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Fair Value Measurement | 3 Months Ended
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Mar. 31, 2015
Fair Value Measurement [Abstract] |
Fair Value Measurement |
4. | Fair Value Measurement
Assets and liabilities measured at fair value on a recurring basis consist of the following as of March 31, 2015 (in thousands):
|  |  |  |  | Fair Value Measurements at Reporting Date Using |
|  | March 31, 2015 |  |  | 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 |  | $ | 10,076 |  |  | $ | 10,076 |  |  | $ | — |  |  | $ | — |
Total assets at fair value on a recurring basis |  | $ | 10,076 |  |  | $ | 10,076 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred payments |  | $ | 2,688 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,688 |
Interest rate swap |  |  | 192 |  |  |  | — |  |  |  | 192 |  |  |  | — |
Total liabilities at fair value on a recurring basis |  | $ | 2,880 |  |  | $ | — |  |  | $ | 192 |  |  | $ | 2,688 |
Assets and liabilities measured at fair value on a recurring basis consist of the following as of December 31, 2014 (in thousands):
|  |  |  |  | Fair Value Measurements at Reporting Date Using |
|  | December 31, 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 |  | $ | 8,275 |  |  | $ | 8,275 |  |  | $ | — |  |  | $ | — |
Interest rate swap |  |  | 143 |  |  |  | — |  |  |  | 143 |  |  |  | — |
Total assets at fair value on a recurring basis |  | $ | 8,418 |  |  | $ | 8,275 |  |  | $ | 143 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred payments |  | $ | 2,398 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,398 |
Total liabilities at fair value on a recurring basis |  | $ | 2,398 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,398 |
The Company measures the above items on a recurring basis at fair value as follows:
| ● | 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 not held in money market funds at December 31, 2014 and March 31, 2015 approximate fair value and are 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 $117.2 million as of March 31, 2015, used to minimize the interest rate exposure and fix the variable interest rate on 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.
The Company’s lease loss liability incorporates an assessment of current sublease market conditions and uses Level 3 inputs, but is not deemed a fair value liability as the future lease payments are required to be discounted using the Company’s incremental borrowing rate at the date of lease abandonment without subsequent adjustment. See Note 3 for further discussion of the Company’s lease loss liability. At March 31, 2015, the carrying value of the Company’s debt was $117.2 million. All of the Company’s debt is variable interest rate debt and is classified within Level 2 because it is valued using market observable inputs. The Company has determined that 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 three months ended March 31, 2014 or 2015. Assets measured at fair value on a non-recurring basis are assessed for impairment annually at September 30, or more frequently if circumstances indicate an impairment may have occurred. No such circumstances existed, and, as of December 31, 2014 and March 31, 2015, $6.8 million of goodwill and $1.6 million of other indefinite-lived intangible assets are included in other assets in the Company’s consolidated balance sheets. Changes in the fair value of the Company’s Level 3 liability that was outstanding throughout the three months ended March 31, 2015 are as follows (in thousands):
|  | Deferred Payments |
Balance at December 31, 2014 |  | $ | 2,398 |
Amounts earned |  |  | (171 | )
Adjustments to fair value |  |  | 461 |
Transfers in or out of Level 3 |  |  | — |
Balance at March 31, 2015 |  | $ | 2,688

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13504-108611 + Details
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