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Fair Value Measurement
 6 Months Ended
Jun. 30, 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 June 30, 2015 (in thousands):

 

     Fair Value Measurements at Reporting Date Using 
  June 30,
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 $10,082  $10,082  $—  $— 
Total assets at fair value on a recurring basis $10,082  $10,082  $—  $— 
Liabilities:                
Other liabilities:                
Deferred payments $2,815  $—  $—  $2,815 
Interest rate swap  238   —   238   — 
Total liabilities at fair value on a recurring basis $3,053  $—  $238  $2,815 

  

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 - The Company holds excess cash in both taxable and tax-exempt money market funds, which are classified in Level 1 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 June 30, 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 $115.6 million as of June 30, 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 June 30, 2015, the carrying value of the Company’s debt was $115.6 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 six months ended June 30, 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 June 30, 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 six months ended June 30, 2015 are as follows (in thousands):

 

  

Deferred

Payments

 
Balance at December 31, 2014 $2,398 
Amounts earned  (350)
Adjustments to fair value  767 
Transfers in or out of Level 3  — 
Balance at June 30, 2015 $2,815