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FINANCIAL INSTRUMENTS
 3 Months Ended
Mar. 31, 2013
Fair Value Disclosures [Abstract]  
FINANCIAL INSTRUMENTS

6. FINANCIAL INSTRUMENTS

Cash and Cash Equivalents and Investments

Cash and cash equivalents from our continuing operations consist of the following as of March 31, 2013 and December 31, 2012:

 

     March 31,
2013		      December 31,
2012		  
     (Dollars in thousands)  

Cash

    $ 119,834       $ 136,783   

Money market funds

      103,982         103,776   
  

 

 

     

 

 

  

Cash and cash equivalents, unrestricted

      223,816         240,559   
  

 

 

     

 

 

  

Restricted cash

      11,408         97,878   
  

 

 

     

 

 

  

Total cash and cash equivalents

    $ 235,224       $ 338,437   
  

 

 

     

 

 

  

Included in cash and cash equivalents, unrestricted within our unaudited consolidated balance sheets are amounts related to certain of our European campuses that operate as not-for-profit schools. The cash and cash equivalents related to these schools require that the funds be utilized for these particular not-for-profit schools. The amount of not-for-profit cash and cash equivalents was $79.8 million and $87.2 million at March 31, 2013 and December 31, 2012, respectively.

Restricted cash balances as of March 31, 2013 and December 31, 2012 are comprised of:

 

     March 31,
2013		      December 31,
2012		  
     (Dollars in thousands)  

Cash collateral for amounts under:

      

Credit Agreement

    $ —          $ 88,000   

Letters of credit

      8,906         7,376   

Funds restricted for legal matter

      2,502         2,502   
  

 

 

     

 

 

  

Total restricted cash

    $ 11,408       $ 97,878   
  

 

 

     

 

 

  

Investments from our continuing operations consist of the following as of March 31, 2013 and December 31, 2012:

 

      March 31, 2013  
            (Dollars in thousands)
Gross Unrealized		        
      Cost          Gain              (Loss)         Fair Value  

Short-term investments (available for sale):

           

U.S. Treasury Bills

    $ 63,952         4         (5 )    $ 63,951   

Long-term investments (available for sale):

           

Municipal bond

      7,850         —           (468 )    $ 7,382   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total investments (available for sale)

    $ 71,802       $ 4 $         (473 )    $ 71,333   
  

 

 

     

 

 

     

 

 

    

 

 

  

 

      December 31, 2012  
            (Dollars in thousands)
Gross Unrealized		        
      Cost          Gain              (Loss)         Fair Value  

Short-term investments (available for sale):

           

U.S. Treasury Bills

    $ 63,879         4         (7 )    $ 63,876   

Long-term investments (available for sale):

           

Municipal bond

      7,850         —           (468 )      7,382   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total investments (available for sale)

    $ 71,729       $ 4 $         (475 )    $ 71,258   
  

 

 

     

 

 

     

 

 

    

 

 

  

In the table above, unrealized holding losses as of March 31, 2013 relate to short-term investments that have been in a continuous unrealized loss position for less than one year. The table also includes an unrealized holding loss, greater than one year, that relates to our long-term investment in a municipal bond, which is an auction rate security (“ARS”). When evaluating our investment for possible impairment, we review factors such as the length of time and extent to which fair value has been less than the cost basis, the financial condition of the investee, and our ability and intent to hold the investment for a period of time that may be sufficient for anticipated recovery in fair value. The unrealized loss attributable to our municipal bond at March 31, 2013 is attributable to the continued lack of activity in the ARS market, exposing this investment to liquidity risk.

