
20,175 
18,507 
Other long-term assets
2,475 
2,740 
Total assets
558,095 
570,012 
Current liabilities:
 
 
Accounts payable
1,013 
5,195 
Accrued liabilities
51,403 
54,290 
Deferred revenue and student deposits
108,048 
132,791 
Total current liabilities
160,464 
192,276 
Rent liability
22,098 
23,927 
Other long-term liabilities
9,652 
9,271 
Total liabilities
192,214 
225,474 
Commitments and contingencies (see Note 20)
   
   
Preferred stock, $0.01 par value:
 
 
20,000 shares authorized; zero shares issued and outstanding at both December 31, 2014, and December 31, 2013
Common stock, $0.01 par value:
 
 
300,000 shares authorized; 62,957 issued and 45,400 outstanding at December 31, 2014; 62,331 issued and 44,774 outstanding at December 31, 2013
630 
623 
Additional paid-in capital
180,720 
168,829 
Retained earnings
521,775 
512,107 
Accumulated other comprehensive gain
(175)
48 
Treasury stock, 17,557 shares at cost at both December 31, 2014, and December 31, 2013
(337,069)
(337,069)
Total stockholders' equity
365,881 
344,538 
Total liabilities and stockholders' equity
$ 558,095 
$ 570,012 
Consolidated Balance Sheets Parenthetical (USD $)
Dec. 31, 2014
Dec. 31, 2013
Stockholders' equity:
 
 
Preferred stock, par value per share
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
20,000,000 
20,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value per share
$ 0.01 
$ 0.01 
Common stock, shares authorized
300,000,000 
300,000,000 
Common stock, shares issued
62,957,000 
62,331,000 
Common stock, shares outstanding
45,400,000 
44,774,000 
Treasury stock, shares at cost
17,557,000 
17,557,000 
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue
$ 638,705 
$ 751,449 
$ 943,405 
Costs and expenses:
 
 
 
Instructional costs and services
321,312 
370,734 
343,072 
Admissions advisory and marketing
236,708 
235,358 
339,209 
General and administrative
66,374 
76,894 
69,497 
Total costs and expenses
624,394 
682,986 
751,778 
Operating income
14,311 
68,463 
191,627 
Other income, net
2,884 
3,082 
3,531 
Income before income taxes
17,195 
71,545 
195,158 
Income tax expense
7,527 
25,662 
74,012 
Net income
$ 9,668 
$ 45,883 
$ 121,146 
Earnings per common share:
 
 
 
Basic (in USD per share)
$ 0.21 
$ 0.85 
$ 2.29 
Diluted (in USD per share)
$ 0.21 
$ 0.83 
$ 2.17 
Weighted average number of common shares outstanding used in computing earnings per common share:
 
 
 
Basic (in shares)
45,204 
53,923 
52,947 
Diluted (in shares)
46,512 
55,487 
55,946 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Net income
$ 9,668 
$ 45,883 
$ 121,146 
Other comprehensive gain (loss), net of tax:
 
 
 
Unrealized gains (losses) on investments
(223)
(174)
817 
Comprehensive income
$ 9,445 
$ 45,709 
$ 121,963 
Consolidated Statement of Stockholders' Equity (USD $)
In Thousands, unless otherwise specified
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Gain/(Loss)
Treasury Stock
Balance at Dec. 31, 2011
$ 347,549 
$ 590 
$ 137,447 
$ 345,078 
$ (595)
$ (134,971)
Balance, shares at Dec. 31, 2011
 
58,981 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock-based compensation
13,729 
 
13,729 
 
 
 
Exercise of stock options, shares, net
 
2,212 
 
 
 
 
Exercise of stock options
2,257 
22 
2,235 
 
 
 
Tax withholdings related to net exercise of stock options
(10,418)
 
(10,418)
 
 
 
Excess tax benefit of option exercises and restricted stock, net of tax shortfall
8,145 
 
8,145 
 
 
 
Stock issued under employee stock purchase plan, shares
 
99 
 
 
 
 
Stock issued under employee stock purchase plan
1,340 
1,339 
 
 
 
Stock issued under restricted stock plan, shares
 
33 
 
 
 
 
Stock issued under restricted stock plan, net of shares held for taxes
(313)
 
(313)
 
 
 
Exercise of warrants, shares
 
81 
 
 
 
 
Exercise of warrants
490 
489 
 
 
 
Tax withholdings related to net exercise of warrants
(944)
 
(944)
 
 
 
Repurchase of common stock
(602)
 
 
 
 
(602)
Net income
121,146 
 
 
121,146 
 
 
Unrealized gains (losses) on investments, net of tax
817 
 
 
 
817 
 
Balance at Dec. 31, 2012
483,196 
614 
151,709 
466,224 
222 
(135,573)
Balance, shares at Dec. 31, 2012
 
61,406 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock-based compensation
13,934 
 
13,934 
 
 
 
Exercise of stock options, shares, net
 
590 
 
 
 
 
Exercise of stock options
10,464 
10,458 
 
 
 
Tax withholdings related to net exercise of stock options
(9,170)
 
(9,170)
 
 
 
Excess tax benefit of option exercises and restricted stock, net of tax shortfall
1,516 
 
1,516 
 
 
 
Stock issued under employee stock purchase plan, shares
 
116 
 
 
 
 
Stock issued under employee stock purchase plan
1,234 
1,233 
 
 
 
Stock issued under restricted stock plan, shares
 
115 
 
 
 
 
Stock issued under restricted stock plan, net of shares held for taxes
(1,080)
(1,081)
 
 
 
Exercise of warrants, shares
 
104 
 
 
 
 
Exercise of warrants
231 
230 
 
 
 
Repurchase of common stock
(201,496)
 
 
 
 
(201,496)
Net income
45,883 
 
 
45,883 
 
 
Unrealized gains (losses) on investments, net of tax
(174)
 
 
 
(174)
 
Balance at Dec. 31, 2013
344,538 
623 
168,829 
512,107 
48 
(337,069)
Balance, shares at Dec. 31, 2013
 
62,331 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Stock-based compensation
10,558 
 
10,558 
 
 
 
Exercise of stock options, shares, net
 
388 
 
 
 
 
Exercise of stock options
3,108 
3,104 
 
 
 
Excess tax benefit of option exercises and restricted stock, net of tax shortfall
326 
 
326 
 
 
 
Stock issued under restricted stock plan, shares
 
238 
 
 
 
 
Stock issued under restricted stock plan, net of shares held for taxes
(2,094)
(2,097)
 
 
 
Net income
9,668 
 
 
9,668 
 
 
Unrealized gains (losses) on investments, net of tax
(223)
 
 
 
(223)
 
Balance at Dec. 31, 2014
$ 365,881 
$ 630 
$ 180,720 
$ 521,775 
$ (175)
$ (337,069)
Balance, shares at Dec. 31, 2014
 
62,957 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cash flows from operating activities
 
 
 
Net income
$ 9,668 
$ 45,883 
$ 121,146 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for bad debts
28,184 
47,119 
52,767 
Depreciation and amortization
23,317 
21,666 
17,424 
Amortization of premium/discount
206 
2,624 
8,992 
Deferred income taxes
(7,096)
(6,962)
(11,373)
Stock-based compensation
10,558 
13,934 
13,729 
Excess tax benefit of option exercises
(1,271)
(2,590)
(10,058)
Loss on impairment of student loans receivable
2,435 
1,998 
Net gain on marketable securities
(34)
(63)
Loss on termination of leased space
6,470 
328 
Loss on disposal of fixed assets
7,028 
751 
1,153 
Changes in operating assets and liabilities:
 
 
 
Restricted cash
11,042 
10,048 
6,721 
Accounts receivable
(27,323)
(15,973)
(62,333)
Prepaid expenses and other current assets
659 
(2,607)
(2,387)
Student loans receivable
809 
291 
(5,742)
Other long-term assets
266 
(412)
2,131 
Accounts payable and accrued liabilities
(12,102)
13,220 
12,100 
Deferred revenue and student deposits
(24,411)
(41,607)
(3,921)
Other liabilities
(3,754)
(184)
8,772 
Uncertain tax position
568 
(1,878)
784 
Net cash provided by operating activities
25,219 
85,586 
149,905 
Cash flows from investing activities
 
 
 
Capital expenditures
(11,429)
(14,825)
(25,296)
Purchases of investments
(87,933)
(26,759)
(179,387)
Restricted cash
(30)
25 
Capitalized costs for intangible assets
(3,634)
(19,563)
(5,262)
Sales and maturities of investments
70,000 
176,343 
186,911 
Net cash provided by (used in) investing activities
(33,026)
115,196 
(23,009)
Cash flows from financing activities
 
 
 
Proceeds from exercise of stock options
3,108 
10,464 
2,257 
Tax withholdings related to net exercise of stock options
(9,170)
(10,418)
Excess tax benefit of option exercises
1,271 
2,590 
10,058 
Proceeds from the issuance of stock under employee stock purchase plan
1,234 
1,340 
Proceeds from the exercise of warrants
231 
490 
Tax withholdings related to net exercise of warrants
(944)
Issuance of restricted stock
(2,095)
(1,080)
(313)
Repurchase of common stock
(201,496)
(602)
Net cash provided by (used in) financing activities
2,284 
(197,227)
1,868 
Net increase (decrease) in cash and cash equivalents
(5,523)
3,555 
128,764 
Cash and cash equivalents at beginning of period
212,526 
208,971 
80,207 
Cash and cash equivalents at end of period
207,003 
212,526 
208,971 
Supplemental disclosure of cash flow information
 
 
 
Cash paid for interest
128 
146 
130 
Cash paid for income taxes
15,534 
38,642 
65,075 
Supplemental disclosure of non-cash transactions:
 
 
 
Purchase of equipment included in accounts payable and accrued liabilities
$ 109 
$ 136 
$ 509 
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.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates.
Prior Year Adjustments
In the fourth quarter of 2014, the Company recorded certain correcting adjustments relating to a prior year, which were not material to the current period, prior periods or previous quarterly periods. The net effect of these adjustments on the annual 2014 period was to decrease revenue by $1.0 million, operating income by $0.7 million and net income by $0.2 million.
Cash and Cash Equivalents
Cash and cash equivalents is comprised of cash and other short-term highly liquid investments that are readily convertible into known amounts of cash. The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Restricted Cash
Restricted cash primarily represents funds held for students from Title IV financial aid program funds that result in credit balances on a student’s account. Restricted cash is excluded from cash and cash equivalents on our consolidated balance sheets and statements of cash flows. Changes in restricted cash are included in cash flows from operating activities on our consolidated statements of cash flows, as these restricted funds are closely related to the Company's operational activity. Our restricted cash is primarily held in money market accounts.
Investments
As of December 31, 2014, the Company held short and long-term investments that consisted of mutual funds, corporate notes and bonds and certificates of deposit. The Company's investments are denominated in U.S. dollars, are investment grade and are readily marketable. The Company considers as current assets those investments which will mature or are likely to be sold in less than one year.
The Company classifies its investments as either trading, available-for-sale or held-to-maturity. Trading securities are those bought and held principally to sell in the short-term, with gains or losses from changes in fair value flowing through current earnings. Available-for-sale securities are carried at fair value as determined by quoted market prices, with unrealized gains and losses, net of tax, reported as a separate component of comprehensive income and stockholders’ equity. Held-to-maturity securities would be carried at amortized cost. Amortization of premiums, accretion of discounts, interest, and realized gains and losses are included in other income, net in the consolidated statement of income.
The Company regularly monitors and evaluates the realizable value of its investments. If events and circumstances indicate that a decline in the value of these assets has occurred and is other-than-temporary, the Company would record a charge to other income, net in the consolidated statement of income.
Deferred Compensation
The Company has a deferred compensation plan, into which certain members of management are eligible to defer a maximum of 80% of their regular compensation and a maximum of 100% of their incentive compensation. The amounts deferred by the participant under this plan are credited with earnings or losses based upon changes in values of participant elected notional investments. Each participant is fully vested in the participant amounts deferred. The Company may make contributions that will generally vest according to a four-year vesting schedule. After four years of service, participants become 100% vested in the employer contributions upon reaching normal retirement age, death, disability or a change in control. The Company's obligations under the deferred compensation plan totaled $1.0 million as of December 31, 2014 and are included in other liabilities in the consolidated balance sheets.
Fair Value Measurements
The Company uses the three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: (i) Level 1, defined as observable inputs such as quoted prices in active markets; (ii) Level 2, defined as inputs other than quoted prices in active markets that are either observable directly or indirectly, through market corroboration, for substantially the full term of the financial instrument; and (iii) Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable consists of student accounts receivable, which represent amounts due for tuition, course digital materials, technology fees and other fees from currently enrolled and former students. Students generally fund their education through grants and/or loans under various Title IV programs, tuition assistance from military and corporate employers or personal funds. Payments are due on the respective course start date and are considered past due subsequent to the respective course start date. An account is considered delinquent 120 days subsequent to the course start date.
Accounts receivable are stated at the amount management expects to collect from outstanding balances. For accounts receivable, an allowance for doubtful accounts is estimated by management and is principally based on historical collection experience as well as (i) an assessment of individual accounts receivable over a specific aging and amount, (ii) consideration of the nature of the receivable accounts and (iii) potential changes in the business or economic environment. The provision for bad debts is recorded within instructional costs and services in the consolidated statements of income. The Company writes off uncollectable accounts receivable when the student account is deemed uncollectable by internal collection efforts or by a third-party collection agency.
Student Loans Receivable and Loan Loss Reserves
Student loans receivable consist of loans to qualified students and have a repayment period of 10 years from the date of graduation or withdrawal from the Company's institutions. The interest rate charged on student loans is a fixed rate of either 4.5% or 0.0% depending upon the repayment plan selected. If the student selects the rate of 0.0%, the student must pay $50 per month on the loan while enrolled in school and during the six months of grace period (after graduation or withdrawal) before the repayment period begins. On the 0.0% student loans, the Company imputes interest using the rate that would be used in a market transaction with similar terms. Interest income on student loans is recognized using the effective interest method and is recorded within other income in the consolidated statements of income. There was an immaterial amount of revenue recognized related to student loans during each of the years ended December 31, 2014, 2013 and 2012, respectively.
Student loans receivable are stated at the amount management expects to collect from outstanding balances. For tuition related student loan receivables, the Company estimates an allowance for doubtful accounts, similar to that of accounts receivable, based on (i) an assessment of individual loans receivable over a specific aging and amount, (ii) consideration of the nature of the receivable accounts, (iii) potential changes in the business or economic environment and (iv) related FICO scores and other industry metrics. The related provision for bad debts is recorded within instructional costs and services in the consolidated statements of income.
For non-tuition related student loans, the Company utilizes an impairment methodology. Under this methodology, management determines whether a loan would be impaired if the Company will be unable to collect all amounts due in accordance with the contractual terms of the individual loan agreement. This assessment is based on an analysis of several factors, including aging history and delinquency trending, the risk characteristics, credit quality and loan performance of the specific loans, and current economic conditions and industry trends. Credit quality is assessed at the outset of a loan, based upon the applicant's FICO score during the loan application process. The Company considers loans to be impaired when they reach a delinquency status that requires specialized collection efforts. The Company defines delinquency for loans as being for students who are no longer active, having amounts that are past due and having the last activity more than 120 days old. The Company records a loss reserve for the full book value of the impaired loans. For the years ended December 31, 2014, and 2013 there was $2.4 million and $2.0 million recorded for loan loss reserves, respectively. The loan loss reserve is maintained at a level deemed adequate by management based on a periodic analysis of the individual loans and is recorded within instructional costs and services in the consolidated statements of income.
Property and Equipment
Property and equipment are recognized at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of the related assets as follows:
Buildings
39 years
Furniture and office equipment
3 - 7 years
Software
3 years
Vehicles
5 years

