3. Restructuring and Related Charges

In October 2013, the Company implemented a restructuring to better align the Company’s resources with its current student enrollments. This restructuring, which occurred primarily in the fourth quarter of 2013, included the closing of approximately 20 physical locations and reductions in the number of campus-based and corporate employees. The Company incurred the following charges associated with these activities in the fourth quarter of 2013, and recorded them in the following line items in the statement of operations below:

	Year Ended December 31, 2013
($ in thousands)	Lease and Related Costs, Net		Severance and Other Employee Separation Costs		Total
Instruction & educational support	$	30,612	$	5,548	$	36,160
Marketing		—		120		120
Admissions advisory		—		248		248
General & administration		17,180		982		18,162
Total charges	$	47,792	$	6,898	$	54,690

The following details the changes in the Company’s restructuring liability by type of cost during the year ended December 31, 2013:

($ in thousands)	Lease and Related Costs, Net			Severance and Other Employee Separation Costs			Total
Balance at December 31, 2012	$	—		$	—		$	—
Restructuring and other charges (1)	47,792			6,898			54,690
Non-cash adjustments(2)	(5,139		)	1,438			(3,701		)
Payments	(103		)	(6,120		)	(6,223		)
Balance at December 31, 2013(1)	$	42,550		$	2,216		$	44,766

(1)

The current portion of restructuring liabilities was $10.4 million as of December 31, 2013, most of which are included in Accounts payable and accrued expenses, and the long-term portion is included in Other long-term liabilities in the Consolidated Balance Sheets. The gross obligation associated with restructuring liabilities as of December 31, 2013 is approximately $44.8 million, which principally represents non-cancelable leases that will be paid over the respective lease terms through 2022.

(2)

A total of $48.5 million of non-cash charges were incurred in connection with the restructuring. Non-cash adjustments for lease and related costs include $10.9 million of accelerated depreciation, partially offset by the release of certain deferred rent and leasehold incentive liabilities of approximately $5.7 million. Non-cash adjustments for severance and other employee separation costs represents share-based compensation.

Lease and Related Costs, Net – During the fourth quarter of 2013, the University implemented a plan to close approximately 20 of its campus locations. The Company recorded approximately $36.0 million of aggregate charges representing the estimated fair value of future contractual operating lease obligations, which were recorded in the periods the Company ceased using the respective facilities. Lease obligations, some of which continue through 2022, are measured at fair value using a discounted cash flow approach encompassing significant unobservable inputs (Level 3). The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. The Company’s estimate of the amount and timing of sublease rental income considers subleases that have been executed and subleases expect to be executed, based on current commercial real estate market data and conditions, and other qualitative factors specific to the facilities. The estimates will be subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

Lease and related costs, net also includes $10.9 million of accelerated depreciation during 2013. This depreciation resulted from revising the useful lives of the fixed assets at the facilities discussed above through their closure dates. Prior to revising the estimated useful lives, a recoverability analysis was performed for the facilities’ fixed assets and no material impairment charges were recorded during 2013.

Severance and Other Employee Separation Costs – The Company implemented workforce reductions in order to better align its human capital resources with the evolving needs of students. A total of $6.9 million in severance and other employee separation costs were recorded in the year ended December 31, 2013, of which approximately $6.1 million was paid in 2013. The majority of the remaining balance will be paid during the first three months of 2014.