RESTRUCTURING CHARGES

12 Months Ended

Dec. 31, 2012

11. RESTRUCTURING CHARGES

During 2012, we made the decision to teach out a number of campuses, meaning gradually close the campuses through an orderly process. Consistent with our commitment to students, we will work with each campus to ensure that existing students are afforded the ability to complete their course of study. We anticipate that a majority of these campus closures will be completed by the second quarter of 2014. See Item 1, “Business,” for a listing of schools that comprise our Transitional Schools segment.

In addition, during the fourth quarter of 2012, we made the decision to carry out a reduction in force as we reorganize our campus and corporate functions to common operating structures across our ground campuses, most notably within our Career Schools, as well as to better align with the current student population.

The following table details the charges incurred during 2012 for these actions by reporting segment:


	Reduction in Force		Campus Closure Actions
	Severance &		Asset		Severance &
	Related Costs		Impairments⁽¹⁾		Related Accrual
	(Dollars in thousands)
CTU	$	151	$	—	$	110
AIU		1,275		140		559

Total University Schools		1,426		140		669

Health Education		1,576		—		—
Culinary Arts		598		—		—
Design & Technology		1,376		—		—

Total Career Schools		3,550		—		—

International		—		—		—
Corporate		1,620		—		—

Subtotal		6,596		140		669

Transitional Schools		1,073		29,322		6,581

Total	$	7,669	$	29,462	$	7,250

(1)	These charges relate to non-cash asset impairments to reduce the carrying value of long-lived assets to their respective fair values.

In addition, as of December 31, 2012, we have accrued approximately $0.3 million related to retention bonuses that have been offered to certain employees. These amounts will be recorded ratably over the period the employees are retained.

In addition to the charges detailed above, a number of these campuses will have remaining lease obligations following the eventual campus closure, with the longest lease term being through 2021. The total gross remaining lease obligations for these campuses once they complete the close process is expected to be approximately $78.0 million, which includes amounts for base rent and estimated expenses for certain occupancy charges such as common area maintenance. At the time each campus completes the close process, a charge will be recorded representing the net present value of the remaining lease obligation reduced by an estimated amount for sublease income. The final amount related to each campus will be finalized at each campus closure date.

The following table details the changes in our accrual for severance and related costs related to these restructuring events during the year ended December 31, 2012:


	(Dollars in thousands)
Balance at January 1, 2012	$	464
Severance & related charges		14,919
Payments ⁽¹⁾		(2,553	)
Non-cash adjustments ⁽²⁾		(2,167	)

Balance at December 31, 2012	$	10,663

(1)	Includes payments related to COBRA and outplacement services which are assumed to be completed by the third month following an employee’s departure.

(2)	Includes cancellations due to employee departures prior to agreed upon end dates, employee transfers to open positions within the organization and subsequent adjustments to severance and related costs.

The current portion of the accrual for severance and related charges was $8.0 million as of December 31, 2012, which is recorded within current accrued expenses – payroll and related benefits; the long-term portion of $2.7 million is recorded within other non-current liabilities on our consolidated balance sheets.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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