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets. Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed and a gain or loss is recorded in the consolidated statements of income. Repairs and maintenance costs are expensed in the period incurred.
During the fourth quarter of 2014, the Company terminated a software development program for internal operations due to a change in the Company's plans. As a result, the Company recorded an asset impairment charge of $2.2 million for previously capitalized software costs, all of which was recorded as general and administrative expenses in the consolidated statements of income.
Leases
Leases are evaluated and classified as either operating or capital leases. Leased property and equipment meeting certain criteria are capitalized, and the present value of the related lease payments is recognized as a liability on the consolidated balance sheets. Amortization of capitalized leased assets is computed on the straight-line method over the term of the lease or the life of the related asset, whichever is shorter.
If the Company receives tenant allowances from the lessor for certain improvements made to the leased property, these allowances are capitalized as leasehold improvements and a long-term liability is established. The long-term liability is amortized on a straight-line basis over the corresponding lease term. The Company records rent expense on a straight-line basis over the initial term of a lease. The difference between the rent payment and the straight-line rent expense is recorded as either a short-term or long-term liability.
The Company recognizes liabilities for exit and disposal activities on non-cancelable lease obligations at fair value in the period the liability is incurred. For the non-cancelable lease obligations, the Company records the obligation when the contract is terminated in accordance with the contract terms. Due to the decline in enrollment and resulting reductions in headcount, for the year ended December 31, 2014, there was $6.5 million recorded for lease exit costs, which primarily related to properties in Denver and San Diego. The total amount was charged as $2.9 million to instructional costs and services, $2.8 million to admissions advisory and marketing expenses, and $0.8 million to general and administrative expenses.
Impairment of Long-Lived Assets
The Company assesses potential impairment to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recorded if the carrying amount of the long-lived asset is not recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. During the fourth quarter of 2014, the Company recognized an impairment charge of $4.6 million to write-off certain fixed assets in addition to the lease exit costs denoted above. This impairment amount was charged as $2.1 million to instructional costs and services, $2.0 million to admissions advisory and marketing expenses, and $0.5 million to general and administrative expenses.
Goodwill and Other Intangible Assets
The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each fiscal year, or more frequently if events and circumstances warrant.
The Company adopted accounting guidance which simplifies how an entity tests goodwill for impairment. The Company first assesses qualitative factors, such as deterioration in general economic conditions or negative company financial performance, to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. The Company's assessment of goodwill during the fourth quarter of fiscal 2014 indicated that there were no significant negative qualitative indicators, and therefore, goodwill was not impaired. There have been no related impairment losses recognized by the Company for any periods presented. If negative qualitative indicators had been noted above, the Company would then need to assess the fair value of its reporting units to determine whether they were in excess of the carrying values.
To evaluate the impairment of the indefinite-lived intangible assets, the Company assessed the fair value of the assets to determine whether they were in excess of the carrying values. Determining the fair value of indefinite-lived intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions are inherently uncertain, and can include such items as growth rates used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and a determination of appropriate market comparables. The Company's assessment of indefinite-lived intangible assets during the fourth quarter of fiscal 2014 did not result in any impairment. There have been no impairment losses recognized by the Company for any periods presented.
The Company also has definite-lived intangible assets, which primarily consist of purchased intangibles and capitalized curriculum development costs. The definite-lived intangible assets are recognized at cost less accumulated amortization. Amortization is computed using the straight-line method based on estimated useful lives of the related assets.
Revenue and Deferred Revenue
The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, its fees or price is fixed or determinable, and collectibility is reasonably assured. The Company's revenue consists of tuition, technology fees, course digital materials and other miscellaneous fees. Tuition revenue is deferred and recognized on a straight-line basis over the applicable period of instruction net of scholarships and expected refunds, with the exception of an online student's first course per degree level at Ashford University. Effective in the fourth quarter of 2012, an online student's first course per degree level at Ashford University falls under a three-week conditional admission period in which the revenue is deferred until the student matriculates into the course.
The Company's institutions' online students generally enroll in a program that encompasses a series of five to six-week courses that are taken consecutively over the length of the program. With the exception of those students under conditional admission, the online students are billed on a payment period basis on the first day of class. The Company's institutions' campus-based students enroll in a program that encompasses a series of nine-week or 16-week courses. Campus-based students are billed at the beginning of each term. The Company assesses collectibility at the start of a student’s payment period for the courses in that payment period (generally five courses for undergraduates and four courses for graduates).
If a student's attendance in a class precedes the receipt of cash from the student's source of funding, the Company establishes an account receivable and corresponding deferred revenue in the amount of the tuition due for that payment period. Cash received either directly from the student or from the student's source of funding reduces the balance of accounts receivable due from the student. Financial aid from sources such as the federal government's Title IV programs pertains to the online student's award year and is generally divided into two disbursement periods. As such, each disbursement period may contain funding for up to four courses. Financial aid disbursements are typically received during the online student's attendance in the first or second course. Since the majority of disbursements cover more courses than for which a student is currently enrolled, the amount received in excess effectively represents a prepayment from the online student for up to four courses. At the end of each accounting period, the deferred revenue and student deposits and related account receivable balances are reduced to present amounts attributable to the current course.
Students under conditional admission are not obligated for payment until after their conditional admission period has lapsed, so there is no potential refund. For all subsequent courses, the Company records a provision for expected refunds and reduces revenue for the amount that is expected to be subsequently refunded. Provisions for expected refunds have not been material to any period presented. If a student withdraws from a program prior to a specified date, a portion of such student's tuition is refunded, subject to certain state requirements that require a pro rata refund. The Company reassess collectibility throughout the period revenue is recognized by the Company's institutions, on a student-by-student basis. The Company reassess collectibility based upon new information and changes in facts and circumstances relevant to a student's ability to pay. For example, the Company reassesses collectibility when a student drops from the institution (i.e., is no longer enrolled) and when a student attends a course that was not included in the initial assessment of collectibility at the start of a student’s payment period.
Prior to January 1, 2013, both institutions recorded revenue from technology fees, which are one-time start up fees charged to each new online student, other than military, scholarship students or certain corporate reimbursement students. Under this methodology, technology fee revenue was then recognized ratably over the average expected enrollment of a student. The average expected enrollment of the student was estimated each quarter based upon historical duration of attendance and qualitative factors as deemed necessary. Beginning on January 1, 2013, Ashford University eliminated the one-time technology fee and replaced it with a per course charge. The per course technology fee revenue for Ashford University is currently recognized on a straight-line basis over the applicable period of instruction. Other miscellaneous fees include fees for course content and textbooks and other services, such as commencements, and are recognized upon delivery of the goods or when the related service is performed.
Workers Compensation
The Company records a gross liability for estimated workers compensation claims, incurred but not yet reported, as of each balance sheet date. The Company also records the gross insurance recoverable due for individual claim amounts. This is recorded as an other asset and as an equal accrued liability. The stop-loss premium is determined annually, but invoiced and paid on a quarterly basis. The related insurance premiums are expensed ratably over the coverage period.
Income Taxes
The Company accounts for its income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the bases used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates expected to be in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more-likely-than-not that the Company will not realize those tax assets through future operations.
The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.
Stock-Based Compensation
Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the vesting period. The Company estimates the fair value of stock options on the grant date using the Black-Scholes option pricing model. The Company estimates the fair value of its performance stock units (“PSUs”) on the grant date using a Monte Carlo simulation model. Determining the fair value of stock-based awards at the grant date under these models requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. The fair value of the Company's restricted stock units (“RSUs”) is based on the market price of the Company's common stock on the date of grant.
The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates award forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company's equity incentive plans require that stock option awards have an exercise price that equals or exceeds the closing price of the Company's common stock, as reported by the New York Stock Exchange (the “NYSE”), on the date of grant.
Stock-based compensation expense for stock-based awards is recorded in the consolidated statement of income, net of estimated forfeitures, using the graded-vesting method over the requisite service periods of the respective stock awards. The requisite service period is generally the period over which an employee is required to provide service to the Company in exchange for the award.
Instructional Costs and Services
Instructional costs and services consist primarily of costs related to the administration and delivery of the Company's educational programs. These expenses include compensation for campus-based faculty and administrative personnel, costs associated with online faculty, curriculum and new program development costs, financial aid processing costs, technology license costs, bad debt expense and costs associated with other support groups that provide services directly to the students. Instructional costs and services also include an allocation of information technology, facility, depreciation and amortization costs.
Admissions Advisory and Marketing
Admissions advisory and marketing costs include compensation of personnel engaged in marketing and recruitment, as well as costs associated with purchasing leads and producing marketing materials. Such costs are generally affected by the cost of advertising media and leads, the efficiency of the Company's marketing and recruiting efforts, compensation for the Company's enrollment personnel and expenditures on advertising initiatives for new and existing academic programs. Admissions advisory and marketing costs also include an allocation of information technology, facility, depreciation and amortization costs.
Advertising costs, a subset of admissions advisory and marketing costs, consists primarily of marketing leads and other branding and promotional activities. These advertising activities are expensed as incurred, or the first time the advertising takes place, depending on the type of advertising activity. Advertising costs were $89.0 million, $76.5 million and $103.7 million for the years ended December 31, 2014, 2013 and 2012, respectively.
General and Administrative
General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, compliance and other corporate functions. General and administrative expenses also include professional services fees, travel and entertainment expenses and an allocation of information technology, facility, depreciation and amortization costs.
Earnings Per Share
Basic earnings per common 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 common share is calculated by dividing net income available to common stockholders by the sum of (i) the weighted average number of common shares outstanding during the period and (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of the stock options and warrants and upon the settlement of RSUs and PSUs.
Segment Information
The Company operates in one reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of both its campus-based and online students regardless of geography. The Company's chief operating decision maker, its CEO and President, manages the Company's operations as a whole, and no revenue, expense or operating income information is evaluated by the chief operating decision maker on any component level.
Comprehensive Income
Comprehensive income consists of net income and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income. For the year ended December 31, 2014, such items consisted of unrealized gains and losses on investments.
The following table summarizes the components of other comprehensive gain (loss) and the related tax effects for the years ended December 31, 2014, 2013 and 2012 (in thousands):
 
December 31, 2014
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized losses on investments
$
(359
)
 
$
136

 
$
(223
)
 
 
 
 
 
 
 
December 31, 2013
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized losses on investments
$
(280
)
 
$
106

 
$
(174
)
 
 
 
 
 
 
 
December 31, 2012
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized gains on investments
$
1,300

 
$
(483
)
 
817


The Company reclassed an immaterial amount out of other comprehensive income for each of the years ended December 31, 2014, 2013 and 2012, respectively, relating to the net realized gain on the sale of securities.
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which raises the threshold for determining which disposals are required to be presented as discontinued operations and modifies related disclosure requirements. The standard is applied prospectively and is effective in 2015, with early adoption permitted. The Company adopted ASU 2014-08 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
In May 2014, the FASB issued 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 will be effective for the first interim period within fiscal years beginning after December 15, 2016, using one of two retrospective application methods. The Company is evaluating the impacts, if any, the adoption of ASU 2014-09 will have on its financial position or results of operations.
In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in ASC 718, Compensation—Stock Compensation, as it relates to such awards. ASU 2014-12 is effective for the Company in its first quarter of fiscal 2017, with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after the effective date; or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, with the cumulative effect of applying ASU 2014-12 as an adjustment to the opening retained earnings balance as of the beginning of the earliest annual period presented in the financial statements. The Company adopted ASU 2014-12 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The amendments are effective for periods ending after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company adopted ASU 2014-15 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
In November 2014, the FASB issued ASU 2014-17, Business Combinations (Topic 805): Pushdown Accounting. ASU 2014-17 gives an acquired entity the option of applying pushdown accounting in its stand-alone financial statements upon a change-in-control event. ASU 2014-17 was effective upon issuance. The Company adopted ASU 2014-17 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
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 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 adoption of ASU 2015-01 is not expected to have a material effect on the Company’s consolidated financial statements.
Investments
Investments
Investments
The following table summarizes the fair value information of short and long-term investments as of December 31, 2014 and 2013, respectively (in thousands):
 
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

 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
Demand notes
$

 
$
719

 
$

 
$
719

Corporate notes and bonds

 
16,244

 

 
16,244

Certificates of deposit

 
90,000

 

 
90,000

Total
$

 
$
106,963

 
$

 
$
106,963


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. There was one transfer from Level 2 into Level 1 during the year ended 2014, as a result of the Company evaluating the related mutual funds as having readily observable market prices.
The following table summarizes the differences between amortized cost and fair value of short and long-term investments as of December 31, 2014 and 2013, respectively (in thousands):
 
December 31, 2014
 
 
 
 
 
Gross unrealized
 
 
 
Maturities
 
Amortized Cost
 
Gain
 
Loss
 
Fair Value
Short-term
 
 
 
 
 
 
 
 
 
Corporate notes and bonds
1 year or less
 
10,947

 
33

 

 
10,980

Long-term
 
 
 
 
 
 
 
 
 
Corporate notes and bonds
3 years or less
 
51,874

 

 
(304
)
 
51,570

U.S. government and agency securities
3 years or less
 
35,000

 

 
(13
)
 
34,987

Certificates of deposit
3 years or less
 
25,000

 

 

 
25,000

Total
 
 
$
122,821

 
$
33

 
$
(317
)
 
$
122,537

The above table does not include $1.1 million for mutual funds at December 31, 2014, which are recorded as trading securities and are therefore not recorded at amortized cost.

 
December 31, 2013
 
 
 
 
 
Gross unrealized
 
 
 
Maturities
 
Amortized Cost
 
Gain
 
Loss
 
Fair Value
Short-term
 
 
 
 
 
 
 
 
 
Demand notes
1 year or less
 
$
719

 
$

 
$

 
$
719

Corporate notes and bonds
1 year or less
 
5,132

 
50

 

 
5,182

Certificate of deposit
1 year or less
 
60,000

 

 

 
60,000

Long-term
 
 
 
 
 
 
 
 
 
Corporate notes and bonds
3 years or less
 
11,037

 
25

 

 
11,062

Certificate of deposit
3 years or less
 
30,000

 

 

 
30,000

Total
 
 
$
106,888

 
$
75

 
$

 
$
106,963


As of December 31, 2014, there were twelve investments that were in an unrealized loss position for less than 12 months. There were no investments that were in an unrealized loss position for greater than 12 months. There was no impairment considered other-than-temporary, as it is more likely than not the Company will hold the securities until maturity or a recovery of the cost basis. The Company accumulates unrealized gains and losses on the available-for-sale debt securities, net of tax, in accumulated other comprehensive gain (loss) in the stockholders’ equity section of the Company's balance sheets. As of December 31, 2013, there were no investments that were in an unrealized loss position for either less than or greater than 12 months.
Accounts Receivable
Accounts Receivables
Accounts Receivable
Accounts receivable, net, consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Accounts receivable
$
48,841

 
$
49,854

Less allowance for doubtful accounts
27,567

 
26,901

Accounts receivable, net
$
21,274

 
$
22,953


There are an immaterial amount of accounts receivable at each balance sheet date with a payment due date of greater than one year.
The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
26,901

 
$
27,853

 
$
(27,187
)
 
$
27,567

For the year ended December 31, 2013
31,466

 
46,851

 
(51,416
)
 
26,901

For the year ended December 31, 2012
24,688

 
52,794

 
(46,016
)
 
31,466

(1)
Deductions represent accounts written off, net of recoveries.
Student Loans Receivable
Student loans receivable, net, consist of the following (in thousands):
 
As of December 31,
Short-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
509

 
$
587

   Student loans receivable (tuition related)
626

 
621

   Current student loans receivable
1,135

 
1,208

Less allowance for doubtful accounts
132

 
165

Student loans receivable, net
$
1,003

 
$
1,043

 
 
 
 
 
As of December 31,
Long-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
4,805

 
$
7,347

   Student loans receivable (tuition related)
6,068

 
6,417

   Non-current student loans receivable
10,873

 
13,764

Less allowance for doubtful accounts
1,363

 
1,979

Student loans receivable, net
$
9,510

 
$
11,785


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.
The following table presents the changes in the allowance for doubtful accounts for student loans receivable (tuition related) for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful student loans receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
2,144

 
$
331

 
$
(980
)
 
$
1,495

For the year ended December 31, 2013
1,895

 
268

 
(19
)
 
2,144

For the year ended December 31, 2012
2,070

 
(27
)
 
(148
)
 
1,895

(1)
Deductions represent accounts written off, net of recoveries.
For the non-tuition related student loans receivable, the Company monitors the credit quality using credit scores, aging history 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 years ended December 31, 2014 and December 31, 2013 there was $2.4 million and $2.0 million of loans that were impaired, respectively, and for the year ended December 31, 2012, no loans were impaired. As of December 31, 2014, $4.4 million of loans had been placed on non-accrual status.
As of December 31, 2014, the delinquency status of gross student loans receivable was as follows (in thousands):
Less than 120 days
$
16,138

From 120 - 269 days
1,159

Greater than 270 days
2,099

Total gross student loans receivable
19,396

Less: Amounts reserved or impaired
(5,927
)
Less: Discount on student loans receivable
(2,956
)
Total student loans receivable, net
$
10,513

Student Loans Receivable
Student Loans Receivable
Accounts Receivable
Accounts receivable, net, consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Accounts receivable
$
48,841

 
$
49,854

Less allowance for doubtful accounts
27,567

 
26,901

Accounts receivable, net
$
21,274

 
$
22,953


There are an immaterial amount of accounts receivable at each balance sheet date with a payment due date of greater than one year.
The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
26,901

 
$
27,853

 
$
(27,187
)
 
$
27,567

For the year ended December 31, 2013
31,466

 
46,851

 
(51,416
)
 
26,901

For the year ended December 31, 2012
24,688

 
52,794

 
(46,016
)
 
31,466

(1)
Deductions represent accounts written off, net of recoveries.
Student Loans Receivable
Student loans receivable, net, consist of the following (in thousands):
 
As of December 31,
Short-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
509

 
$
587

   Student loans receivable (tuition related)
626

 
621

   Current student loans receivable
1,135

 
1,208

Less allowance for doubtful accounts
132

 
165

Student loans receivable, net
$
1,003

 
$
1,043

 
 
 
 
 
As of December 31,
Long-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
4,805

 
$
7,347

   Student loans receivable (tuition related)
6,068

 
6,417

   Non-current student loans receivable
10,873

 
13,764

Less allowance for doubtful accounts
1,363

 
1,979

Student loans receivable, net
$
9,510

 
$
11,785


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.
The following table presents the changes in the allowance for doubtful accounts for student loans receivable (tuition related) for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful student loans receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
2,144

 
$
331

 
$
(980
)
 
$
1,495

For the year ended December 31, 2013
1,895

 
268

 
(19
)
 
2,144

For the year ended December 31, 2012
2,070

 
(27
)
 
(148
)
 
1,895

(1)
Deductions represent accounts written off, net of recoveries.
For the non-tuition related student loans receivable, the Company monitors the credit quality using credit scores, aging history 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 years ended December 31, 2014 and December 31, 2013 there was $2.4 million and $2.0 million of loans that were impaired, respectively, and for the year ended December 31, 2012, no loans were impaired. As of December 31, 2014, $4.4 million of loans had been placed on non-accrual status.
As of December 31, 2014, the delinquency status of gross student loans receivable was as follows (in thousands):
Less than 120 days
$
16,138

From 120 - 269 days
1,159

Greater than 270 days
2,099

Total gross student loans receivable
19,396

Less: Amounts reserved or impaired
(5,927
)
Less: Discount on student loans receivable
(2,956
)
Total student loans receivable, net
$
10,513

Prepaid Expense and Other Current Assets
Prepaid Expenses and Other Current Assets
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Prepaid expenses
$
8,500

 
$
10,814

Prepaid licenses
5,598

 
5,833

Prepaid income taxes
2,945

 
195

Prepaid insurance
1,508

 
1,131

Workers compensation
1,440

 
2,814

Interest receivable
424

 
86

Other current assets
2,403

 
690

Total prepaid expenses and other current assets
$
22,818

 
$
21,563

Property and Equipment, Net
Property and Equipment, Net
Property and Equipment, Net
Property and equipment, net, consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Land
$
7,091

 
$
7,091

Buildings
29,540

 
28,916

Furniture and office equipment
81,030

 
84,852

Software
12,454

 
10,075

Leasehold improvements
21,096

 
24,360

Vehicles
147

 
147

Total property and equipment
151,358

 
155,441

Less accumulated depreciation and amortization
(73,139
)
 
(64,016
)
Total property and equipment, net
$
78,219

 
$
91,425


Depreciation and amortization expense associated with property and equipment totaled $17.6 million, $18.2 million and $15.9 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Goodwill and Intangibles, Net
Goodwill and Intangibles, Net
Goodwill and Intangibles, Net
Goodwill and intangibles, net, consist of the following (in thousands):
 
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

 
 
 
 
 
 
 
December 31, 2013
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
14,540

 
$
(5,035
)
 
$
9,505

Purchased intangible assets
15,857

 
(1,051
)
 
14,806

     Total definite-lived intangible assets
$
30,397

 
$
(6,086
)
 
