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Restructuring and Related Charges
 9 Months Ended
Sep. 30, 2014
Restructuring and Related Charges [Abstract]  
Restructuring and Related Charges
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 following details the changes in the Company’s restructuring liability by type of cost during the nine months ended September 30, 2014:

 

($ in thousands)   Lease and 
Related
Costs, 
Net		     Severance and Other 
Employee 
Separation
Costs		     Total  
Balance at December 31, 2013(1)   $ 42,550     $ 2,216     $ 44,766  
Non-cash adjustments(2)     (2,856 )     (46 )     (2,902 )
Payments     (10,023 )     (2,138 )     (12,161 )
Balance at September 30, 2014(1)   $ 29,671     $ 32     $ 29,703  

 

 
(1) The current portion of restructuring liabilities was $10.4 million and $6.6 million as of December 31, 2013 and September 30, 2014, respectively, which are included in Accounts payable and accrued expenses. The long-term portion is included in Other long-term liabilities.

 

(2) Non-cash adjustments for lease and related costs during the nine months ended September 30, 2014 primarily result from changes in the timing and expected income from settlements and executed sublease agreements signed during the period, which amounted to $3.9 million, partly offset by the accretion of interest on lease costs of approximately $1.0 million. Non-cash adjustments for severance and other employee separation costs primarily related to employees who were re-hired to other roles within the Company and were not paid severance.

 

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 discounted at the Company’s marginal discount rate of 4.5%, partially offset by estimated future sublease rental income discounted at credit-adjusted rates. The Company’s estimate of the amount and timing of sublease rental income considers subleases that have been executed and subleases expected to be executed, based on current commercial real estate market data and conditions, and other qualitative factors specific to the facilities. The estimates are adjusted as market conditions change or as new information becomes available. Through September 30, 2014, adjustments to these reserves have related to settlements of leases with the landlords, execution of sublease agreements and accretion of interest.

 

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, net of $1.4 million of non-cash adjustments of share-based compensation, were recorded in the year ended December 31, 2013, of which approximately $6.1 million was paid in 2013.