5. INVESTMENTS

Investments consist of the following as of March 31, 2016 and December 31, 2015 (dollars in thousands):

	March 31, 2016
			Gross Unrealized
	Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	930	$	-	$	(8	)	$	922
Non-governmental debt securities		84,965		38		(97	)		84,906
Treasury and federal agencies		37,020		28		(17	)		37,031
Total short-term investments		122,915		66		(122	)		122,859
Long-term investments (available for sale):
Municipal bond		7,850		-		(476	)		7,374
Total investments (available for sale)	$	130,765	$	66	$	(598	)	$	130,233

	December 31, 2015
			Gross Unrealized
	Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	1,500	$	-	$	(11	)	$	1,489
Non-governmental debt securities		76,999		-		(242	)		76,757
Treasury and federal agencies		36,779		3		(127	)		36,655
Total short-term investments		115,278		3		(380	)		114,901
Long-term investments (available for sale):
Municipal bond		7,850		-		(476	)		7,374
Total investments (available for sale)	$	123,128	$	3	$	(856	)	$	122,275

In the table above, unrealized holding gains (losses) as of March 31, 2016 relate to short-term investments that have been in a continuous unrealized gain (loss) position for less than one year. The table also includes an unrealized holding loss, greater than one year, which relates to our long-term investment in a municipal bond, which is an auction rate security (“ARS”).

Our ARS is comprised of debt obligations issued by states, cities, counties and other governmental entities, which earn federally tax-exempt interest. Our 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 condensed 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, 2016, we have determined this investment is at risk for impairment due to the nature of the liquidity of the market over the past several years. Cumulative unrealized losses as of March 31, 2016 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.

Our non-governmental debt securities primarily consist of corporate bonds and commercial paper. Our treasury and federal agencies primarily consist of U.S. Treasury bills and federal home loan debt securities. We do not intend to sell our investments in these securities and it is not likely that we will be required to sell these investments before recovery of the 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, 2016, we held investments that are required to be measured at fair value on a recurring basis. These investments (available-for-sale) consist of non-governmental debt securities, treasury and federal agencies and municipal bonds that are publicly traded and our investment in an ARS. Available for sale securities included in Level 2 are estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our investment in an ARS is categorized as Level 3 and fair value is estimated utilizing a discounted cash flow analysis as of March 31, 2016 which considers, among other items, the collateralization underlying the security investment, the credit worthiness of the counterparty, the time of expected future cash flows, and the expectation of the next time the security is expected to have a successful auction. The auction event for our ARS investment has failed for multiple years. The 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, 2016 and December 31, 2015 were as follows (dollars in thousands):

	As of March 31, 2016
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	-	$	922	$	7,374	$	8,296
Non-governmental debt securities		-		84,906		-		84,906
Treasury and federal agencies		-		37,031		-		37,031
Totals	$	-	$	122,859	$	7,374	$	130,233

	As of December 31, 2015
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	-	$	1,489	$	7,374	$	8,863
Non-governmental debt securities		-		76,757		-		76,757
Treasury and federal agencies		-		36,655		-		36,655
Totals	$	-	$	114,901	$	7,374	$	122,275

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, 2016 (dollars in thousands):

Balance at December 31, 2015	$	7,374
Unrealized gain (loss)		-
Balance at March 31, 2016	$	7,374

Equity Method Investment

Our investment in an equity affiliate, which is recorded within other noncurrent assets on our condensed consolidated balance sheets, represents an international investment in a private company. As of March 31, 2016, our investment in an equity affiliate equated to a 30.7%, or $4.2 million, non-controlling interest in CCKF, a Dublin-based educational technology company providing intelligent adaptive systems to power the delivery of individualized and personalized learning. During the quarters ended March 31, 2016 and 2015, we recorded approximately $0.1 million of loss related to our proportionate investment in CCKF within miscellaneous income (expense) on our unaudited condensed consolidated statements of income (loss) and comprehensive income (loss).

We make periodic operating maintenance payments for our use of intellipath^TM. The total fees paid to CCKF for the quarters ended March 31, 2016 and 2015, were as follows (dollars in thousands):

	Maintenance Fee Payments
For the quarter ended March 31, 2016	$	342
For the quarter ended March 31, 2015	$	356

Credit Agreement

During the fourth quarter of 2015, the Company; its wholly-owned subsidiary, CEC Educational Services, LLC (“CEC-ES”); and the subsidiary guarantors thereunder entered into a Fourth Amendment to its Amended and Restated Credit Agreement dated as of December 30, 2013 (as amended, the “Credit Agreement”) with BMO Harris Bank N.A., in its capacities as the initial lender and letter of credit issuer thereunder and the administrative agent for the lenders which from time to time may be parties to the Credit Agreement, to among other things, decrease the revolving credit facility to $95.0 million and require pre-approval by the lenders for each credit extension (other than letter of credit extensions) occurring after December 31, 2015. The revolving credit facility under the Credit Agreement is scheduled to mature on December 31, 2018. The loans and letter of credit obligations under the Credit Agreement are required to be secured by 100% cash collateral. As of March 31, 2016, there were no outstanding borrowings under the revolving credit facility.