$
24,311

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
26,878


Goodwill and indefinite lived-intangibles includes the goodwill resulting from prior period acquisitions and the indefinite lived-intangibles attributable to the accreditation of our the Company's institutions.
In October 2013, the Company entered into an agreement (the “Forbes Agreement”) to license certain trademarks and print and online content, as well as other intellectual property, for use in Ashford University's bachelor’s and master’s business programs. The Forbes Agreement has an initial 12-year term, with an option to renew. During the fourth quarter of 2013, the Company made a payment of $15 million, that was recorded as an intangible asset, and which will be amortized over the life of the Forbes Agreement. The Company began paying royalties in 2014, based on a percentage of annual revenues attributable to Ashford University’s business-related programs, subject to a $2.5 million annual minimum which is recorded within instructional costs and services on the income statement. The Company does not plan to capitalize any future costs to renew or extend the term of the acquired intangible assets.
For the years ended December 31, 2014, 2013 and 2012, amortization expense was $5.7 million, $3.4 million and $1.6 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
$
5,575

2016
4,063

2017
2,466

2018
1,471

2019
1,233

Thereafter
7,400

Total future amortization expense
$
22,208

Accrued Liabilities
Accrued Liabilities
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Accrued salaries and wages
$
8,250

 
$
12,790

Accrued bonus
2,720

 
2,277

Accrued vacation
9,771

 
9,696

Accrued litigation and fees
542

 
8,000

Accrued expenses
18,223

 
15,079

Rent liability
8,528

 
2,446

Accrued workers compensation
2,920

 
4,002

Accrued income taxes payable
449

 

Total accrued liabilities
$
51,403

 
$
54,290


There was a reduction in force during the fourth quarter of 2014 to help better align personnel resources with the decline in enrollments. We recognized $3.6 million of severance costs for wages and benefits during the fourth quarter of 2014 for this reduction in force. The total severance amount was charged as $1.2 million to instructional costs and services, $0.8 million to admissions advisory and marketing expenses, and $1.6 million to general and administrative expenses. As of December 31, 2014, there was $0.8 million accrued for in the accrued salaries and wages line item in the table above. These costs are anticipated to be fully paid out by the end of the first quarter of 2015 from existing cash on hand.
Accrued litigation and fees decreased from the prior year as a result of paying out a portion of a legal settlement to the Iowa Attorney General. For more information regarding the Iowa Attorney General Civil Investigation of Ashford University, see Note 20, “Commitments and Contingencies.”
Deferred Revenue and Student Deposits
Deferred Revenue and Student Deposits
Deferred Revenue and Student Deposits
Deferred revenue and student deposits consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Deferred revenue
$
26,445

 
$
29,279

Student deposits
81,603

 
103,512

Total deferred revenue and student deposits
$
108,048

 
$
132,791

Other Long-Term Liabilities
Other Long-Term Liabilities
Other Long-Term Liabilities
Other long-term liabilities consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Uncertain tax positions
$
7,586

 
$
7,466

Legal settlements
1,000

 
1,000

Other long-term liabilities
1,066

 
805

Total other long term liabilities
$
9,652

 
$
9,271

Credit Facilities
Credit Facilities
Credit Facilities
On April 13, 2012, the Company entered into 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”), as administrative agent for the lenders. At the Company's option, the Company may increase the size of the Facility up to $100 million (in certain minimum increments), subject to the terms and conditions of the Revolving Credit Agreement. Additionally, the Company may request swing-line advances under the Facility up to $3 million in the aggregate.
Under the Revolving Credit Agreement and the documents executed in connection therewith (collectively, the “Facility Loan Documents”), the lenders have agreed to make loans to the Company and issue letters of credit on the Company's behalf, subject to the terms and conditions of the Facility Loan Documents. The Facility has a term of three years and matures on April 13, 2015. Interest and fees accruing under the Facility are payable quarterly in arrears and principal is payable at maturity. The Company may terminate the Facility upon five days' notice without premium or penalty, other than customary breakage fees.
For any advance under the Facility, interest will accrue at either the “Base Rate” or the “Eurodollar-based Rate,” at the Company's option. The Base Rate means, for any day, 0.5% plus the greatest of: (1) the prime rate for such day, (2) the Federal Funds Effective Rate in effect on such day, plus 1.0%, and (3) the daily adjusting LIBOR rate, plus 1.0%. The Eurodollar-based Rate means, for any day, 1.5% plus the quotient of (1) the LIBOR Rate, divided by (2) a percentage equal to 100% minus the maximum rate on such date at which the Agent is required to maintain reserves on “Eurocurrency Liabilities” as defined in Regulation D of the Board of Governors of the Federal Reserve System. For any advance under the swing line, interest will accrue at either the Base Rate or, if made available to the Company by the swing line lender, at the lender's option, a different rate quoted by such lender. For any letter of credit issued on the Company's behalf under the Facility, the Company is required to pay a fee of 1.50% of the undrawn amount of such letter of credit plus a letter of credit facing fee. The Company is also required to pay a facility fee of 0.25% of the aggregate commitment then in effect under the Facility, whether used or unused.
The Facility Loan Documents contain 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. The Company was in compliance with all financial covenants in the Facility Loan Documents as of December 31, 2014 and 2013.
As security for the performance of the Company's obligations under the Facility Loan Documents, the Company granted the lenders a first priority security interest in substantially all of the Company's assets, including its real property worth $7.1 million as of December 31, 2014.
As of December 31, 2014, and up through the date of filing, the Company had no borrowings outstanding under the Facility. As of December 31, 2014, the Company used the availability under the Facility to issue letters of credit aggregating $5.8 million.
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. As of December 31, 2014, the Company's total available surety bond facility was $12.0 million and the surety had issued bonds under the facility totaling $5.5 million on the Company's behalf.
Lease Obligations
Lease Obligations
Lease Obligations
Operating leases
The Company leases certain office facilities and office equipment under non-cancelable lease arrangements that expire at various dates through 2023. The office leases contain certain renewal options. Rent expense under non-cancelable operating lease arrangements is accounted for on a straight-line basis and totaled $42.2 million, $37.1 million and $36.8 million for the years ended December 31, 2014, 2013 and 2012, respectively.
The following table summarizes the future minimum rental payments under non-cancelable operating lease arrangements in effect at December 31, 2014 (in thousands):
Year Ended December 31,
 
 
2015
$
37,511

2016
37,449

2017
37,363

2018
32,698

2019
22,148

Thereafter
20,948

Total minimum payments
$
188,117

Earnings Per Share
Earnings Per Share
Earnings Per Share
Basic earnings per common 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 common 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 warrants and upon the settlement of RSUs and PSUs.
The following table sets forth the computation of basic and diluted earnings per common share for the periods indicated (in thousands, except per share data):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Numerator:
 
 
 
 
 
Net income
$
9,668

 
$
45,883

 
$
121,146

Denominator:
 
 
 
 
 
Weighted average number of common shares outstanding
45,204

 
53,923

 
52,947

Effect of dilutive options and restricted stock units
1,308

 
1,482

 
2,762

Effect of dilutive warrants

 
82

 
237

Diluted weighted average number of common shares outstanding
46,512

 
55,487

 
55,946

Earnings per common share:
 
 
 
 
 
Basic earnings per common share
$
0.21

 
$
0.85

 
$
2.29

Diluted earnings per common share
0.21

 
0.83

 
2.17


For the periods indicated below, the computation of dilutive common shares outstanding excludes stock options and RSUs, as applicable, because their effect was anti-dilutive.
 
Year Ended December 31,
(in thousands)
2014
 
2013
 
2012
Options
2,660

 
3,004

 
2,524

Restricted stock units

 
3

 

Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation
The Company recorded $10.6 million, $13.9 million and $13.7 million of compensation expense related to equity awards for the years ended December 31, 2014, 2013 and 2012, respectively. The related income tax benefit was $4.0 million, $5.2 million and $5.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. The Company records stock-based compensation expense over the vesting term using the graded-vesting method.
Stock Options
The Company grants stock options from its 2009 Stock Incentive Plan (the “2009 Plan”). The compensation committee of the Company's board of directors, or the full board of directors, determines eligibility, vesting schedules and exercise prices for stock options granted under the 2009 Plan. Stock options granted under the 2009 Plan typically have a maximum contractual term of 10 years, subject to the option holder's continuing service to the Company. Stock options are generally granted with a four-year vesting requirement, pursuant to which the option holder must continue providing service to the Company at each vesting date. All stock options granted in 2014, 2013 and 2012, were awarded pursuant to the 2009 Plan. Under the 2009 Plan, the number of authorized shares is subject to automatic increase each January 1 through and including January 1, 2019, pursuant to a formula contained in the 2009 Plan, without the need for further approval by the Company's board of directors or stockholders.
Before the adoption of the 2009 Plan, the Company awarded stock options pursuant to the Company's Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). Effective upon the closing of the Company's initial public offering, the 2005 Plan was terminated and no further stock options may be issued under the 2005 Plan, provided that all stock options then outstanding under the 2005 Plan will continue to remain outstanding pursuant to the terms of the 2005 Plan and the applicable award agreements.
The following table presents a summary of stock option activity in 2014, 2013 and 2012 (in thousands, except for exercise prices and contractual terms):
 
Options
Outstanding
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic Value
December 31, 2011
8,280

 
$
7.70

 
5.90
 
$
127,308

Granted
1,595

 
22.59

 
 
 
 
Exercised
(3,128
)
 
0.72

 
 
 
 
Forfeitures and expired
(335
)
 
19.79

 
 
 
 
December 31, 2012
6,412

 
14.17

 
7.21
 
$
9,010

Granted
483

 
10.23

 
 
 
 
Exercised
(1,060
)
 
9.87

 
 
 
 
Forfeitures and expired
(345
)
 
20.65

 
 
 
 
December 31, 2013
5,490

 
14.25

 
6.52
 
$
28,769

Granted
403

 
14.35

 
 
 
 
Exercised
(388
)
 
8.01

 
 
 
 
Forfeitures and expired
(337
)
 
21.43

 
 
 
 
December 31, 2014
5,168

 
$
14.26

 
5.73
 
$
7,732

Vested and expected to vest at December 31, 2014
5,134

 
$
14.25

 
5.71
 
$
7,720

Exercisable at December 31, 2014
4,070

 
$
13.72

 
5.11
 
$
7,367


As of December 31, 2014, the Company has reserved 10.5 million shares of common stock for issuance upon the exercise of stock options and settlement of outstanding stock awards under the Company's equity incentive plans. Shares issued upon stock option exercises and settlements of stock awards are drawn from the authorized but unissued shares of common stock.
During the year ended December 31, 2014, there were 0.4 million stock options exercised with an intrinsic value of $3.3 million. The windfall tax benefit realized from these exercises was $0.7 million. The Company also recognized a tax benefit shortfall of $0.1 million related to stock options exercised at values lower than the related compensation expense, and $0.8 million related to stock options that expired unexercised during the year. During the year ended December 31, 2013, there were 1.1 million stock options exercised with an intrinsic value of $9.4 million. The windfall tax benefit realized from these exercises was $2.1 million. The Company also recognized a tax benefit shortfall of $0.6 million related to stock options exercised at values lower than the related compensation expense, and $0.5 million related to stock options that expired unexercised during the year. During the year ended December 31, 2012, there were 3.1 million stock options exercised with an intrinsic value of $45.2 million. The windfall tax benefit realized from these exercises was $10.1 million. The Company also recognized a tax benefit shortfall of $1.5 million related to stock options exercised at values lower than the related compensation expense, and $0.2 million related to stock options that expired unexercised during the year.
During the years ended December 31, 2014 and 2013, approximately 203,000 and 137,000 stock options expired, respectively.
The fair value of each option award granted during the years ended December 31, 2014, 2013 and 2012, was estimated on the date of grant using the Black-Scholes option pricing model. The Company's determination of the fair value of share-based awards is affected by the Company's common stock price as well as assumptions regarding a number of complex and subjective variables. Below is a summary of the assumptions used for the stock options granted in the years indicated:
 
2014
 
2013
 
2012
Weighted average exercise price per share
$
14.35

 
$
10.23

 
$
22.59

Risk-free interest rate
2.0
%
 
1.0
%
 
1.2
%
Expected dividend yield

 

 

Expected volatility
55.1
%
 
58.9
%
 
54.6
%
Expected life (in years)
5.75

 
5.85

 
5.67

Forfeiture rate
6.0
%
 
5.0
%
 
4.0
%
Weighted average grant date fair value per share
$
7.43

 
$
5.48

 
$
11.26


The risk-free interest rate is based on the currently available rate on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the stock option converted into a continuously compounded rate. The dividend yield reflects the fact that the Company has never declared or paid any cash dividends on its common stock and does not currently anticipate paying cash dividends in the future. The volatility of the Company's common stock is based upon a blended rate of the Company's historical volatility and that of publicly-traded securities of a peer group of comparable companies in the Company's industry. The peer group volatility supplements the Company's historical volatility in order to calculate a volatility that approximates the expected term used in the Black-Scholes option pricing model. In evaluating comparability, the Company considered factors such as industry, stage of life cycle and size. The Company now has enough historical option exercise information to be able to accurately compute an expected term for use as an assumption in the Black-Scholes option pricing model, and as such, its computation of expected term was calculated using its own historical data.
As of December 31, 2014, 2013 and 2012, there was $3.2 million, $5.6 million and $12.9 million, respectively, of unrecognized compensation costs related to unvested stock options.
At December 31, 2014, the unrecognized compensation costs of stock options are expected to be recognized over a weighted average period of 1.04 years.
Stock Awards
In 2011, the Company began granting RSUs under the 2009 Plan. The Company now primarily grants RSUs to its employees. Each RSU represents a future issuance of one share of common stock contingent upon the recipient's continued service to the Company through the vesting date. Upon the vesting date, RSUs are automatically settled for shares of the Company's common stock unless the applicable award agreement provides for delayed settlement. If, prior to the vesting date, the employee's status as a full-time employee is terminated, then the RSU is automatically canceled on the employment termination date, unless otherwise specified in an employee's individual employment agreement. The fair value of an RSU is calculated based on the market value of the common stock on the grant date and is amortized over the applicable vesting period using the graded-vesting method.
In December 2014, the Company also authorized 1.4 million PSUs under the 2009 Plan. This total authorized amount is comprised of 1.0 million shares that will vest contingently based upon a market-based measure, the Company's stock price, and 0.4 million shares that will vest contingently based upon a performance-based measure, the Company's diluted earnings per share. The portion of the PSU awards related to the market-based measure was granted for accounting purposes on December 18, 2014. The portion of the PSU awards related to the performance-based measure is anticipated to be granted for accounting purposes in March 2015, after the final approval of the 2015 budget by the Company's board of directors.
Each PSU represents a future issuance of one share of common stock contingent upon achieving certain performance measures and the recipient's continued service to the Company through the vesting date. The PSUs are subject to cliff vesting equally over four years at the end of each annual service period upon meeting the performance-based and/or market-based measures applicable to such service period. Upon the vesting date, PSUs are automatically settled for shares of the Company's common stock unless the applicable award agreement provides for delayed settlement. If, prior to the vesting date, the employee's status as a full-time employee is terminated, then the PSU is automatically canceled on the employment termination date, unless otherwise specified in an employee's individual employment agreement.
The fair value and compensation expense of the market-based measure portion of the PSU awards was estimated based on the Company's stock price as of the date of grant using a Monte Carlo simulation model. The fair value of these awards on the grant date was $5.3 million. The fair value of the performance-based portion of the PSU awards will be based on the Company's stock price as of the date the target is approved by the Company's board of directors. Compensation cost for the portion of the PSUs with a performance-based measure is recorded based on the probable outcome of the performance conditions associated with the respective shares, as determined by management. PSUs are amortized over the applicable vesting period using the graded-vesting method.
The assumptions for the market-based portion of the PSUs granted in 2014 are noted in the following table:
 
2014
Grant price per share
$
11.54

Risk-free interest rate
1.4
%
Expected dividend yield

Historical volatility
50.0
%
Expected life (in years)
4.0

Forfeiture rate
6.0
%
Weighted average grant date fair value per share
$
5.39


A summary of the RSU and PSU activity and related information is as follows:
 
Restricted Stock Units and Performance Stock Units
 
Time Based
 
Performance-Based
 
Market-Based
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
Balance at December 31, 2011
56,855

 
$
23.97

 

 
$

 

 
$

Awarded
362,199

 
9.72

 

 

 

 

Vested
(56,855
)
 
23.97

 

 

 

 

Canceled

 

 

 

 

 

Balance at December 31, 2012
362,199

 
9.72

 

 

 

 

Awarded
1,016,035

 
10.50

 

 

 

 

Vested
(181,104
)
 
9.72

 

 

 

 

Canceled
(98,613
)
 
10.39

 

 

 

 

Balance at December 31, 2013
1,098,517

 
10.38

 

 

 

 

Awarded
786,250

 
14.33

 

 

 
975,295

 
5.39

Vested
(393,106
)
 
10.15

 

 

 

 

Canceled
(212,572
)
 
11.89

 

 

 

 

Balance at December 31, 2014
1,279,089

 
$
12.63

 