Our municipal bond is comprised of debt obligations issued by states, cities, counties, and other governmental entities, which earn federally tax-exempt interest. Our investment in ARS has a stated term to maturity of greater than one year, and as such, we classify our investment in ARS as non-current on our unaudited consolidated balance sheets within other assets. Auctions can “fail” when the number of sellers of the security exceeds the buyers for that particular auction period. In the event that an auction fails, the interest rate resets at a rate based on a formula determined by the individual security. The ARS for which auctions have failed continues to accrue interest and is auctioned on a set interval until the auction succeeds, the issuer calls the security, or it matures. As of March 31, 2013, we have determined this investment is at risk for impairment due to the nature of the liquidity of the market over the past year. Cumulative unrealized losses as of March 31, 2013 amount to $0.5 million and are reflected within accumulated other comprehensive loss as a component of stockholders’ equity. We believe this impairment is temporary, as we do not intend to sell the investment and it is unlikely we will be required to sell the investment before recovery of its amortized cost basis.

Fair Value Measurements

FASB ASC Topic 820 – Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of March 31, 2013, we held investments that are required to be measured at fair value on a recurring basis. These investments (available-for-sale) consist of U.S. Treasury bills that are publicly traded and for which market prices are readily available.

As of March 31, 2013, our investment in a municipal bond is classified as available-for-sale and reflected at fair value. The auction event for this investment has failed for over three years. The fair value of this security is estimated utilizing a discounted cash flow analysis as of March 31, 2013. This analysis considers, among other items, the collateralization underlying the security investment, the credit worthiness of the counterparty, the timing of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction. This security was also compared, when possible, to other observable market data with similar characteristics.

 

Investments measured at fair value on a recurring basis subject to the disclosure requirements of FASB ASC Topic 820 – Fair Value Measurements at March 31, 2013 and December 31, 2012 were as follows:

 

     As of March 31, 2013  
            (Dollars in thousands)         
      Level 1      Level 2      Level 3      Total  

U.S. Treasury bills

    $ 63,951       $  —         $ —          $ 63,951   

Municipal bond

      —            —           7,382         7,382   
  

 

 

     

 

 

     

 

 

     

 

 

  

Totals

    $ 63,951       $ —         $ 7,382       $ 71,333   
  

 

 

     

 

 

     

 

 

     

 

 

  
     As of December 31, 2012  
            (Dollars in thousands)         
      Level 1      Level 2      Level 3      Total  

U.S. Treasury bills

    $ 63,876       $ —         $ —          $ 63,876   

Municipal bond

      —            —           7,382         7,382   
  

 

 

     

 

 

     

 

 

     

 

 

  

Totals

    $ 63,876       $ —         $ 7,382       $ 71,258   
  

 

 

     

 

 

     

 

 

     

 

 

  

The following table presents a rollforward of our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in FASB ASC Topic 820 for the quarter ended March 31, 2013:

 

     (Dollars in thousands)  

Balance at December 31, 2012

    $ 7,382   

Unrealized gain (loss)

      —      
  

 

 

  

Balance at March 31, 2013

    $ 7,382   
  

 

 

  

Credit Agreement

During the fourth quarter of 2012, we entered into a revolving credit facility pursuant to a Credit Agreement with BMO Harris Bank N.A., in its capacities as the initial lender thereunder and the administrative agent for the lenders which from time to time may be parties to the Credit Agreement. The revolving credit facility under the Credit Agreement is scheduled to mature on January 31, 2014. The Credit Agreement requires that interest and fees are payable quarterly in arrears and principal is payable at maturity.

We may prepay amounts outstanding under, or terminate, the Credit Agreement upon three or five business days’ prior notice, respectively, in each case without premium or penalty. The Credit Agreement contains customary affirmative, negative and financial maintenance covenants, including limits on capital expenditures and a requirement to maintain a minimum of $75.0 million in cash and cash equivalents in domestic accounts at all times. The loans under the Credit Agreement are secured by 110% cash collateral. The agreement also contains customary representations and warranties, events of default, and rights and remedies upon the occurrence of any event of default, including rights to accelerate the debt and rights to realize upon the collateral securing the obligations under the Credit Agreement.

During the first quarter of 2013, we repaid the full amount borrowed of $80.0 million under the Credit Agreement.