XML 31 R16.htm IDEA: XBRL DOCUMENT v3.20.2
Leases
 12 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Leases Leases
We lease 10 of our 12 campuses and our corporate headquarters under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases. Our lease for the Norwood, Massachusetts campus ended on July 31, 2020 when the campus closed. During the year ended September 30, 2020, we relocated our corporate headquarters facility in conjunction with the expiration of the existing lease agreement, and entered into a new long-term lease agreement at a new facility. We also modified our existing lease for our Sacramento campus by extending the term, and reducing the leased square footage effective as of January 1, 2022. Our facility leases have original lease terms ranging from 8 to 20 years and expire at various dates through 2033. In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances. We sublease certain portions of unused building space to third parties, which currently result in minimal income. All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on our consolidated balance sheets.

Some of the facility leases are subject to annual changes in the Consumer Price Index (“CPI”). While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. There are no early termination with penalties, residual value guarantees, restrictions or covenants imposed by our facility leases.

Significant Assumptions and Judgments

To determine if a contract is or contains a lease, we considered whether (1) explicitly or implicitly identified assets have been deployed in the contract and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract. If we determine a contract is, or contains, a lease, we assess whether the contract contains multiple lease components. We consider a lease component to be separate from other lease components in the contract if (a) we can benefit from the right of use either on its own or together with other resources that are readily available to us and (b) the right of use is neither highly dependent on nor highly interrelated with the other right(s) to use underlying assets in the contract. In contracts involving the use of real estate, we separate the right to use land from other underlying assets unless the effect of separating the land is insignificant to the resulting lease accounting. We have elected to account for the lease and non-lease components as a single lease component.

For all leases we are a party to, the discount rate implicit in the lease was not readily determinable. Therefore, we used our incremental borrowing rate for each lease to determine the present value of the lease. We determined the incremental borrowing rate applicable to each lease through a model that represents the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The incremental borrowing rate was applied to each lease based on the remaining term of the lease.

The components of lease expense are included in “Educational services and facilities” and “Selling, general and administrative” on the consolidated statement of operations, with the exception of interest on lease liabilities, which is included in “Interest expense.”
The components of lease expense during the year ended September 30, 2020 were as follows:
Lease ExpenseYear ended September 30, 2020
Operating lease expense(1)
$29,348 
Finance lease expense:
   Amortization of leased assets102 
   Interest on lease liabilities7 
Variable lease expense4,120 
Sublease income(744)
Total net lease expense$32,833 

(1) Excludes the expense for short-term leases not accounted for under ASC 842, which was not significant for the year ended September 30, 2020.

Supplemental balance sheet, cash flow and other information related to our leases was as follows:
LeasesClassificationAs of September 30, 2020
Assets:
Operating lease assetsRight-of-use assets for operating leases$144,663 
Finance lease assets
Property and equipment, net(1)
257 
Total leased assets$144,920 
Liabilities:
Current
   Operating lease liabilitiesOperating lease liability, current portion$23,666 
   Finance lease liabilitiesOther current liabilities129 
Noncurrent
   Operating lease liabilitiesOperating lease liability134,089 
   Finance lease liabilitiesOther liabilities131 
Total lease liabilities$158,015 

(1) Finance lease assets are recorded net of accumulated amortization of $0.1 million as of September 30, 2020.
Supplemental Disclosure of Cash Flow Information and Other InformationYear ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$25,617 
   Operating cash flows from finance leases7 
   Financing cash flows from finance leases99 
Non-cash activity related to lease liabilities:
   Lease assets obtained in exchange for new operating lease liabilities$20,321 
   Leases assets obtained in exchange for new finance lease liabilities215 

Lease Term and Discount RateAs of September 30, 2020
Weighted-average remaining lease term (in years):
   Operating leases9.34
   Finance leases2.05
Weighted average discount rate:
   Operating leases4.37 %
   Finance leases3.08 %

Maturities of lease liabilities were as follows:
As of September 30, 2020
Years ending September 30,Operating LeasesFinance Leases
2021$28,212 $135 
202227,447 110 
202318,565 23 
202417,435 — 
202515,022 — 
2026 and thereafter86,134 — 
Total lease payments192,815 268 
Less: interest(35,060)(8)
Present value of lease liabilities157,755 260 
Less: current lease liabilities(23,666)(129)
Long-term lease liabilities$134,089 $131 

The maturities of lease liabilities as of September 30, 2020 includes the future minimum lease payments for the build-to-suit leases.

Disclosures Related to Periods Prior to the Adoption of ASC 842

As of September 30, 2019, minimum lease payments under non-cancelable operating leases by period were expected to be as follows (in thousands):
Years ending September 30,GrossSublease incomeNet
2020$26,379 $(362)$26,017 
202123,531 (77)23,454 
202221,621 (78)21,543 
202310,461 (20)10,441 
20249,180 — 9,180 
Thereafter41,822 — 41,822 
Total lease payments$132,994 $(537)$132,457 

Related Party Transactions for Leases

Rent expense includes rent paid to related parties, which was approximately $2.0 million for the years ended September 30, 2020, 2019, and 2018. Since 1991, two of our properties comprising our Orlando, Florida location have been leased from entities controlled by John C. White, a director on our Board of Directors. The leases extend through August 19, 2022 and August 31, 2022 with annual base lease payments for the first year under this lease totaling approximately $0.3 million and $0.7 million, with annual adjustments based on the higher of (i) an amount equal to 4% of the total annual rent for the immediately preceding year or (ii) the percentage of increase in the CPI. These transactions were not considered significant as of September 30, 2020.
Leases Leases
We lease 10 of our 12 campuses and our corporate headquarters under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases. Our lease for the Norwood, Massachusetts campus ended on July 31, 2020 when the campus closed. During the year ended September 30, 2020, we relocated our corporate headquarters facility in conjunction with the expiration of the existing lease agreement, and entered into a new long-term lease agreement at a new facility. We also modified our existing lease for our Sacramento campus by extending the term, and reducing the leased square footage effective as of January 1, 2022. Our facility leases have original lease terms ranging from 8 to 20 years and expire at various dates through 2033. In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances. We sublease certain portions of unused building space to third parties, which currently result in minimal income. All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on our consolidated balance sheets.