 
$

 
975,295

 
$
5.39


As of December 31, 2014 and 2013, there was $8.5 million and $6.5 million, respectively, of unrecognized compensation costs related to unvested RSUs. The unrecognized compensation costs of RSUs are expected to be recognized over a weighted average period of 1.5 years.
During the year ended December 31, 2014, 0.4 million RSUs vested and were released with a market value of $5.3 million. The actual tax benefit realized from the RSUs released was $0.5 million. During the year ended December 31, 2013, 0.2 million RSUs vested and were released with a market value of $3.0 million. The actual tax benefit realized from the RSUs released was $0.5 million. During the year ended December 31, 2012, 0.1 million RSUs vested and were released with a market value of $0.8 million. The Company recognized a tax benefit shortfall of $0.2 million related to RSUs vesting at values lower than the related compensation expense. There were no RSUs granted prior to 2011.
As of December 31, 2014, there was $5.2 million of unrecognized compensation costs related to unvested PSUs. The unrecognized compensation costs of PSU' are expected to be recognized over a weighted average period of 2.7 years, to the extent the performance criteria is met. There were no PSUs granted in 2013 or 2012, and no PSUs vested during 2014.
Warrants
The Company previously issued warrants to purchase common stock to various employees, consultants, licensors and lenders. Each warrant represented the right to purchase one share of common stock. No warrants were issued during any of the years ended December 31, 2014, 2013 or 2012. During the years ended December 31, 2013 and 2012, approximately 104,000 and 174,000 warrants to purchase shares of common stock were exercised, respectively. All outstanding warrants expired in the fourth quarter of 2013.
Stock Repurchase Programs
Stock Repurchase Programs
Stock Repurchase Programs
The Company's board of directors has authorized the Company to repurchase outstanding shares of its common stock from time to time in the open market through block trades or otherwise depending on market conditions and other considerations, pursuant to the applicable rules of the Securities and Exchange Commission (the “SEC”). The Company's policy is to retain these repurchased shares as treasury shares and not to retire them. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.
On April 30, 2012, the Company's board of directors authorized the repurchase of up to an additional $75.0 million of the Company's outstanding shares of common stock over the following 12 months. The repurchase program was authorized with the intention of creating additional value for stockholders. Under the repurchase program, the Company was authorized to purchase shares from time to time in the open market, through block trades or otherwise. As of December 31, 2014, the Company had completed this authorized repurchase program, and no shares were repurchased under this program.
In December 2012, the Company repurchased 0.1 million shares of its common stock from certain senior executives in the amount of $0.6 million. The repurchase was approved by the Company's board of directors following its approval and recommendation by the compensation committee and the audit committee. The shares were repurchased at a price equal to the closing price of the Company's common stock on the New York Stock Exchange on the day the repurchase was approved by the Company's board of directors. No shares were sold into the market in connection with the share repurchase. The portion of the repurchase related to tax withholding requirements on stock options exercised was not part of the repurchase programs described above.
On November 10, 2013, a special committee of the Company's board of directors approved a plan to purchase up to 10,250,000 shares of the Company's common stock through a tender offer. The tender offer commenced on November 13, 2013 and expired on December 11, 2013. On December 18, 2013, the Company repurchased shares of its common stock through the tender offer at a price of $19.50 per share. The tender offer was oversubscribed, resulting in the purchase of 10.2 million shares, including 0.2 million shares underlying previously unexercised stock options, for a total cost of $199.9 million, exclusive of fees. The repurchased shares were added to treasury stock.
Income Taxes
Income Taxes
Income Taxes
The Company uses the asset and liability method to account for taxes. Under this method, deferred income tax assets and liabilities result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in tax and deductions in future years.
The components of income tax expense are as follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
Federal
$
12,686

 
$
29,456

 
$
77,720

State
1,937

 
3,168

 
7,665

 
14,623

 
32,624

 
85,385

Deferred:
 
 
 
 
 
Federal
(6,216
)
 
(5,952
)
 
(10,470
)
State
(880
)
 
(1,010
)
 
(903
)
 
(7,096
)
 
(6,962
)
 
(11,373
)
Total
$
7,527

 
$
25,662

 
$
74,012


Deferred tax assets and liabilities are comprised of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Deferred tax assets:
 
 
 
Net operating loss
$
211

 
$
235

Fixed assets
194

 
214

Bad debt
2,338

 
463

Vacation accrual
2,956

 
2,762

Stock-based compensation
16,291

 
15,341

Deferred rent
11,580

 
9,944

State tax
2,257

 
2,310

Bonus accrual
1,023

 
849

Unearned interest
1,118

 
1,281

Accrued expenses
2,121

 
4,377

Revenue reserves
9,820

 
8,992

Other
107

 

Total deferred tax assets
50,016

 
46,768

Valuation allowance

 

Net deferred tax assets
50,016

 
46,768

Deferred tax liabilities:
 
 
 
Fixed assets and intangibles
(8,540
)
 
(11,550
)
Unrealized gain on investments

 
(28
)
Total deferred tax liabilities
(8,540
)
 
(11,578
)
Total net deferred tax assets
$
41,476

 
$
35,190


The current year change in net deferred tax assets of $6.3 million is comprised of net deferred expense of $7.1 million recorded through income tax expense, offset by the $0.9 million tax benefit related to the recognized shortfall recorded as a reduction in additional paid in capital, net of the $0.1 million tax effect of unrealized loss on investments recorded through other comprehensive income.
Deferred taxes are reflected in the balance sheet as follows (in thousands):
 
As of December 31,
 
2014
 
2013
Current deferred tax assets
$
21,301

 
$
16,683

Current deferred tax liabilities

 

Noncurrent deferred tax assets
20,175

 
18,507

Noncurrent deferred tax liabilities

 

Total
$
41,476

 
$
35,190


The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits. Based on the Company's history of positive earnings, the Company concluded that it is more likely than not that the Company will fully utilize the deferred tax assets. Accordingly, the Company has not provided any valuation allowance against the deferred tax assets.
At December 31, 2014, the Company had federal net operating loss carryforwards of $0.6 million, which are available to offset future taxable income. The federal net operating loss carryforwards will begin to expire in 2022. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, use of the net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has performed a Section 382 analysis and has determined that there is no material effect on the net operating loss carryforwards.
A reconciliation of the income tax expense computed using the U.S. federal statutory tax rate of 35% and the Company's provision for income taxes follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Computed expected federal tax expense
$
6,018

35.0
 %
 
$
25,041

35.0
 %
 
$
68,305

35.0
 %
State taxes, net of federal benefit
426

2.5

 
1,466

2.0

 
4,042

2.2

Permanent differences
1,125

6.5

 
1,295

1.8

 
1,314

0.6

Uncertain tax positions
424

2.5

 
(1,762
)
(2.5
)
 
575

0.2

Credits
(470
)
(2.7
)
 
(378
)
(0.4
)
 
(240
)
(0.1
)
Other
4


 


 
16


Income tax expense
$
7,527

43.8
 %
 
$
25,662

35.9
 %
 
$
74,012

37.9
 %

The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with the taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.
The accrual for uncertain tax positions can result in a difference between the estimated benefit recorded in the Company's financial statements and the benefit taken or expected to be taken in the Company's income tax returns. This difference is generally referred to as an “unrecognized tax benefit.”
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Unrecognized tax benefits at December 31, 2012
$
9,266

Gross increases-tax positions in prior period

Gross decreases-tax positions in prior period
(5
)
Gross increases-current period tax positions
100

Settlements

Lapse of statute of limitations
(1,974
)
Unrecognized tax benefits at December 31, 2013
7,387

Gross increases-tax positions in prior period
13,869

Gross decreases-tax positions in prior period
(23
)
Gross increases-current period tax positions
53

Settlements
(409
)
Lapse of statute of limitations

Unrecognized tax benefits at December 31, 2014
$
20,877


Included in the amount of unrecognized tax benefits at December 31, 2014 and 2013 is $5.4 million and $4.8 million, respectively, of tax benefits that, if recognized, would affect the Company's effective tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2014 and 2013 is $2.9 million and $2.6 million, respectively, of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred tax assets.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2014 and 2013, the Company had approximately $1.9 million and $1.7 million, respectively, of accrued interest, before any tax benefit, related to uncertain tax positions.
The tax years 2002-2014 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 regard to all audits, the Company does not expect any significant adjustments to amounts already reserved.
In connection with the California Franchise Tax Board audit, the Company filed a refund claim for tax years 2008-2010 for approximately $12.6 million in 2014. 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 the potential change to have a material effect on the results of operations or financial position in the next year.
The Company's continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.
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, and University of the Rockies is regionally accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools (“HLC”).
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 commenced on August 25, 2014, and 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
On July 10, 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 WSCUC monitoring process, Ashford University will host a visiting team from WSCUC in a special visit in April 2015. 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.
On October 22, 2014, BPPE notified Ashford University that it had been identified for a compliance inspection of statutory and regulatory requirements. The university submitted documents for review in November 2014 and underwent an onsite compliance inspection on December 16, 2014. No issues of noncompliance were noted in connection with the inspection.
HLC Visit to University of the Rockies
In September and October of 2014, HLC conducted a previously scheduled comprehensive evaluation visit at University of the Rockies in order for the University to seek reaffirmation of its accreditation by HLC. On February 3, 2015, University of the Rockies received a letter from HLC stating that the Institutional Actions Council of HLC continued the accreditation of the university, with the next Reaffirmation of Accreditation in 2024-2025.
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, which are 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. The Department issued a Dear Colleague Letter on July 14, 2014 and confirmed that it expects institutions to make a good faith effort to comply with the statutory requirements in the interim. 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. This notice announced two public hearings at which interested parties may comment on the topics suggested by the Department and suggest additional topics for consideration for action by the negotiated rulemaking committee.
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, the 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 December 19, 2014, the Department published a notice in the Federal Register announcing its intention to establish a negotiated rulemaking committee to (i) prepare proposed regulations to establish a new Pay as You Earn repayment plan for those not covered by the existing Pay as you Earn Repayment Plan in the Federal Direct Loan Program and (ii) establish procedures for Federal Family Education Loan Program (“FFEL Program”) holders to use to identify U.S. military service members who may be eligible for a lower interest rate on their FFEL Program loans under Section 527 of the Service Members Civil Relief Act. The notice sets a schedule for the committee meetings and requests nominations for individual negotiators to serve on the negotiating committee.
The “90/10” Rule
Under the Higher Education Act, a for-profit institution loses its eligibility to participate in Title IV programs if the institution derives more than 90% of its revenues (calculated in accordance with applicable Department regulations) from Title IV program funds for two consecutive fiscal years. This rule is commonly referred to as the “90/10 rule.” Any institution that violates the 90/10 rule for two consecutive fiscal years becomes ineligible to participate in Title IV programs for at least two fiscal years. In addition, an institution whose rate exceeds 90% for any single year will be placed on provisional certification and may be subject to other enforcement measures.
For the years ended December 31, 2014, 2013 and 2012, Ashford University derived 83.4%, 85.6% and 86.4%, respectively, and University of the Rockies derived 88.3%, 87.6% and 87.3%, respectively, of their respective revenues (calculated in accordance with applicable Department regulations) from students whose source of funding is through Title IV funds.
Cohort Default Rate
For each federal fiscal year, the Department calculates a rate of student defaults over a three-year measuring period for each educational institution, which is known as a “cohort default rate.” An institution may lose its eligibility to participate in the Direct Loan and Pell programs if, for each of the three most recent federal fiscal years, 30% or more of its students who became subject to a repayment obligation in that federal fiscal year defaulted on such obligation by the end of the following federal fiscal year.
The three-year cohort default rates for Ashford University for the 2011, 2010 and 2009 federal fiscal years, were 15.3%, 16.3% and 19.8%, respectively. The three-year cohort default rates for University of the Rockies for the 2011, 2010 and 2009 federal fiscal years, were 6.6%, 8.0% and 3.3%, respectively.
Return of Title IV Funds
An institution participating in Title IV programs must correctly calculate the amount of unearned Title IV program funds that have been disbursed to students who withdraw from their educational programs before completion and must return those unearned funds in a timely manner, generally within 45 days of the date the school determines that the student has withdrawn. Under Department regulations, failure to make timely returns of Title IV program funds for 5% or more of students sampled on the institution's annual compliance audit in either of its two most recently completed fiscal years can result in the institution having to post a letter of credit in an amount equal to 25% of its required Title IV returns during its most recently completed fiscal year. If unearned funds are not properly calculated and returned in a timely manner, an institution is also subject to monetary liabilities or an action to impose a fine or to limit, suspend or terminate its participation in Title IV programs. For the years ended December 31, 2014 and 2013, the Company's institutions did not exceed the 5% threshold for late refunds sampled.
Financial Responsibility
The Department calculates an institution's composite score for financial responsibility based on its (i) equity ratio, which measures the institution's capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and (iii) net income ratio, which measures the institution's ability to operate at a profit. An institution that does not meet the Department's minimum composite score of 1.5 may demonstrate its financial responsibility by posting a letter of credit in favor of the Department and possibly accepting other conditions on its participation in the Title IV programs.
For the fiscal year ended December 31, 2013, the consolidated composite score calculated was 3.0, satisfying the composite score requirement of the Department's financial responsibility test, which institutions must satisfy in order to participate in Title IV programs. We expect the consolidated composite score to be 2.7 for the year ended December 31, 2014. However, the consolidated calculation is subject to determination by the Department once it receives and reviews our audited financial statements for the year ended December 31, 2014.
Retirement Plans
Retirement Plans
Retirement Plans
The Company maintains an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended. Under the savings plan, participating employees may contribute a portion of their pre-tax earnings up to the Internal Revenue Service annual contribution limit. Additionally, the Company may elect to make matching contributions into the savings plan in its sole discretion. The Company's total expense related to the 401(k) plan was $3.7 million, $3.3 million and $3.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.
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 (“OIG”)
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 Department's Office of Federal Student Aid (the “FSA”). Ashford University provided the FSA a detailed response to 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 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, contained 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 as of December 31, 2013, related to this matter, which represented its best estimate of the total restitution, cost of non-monetary remedies and future legal costs. Approximately $7.5 million of the original amount was paid during 2014. The remaining accrual of $1.5 million as of December 31, 2014 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 Subpoena related to recorded calls and electronic marketing data. On September 25, 2013, we 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 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 proceeding to 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. 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.
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. The complaint has not yet been served.
The Company is evaluating the complaint and intends to vigorously defend against it. However, because of the many questions of fact and law that may arise, the outcome of the legal proceeding is uncertain at this point. Based on information available to the Company at present, it cannot reasonably estimate a range of loss and accordingly 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 entitled 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 complaint 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 entitled 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 entitled 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 entitled Cannon v. Clark, et al. and is substantially similar to the previously filed California State Court derivative action now entitled In re Bridgepoint, Inc. Shareholder Derivative Action. In the complaint, the 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 complaint 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 lawsuits are captioned Di Giovanni v. Clark, et al., and Craig-Johnston v. Clark, et al. The complaints 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 lawsuit is captioned Klein v. Clark, et al. The complaint 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 Ninth Circuit.
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 entitled Guzman v. Bridgepoint Education, Inc., et al., and 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 March 14, 2013, the Company filed a motion to deny class certification for students enrolled on or after May 2007 when Ashford University adopted a binding arbitration policy. On August 23, 2013, the Court denied the motion finding that although “some” absent class members in this case may have signed an enforceable arbitration agreement, this does not demonstrate an overbroad or unascertainable class that forecloses certification at this stage of the proceedings. On September 23, 2013, the Court entered an order bifurcating discovery and permitting only class certification discovery to take place until the plaintiff’s motion for class certification, which was filed on April 30, 2014, is decided.
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 case is entitled 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 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 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 case is entitled 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. 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.
Concentration of Risk
Concentration of Risk
Concentration of Risk
Concentration of Revenue
In 2014, Ashford University derived 83.4% and University of the Rockies derived 88.3% of their respective revenues (in each case calculated on a cash basis in accordance with applicable Department regulations) from students whose source of funding is through Title IV programs. See Note 18, “Regulatory - The “90/10” Rule.” Title IV programs are subject to political and budgetary considerations and are subject to extensive and complex regulations. The Company's administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for the initiation of potentially adverse actions including a suspension, limitation, or termination proceeding, which could have a material adverse effect on the Company's enrollments, revenues and results of operations.
Students obtain access to federal student financial aid through a Department prescribed application and eligibility certification process. Student financial aid funds are generally made available to students at prescribed intervals throughout their expected length of study. Students typically apply the funds received from the federal financial aid programs first to pay their tuition and fees. Any remaining funds are distributed directly to the student.
Concentration of Credit Risk
The Company maintains its cash and cash equivalents accounts in financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company performs ongoing evaluations of these institutions to limit its concentrations risk exposure.
Concentration of Sources of Supply
The Company is dependent on a third-party provider for its online platform, which includes a learning management system, that stores, manages and delivers course content, enables assignment uploading, provides interactive communication between students and faculty and supplies online assessment tools. The partial or complete loss of this source may have an adverse effect on enrollments, revenues and results of operations.
Quarterly Results of Operations (Unaudited)
Quarterly Results of Operations (Unaudited)
Quarterly Results of Operations (Unaudited)
The following tables set forth unaudited results of operations and certain operating results for each quarter during 2014 and 2013. The Company believes that the information reflects all adjustments necessary to present fairly the information below. Basic and diluted earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per common share information may not equal annual basic and diluted earnings per common share.
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
(In thousands, except per share data)
2014
 
 
 
 
 
 
 
Revenue
$
157,270

 
$
171,522

 
$
162,654

 
$
147,259

Operating income (loss)
(7,858
)
 
22,414

 
10,581

 
(10,826
)
Net income (loss)
(4,330
)
 
12,955

 
6,291

 
(5,248
)
Earnings (loss) per common share:
 
 
 
 
 
 
 
Basic
$
(0.10
)
 
$
0.29

 
$
0.14

 
$
(0.12
)
Diluted
(0.10
)
 
0.28

 
0.14

 
(0.12
)
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
(In thousands, except per share data)
2013
 
 
 
 
 
 
 
Revenue
$
212,986

 
$
193,470

 
$
182,768

 
$
162,225

Operating income
39,676

 
19,133

 
19,524

 
(9,870
)
Net income
24,667

 
12,114

 
14,211

 
(5,109
)
Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.46

 
$
0.22

 
$
0.26

 
$
(0.10
)
Diluted
0.45

 
0.22

 
0.25

 
(0.10
)

