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BASIS OF PRESENTATION
 3 Months Ended
Mar. 31, 2013
Accounting Policies [Abstract]  
BASIS OF PRESENTATION

2. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the quarter ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

The unaudited consolidated financial statements presented herein include the accounts of CEC. All intercompany transactions and balances have been eliminated.

In the fourth quarter of 2012, we reorganized our business across seven reporting segments: CTU, AIU (comprises University Schools); Health Education, Culinary Arts, Design & Technology (comprises Career Schools); International; and Transitional Schools. This reorganization was a result of the decision made in the fourth quarter of 2012 to teach out a number of campuses, which are now included in our Transitional Schools reporting segment, along with certain additional campuses which were previously in the process of being taught out. These campuses employ a gradual teach-out process, enabling them to continue to operate while current students complete their course of study; they no longer enroll new students. The results of operations for campuses within the Transitional Schools segment will be reported within continuing operations for all periods presented until they complete their teach-out. As campuses within Transitional Schools cease operations, the results of operation for all periods presented will be reflected within discontinued operations. During the first quarter of 2013 and the fourth quarter of 2012, we completed the teach-out of Sanford-Brown College (“SBC”) Hazelwood and LCB Pittsburgh, respectively. Accordingly, the results of operations for these campuses are now reported within discontinued operations. All prior period results have been recast to reflect our reporting segments on a comparable basis.

 

As of March 31, 2013, an agreement for the sale of our AIU campus in London, England existed with an effective date for the sale of April 1, 2013. AIU London is considered to be part of the AIU asset group and as such the sale will be reported within continuing operations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205 – Presentation of Financial Statements. AIU London meets the criteria of an asset held for sale under FASB ASC Topic 360 – Property, Plant and Equipment and accordingly, we recorded this asset at fair market value less costs to sell as of March 31, 2013. We received no consideration for the sale of AIU London resulting in a fair market value of zero and recorded a loss of $6.7 million on the pending sale during the first quarter of 2013. As the fair value was determined based on a quoted price, this would be categorized as Level 1 per ASC Topic 820. This loss is reported within other (expense) income on our unaudited consolidated statements of income and comprehensive income. The terms of the sales agreement provide that we make payments to the buyer in consideration of negative working capital and obligate us to make payments to offset future rent payments made by the buyer related to leases assigned to the buyer; accordingly, these amounts have been included in the loss calculation. Also included in the loss on the pending sale is approximately $3.3 million of expense related to the cumulative translation loss resulting from the effects of foreign currency on AIU London’s balance sheet as of March 31, 2013. This loss had previously been recorded within accumulated other comprehensive loss as a component of stockholders’ equity.