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Fair Value Measurement

9 Months Ended

Sep. 30, 2014

Fair Value Measurement [Abstract]

Fair Value Measurement

5.	Fair Value Measurement

Assets and liabilities measured at fair value on a recurring basis consist of the following as of September 30, 2014 (in thousands):

						Fair Value Measurements at Reporting Date Using
		September 30, 2014				Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds		$	3,449			$	3,449			$	—			$	—
Interest rate swap			301				—				301				—
Total assets at fair value on a recurring basis		$	3,750			$	3,449			$	301			$	—
Liabilities:
Other long-term liabilities:
Deferred payments		$	2,167			$	—			$	—			$	2,167
Total liabilities at fair value on a recurring basis		$	2,167			$	—			$	—			$	2,167

Assets and liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2013 (in thousands):

						Fair Value Measurements at Reporting Date Using
		December 31, 2013				Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds		$	8,382			$	8,382			$	—			$	—
Interest rate swap			45				—				45				—
Total assets at fair value on a recurring basis		$	8,427			$	8,382			$	45			$	—
Liabilities:
Other long-term liabilities:
Deferred payments		$	2,115			$	—			$	—			$	2,115
Total liabilities at fair value on a recurring basis		$	2,115			$	—			$	—			$	2,115

The Company measures the above items on a recurring basis at fair value as follows:

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Money market funds — Classified in Level 1 is excess cash the Company holds in both taxable and tax-exempt money market funds, and are included in Cash and cash equivalents in the accompanying unaudited condensed consolidated balance sheets. The Company records any net unrealized gains and losses for changes in fair value as a component of Accumulated other comprehensive income in Stockholders’ equity. The Company’s cash and cash equivalents held at December 31, 2013 and September 30, 2014 approximate fair value and is not disclosed in the above tables because of the short-term nature of the financial instruments.

●

Interest rate swap — The Company has an interest rate swap with a notional amount of $119.5 million as of September 30, 2014, used to minimize the interest rate exposure and fix the variable interest rate on a portion of the Company’s variable rate debt. The swap is classified within Level 2 and is valued using readily available pricing sources which utilize market observable inputs including the current variable interest rate for similar types of instruments.

●

Deferred payments — The Company acquired certain assets and entered into a deferred payment arrangement with one of the sellers in connection with an acquisition completed in 2011, which is classified within Level 3 as there is no liquid market for similarly priced instruments. The deferred payment is valued using a discounted cash flow model that encompasses significant unobservable inputs to estimate the operating results of the acquired assets. The assumptions used to prepare the discounted cash flows include estimates for interest rates, enrollment growth, retention rates and pricing strategies. These assumptions are subject to change as the underlying data sources evolve and the program matures.

At September 30, 2014, the carrying value of the Company’s debt was $119.5 million. All of the Company’s debt is variable interest rate debt and is classified within Level 2 because it is valued using readily available pricing sources which utilize market observable inputs. The Company has determined the carrying amount approximates fair value.

The Company did not change its valuation techniques associated with recurring fair value measurements from prior periods, and no assets or liabilities were transferred between levels of the fair value hierarchy during the nine months ended September 30, 2013 or 2014. Assets measured at fair value on a non-recurring basis as of December 31, 2013 and September 30, 2014 include $6.8 million of goodwill and $1.6 million of other indefinite-lived intangible assets. Changes in the fair value of the Company’s Level 3 liability during the nine months ended September 30, 2014 are as follows (in thousands):

		Deferred Payments
Balance at December 31, 2013		$	2,115
Amounts earned			(383	)
Adjustments to fair value			435
Transfers in or out of Level 3			—
Balance at September 30, 2014		$	2,167

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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