In the fourth quarter of 2014, the Company recorded certain correcting adjustments relating to a prior year, which were not material to the current period, prior periods or previous quarterly periods. The adjustments decreased revenue by $1.7 million, operating income by $1.7 million and net income by $1.0 million.  In the third quarter of 2014, the Company had also recorded an adjustment that related to a prior year, which were not material to the current period, prior periods or previous quarterly periods. This adjustment did not impact revenue or operating income, but increased net income by $0.2 million.  The net effect of these adjustments on the annual 2014 period was to decrease revenue by $1.0 million, operating income by $0.7 million and net income by $0.2 million.
Summary of Significant Accounting Policies (Policies)
Principles of Consolidation
The consolidated financial statements include the accounts of Bridgepoint Education, Inc. and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents is comprised of cash and other short-term highly liquid investments that are readily convertible into known amounts of cash. The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Restricted Cash
Restricted cash primarily represents funds held for students from Title IV financial aid program funds that result in credit balances on a student’s account. Restricted cash is excluded from cash and cash equivalents on our consolidated balance sheets and statements of cash flows. Changes in restricted cash are included in cash flows from operating activities on our consolidated statements of cash flows, as these restricted funds are closely related to the Company's operational activity. Our restricted cash is primarily held in money market accounts.
Investments
As of December 31, 2014, the Company held short and long-term investments that consisted of mutual funds, corporate notes and bonds and certificates of deposit. The Company's investments are denominated in U.S. dollars, are investment grade and are readily marketable. The Company considers as current assets those investments which will mature or are likely to be sold in less than one year.
The Company classifies its investments as either trading, available-for-sale or held-to-maturity. Trading securities are those bought and held principally to sell in the short-term, with gains or losses from changes in fair value flowing through current earnings. Available-for-sale securities are carried at fair value as determined by quoted market prices, with unrealized gains and losses, net of tax, reported as a separate component of comprehensive income and stockholders’ equity. Held-to-maturity securities would be carried at amortized cost. Amortization of premiums, accretion of discounts, interest, and realized gains and losses are included in other income, net in the consolidated statement of income.
The Company regularly monitors and evaluates the realizable value of its investments. If events and circumstances indicate that a decline in the value of these assets has occurred and is other-than-temporary, the Company would record a charge to other income, net in the consolidated statement of income.
Deferred Compensation
The Company has a deferred compensation plan, into which certain members of management are eligible to defer a maximum of 80% of their regular compensation and a maximum of 100% of their incentive compensation. The amounts deferred by the participant under this plan are credited with earnings or losses based upon changes in values of participant elected notional investments. Each participant is fully vested in the participant amounts deferred. The Company may make contributions that will generally vest according to a four-year vesting schedule. After four years of service, participants become 100% vested in the employer contributions upon reaching normal retirement age, death, disability or a change in control. The Company's obligations under the deferred compensation plan totaled $1.0 million as of December 31, 2014 and are included in other liabilities in the consolidated balance sheets.
Fair Value Measurements
The Company uses the three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: (i) Level 1, defined as observable inputs such as quoted prices in active markets; (ii) Level 2, defined as inputs other than quoted prices in active markets that are either observable directly or indirectly, through market corroboration, for substantially the full term of the financial instrument; and (iii) Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable consists of student accounts receivable, which represent amounts due for tuition, course digital materials, technology fees and other fees from currently enrolled and former students. Students generally fund their education through grants and/or loans under various Title IV programs, tuition assistance from military and corporate employers or personal funds. Payments are due on the respective course start date and are considered past due subsequent to the respective course start date. An account is considered delinquent 120 days subsequent to the course start date.
Accounts receivable are stated at the amount management expects to collect from outstanding balances. For accounts receivable, an allowance for doubtful accounts is estimated by management and is principally based on historical collection experience as well as (i) an assessment of individual accounts receivable over a specific aging and amount, (ii) consideration of the nature of the receivable accounts and (iii) potential changes in the business or economic environment. The provision for bad debts is recorded within instructional costs and services in the consolidated statements of income. The Company writes off uncollectable accounts receivable when the student account is deemed uncollectable by internal collection efforts or by a third-party collection agency.
Student Loans Receivable and Loan Loss Reserves
Student loans receivable consist of loans to qualified students and have a repayment period of 10 years from the date of graduation or withdrawal from the Company's institutions. The interest rate charged on student loans is a fixed rate of either 4.5% or 0.0% depending upon the repayment plan selected. If the student selects the rate of 0.0%, the student must pay $50 per month on the loan while enrolled in school and during the six months of grace period (after graduation or withdrawal) before the repayment period begins. On the 0.0% student loans, the Company imputes interest using the rate that would be used in a market transaction with similar terms. Interest income on student loans is recognized using the effective interest method and is recorded within other income in the consolidated statements of income. There was an immaterial amount of revenue recognized related to student loans during each of the years ended December 31, 2014, 2013 and 2012, respectively.
Student loans receivable are stated at the amount management expects to collect from outstanding balances. For tuition related student loan receivables, the Company estimates an allowance for doubtful accounts, similar to that of accounts receivable, based on (i) an assessment of individual loans receivable over a specific aging and amount, (ii) consideration of the nature of the receivable accounts, (iii) potential changes in the business or economic environment and (iv) related FICO scores and other industry metrics. The related provision for bad debts is recorded within instructional costs and services in the consolidated statements of income.
For non-tuition related student loans, the Company utilizes an impairment methodology. Under this methodology, management determines whether a loan would be impaired if the Company will be unable to collect all amounts due in accordance with the contractual terms of the individual loan agreement. This assessment is based on an analysis of several factors, including aging history and delinquency trending, the risk characteristics, credit quality and loan performance of the specific loans, and current economic conditions and industry trends. Credit quality is assessed at the outset of a loan, based upon the applicant's FICO score during the loan application process. The Company considers loans to be impaired when they reach a delinquency status that requires specialized collection efforts. The Company defines delinquency for loans as being for students who are no longer active, having amounts that are past due and having the last activity more than 120 days old. The Company records a loss reserve for the full book value of the impaired loans. For the years ended December 31, 2014, and 2013 there was $2.4 million and $2.0 million recorded for loan loss reserves, respectively. The loan loss reserve is maintained at a level deemed adequate by management based on a periodic analysis of the individual loans and is recorded within instructional costs and services in the consolidated statements of income.
Property and Equipment
Property and equipment are recognized at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of the related assets as follows:
Buildings
39 years
Furniture and office equipment
3 - 7 years
Software
3 years
Vehicles
5 years

Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets. Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed and a gain or loss is recorded in the consolidated statements of income. Repairs and maintenance costs are expensed in the period incurred.
During the fourth quarter of 2014, the Company terminated a software development program for internal operations due to a change in the Company's plans. As a result, the Company recorded an asset impairment charge of $2.2 million for previously capitalized software costs, all of which was recorded as general and administrative expenses in the consolidated statements of income.
Leases
Leases are evaluated and classified as either operating or capital leases. Leased property and equipment meeting certain criteria are capitalized, and the present value of the related lease payments is recognized as a liability on the consolidated balance sheets. Amortization of capitalized leased assets is computed on the straight-line method over the term of the lease or the life of the related asset, whichever is shorter.
If the Company receives tenant allowances from the lessor for certain improvements made to the leased property, these allowances are capitalized as leasehold improvements and a long-term liability is established. The long-term liability is amortized on a straight-line basis over the corresponding lease term. The Company records rent expense on a straight-line basis over the initial term of a lease. The difference between the rent payment and the straight-line rent expense is recorded as either a short-term or long-term liability.
The Company recognizes liabilities for exit and disposal activities on non-cancelable lease obligations at fair value in the period the liability is incurred. For the non-cancelable lease obligations, the Company records the obligation when the contract is terminated in accordance with the contract terms. Due to the decline in enrollment and resulting reductions in headcount, for the year ended December 31, 2014, there was $6.5 million recorded for lease exit costs, which primarily related to properties in Denver and San Diego. The total amount was charged as $2.9 million to instructional costs and services, $2.8 million to admissions advisory and marketing expenses, and $0.8 million to general and administrative expenses.
Impairment of Long-Lived Assets
The Company assesses potential impairment to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recorded if the carrying amount of the long-lived asset is not recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. During the fourth quarter of 2014, the Company recognized an impairment charge of $4.6 million to write-off certain fixed assets in addition to the lease exit costs denoted above. This impairment amount was charged as $2.1 million to instructional costs and services, $2.0 million to admissions advisory and marketing expenses, and $0.5 million to general and administrative expenses
Goodwill and Other Intangible Assets
The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of each fiscal year, or more frequently if events and circumstances warrant.
The Company adopted accounting guidance which simplifies how an entity tests goodwill for impairment. The Company first assesses qualitative factors, such as deterioration in general economic conditions or negative company financial performance, to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. The Company's assessment of goodwill during the fourth quarter of fiscal 2014 indicated that there were no significant negative qualitative indicators, and therefore, goodwill was not impaired. There have been no related impairment losses recognized by the Company for any periods presented. If negative qualitative indicators had been noted above, the Company would then need to assess the fair value of its reporting units to determine whether they were in excess of the carrying values.
To evaluate the impairment of the indefinite-lived intangible assets, the Company assessed the fair value of the assets to determine whether they were in excess of the carrying values. Determining the fair value of indefinite-lived intangible asset is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions are inherently uncertain, and can include such items as growth rates used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and a determination of appropriate market comparables. The Company's assessment of indefinite-lived intangible assets during the fourth quarter of fiscal 2014 did not result in any impairment. There have been no impairment losses recognized by the Company for any periods presented.
The Company also has definite-lived intangible assets, which primarily consist of purchased intangibles and capitalized curriculum development costs. The definite-lived intangible assets are recognized at cost less accumulated amortization. Amortization is computed using the straight-line method based on estimated useful lives of the related assets.
Revenue and Deferred Revenue
The Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered or delivery has occurred, its fees or price is fixed or determinable, and collectibility is reasonably assured. The Company's revenue consists of tuition, technology fees, course digital materials and other miscellaneous fees. Tuition revenue is deferred and recognized on a straight-line basis over the applicable period of instruction net of scholarships and expected refunds, with the exception of an online student's first course per degree level at Ashford University. Effective in the fourth quarter of 2012, an online student's first course per degree level at Ashford University falls under a three-week conditional admission period in which the revenue is deferred until the student matriculates into the course.
The Company's institutions' online students generally enroll in a program that encompasses a series of five to six-week courses that are taken consecutively over the length of the program. With the exception of those students under conditional admission, the online students are billed on a payment period basis on the first day of class. The Company's institutions' campus-based students enroll in a program that encompasses a series of nine-week or 16-week courses. Campus-based students are billed at the beginning of each term. The Company assesses collectibility at the start of a student’s payment period for the courses in that payment period (generally five courses for undergraduates and four courses for graduates).
If a student's attendance in a class precedes the receipt of cash from the student's source of funding, the Company establishes an account receivable and corresponding deferred revenue in the amount of the tuition due for that payment period. Cash received either directly from the student or from the student's source of funding reduces the balance of accounts receivable due from the student. Financial aid from sources such as the federal government's Title IV programs pertains to the online student's award year and is generally divided into two disbursement periods. As such, each disbursement period may contain funding for up to four courses. Financial aid disbursements are typically received during the online student's attendance in the first or second course. Since the majority of disbursements cover more courses than for which a student is currently enrolled, the amount received in excess effectively represents a prepayment from the online student for up to four courses. At the end of each accounting period, the deferred revenue and student deposits and related account receivable balances are reduced to present amounts attributable to the current course.
Students under conditional admission are not obligated for payment until after their conditional admission period has lapsed, so there is no potential refund. For all subsequent courses, the Company records a provision for expected refunds and reduces revenue for the amount that is expected to be subsequently refunded. Provisions for expected refunds have not been material to any period presented. If a student withdraws from a program prior to a specified date, a portion of such student's tuition is refunded, subject to certain state requirements that require a pro rata refund. The Company reassess collectibility throughout the period revenue is recognized by the Company's institutions, on a student-by-student basis. The Company reassess collectibility based upon new information and changes in facts and circumstances relevant to a student's ability to pay. For example, the Company reassesses collectibility when a student drops from the institution (i.e., is no longer enrolled) and when a student attends a course that was not included in the initial assessment of collectibility at the start of a student’s payment period.
Prior to January 1, 2013, both institutions recorded revenue from technology fees, which are one-time start up fees charged to each new online student, other than military, scholarship students or certain corporate reimbursement students. Under this methodology, technology fee revenue was then recognized ratably over the average expected enrollment of a student. The average expected enrollment of the student was estimated each quarter based upon historical duration of attendance and qualitative factors as deemed necessary. Beginning on January 1, 2013, Ashford University eliminated the one-time technology fee and replaced it with a per course charge. The per course technology fee revenue for Ashford University is currently recognized on a straight-line basis over the applicable period of instruction. Other miscellaneous fees include fees for course content and textbooks and other services, such as commencements, and are recognized upon delivery of the goods or when the related service is performed.
Workers Compensation
The Company records a gross liability for estimated workers compensation claims, incurred but not yet reported, as of each balance sheet date. The Company also records the gross insurance recoverable due for individual claim amounts. This is recorded as an other asset and as an equal accrued liability. The stop-loss premium is determined annually, but invoiced and paid on a quarterly basis. The related insurance premiums are expensed ratably over the coverage period.
Income Taxes
The Company accounts for its income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the bases used for financial reporting and income tax reporting purposes. Deferred income taxes are provided based on the enacted tax rates expected to be in effect at the time such temporary differences are expected to reverse. A valuation allowance is provided for deferred tax assets if it is more-likely-than-not that the Company will not realize those tax assets through future operations.
The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained.
Stock-Based Compensation
Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the vesting period. The Company estimates the fair value of stock options on the grant date using the Black-Scholes option pricing model. The Company estimates the fair value of its performance stock units (“PSUs”) on the grant date using a Monte Carlo simulation model. Determining the fair value of stock-based awards at the grant date under these models requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. The fair value of the Company's restricted stock units (“RSUs”) is based on the market price of the Company's common stock on the date of grant.
The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates award forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company's equity incentive plans require that stock option awards have an exercise price that equals or exceeds the closing price of the Company's common stock, as reported by the New York Stock Exchange (the “NYSE”), on the date of grant.
Stock-based compensation expense for stock-based awards is recorded in the consolidated statement of income, net of estimated forfeitures, using the graded-vesting method over the requisite service periods of the respective stock awards. The requisite service period is generally the period over which an employee is required to provide service to the Company in exchange for the award.
Instructional Costs and Services
Instructional costs and services consist primarily of costs related to the administration and delivery of the Company's educational programs. These expenses include compensation for campus-based faculty and administrative personnel, costs associated with online faculty, curriculum and new program development costs, financial aid processing costs, technology license costs, bad debt expense and costs associated with other support groups that provide services directly to the students. Instructional costs and services also include an allocation of information technology, facility, depreciation and amortization costs.
Admissions Advisory and Marketing
Admissions advisory and marketing costs include compensation of personnel engaged in marketing and recruitment, as well as costs associated with purchasing leads and producing marketing materials. Such costs are generally affected by the cost of advertising media and leads, the efficiency of the Company's marketing and recruiting efforts, compensation for the Company's enrollment personnel and expenditures on advertising initiatives for new and existing academic programs. Admissions advisory and marketing costs also include an allocation of information technology, facility, depreciation and amortization costs.
Advertising costs, a subset of admissions advisory and marketing costs, consists primarily of marketing leads and other branding and promotional activities. These advertising activities are expensed as incurred, or the first time the advertising takes place, depending on the type of advertising activity. Advertising costs were $89.0 million, $76.5 million and $103.7 million for the years ended December 31, 2014, 2013 and 2012, respectively.
General and Administrative
General and administrative expenses include compensation of employees engaged in corporate management, finance, human resources, compliance and other corporate functions. General and administrative expenses also include professional services fees, travel and entertainment expenses and an allocation of information technology, facility, depreciation and amortization costs.
Earnings Per Share
Basic earnings per common 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 common share is calculated by dividing net income available to common stockholders by the sum of (i) the weighted average number of common shares outstanding during the period and (ii) potentially dilutive securities outstanding during the period, if the effect is dilutive. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of the stock options and warrants and upon the settlement of RSUs and PSUs.
Segment Information
The Company operates in one reportable segment as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of both its campus-based and online students regardless of geography. The Company's chief operating decision maker, its CEO and President, manages the Company's operations as a whole, and no revenue, expense or operating income information is evaluated by the chief operating decision maker on any component level.
Comprehensive Income
Comprehensive income consists of net income and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net income. For the year ended December 31, 2014, such items consisted of unrealized gains and losses on investments.
The following table summarizes the components of other comprehensive gain (loss) and the related tax effects for the years ended December 31, 2014, 2013 and 2012 (in thousands):
 
December 31, 2014
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized losses on investments
$
(359
)
 
$
136

 
$
(223
)
 
 
 
 
 
 
 
December 31, 2013
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized losses on investments
$
(280
)
 
$
106

 
$
(174
)
 
 
 
 
 
 
 
December 31, 2012
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized gains on investments
$
1,300

 
$
(483
)
 
817


The Company reclassed an immaterial amount out of other comprehensive income for each of the years ended December 31, 2014, 2013 and 2012, respectively, relating to the net realized gain on the sale of securities.
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which raises the threshold for determining which disposals are required to be presented as discontinued operations and modifies related disclosure requirements. The standard is applied prospectively and is effective in 2015, with early adoption permitted. The Company adopted ASU 2014-08 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
In May 2014, the FASB issued 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 will be effective for the first interim period within fiscal years beginning after December 15, 2016, using one of two retrospective application methods. The Company is evaluating the impacts, if any, the adoption of ASU 2014-09 will have on its financial position or results of operations.
In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 requires that a performance target that affects vesting and could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in ASC 718, Compensation—Stock Compensation, as it relates to such awards. ASU 2014-12 is effective for the Company in its first quarter of fiscal 2017, with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after the effective date; or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter, with the cumulative effect of applying ASU 2014-12 as an adjustment to the opening retained earnings balance as of the beginning of the earliest annual period presented in the financial statements. The Company adopted ASU 2014-12 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The amendments are effective for periods ending after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company adopted ASU 2014-15 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
In November 2014, the FASB issued ASU 2014-17, Business Combinations (Topic 805): Pushdown Accounting. ASU 2014-17 gives an acquired entity the option of applying pushdown accounting in its stand-alone financial statements upon a change-in-control event. ASU 2014-17 was effective upon issuance. The Company adopted ASU 2014-17 effective January 1, 2015, and does not believe that such adoption will have a material effect on its consolidated financial statements.
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 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 adoption of ASU 2015-01 is not expected to have a material effect on the Company’s consolidated financial statements.
Prior Year Adjustments
In the fourth quarter of 2014, the Company recorded certain correcting adjustments relating to a prior year, which were not material to the current period, prior periods or previous quarterly periods. The net effect of these adjustments on the annual 2014 period was to decrease revenue by $1.0 million, operating income by $0.7 million and net income by $0.2 million.
Summary of Significant Accounting Policies (Tables)
Property and equipment are recognized at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of the related assets as follows:
Buildings
39 years
Furniture and office equipment
3 - 7 years
Software
3 years
Vehicles
5 years
Property and equipment, net, consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Land
$
7,091

 
$
7,091

Buildings
29,540

 
28,916

Furniture and office equipment
81,030

 
84,852

Software
12,454

 
10,075

Leasehold improvements
21,096

 
24,360

Vehicles
147

 
147

Total property and equipment
151,358

 
155,441

Less accumulated depreciation and amortization
(73,139
)
 
(64,016
)
Total property and equipment, net
$
78,219

 
$
91,425

The following table summarizes the components of other comprehensive gain (loss) and the related tax effects for the years ended December 31, 2014, 2013 and 2012 (in thousands):
 
December 31, 2014
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized losses on investments
$
(359
)
 
$
136

 
$
(223
)
 
 
 
 
 
 
 
December 31, 2013
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized losses on investments
$
(280
)
 
$
106

 
$
(174
)
 
 
 
 
 
 
 
December 31, 2012
 
Before-Tax Amount
 
Tax Effect
 
Net-of-Tax Amount
Unrealized gains on investments
$
1,300

 
$
(483
)
 
817

Investments (Tables)
The following table summarizes the fair value information of short and long-term investments as of December 31, 2014 and 2013, respectively (in thousands):
 
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

 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
Demand notes
$

 
$
719

 
$

 
$
719

Corporate notes and bonds

 
16,244

 

 
16,244

Certificates of deposit

 
90,000

 

 
90,000

Total
$

 
$
106,963

 
$

 
$
106,963

The following table summarizes the differences between amortized cost and fair value of short and long-term investments as of December 31, 2014 and 2013, respectively (in thousands):
 
December 31, 2014
 
 
 
 
 
Gross unrealized
 
 
 
Maturities
 
Amortized Cost
 
Gain
 
Loss
 
Fair Value
Short-term
 
 
 
 
 
 
 
 
 
Corporate notes and bonds
1 year or less
 
10,947

 
33

 

 
10,980

Long-term
 
 
 
 
 
 
 
 
 
Corporate notes and bonds
3 years or less
 
51,874

 

 
(304
)
 
51,570

U.S. government and agency securities
3 years or less
 
35,000

 

 
(13
)
 
34,987

Certificates of deposit
3 years or less
 
25,000

 

 

 
25,000

Total
 
 
$
122,821

 
$
33

 
$
(317
)
 
$
122,537

The above table does not include $1.1 million for mutual funds at December 31, 2014, which are recorded as trading securities and are therefore not recorded at amortized cost.

