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Short-Term and Long-Term Investments
 6 Months Ended
Jun. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
Short-Term and Long-Term Investments

2. Short-Term and Long-Term Investments

As of June 30, 2015 and December 31, 2014, the Company held one auction rate security that had experienced failed auctions totaling $3,000,000 at par value, which was purchased through and is held by a broker-dealer affiliate of Bank of America, N.A. (the “Failed Auction Security”). The Failed Auction Security held by the Company is Aaa/AA+ rated by major credit rating agencies, collateralized by student loans, and guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program. Management is not aware of any reason to believe the issuer of the Failed Auction Security is presently at risk of default. Through June 30, 2015, the Company has continued to receive interest payments on the Failed Auction Security in accordance with the terms of its indenture. Management believes the Company ultimately should be able to liquidate the Failed Auction Security without significant loss primarily due to the overall quality of the issue held and the collateral securing the substantial majority of the underlying obligation. However, current conditions in the auction rate securities market have led management to conclude the recovery period for the Failed Auction Security exceeds 12 months. As a result, the Company continued to classify the Failed Auction Security as long-term as of June 30, 2015.

The following is a summary of available-for-sale securities (in thousands):

 

            Gross      Gross      Estimated  
            Unrealized      Unrealized      Fair  

June 30, 2015

    Cost      Gains      Losses      Value  

Failed Auction Security

    $ 3,000       $  —         $ 386       $ 2,614   

Brokered certificates of deposit

      340         1         —           341   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 3,340       $ 1       $ 386       $ 2,955   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

            Gross      Gross      Estimated  
            Unrealized      Unrealized      Fair  

December 31, 2014

    Cost      Gains      Losses      Value  

Failed Auction Security

    $ 3,000       $ —         $ 425       $ 2,575   

Brokered certificates of deposit

      700         —           3         697   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 3,700       $  —         $ 428       $ 3,272   
  

 

 

     

 

 

     

 

 

     

 

 

  

The Failed Auction Security as of June 30, 2015 has been in an unrealized loss position for greater than 12 months.

The amortized cost and estimated fair value of available-for-sale securities on June 30, 2015, by contractual maturities, are shown below (in thousands):

 

            Estimated  
     Cost      Fair Value  

Due in two to ten years

    $ 340      $ 341  

Due in ten to twenty years

      —          —    

Due in twenty to forty years

      3,000        2,614  
  

 

 

     

 

 

  
   $ 3,340      $ 2,955  
  

 

 

     

 

 

  

Based on the fair value measurements described in Note 3, the fair value of the Failed Auction Security on June 30, 2015, with a par value of $3,000,000, was estimated by the Company to be approximately $2,614,000. The gross unrealized loss of $386,000 on the Failed Auction Security consists of two types of estimated loss: an aggregate credit loss of $76,000 and an aggregate temporary impairment of $310,000. In determining the amount of credit loss, the Company compared the present value of cash flows expected to be collected to the amortized cost basis of the security, considering credit default risk probabilities and changes in credit ratings as significant inputs, among other factors (See Note 3).

The following table represents a rollforward of the activity related to the credit loss recognized in earnings on available-for-sale auction rate securities held by the Company for the six months ended June 30 (in thousands):

 

     2015      2014  

Balance at the beginning of the period

    $ 84      $ 395  

Changes in the amount related to credit gain for which other-than- temporary impairment was not previously recognized

      (8 )       (20 ) 
  

 

 

     

 

 

  

Balance at the end of the period

    $ 76      $ 375  
  

 

 

     

 

 

  

At this time, the Company has no intent to sell the impaired Failed Auction Security and does not believe it is more likely than not the Company will be required to sell this security. If current market conditions deteriorate further, the Company may be required to record additional unrealized losses. If the credit rating of the security deteriorates, the Company may be required to adjust the carrying value of the investment through impairment charges recorded in the Condensed Consolidated Statements of Operations, and any such impairment adjustments may be material.

Based on the Company’s ability to access cash and cash equivalents and its expected operating cash flows, management does not anticipate the current lack of liquidity associated with the Failed Auction Security held will affect the Company’s ability to execute its current operating plan.