Some of the facility leases are subject to annual changes in the Consumer Price Index (“CPI”). While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. There are no early termination with penalties, residual value guarantees, restrictions or covenants imposed by our facility leases.

Significant Assumptions and Judgments

To determine if a contract is or contains a lease, we considered whether (1) explicitly or implicitly identified assets have been deployed in the contract and (2) we obtain substantially all of the economic benefits from the use of that underlying asset and direct how and for what purpose the asset is used during the term of the contract. If we determine a contract is, or contains, a lease, we assess whether the contract contains multiple lease components. We consider a lease component to be separate from other lease components in the contract if (a) we can benefit from the right of use either on its own or together with other resources that are readily available to us and (b) the right of use is neither highly dependent on nor highly interrelated with the other right(s) to use underlying assets in the contract. In contracts involving the use of real estate, we separate the right to use land from other underlying assets unless the effect of separating the land is insignificant to the resulting lease accounting. We have elected to account for the lease and non-lease components as a single lease component.

For all leases we are a party to, the discount rate implicit in the lease was not readily determinable. Therefore, we used our incremental borrowing rate for each lease to determine the present value of the lease. We determined the incremental borrowing rate applicable to each lease through a model that represents the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The incremental borrowing rate was applied to each lease based on the remaining term of the lease.

The components of lease expense are included in “Educational services and facilities” and “Selling, general and administrative” on the consolidated statement of operations, with the exception of interest on lease liabilities, which is included in “Interest expense.”
The components of lease expense during the year ended September 30, 2020 were as follows:
Lease ExpenseYear ended September 30, 2020
Operating lease expense(1)
$29,348 
Finance lease expense:
   Amortization of leased assets102 
   Interest on lease liabilities7 
Variable lease expense4,120 
Sublease income(744)
Total net lease expense$32,833 

(1) Excludes the expense for short-term leases not accounted for under ASC 842, which was not significant for the year ended September 30, 2020.

Supplemental balance sheet, cash flow and other information related to our leases was as follows:
LeasesClassificationAs of September 30, 2020
Assets:
Operating lease assetsRight-of-use assets for operating leases$144,663 
Finance lease assets
Property and equipment, net(1)
257 
Total leased assets$144,920 
Liabilities:
Current
   Operating lease liabilitiesOperating lease liability, current portion$23,666 
   Finance lease liabilitiesOther current liabilities129 
Noncurrent
   Operating lease liabilitiesOperating lease liability134,089 
   Finance lease liabilitiesOther liabilities131 
Total lease liabilities$158,015 

(1) Finance lease assets are recorded net of accumulated amortization of $0.1 million as of September 30, 2020.
Supplemental Disclosure of Cash Flow Information and Other InformationYear ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$25,617 
   Operating cash flows from finance leases7 
   Financing cash flows from finance leases99 
Non-cash activity related to lease liabilities:
   Lease assets obtained in exchange for new operating lease liabilities$20,321 
   Leases assets obtained in exchange for new finance lease liabilities215 

Lease Term and Discount RateAs of September 30, 2020
Weighted-average remaining lease term (in years):
   Operating leases9.34
   Finance leases2.05
Weighted average discount rate:
   Operating leases4.37 %
   Finance leases3.08 %

Maturities of lease liabilities were as follows:
As of September 30, 2020
Years ending September 30,Operating LeasesFinance Leases
2021$28,212 $135 
202227,447 110 
202318,565 23 
202417,435 — 
202515,022 — 
2026 and thereafter86,134 — 
Total lease payments192,815 268 
Less: interest(35,060)(8)
Present value of lease liabilities157,755 260 
Less: current lease liabilities(23,666)(129)
Long-term lease liabilities$134,089 $131 

The maturities of lease liabilities as of September 30, 2020 includes the future minimum lease payments for the build-to-suit leases.

Disclosures Related to Periods Prior to the Adoption of ASC 842

As of September 30, 2019, minimum lease payments under non-cancelable operating leases by period were expected to be as follows (in thousands):
Years ending September 30,GrossSublease incomeNet
2020$26,379 $(362)$26,017 
202123,531 (77)23,454 
202221,621 (78)21,543 
202310,461 (20)10,441 
20249,180 — 9,180 
Thereafter41,822 — 41,822 
Total lease payments$132,994 $(537)$132,457 

Related Party Transactions for Leases

Rent expense includes rent paid to related parties, which was approximately $2.0 million for the years ended September 30, 2020, 2019, and 2018. Since 1991, two of our properties comprising our Orlando, Florida location have been leased from entities controlled by John C. White, a director on our Board of Directors. The leases extend through August 19, 2022 and August 31, 2022 with annual base lease payments for the first year under this lease totaling approximately $0.3 million and $0.7 million, with annual adjustments based on the higher of (i) an amount equal to 4% of the total annual rent for the immediately preceding year or (ii) the percentage of increase in the CPI. These transactions were not considered significant as of September 30, 2020.