 
December 31, 2013
 
 
 
 
 
Gross unrealized
 
 
 
Maturities
 
Amortized Cost
 
Gain
 
Loss
 
Fair Value
Short-term
 
 
 
 
 
 
 
 
 
Demand notes
1 year or less
 
$
719

 
$

 
$

 
$
719

Corporate notes and bonds
1 year or less
 
5,132

 
50

 

 
5,182

Certificate of deposit
1 year or less
 
60,000

 

 

 
60,000

Long-term
 
 
 
 
 
 
 
 
 
Corporate notes and bonds
3 years or less
 
11,037

 
25

 

 
11,062

Certificate of deposit
3 years or less
 
30,000

 

 

 
30,000

Total
 
 
$
106,888

 
$
75

 
$

 
$
106,963

Accounts Receivable (Tables)
Accounts receivable, net, consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Accounts receivable
$
48,841

 
$
49,854

Less allowance for doubtful accounts
27,567

 
26,901

Accounts receivable, net
$
21,274

 
$
22,953

Student loans receivable, net, consist of the following (in thousands):
 
As of December 31,
Short-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
509

 
$
587

   Student loans receivable (tuition related)
626

 
621

   Current student loans receivable
1,135

 
1,208

Less allowance for doubtful accounts
132

 
165

Student loans receivable, net
$
1,003

 
$
1,043

 
 
 
 
 
As of December 31,
Long-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
4,805

 
$
7,347

   Student loans receivable (tuition related)
6,068

 
6,417

   Non-current student loans receivable
10,873

 
13,764

Less allowance for doubtful accounts
1,363

 
1,979

Student loans receivable, net
$
9,510

 
$
11,785

The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
26,901

 
$
27,853

 
$
(27,187
)
 
$
27,567

For the year ended December 31, 2013
31,466

 
46,851

 
(51,416
)
 
26,901

For the year ended December 31, 2012
24,688

 
52,794

 
(46,016
)
 
31,466

(1)
Deductions represent accounts written off, net of recoveries.
The following table presents the changes in the allowance for doubtful accounts for student loans receivable (tuition related) for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful student loans receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
2,144

 
$
331

 
$
(980
)
 
$
1,495

For the year ended December 31, 2013
1,895

 
268

 
(19
)
 
2,144

For the year ended December 31, 2012
2,070

 
(27
)
 
(148
)
 
1,895

(1)
Deductions represent accounts written off, net of recoveries.
Student Loans Receivable (Tables)
Accounts receivable, net, consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Accounts receivable
$
48,841

 
$
49,854

Less allowance for doubtful accounts
27,567

 
26,901

Accounts receivable, net
$
21,274

 
$
22,953

Student loans receivable, net, consist of the following (in thousands):
 
As of December 31,
Short-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
509

 
$
587

   Student loans receivable (tuition related)
626

 
621

   Current student loans receivable
1,135

 
1,208

Less allowance for doubtful accounts
132

 
165

Student loans receivable, net
$
1,003

 
$
1,043

 
 
 
 
 
As of December 31,
Long-term:
2014
 
2013
   Student loans receivable (non-tuition related)
$
4,805

 
$
7,347

   Student loans receivable (tuition related)
6,068

 
6,417

   Non-current student loans receivable
10,873

 
13,764

Less allowance for doubtful accounts
1,363

 
1,979

Student loans receivable, net
$
9,510

 
$
11,785

The following table presents the changes in the allowance for doubtful accounts for accounts receivable for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful accounts receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
26,901

 
$
27,853

 
$
(27,187
)
 
$
27,567

For the year ended December 31, 2013
31,466

 
46,851

 
(51,416
)
 
26,901

For the year ended December 31, 2012
24,688

 
52,794

 
(46,016
)
 
31,466

(1)
Deductions represent accounts written off, net of recoveries.
The following table presents the changes in the allowance for doubtful accounts for student loans receivable (tuition related) for the periods indicated (in thousands):
 
Beginning
Balance
 
Charged to
Expense
 
Deductions(1)
 
Ending
Balance
Allowance for doubtful student loans receivable:
 
 
 
 
 
 
 
For the year ended December 31, 2014
$
2,144

 
$
331

 
$
(980
)
 
$
1,495

For the year ended December 31, 2013
1,895

 
268

 
(19
)
 
2,144

For the year ended December 31, 2012
2,070

 
(27
)
 
(148
)
 
1,895

(1)
Deductions represent accounts written off, net of recoveries.
As of December 31, 2014, the delinquency status of gross student loans receivable was as follows (in thousands):
Less than 120 days
$
16,138

From 120 - 269 days
1,159

Greater than 270 days
2,099

Total gross student loans receivable
19,396

Less: Amounts reserved or impaired
(5,927
)
Less: Discount on student loans receivable
(2,956
)
Total student loans receivable, net
$
10,513

Prepaid Expense and Other Current Assets (Tables)
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Prepaid expenses
$
8,500

 
$
10,814

Prepaid licenses
5,598

 
5,833

Prepaid income taxes
2,945

 
195

Prepaid insurance
1,508

 
1,131

Workers compensation
1,440

 
2,814

Interest receivable
424

 
86

Other current assets
2,403

 
690

Total prepaid expenses and other current assets
$
22,818

 
$
21,563

Property and Equipment, Net (Tables)
Property and Equipment
Property and equipment are recognized at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of the related assets as follows:
Buildings
39 years
Furniture and office equipment
3 - 7 years
Software
3 years
Vehicles
5 years
Property and equipment, net, consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Land
$
7,091

 
$
7,091

Buildings
29,540

 
28,916

Furniture and office equipment
81,030

 
84,852

Software
12,454

 
10,075

Leasehold improvements
21,096

 
24,360

Vehicles
147

 
147

Total property and equipment
151,358

 
155,441

Less accumulated depreciation and amortization
(73,139
)
 
(64,016
)
Total property and equipment, net
$
78,219

 
$
91,425

Goodwill and Intangibles, Net (Tables)
Goodwill and intangibles, net, consist of the following (in thousands):
 
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

 
 
 
 
 
 
 
December 31, 2013
Definite-lived intangible assets:
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Capitalized curriculum costs
$
14,540

 
$
(5,035
)
 
$
9,505

Purchased intangible assets
15,857

 
(1,051
)
 
14,806

     Total definite-lived intangible assets
$
30,397

 
$
(6,086
)
 
$
24,311

Goodwill and indefinite-lived intangibles
 
 
 
 
2,567

Total goodwill and intangibles, net
 
 
 
 
$
26,878

The following table summarizes the estimated remaining amortization expense as of each fiscal year ended below (in thousands):
Year Ended December 31,
 
 
2015
$
5,575

2016
4,063

2017
2,466

2018
1,471

2019
1,233

Thereafter
7,400

Total future amortization expense
$
22,208

Accrued Liabilities (Tables)
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Accrued salaries and wages
$
8,250

 
$
12,790

Accrued bonus
2,720

 
2,277

Accrued vacation
9,771

 
9,696

Accrued litigation and fees
542

 
8,000

Accrued expenses
18,223

 
15,079

Rent liability
8,528

 
2,446

Accrued workers compensation
2,920

 
4,002

Accrued income taxes payable
449

 

Total accrued liabilities
$
51,403

 
$
54,290

Deferred Revenue and Student Deposits (Tables)
Deferred Revenue and Student Deposits
Deferred revenue and student deposits consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Deferred revenue
$
26,445

 
$
29,279

Student deposits
81,603

 
103,512

Total deferred revenue and student deposits
$
108,048

 
$
132,791

Other Long-Term Liabilities (Tables)
Schedule of Other Long-Term Liabilities
Other long-term liabilities consist of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Uncertain tax positions
$
7,586

 
$
7,466

Legal settlements
1,000

 
1,000

Other long-term liabilities
1,066

 
805

Total other long term liabilities
$
9,652

 
$
9,271

Lease Obligations (Tables)
Future Minimum Rental Payments Under Non-Cancelable Operating Leases
The following table summarizes the future minimum rental payments under non-cancelable operating lease arrangements in effect at December 31, 2014 (in thousands):
Year Ended December 31,
 
 
2015
$
37,511

2016
37,449

2017
37,363

2018
32,698

2019
22,148

Thereafter
20,948

Total minimum payments
$
188,117

Earnings Per Share (Tables)
The following table sets forth the computation of basic and diluted earnings per common share for the periods indicated (in thousands, except per share data):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Numerator:
 
 
 
 
 
Net income
$
9,668

 
$
45,883

 
$
121,146

Denominator:
 
 
 
 
 
Weighted average number of common shares outstanding
45,204

 
53,923

 
52,947

Effect of dilutive options and restricted stock units
1,308

 
1,482

 
2,762

Effect of dilutive warrants

 
82

 
237

Diluted weighted average number of common shares outstanding
46,512

 
55,487

 
55,946

Earnings per common share:
 
 
 
 
 
Basic earnings per common share
$
0.21

 
$
0.85

 
$
2.29

Diluted earnings per common share
0.21

 
0.83

 
2.17

For the periods indicated below, the computation of dilutive common shares outstanding excludes stock options and RSUs, as applicable, because their effect was anti-dilutive.
 
Year Ended December 31,
(in thousands)
2014
 
2013
 
2012
Options
2,660

 
3,004

 
2,524

Restricted stock units

 
3

 

Stock-Based Compensation (Tables)
The following table presents a summary of stock option activity in 2014, 2013 and 2012 (in thousands, except for exercise prices and contractual terms):
 
Options
Outstanding
 
Weighted-
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic Value
December 31, 2011
8,280

 
$
7.70

 
5.90
 
$
127,308

Granted
1,595

 
22.59

 
 
 
 
Exercised
(3,128
)
 
0.72

 
 
 
 
Forfeitures and expired
(335
)
 
19.79

 
 
 
 
December 31, 2012
6,412

 
14.17

 
7.21
 
$
9,010

Granted
483

 
10.23

 
 
 
 
Exercised
(1,060
)
 
9.87

 
 
 
 
Forfeitures and expired
(345
)
 
20.65

 
 
 
 
December 31, 2013
5,490

 
14.25

 
6.52
 
$
28,769

Granted
403

 
14.35

 
 
 
 
Exercised
(388
)
 
8.01

 
 
 
 
Forfeitures and expired
(337
)
 
21.43

 
 
 
 
December 31, 2014
5,168

 
$
14.26

 
5.73
 
$
7,732

Vested and expected to vest at December 31, 2014
5,134

 
$
14.25

 
5.71
 
$
7,720

Exercisable at December 31, 2014
4,070

 
$
13.72

 
5.11
 
$
7,367

Below is a summary of the assumptions used for the stock options granted in the years indicated:
 
2014
 
2013
 
2012
Weighted average exercise price per share
$
14.35

 
$
10.23

 
$
22.59

Risk-free interest rate
2.0
%
 
1.0
%
 
1.2
%
Expected dividend yield

 

 

Expected volatility
55.1
%
 
58.9
%
 
54.6
%
Expected life (in years)
5.75

 
5.85

 
5.67

Forfeiture rate
6.0
%
 
5.0
%
 
4.0
%
Weighted average grant date fair value per share
$
7.43

 
$
5.48

 
$
11.26

The assumptions for the market-based portion of the PSUs granted in 2014 are noted in the following table:
 
2014
Grant price per share
$
11.54

Risk-free interest rate
1.4
%
Expected dividend yield

Historical volatility
50.0
%
Expected life (in years)
4.0

Forfeiture rate
6.0
%
Weighted average grant date fair value per share
$
5.39

A summary of the RSU and PSU activity and related information is as follows:
 
Restricted Stock Units and Performance Stock Units
 
Time Based
 
Performance-Based
 
Market-Based
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
 
Number of Shares
 
Weighted Average
Grant Date
Fair Value
Balance at December 31, 2011
56,855

 
$
23.97

 

 
$

 

 
$

Awarded
362,199

 
9.72

 

 

 

 

Vested
(56,855
)
 
23.97

 

 

 

 

Canceled

 

 

 

 

 

Balance at December 31, 2012
362,199

 
9.72

 

 

 

 

Awarded
1,016,035

 
10.50

 

 

 

 

Vested
(181,104
)
 
9.72

 

 

 

 

Canceled
(98,613
)
 
10.39

 

 

 

 

Balance at December 31, 2013
1,098,517

 
10.38

 

 

 

 

Awarded
786,250

 
14.33

 

 

 
975,295

 
5.39

Vested
(393,106
)
 
10.15

 

 

 

 

Canceled
(212,572
)
 
11.89

 

 

 

 

Balance at December 31, 2014
1,279,089

 
$
12.63

 

 
$

 
975,295

 
$
5.39

Income Taxes (Tables)
The components of income tax expense are as follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Current:
 
 
 
 
 
Federal
$
12,686

 
$
29,456

 
$
77,720

State
1,937

 
3,168

 
7,665

 
14,623

 
32,624

 
85,385

Deferred:
 
 
 
 
 
Federal
(6,216
)
 
(5,952
)
 
(10,470
)
State
(880
)
 
(1,010
)
 
(903
)
 
(7,096
)
 
(6,962
)
 
(11,373
)
Total
$
7,527

 
$
25,662

 
$
74,012

Deferred taxes are reflected in the balance sheet as follows (in thousands):
 
As of December 31,
 
2014
 
2013
Current deferred tax assets
$
21,301

 
$
16,683

Current deferred tax liabilities

 

Noncurrent deferred tax assets
20,175

 
18,507

Noncurrent deferred tax liabilities

 

Total
$
41,476

 
$
35,190

Deferred tax assets and liabilities are comprised of the following (in thousands):
 
As of December 31,
 
2014
 
2013
Deferred tax assets:
 
 
 
Net operating loss
$
211

 
$
235

Fixed assets
194

 
214

Bad debt
2,338

 
463

Vacation accrual
2,956

 
2,762

Stock-based compensation
16,291

 
15,341

Deferred rent
11,580

 
9,944

State tax
2,257

 
2,310

Bonus accrual
1,023

 
849

Unearned interest
1,118

 
1,281

Accrued expenses
2,121

 
4,377

Revenue reserves
9,820

 
8,992

Other
107

 

Total deferred tax assets
50,016

 
46,768

Valuation allowance

 

Net deferred tax assets
50,016

 
46,768

Deferred tax liabilities:
 
 
 
Fixed assets and intangibles
(8,540
)
 
(11,550
)
Unrealized gain on investments

 
(28
)
Total deferred tax liabilities
(8,540
)
 
(11,578
)
Total net deferred tax assets
$
41,476

 
$
35,190

A reconciliation of the income tax expense computed using the U.S. federal statutory tax rate of 35% and the Company's provision for income taxes follows (in thousands):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Computed expected federal tax expense
$
6,018

35.0
 %
 
$
25,041

35.0
 %
 
$
68,305

35.0
 %
State taxes, net of federal benefit
426

2.5

 
1,466

2.0

 
4,042

2.2

Permanent differences
1,125

6.5

 
1,295

1.8

 
1,314

0.6

Uncertain tax positions
424

2.5

 
(1,762
)
(2.5
)
 
575

0.2

Credits
(470
)
(2.7
)
 
(378
)
(0.4
)
 
(240
)
(0.1
)
Other
4


 


 
16


Income tax expense
$
7,527

43.8
 %
 
$
25,662

35.9
 %
 
$
74,012

37.9
 %
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Unrecognized tax benefits at December 31, 2012
$
9,266

Gross increases-tax positions in prior period

Gross decreases-tax positions in prior period
(5
)
Gross increases-current period tax positions
100

Settlements

Lapse of statute of limitations
(1,974
)
Unrecognized tax benefits at December 31, 2013
7,387

Gross increases-tax positions in prior period
13,869

Gross decreases-tax positions in prior period
(23
)
Gross increases-current period tax positions
53

Settlements
(409
)
Lapse of statute of limitations

Unrecognized tax benefits at December 31, 2014
$
20,877

Quarterly Results of Operations (Unaudited) (Tables)
Schedule of Quarterly Financial Information
The following tables set forth unaudited results of operations and certain operating results for each quarter during 2014 and 2013. The Company believes that the information reflects all adjustments necessary to present fairly the information below. Basic and diluted earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per common share information may not equal annual basic and diluted earnings per common share.
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
(In thousands, except per share data)
2014
 
 
 
 
 
 
 
Revenue
$
157,270

 
$
171,522

 
$
162,654

 
$
147,259

Operating income (loss)
(7,858
)
 
22,414

 
10,581

 
(10,826
)
Net income (loss)
(4,330
)
 
12,955

 
6,291

 
(5,248
)
Earnings (loss) per common share:
 
 
 
 
 
 
 
Basic
$
(0.10
)
 
$
0.29

 
$
0.14

 
$
(0.12
)
Diluted
(0.10
)
 
0.28

 
0.14

 
(0.12
)
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
 
(In thousands, except per share data)
2013
 
 
 
 
 
 
 
Revenue
$
212,986

 
$
193,470

 
$
182,768

 
$
162,225

Operating income
39,676

 
19,133

 
19,524

 
(9,870
)
Net income
24,667

 
12,114

 
14,211

 
(5,109
)
Earnings per common share:
 
 
 
 
 
 
 
Basic
$
0.46

 
$
0.22

 
$
0.26

 
$
(0.10
)
Diluted
0.45

 
0.22

 
0.25

 
(0.10
)
Summary of Significant Accounting Policies (Narrative) (Details) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
segment
Dec. 31, 2013
Dec. 31, 2012
Quantifying Misstatement in Current Year Financial Statements [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 147,259,000 
$ 162,654,000 
$ 171,522,000 
$ 157,270,000 
$ 162,225,000 
$ 182,768,000 
$ 193,470,000 
$ 212,986,000 
$ 638,705,000 
$ 751,449,000 
$ 943,405,000 
Operating income (loss)
(10,826,000)
10,581,000 
22,414,000 
(7,858,000)
(9,870,000)
19,524,000 
19,133,000 
39,676,000 
14,311,000 
68,463,000 
191,627,000 
Net income
(5,248,000)
6,291,000 
12,955,000 
(4,330,000)
(5,109,000)
14,211,000 
12,114,000 
24,667,000 
9,668,000 
45,883,000 
121,146,000 
Deferred compensation, maximum employee contribution, percentage of regular compensation
 
 
 
 
 
 
 
 
80.00% 
 
 
Deferred compensation, maximum employee contribution, percentage of incentive compensation
 
 
 
 
 
 
 
 
100.00% 
 
 
Deferred compensation, requisite service period
 
 
 
 
 
 
 
 
4 years 
 
 
Company obligations under deferred compensation plan
1,000,000 
 
 
 
 
 
 
 
1,000,000 
 
 
Advertising costs
 
 
 
 
 
 
 
 
89,000,000 
76,500,000 
103,700,000 
Number of reportable segments
 
 
 
 
 
 
 
 
 
 
Year-End Adjustment [Member]
 
 
 
 
 
 
 
 
 
 
 
Quantifying Misstatement in Current Year Financial Statements [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
(1,700,000)
 
 
 
 
 
 
 
(1,000,000)
 
 
Operating income (loss)
(1,700,000)
 
 
 
 
 
 
 
(700,000)
 
 
Net income
$ (1,000,000)
$ 200,000 
 
 
 
 
 
 
$ (200,000)
 
 
Summary of Significant Accounting Policies (Receivables) (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Student loans receivable, repayment term following graduation or withdrawal
10 years 
 
 
Student loans receivable, grace period following graduation or withdrawal
6 months 
 
 
Loss on impairment of student loans receivable
$ 2,435,000 
$ 1,998,000 
$ 0 
Repayment Plan One
 
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Student loans receivable, interest rate
4.50% 
 
 
Repayment Plan Two
 
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Student loans receivable, interest rate
0.00% 
 
 
Student loans receivable, monthly payment during school and grace period
$ 50 
 
 
Summary of Significant Accounting Policies (Property and Equipment) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2014
Buildings
Dec. 31, 2014
Furniture and Office Equipment
Minimum
Dec. 31, 2014
Furniture and Office Equipment
Maximum
Dec. 31, 2014
Software
Dec. 31, 2014
Vehicles
Property, Plant and Equipment [Line Items]
 
 
 
 
 
 
Property and equipment, estimated useful lives
 
39 years 
3 years 
7 years 
3 years 
5 years 
Impairment for previously capitalize software costs
$ 2.2 
 
 
 
 
 
Summary of Significant Accounting Policies (Leases) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Restructuring Cost and Reserve [Line Items]
 
Lease exit costs
$ 6.5 
Cost of Sales [Member]
 
Restructuring Cost and Reserve [Line Items]
 
Lease exit costs
2.9 
Selling and Marketing Expense [Member]
 
Restructuring Cost and Reserve [Line Items]
 
Lease exit costs
2.8 
General and Administrative
 
Restructuring Cost and Reserve [Line Items]
 
Lease exit costs
$ 0.8 
Summary of Significant Accounting Policies (Impairment) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Impaired Long-Lived Assets Held and Used [Line Items]
 
Impairment charge to write off certain fixed assets as part of lease exit costs
$ 4.6 
Cost of Sales [Member]
 
Impaired Long-Lived Assets Held and Used [Line Items]
 
Impairment charge to write off certain fixed assets as part of lease exit costs
2.1 
Selling and Marketing Expense [Member]
 
Impaired Long-Lived Assets Held and Used [Line Items]
 
Impairment charge to write off certain fixed assets as part of lease exit costs
2.0 
General and Administrative
 
Impaired Long-Lived Assets Held and Used [Line Items]
 
Impairment charge to write off certain fixed assets as part of lease exit costs
$ 0.5 
Summary of Significant Accounting Policies (Revenue and Deferred Revenue) (Details)
12 Months Ended
Dec. 31, 2014
disbursement
Deferred Revenue Arrangement [Line Items]
 
Conditional admission period
21 days 
Number of disbursement periods for financial aid
Online
 
Deferred Revenue Arrangement [Line Items]
 
Length of educational course, short
35 days 
Length of educational course, long
42 days 
Campus-based
 
Deferred Revenue Arrangement [Line Items]
 
Length of educational course, short
63 days 
Length of educational course, long
112 days 
Maximum
 
Deferred Revenue Arrangement [Line Items]
 
Number of courses covered by each disbursement
Summary of Significant Accounting Policies (Comprehensive Income) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounting Policies [Abstract]
 
 
 
Unrealized losses on investments, before-tax amount
$ (359)
$ (280)
$ 1,300 
Unrealized losses on investments, tax benefit
136 
106 
(483)
Unrealized losses on investments, net-of-tax amount
$ (223)
$ (174)
$ 817 
Investments (Fair Value Information) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
$ 122,537 
$ 106,963 
Investments
123,608 
106,963 
Level 1
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Investments
1,071 
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Investments
122,537 
106,963 
Level 3
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Investments
Mutual funds/Demand notes
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading Securities
1,071 
 
Available-for-sale securities
 
719 
Mutual funds/Demand notes |
Level 1
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading Securities
1,071 
Mutual funds/Demand notes |
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading Securities
 
Available-for-sale securities
 
719 
Mutual funds/Demand notes |
Level 3
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Trading Securities
 
Available-for-sale securities
 
Corporate Notes and Bonds
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
62,550 
16,244 
Corporate Notes and Bonds |
Level 1
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
Corporate Notes and Bonds |
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
62,550 
16,244 
Corporate Notes and Bonds |
Level 3
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
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
 
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
 
Certificates of Deposit
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
25,000 
90,000 
Certificates of Deposit |
Level 1
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
Certificates of Deposit |
Level 2
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
25,000 
90,000 
Certificates of Deposit |
Level 3
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Available-for-sale securities
$ 0 
$ 0 
Investments (Differences Between Amortized Cost and Fair Value of Investments) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
$ 122,821 
$ 106,888 
Gross unrealized gain
33 
75 
Gross unrealized loss
(317)
Available-for-sale securities
122,537 
106,963 
Number of investments in an unrealized loss position for less than 12 months
12 
Number of investments in an unrealized loss position for greater than 12 months
Number of investments in an unrealized loss position
 
Mutual funds/Demand notes
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Trading Securities
1,071 
 
Amortized cost
 
719 
Gross unrealized gain
 
Gross unrealized loss
 
Available-for-sale securities
 
719 
Corporate Notes and Bonds, Short-term
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
10,947 
5,132 
Gross unrealized gain
33 
50 
Gross unrealized loss
Available-for-sale securities
10,980 
5,182 
Certificates of Deposit, Short-term
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
 
60,000 
Gross unrealized gain
 
Gross unrealized loss
 
Available-for-sale securities
 
60,000 
Corporate Notes and Bonds, Long-term
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
51,874 
11,037 
Gross unrealized gain
25 
Gross unrealized loss
(304)
Available-for-sale securities
51,570 
11,062 
U.S. government and agency securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
35,000 
 
Gross unrealized gain
 
Gross unrealized loss
(13)
 
Available-for-sale securities
34,987 
 
Certificates of Deposit, Long-term
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Amortized cost
25,000 
30,000 
Gross unrealized gain
Gross unrealized loss
Available-for-sale securities
25,000 
30,000 
Certificates of Deposit, Long-term |
Maximum
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Maturities in years
3 years 
3 years 
Level 1 |
Mutual funds/Demand notes
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Trading Securities
1,071 
Level 1 |
U.S. government and agency securities
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
Available-for-sale securities
$ 0 
 
Accounts Receivable (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Receivables [Abstract]
 
 
Accounts receivable
$ 48,841 
$ 49,854 
Less allowance for doubtful accounts
27,567 
26,901 
Accounts receivable
$ 21,274 
$ 22,953 
Accounts Receivable (Valuation Accounts) (Details) (Allowance for Doubtful Accounts Receivable, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Allowance for Doubtful Accounts Receivable
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Beginning Balance
$ 26,901 
$ 31,466 
$ 24,688 
Charged to Expense
27,853 
46,851 
52,794 
Deductions(1)
(27,187)1
(51,416)1
(46,016)1
Ending Balance
$ 27,567 
$ 26,901 
$ 31,466 
Student Loans Receivable (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Non-tuition Related
Dec. 31, 2013
Non-tuition Related
Dec. 31, 2014
Tuition Related
Dec. 31, 2013
Tuition Related
Dec. 31, 2014
Repayment Plan One
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
 
 
 
 
Student loans receivable, interest rate
 
 
 
 
 
 
4.50% 
Current student loans receivable
$ 1,135 
$ 1,208 
$ 509 
$ 587 
$ 626 
$ 621 
 
Less allowance for doubtful accounts
132 
165 
 
 
 
 
 
Student loans receivable, net
1,003 
1,043 
 
 
 
 
 
Noncurrent student loans receivable
10,873 
13,764 
4,805 
7,347 
6,068 
6,417 
 
Less allowance for doubtful accounts
1,363 
1,979 
 
 
 
 
 
Student loans receivable, net
$ 9,510 
$ 11,785 
 
 
 
 
 
Student Loans Receivable (Allowance for Doubtful Accounts) (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Impaired student loans
$ 2,435,000 
$ 1,998,000 
$ 0 
Loans placed on non-accrual status
4,400,000 
 
 
Allowance for Doubtful Student Loans Receivable
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Beginning Balance
2,144,000 
1,895,000 
2,070,000 
Charged to Expense
331,000 
268,000 
(27,000)
Deductions(1)
(980,000)1
(19,000)1
(148,000)1
Ending Balance
$ 1,495,000 
$ 2,144,000 
$ 1,895,000 
Student Loans Receivable (Delinquency Status) (Details) (Allowance for Doubtful Student Loans Receivable, USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Allowance for Doubtful Student Loans Receivable
 
Financing Receivable, Recorded Investment, Past Due [Line Items]
 
Less than 120 days
$ 16,138 
From 120 - 269 days
1,159 
Greater than 270 days
2,099 
Total gross student loans receivable
19,396 
Less: Amounts reserved or impaired
(5,927)
Less: Discount on student loans receivable
(2,956)
Total student loans receivable, net
$ 10,513 
Prepaid Expense and Other Current Assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
 
 
Prepaid expenses
$ 8,500 
$ 10,814 
Prepaid licenses
5,598 
5,833 
Prepaid income taxes
2,945 
195 
Prepaid insurance
1,508 
1,131 
Workers compensation
1,440 
2,814 
Interest receivable
424 
86 
Other current assets
2,403 
690 
Total prepaid expenses and other current assets
$ 22,818 
$ 21,563 
Property and Equipment, Net (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
$ 151,358,000 
$ 155,441,000 
 
Less accumulated depreciation and amortization
(73,139,000)
(64,016,000)
 
Total property and equipment, net
78,219,000 
91,425,000 
 
Depreciation and amortization associated with property and equipment, including assets under capital lease
17,600,000 
18,200,000 
15,900,000 
Land
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
7,091,000 
7,091,000 
 
Buildings
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
29,540,000 
28,916,000 
 
Furniture and Office Equipment
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
81,030,000 
84,852,000 
 
Software
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
12,454,000 
10,075,000 
 
Leasehold Improvements
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
21,096,000 
24,360,000 
 
Vehicles
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
$ 147,000 
$ 147,000 
 
Goodwill and Intangibles, Net (Details) (USD $)
12 Months Ended 0 Months Ended 3 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
Capitalized curriculum costs
Dec. 31, 2013
Capitalized curriculum costs
Oct. 31, 2013
Purchased intangible assets
Dec. 31, 2014
Purchased intangible assets
Dec. 31, 2013
Purchased intangible assets
Goodwill and Intangibles, Net:
 
 
 
 
 
 
 
 
Gross carrying amount
$ 34,024,000 
$ 30,397,000 
 
$ 18,174,000 
$ 14,540,000 
 
$ 15,850,000 
$ 15,857,000 
Accumulated amortization
(11,816,000)
(6,086,000)
 
(9,526,000)
(5,035,000)
 
(2,290,000)
(1,051,000)
Net carrying amount
22,208,000 
24,311,000 
 
8,648,000 
9,505,000 
 
13,560,000 
14,806,000 
Goodwill and indefinite-lived intangibles
2,567,000 
2,567,000 
 
 
 
 
 
 
Total goodwill and intangibles, net
24,775,000 
26,878,000 
 
 
 
 
 
 
Amortization expense
5,700,000 
3,400,000 
1,600,000 
 
 
 
 
 
Licensing Agreement:
 
 
 
 
 
 
 
 
Initial term of Forbes Agreement
 
 
 
 
 
12 years 
 
 
Upfront payment for Forbes Agreement
 
 
 
 
 
 
15,000,000 
 
Future minimum annual royalty payments due
 
 
 
 
 
 
2,500,000.0 
 
Estimated Remaining Amortization Expense as of Each Fiscal Year:
 
 
 
 
 
 
 
 
2015
5,575,000 
 
 
 
 
 
 
 
2016
4,063,000 
 
 
 
 
 
 
 
2017
2,466,000 
 
 
 
 
 
 
 
2018
1,471,000 
 
 
 
 
 
 
 
2019
1,233,000 
 
 
 
 
 
 
 
Thereafter
7,400,000 
 
 
 
 
 
 
 
Total future amortization expense
$ 22,208,000 
 
 
 
 
 
 
 
Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Accrued Liabilities [Abstract]
 
 
Accrued salaries and wages
$ 8,250 
$ 12,790 
Accrued bonus
2,720 
2,277 
Accrued vacation
9,771 
9,696 
Accrued litigation and fees
542 
8,000 
Accrued expenses
18,223 
15,079 
Rent liability
8,528 
2,446 
Accrued workers compensation
2,920 
4,002 
Accrued income taxes payable
449 
Accrued liabilities
$ 51,403 
$ 54,290 
Accrued Liabilities (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Dec. 31, 2014
Restructuring Cost and Reserve [Line Items]
 
Severance costs
$ 3.6 
Supplemental Unemployment Benefits, Severance Benefits
0.8 
Instructional Costs and Services
 
Restructuring Cost and Reserve [Line Items]
 
Severance costs
1.2 
Admissions Advisory and Marketing
 
Restructuring Cost and Reserve [Line Items]
 
Severance costs
0.8 
General and Administrative
 
Restructuring Cost and Reserve [Line Items]
 
Severance costs
$ 1.6 
Deferred Revenue and Student Deposits (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred Revenue Disclosure [Abstract]
 
 
Deferred revenue
$ 26,445 
$ 29,279 
Student deposits
81,603 
103,512 
Total deferred revenue and student deposits
$ 108,048 
$ 132,791 
Other Long-Term Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Other Liabilities, Noncurrent [Abstract]
 
 
Uncertain tax positions
$ 7,586 
$ 7,466 
Legal settlements
1,000 
1,000 
Other long-term liabilities
1,066 
805 
Total other long term liabilities
$ 9,652 
$ 9,271 
Credit Facilities (Details) (USD $)
0 Months Ended 12 Months Ended
Apr. 13, 2012
Dec. 31, 2014
Line of Credit Facility [Line Items]
 
 
Pledged Assets Separately Reported, Real Estate Pledged as Collateral, at Fair Value
 
$ 7,100,000 
Revolving line of credit, amount outstanding
 
Surety Bond Facility [Abstract]
 
 
Surety bond facility, available amount
 
12,000,000 
Surety bond facility, issued amount
 
5,500,000 
January 2010 Credit Facility
 
 
Line of Credit Facility [Line Items]
 
 
Revolving line of credit, amount outstanding
 
5,800,000 
April 2012 Credit Facility
 
 
Line of Credit Facility [Line Items]
 
 
Revolving line of credit, current borrowing capacity
50,000,000 
 
Revolving line of credit, maximum borrowing capacity
100,000,000 
 
Revolving line of credit, maximum swing-line advances
$ 3,000,000 
 
Revolving line of credit, term
3 years 
 
Revolving line of credit, notice required for termination
 
5 days 
Commitment fee, percentage on undrawn amount of letter of credit
1.50% 
 
Revolving line of credit, facility fee, percentage
0.25% 
 
Eurodollar |
April 2012 Credit Facility
 
 
Line of Credit Facility [Line Items]
 
 
Revolving line of credit, fixed portion of interest rate
1.50% 
 
Base Rate |
April 2012 Credit Facility
 
 
Line of Credit Facility [Line Items]
 
 
Revolving line of credit, fixed portion of interest rate
0.50% 
 
Base Rate |
Federal Funds Rate |
April 2012 Credit Facility
 
 
Line of Credit Facility [Line Items]
 
 
Revolving line of credit, variable portion of interest rate, addition to reference rate
1.00% 
 
Base Rate |
London Interbank Offered Rate (LIBOR) |
April 2012 Credit Facility
 
 
Line of Credit Facility [Line Items]
 
 
Revolving line of credit, variable portion of interest rate, addition to reference rate
1.00% 
 
Lease Obligations (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Leases [Abstract]
 
 
 
Rent expense under non-cancelable operating lease arrangements
$ 42,200,000 
$ 37,100,000 
$ 36,800,000 
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
 
 
2015
37,511,000 
 
 
2016
37,449,000 
 
 
2017
37,363,000 
 
 
2018
32,698,000 
 
 
2019
22,148,000 
 
 
Thereafter
20,948,000 
 
 
Total minimum payments
$ 188,117,000 
 
 
Earnings Per Share (Basic and Diluted) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Net income
$ (5,248)
$ 6,291 
$ 12,955 
$ (4,330)
$ (5,109)
$ 14,211 
$ 12,114 
$ 24,667 
$ 9,668 
$ 45,883 
$ 121,146 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding (in shares)
 
 
 
 
 
 
 
 
45,204 
53,923 
52,947 
Effect of dilutive options and restricted stock units (in shares)
 
 
 
 
 
 
 
 
1,308 
1,482 
2,762 
Effect of dilutive warrants (in shares)
 
 
 
 
 
 
 
 
82 
237 
Diluted weighted average number of common shares outstanding (in shares)
 
 
 
 
 
 
 
 
46,512 
55,487 
55,946 
Earnings per share:
 
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share (in USD per share)
$ (0.12)
$ 0.14 
$ 0.29 
$ (0.10)
$ (0.10)
$ 0.26 
$ 0.22 
$ 0.46 
$ 0.21 
$ 0.85 
$ 2.29 
Diluted earnings (loss) per share (in USD per share)
$ (0.12)
$ 0.14 
$ 0.28 
$ (0.10)
$ (0.10)
$ 0.25 
$ 0.22 
$ 0.45 
$ 0.21 
$ 0.83 
$ 2.17 
Earnings Per Share (Anti-Dilutive Securities) (Details)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Stock Options
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Anti-dilutive securities
2,660 
3,004 
2,524 
Restricted Stock Units (RSUs)
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Anti-dilutive securities
Stock-Based Compensation (Narrative) (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 18, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock-based compensation expense
$ 10,600,000 
$ 13,900,000 
$ 13,700,000 
 
Income tax benefit of stock-based compensation expense
4,000,000 
5,200,000 
5,100,000 
 
Number of common shares reserved for issuance upon exercise of stock options and settlement of RSUs
10,500,000 
 
 
 
Exercise of stock options, shares
388,000 
1,060,000 
3,128,000 
 
Intrinsic value of exercised options
3,300,000 
9,400,000 
45,200,000 
 
Excess tax benefit of option exercises
1,271,000 
2,590,000 
10,058,000 
 
Tax benefit realized from exercise of stock options
700,000 
2,100,000 
10,100,000 
 
Tax benefit shortfall related to share-based compensation activity
100,000 
600,000 
1,500,000 
 
Employee Service Share-based Compensation, Tax Benefit Realized from Exercise of Stock Options
800,000 
500,000 
200,000 
 
Option expirations in period
203,000 
137,000 
 
 
Shares of common stock represented by each RSU
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding
 
 
 
5,300,000 
Employee Service Share-based Compensation, Tax benefit (Shortfall) Realized from Exercise of Restricted Stock Units
500,000 
500,000 
200,000 
 
Number of common stock shares represented by each warrant
 
 
 
Warrants exercised
 
104,000 
174,000 
 
Stock Options
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Award expiration period
10 years 
 
 
 
Award vesting period
4 years 
 
 
 
Unrecognized compensation cost
3,200,000 
5,600,000 
12,900,000 
 
Unrecognized compensation cost, period for recognition
1 year 14 days 
 
 
 
Restricted Stock Units (RSUs)
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Unrecognized compensation cost
8,500,000 
6,500,000 
 
 
Unrecognized compensation cost, period for recognition
1 year 6 months 
 
 
 
Number vested and released in period
393,106 
181,104 
56,855 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value
5,300,000 
3,000,000 
800,000 
 
Performance Shares [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Number of common shares reserved for issuance upon exercise of stock options and settlement of RSUs
 
 
 
1,400,000 
Unrecognized compensation cost
$ 5,200,000 
 
 
 
Unrecognized compensation cost, period for recognition
2 years 8 months 
 
 
 
Stock-Based Compensation (Stock Option Activity) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
 
 
 
Balance, beginning of period
5,490 
6,412 
8,280 
 
Granted
403 
483 
1,595 
 
Exercised
(388)
(1,060)
(3,128)
 
Forfeitures and expired
(337)
(345)
(335)
 
Balance, end of period
5,168 
5,490 
6,412 
8,280 
Vested and expected to vest
5,134 
 
 
 
Exercisable
4,070 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
 
 
 
 
Balance, beginning of period, weighted-average exercise price (in USD per share)
$ 14.25 
$ 14.17 
$ 7.70 
 
Granted, weighted-average exercise price (in USD per share)
$ 14.35 
$ 10.23 
$ 22.59 
 
Exercised, weighted-average exercise price (in USD per share)
$ 8.01 
$ 9.87 
$ 0.72 
 
Forfeitures, weighted-average exercise price (in USD per share)
$ 21.43 
$ 20.65 
$ 19.79 
 
Balance, end of period, weighted-average exercise price (in USD per share)
$ 14.26 
$ 14.25 
$ 14.17 
$ 7.70 
Vested and expected to vest
$ 14.25 
 
 
 
Exercisable
$ 13.72 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
 
 
 
 
Balance, weighted-average remaining contractual term
5 years 8 months 22 days 
6 years 6 months 7 days 
7 years 2 months 14 days 
5 years 10 months 24 days 
Vested and expected to vest, weighted-average remaining contractual term
5 years 8 months 14 days 
 
 
 
Exercisable, weighted-average remaining contractual term
5 years 1 month 10 days 
 
 
 
Balance, aggregate intrinsic value
$ 7,732 
$ 28,769 
$ 9,010 
$ 127,308 
Vested and expected to vest, aggregate intrinsic value
7,720 
 
 
 
Exercisable, aggregate intrinsic value
$ 7,367 
 
 
 
Stock-Based Compensation (Option Valuation Assumptions) (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Weighted average exercise price per share (in USD per share)
$ 14.35 
$ 10.23 
$ 22.59 
Weighted average grant date fair value per share (in USD per share)
$ 7.43 
$ 5.48 
$ 11.26 
Stock Options
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Risk-free interest rate
2.00% 
1.00% 
1.20% 
Expected dividend yield
0.00% 
0.00% 
0.00% 
Expected volatility
55.10% 
58.90% 
54.60% 
Expected life (in years)
5 years 9 months 
5 years 10 months 6 days 
5 years 8 months 1 day 
Forfeiture rate
6.00% 
5.00% 
4.00% 
Stock-Based Compensation (Restricted Stock Unit Activity) (Details) (USD $)
12 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
Performance Shares [Member]
Dec. 18, 2014
Performance Shares [Member]
Dec. 31, 2014
Restricted Stock Units (RSUs)
Dec. 31, 2013
Restricted Stock Units (RSUs)
Dec. 31, 2012
Restricted Stock Units (RSUs)
Dec. 18, 2014
Market-based measure [Member]
Performance Shares [Member]
Dec. 18, 2014
Performance-based measure [Member]
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
Number of common shares reserved for issuance upon exercise of stock options and settlement of RSUs
10,500,000 
 
 
 
1,400,000 
 
 
 
1,000,000 
400,000 
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
 
 
 
 
 
 
 
 
 
 
Weighted average exercise price per share (in USD per share)
$ 14.35 
$ 10.23 
$ 22.59 
$ 11.54 
 
 
 
 
 
 
Risk-free interest rate
 
 
 
1.40% 
 
 
 
 
 
 
Expected dividend yield
 
 
 
0.00% 
 
 
 
 
 
 
Expected volatility
 
 
 
50.00% 
 
 
 
 
 
 
Expected life (in years)
 
 
 
4 years 
 
 
 
 
 
 
Forfeiture rate
 
 
 
6.00% 
 
 
 
 
 
 
Weighted average grant date fair value per share (in USD per share)
$ 7.43 
$ 5.48 
$ 11.26 
$ 5.39 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
 
 
 
 
 
1,098,517 
362,199 
56,855 
 
 
Awarded
 
 
 
975,295 
 
786,250 
1,016,035 
362,199 
 
 
Vested and released
 
 
 
 
 
(393,106)
(181,104)
(56,855)
 
 
Canceled
 
 
 
 
 
(212,572)
(98,613)
 
 
Balance, end of period
 
 
 
975,295 
 
1,279,089 
1,098,517 
362,199 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period, weighted average grant date fair value (in USD per share)
 
 
 
 
 
$ 10.38 
$ 9.72 
$ 23.97 
 
 
Awarded, weighted average grant date fair value (in USD per share)
 
 
 
 
 
$ 14.33 
$ 10.50 
$ 9.72 
 
 
Vested and released, weighted average grant date fair value (in USD per share)
 
 
 
 
 
$ 10.15 
$ 9.72 
$ 23.97 
 
 
Canceled, weighted average grant date fair value (in USD per share)
 
 
 
 
 
$ 11.89 
$ 10.39 
$ 0.00 
 
 
Balance, end of period, weighted average grant date fair value (in USD per share)
 
 
 
$ 5.39 
 
$ 12.63 
$ 10.38 
$ 9.72 
 
 
Stock Repurchase Programs (Details) (USD $)
1 Months Ended 3 Months Ended 12 Months Ended 0 Months Ended 3 Months Ended
Dec. 31, 2012
Dec. 31, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 18, 2013
Apr. 30, 2012
2012 Repurchase Program
Nov. 10, 2013
Tender Offer Repurchase Program 2013 [Member] [Domain]
Dec. 31, 2014
Stock Options
Equity, Class of Treasury Stock [Line Items]
 
 
 
 
 
 
 
 
 
Stock repurchase program, authorized amount
 
 
 
 
 
 
$ 75,000,000 
 
 
Stock repurchase program, period in force
 
 
 
 
 
 
12 months 
 
 
Shares repurchased
100,000 
10,200,000 
 
 
 
 
 
 
200,000 
Repurchase of common stock
$ 600,000 
$ 199,900,000 
$ 0 
$ 201,496,000 
$ 602,000 
 
 
 
 
Stock Repurchase Program, Number of Shares Authorized to be Repurchased
 
 
 
 
 
 
 
10,250,000 
 
Share Price
 
 
 
 
 
$ 19.50 
 
 
 
Income Taxes (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]
 
 
Change in net deferred tax assets
$ 6.3 
 
Change in net deferred tax expense
7.1 
 
Tax benefit shortfall recorded to additional paid in capital
0.9 
 
Tax effect of unrealized gain on investments
0.1 
 
Gross unrecognized tax benefits that would impact effective tax rate if recognized
5.4 
4.8 
Unrecognized tax benefits that would result in adjustments to other tax accounts
2.9 
2.6 
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued
1.9 
1.7 
Income Tax Examination, Liability (Refund) Adjustment from Settlement with Taxing Authority
$ 12.6 
 
Income Taxes (Components of Income Tax Expense) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current:
 
 
 
Federal
$ 12,686 
$ 29,456 
$ 77,720 
State
1,937 
3,168 
7,665 
Current income tax expense (benefit)
14,623 
32,624 
85,385 
Deferred:
 
 
 
Federal
(6,216)
(5,952)
(10,470)
State
(880)
(1,010)
(903)
Deferred income tax expense (benefit)
(7,096)
(6,962)
(11,373)
Total
$ 7,527 
$ 25,662 
$ 74,012 
Income Taxes (Deferred Tax Assets and Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets:
 
 
Net operating loss
$ 211 
$ 235 
Fixed assets
194 
214 
Bad debt
2,338 
463 
Vacation accrual
2,956 
2,762 
Stock-based compensation
16,291 
15,341 
Deferred rent
11,580 
9,944 
State tax
2,257 
2,310 
Bonus accrual
1,023 
849 
Unearned interest
1,118 
1,281 
Accrued expenses
2,121 
4,377 
Revenue reserves
9,820 
8,992 
Other
107 
Total deferred tax assets
50,016 
46,768 
Valuation allowance
Net deferred tax assets
50,016 
46,768 
Deferred tax liabilities:
 
 
Fixed assets and intangibles
(8,540)
(11,550)
Unrealized gain on investments
(28)
Total deferred tax liabilities
(8,540)
(11,578)
Total net deferred tax assets
$ 41,476 
$ 35,190 
Income Taxes (Balance Sheet Location of Deferred Tax Assets and Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]
 
 
Current deferred tax assets
$ 21,301 
$ 16,683 
Current deferred tax liabilities
Noncurrent deferred tax assets
20,175 
18,507 
Noncurrent deferred tax liabilities
Total net deferred tax assets
$ 41,476 
$ 35,190 
Income Taxes (Operating Loss Carryforwards) (Details) (Internal Revenue Service (IRS) [Member], USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Internal Revenue Service (IRS) [Member]
 
Operating Loss Carryforwards [Line Items]
 
Net operating loss carryforwards
$ 0.6 
Income Taxes (Income Tax Reconciliation) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Reconciliation, Amount:
 
 
 
Computed expected federal tax expense
$ 6,018 
$ 25,041 
$ 68,305 
State taxes, net of federal benefit
426 
1,466 
4,042 
Permanent differences
1,125 
1,295 
1,314 
Uncertain tax positions
424 
(1,762)
575 
Credits
(470)
(378)
(240)
Other
16 
Total
$ 7,527 
$ 25,662 
$ 74,012 
Income Tax Reconciliation, Percent:
 
 
 
Computed expected federal tax expense
35.00% 
35.00% 
35.00% 
State taxes, net of federal benefit
2.50% 
2.00% 
2.20% 
Permanent differences
6.50% 
1.80% 
0.60% 
Uncertain tax positions
2.50% 
(2.50%)
0.20% 
Credits
(2.70%)
(0.40%)
(0.10%)
Other
0.00% 
0.00% 
0.00% 
Income tax expense
43.80% 
35.90% 
37.90% 
Income Taxes (Unrecognized Tax Benefits) (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
Unrecognized tax benefits, beginning of period
$ 7,387 
$ 9,266 
Gross increases-tax positions in prior period
13,869 
Gross decreases-tax positions in prior period
(23)
(5)
Gross increases-current period tax positions
53 
100 
Settlements
 
Settlements
(409)
 
Lapse of statute of limitations
(1,974)
Unrecognized tax benefits, end of period
$ 20,877 
$ 7,387 
Regulatory (Details)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Ashford University
Dec. 31, 2013
Ashford University
Dec. 31, 2012
Ashford University
Dec. 31, 2014
University of the Rockies
Dec. 31, 2013
University of the Rockies
Dec. 31, 2012
University of the Rockies
Sep. 30, 2011
Three-year cohort default rate [Member]
Ashford University
Sep. 30, 2010
Three-year cohort default rate [Member]
Ashford University
Sep. 30, 2009
Three-year cohort default rate [Member]
Ashford University
Sep. 30, 2011
Three-year cohort default rate [Member]
University of the Rockies
Sep. 30, 2010
Three-year cohort default rate [Member]
University of the Rockies
Sep. 30, 2009
Three-year cohort default rate [Member]
University of the Rockies
Dec. 31, 2014
Minimum
The 90-10 Rule:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Title IV eligibility, maximum allowable percentage of revenue from Title IV programs over two consecutive years
90.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Title IV eligibility, minimum term of ineligibility once noncompliant
2 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Title IV eligibility, maximum allowable percentage of revenue from Title IV programs in any single year
90.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Actual percentage of revenue from Title IV programs
 
 
83.40% 
85.60% 
86.40% 
88.30% 
87.60% 
87.30% 
 
 
 
 
 
 
 
Accreditation, Regulatory Compliance, Cohort Default Term
3 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accreditation, Regulatory Terms, Maximum Cohort Default Rate over Prior Three Years
30.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accreditation, Regulatory Compliance, Cohort Default Rate
 
 
 
 
 
 
 
 
15.30% 
16.30% 
19.80% 
6.60% 
8.00% 
3.30% 
 
Return of Title IV Funds:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deadline for return of unearned funds after student withdrawal
45 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unearned Title IV funds, trigger for letter of credit requirement, noncompliance of return of funds, maximum allowable percentage in either of last two annual audits
5.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unearned Title IV funds, noncompliance of return of funds, required letter of credit as percentage of required returns
25.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unearned Title IV funds, actual percentage of noncompliance with return of funds requirement (less than 5%)
5.00% 
5.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composite score
 
3.0 
 
 
 
 
 
 
 
 
 
 
 
 
1.5 
Estimated composite score
2.7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement Plans (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Compensation and Retirement Disclosure [Abstract]
 
 
 
Expense related to 401(k) plan
$ 3.7 
$ 3.3 
$ 3.3 
Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Payment for restitution, costs and fees [Member]
Obligation with Joint and Several Liability Arrangement [Line Items]
 
 
 
Payments to Settle Civil Investigation
 
 
$ 7.5 
Estimated Litigation Liability
$ 1.5 
$ 9.0 
 
Concentration of Risk (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Concentration Risk [Line Items]
 
 
 
Cash and cash equivalents, FDIC insurance limit
$ 250,000 
 
 
Ashford University
 
 
 
Concentration Risk [Line Items]
 
 
 
Actual percentage of revenue from Title IV programs
83.40% 
85.60% 
86.40% 
University of the Rockies
 
 
 
Concentration Risk [Line Items]
 
 
 
Actual percentage of revenue from Title IV programs
88.30% 
87.60% 
87.30% 
Quarterly Results of Operations (Unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Effect of Fourth Quarter Events [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 147,259 
$ 162,654 
$ 171,522 
$ 157,270 
$ 162,225 
$ 182,768 
$ 193,470 
$ 212,986 
$ 638,705 
$ 751,449 
$ 943,405 
Operating income (loss)
(10,826)
10,581 
22,414 
(7,858)
(9,870)
19,524 
19,133 
39,676 
14,311 
68,463 
191,627 
Net income (loss)
(5,248)
6,291 
12,955 
(4,330)
(5,109)
14,211 
12,114 
24,667 
9,668 
45,883 
121,146 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
Basic (in USD per share)
$ (0.12)
$ 0.14 
$ 0.29 
$ (0.10)
$ (0.10)
$ 0.26 
$ 0.22 
$ 0.46 
$ 0.21 
$ 0.85 
$ 2.29 
Diluted (in USD per share)
$ (0.12)
$ 0.14 
$ 0.28 
$ (0.10)
$ (0.10)
$ 0.25 
$ 0.22 
$ 0.45 
$ 0.21 
$ 0.83 
$ 2.17 
Year-End Adjustment [Member]
 
 
 
 
 
 
 
 
 
 
 
Effect of Fourth Quarter Events [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
(1,700)
 
 
 
 
 
 
 
(1,000)
 
 
Operating income (loss)
(1,700)
 
 
 
 
 
 
 
(700)
 
 
Net income (loss)
$ (1,000)
$ 200 
 
 
 
 
 
 
$ (200)