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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 20-3356009 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
(Address of principal executive offices, including zip code)
(602) 639-7500
(Title of Each Class) | (Name of Each Exchange on Which Registered) | |
Grand Canyon Education, Inc. | The NASDAQ Global Market | |
Common stock, $.01 par value |
None
(Title of class)
Large accelerated filerþ | Accelerated filero | Non-accelerated filero | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
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Exhibit 23.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
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• | our failure to comply with the extensive regulatory framework applicable to our industry, including Title IV of the Higher Education Act and the regulations thereunder, state laws and regulatory requirements, and accrediting commission requirements; |
• | the results of the ongoing program review being conducted by the Department of Education of our compliance with Title IV program requirements, and possible fines or other administrative sanctions resulting therefrom; |
• | the ability of our students to obtain federal Title IV funds, state financial aid, and private financing; |
• | potential damage to our reputation or other adverse effects as a result of negative publicity in the media, in the industry or in connection with governmental reports or investigations or otherwise, affecting us or other companies in the for-profit postsecondary education sector; |
• | risks associated with changes in applicable federal and state laws and regulations and accrediting commission standards including pending rulemaking by the Department of Education; |
• | our ability to hire and train new, and develop and train existing, enrollment counselors; |
• | the pace of growth of our enrollment; |
• | our ability to convert prospective students to enrolled students and to retain active students; |
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• | our success in updating and expanding the content of existing programs and developing new programs in a cost-effective manner or on a timely basis; |
• | industry competition, including competition for qualified executives and other personnel; |
• | risks associated with the competitive environment for marketing our programs; |
• | failure on our part to keep up with advances in technology that could enhance the online experience for our students; |
• | the extent to which obligations under our loan agreement, including the need to comply with restrictive and financial covenants and to pay principal and interest payments, limits our ability to conduct our operations or seek new business opportunities; |
• | potential decreases in enrollment, the payment of refunds or other negative impacts on our operating results as a result of our change from a “term-based” financial aid system to a “borrower-based, non-term” or “BBAY” financial aid system; |
• | our ability to manage future growth effectively; |
• | general adverse economic conditions or other developments that affect job prospects in our core disciplines; and |
• | other factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “Regulation.” |
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Item 1. | Business |
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• | Academically rigorous, career oriented curricula.We create academically rigorous curricula that are designed to enable all students to gain the foundational knowledge, professional competencies, and demonstrable skills required to be successful in their chosen fields. Our curriculum is designed and delivered by faculty that are committed to delivering a high quality, rigorous education. We design our curricula to address specific career-oriented objectives that we believe working adult students in the disciplines we serve are seeking. Through this combination, we believe that we produce graduates that can compete and become leaders in their chosen fields. |
• | Qualified faculty.We demonstrate our commitment to high quality education by hiring qualified faculty with relevant practical experience. Substantially all of our current faculty members hold at least a master’s degree in their respective field and 30% of our faculty members hold a doctoral degree. Faculty members are able to integrate relevant, practical experiences from their professional careers into the courses they teach. We invest in the professional development of our faculty members by providing training in traditional and online teaching techniques, hosting events and discussion forums that foster sharing of best practices, and continually assessing teaching effectiveness through assessment, peer reviews, and student evaluations. |
• | Standardized course design.We employ a standardized curriculum development process to ensure a consistent learning experience with frequent faculty-student interaction in our courses. We thereafter continuously review our programs in an effort to ensure that they remain consistent, up-to-date, and effective in producing the desired learning outcomes. We also regularly review student surveys to identify opportunities for course modifications and upgrades. |
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• | Effective student services.We establish teams comprised of enrollment, academic and finance personnel that act as the primary support contact point for each of our students, beginning at the application stage and continuing through graduation. In recent years, we have also concentrated on improving the technology used to support student learning, including enhancing our online learning platform and further improving student services through the implementation of online interfaces. As a result, many of our support services, including academic, administrative, library, and career services, are accessible online, generally allowing users to access these services at a time and in a manner that is generally convenient to them. |
• | Continual academic oversight.We have centralized the assessment functions for all of our programs through our Office of Assessment, which continuously evaluates the desired learning outcomes for each of our programs. We continuously assess outcomes data to determine whether our students graduate with the knowledge, competencies, and skills that are necessary to succeed in the workplace. The Office of Assessment also initiates and manages periodic examinations of our curricula by internal and external reviewers to evaluate and verify program quality and workplace applicability. Based on these processes and student feedback, we determine whether to modify or discontinue programs that do not meet our standards or market needs, or to create new programs. The Office of Assessment also oversees assessment of mission-based competencies. |
• | Flexibility in program delivery.We also seek to meet market demands by providing students with the flexibility to take courses exclusively online or to combine online coursework with various campus and onsite options. For example, based on market demand, particularly in connection with our nursing programs, we have established satellite locations at multiple hospitals that allow nursing students to take clinical courses onsite while completing other course work online. We have established similar onsite arrangements with other major employers, including schools and school districts through which students can pursue student teaching opportunities. This flexibility raises our profile among employers, encourages students to take and complete courses and eliminates inconveniences that tend to lessen student persistence. |
• | Small class size.At December 31, 2010, over 98.0% of our online classes had 25 or fewer students. These class sizes provide each student with the opportunity to interact directly with course faculty and to receive individualized feedback and attention while also affording our faculty with the opportunity to engage proactively with a manageable number of students. We believe this interaction enhances the academic quality of our programs by promoting opportunities for students to participate actively and thus build the requisite knowledge, competencies, and skills. |
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Specialized Accreditations and Program | ||||
College | Approvals | Current Period | ||
College of Education | • The Arizona State Board of Education approves our College of Education to offer Institutional Recommendations for the certification of elementary, secondary, and special education teachers (B.S./M.Ed.) and school principals (M.Ed.). | 2010 – 2013 (teacher) 2010-2012 (principal) | ||
Ken Blanchard College of Business | • The Association of Collegiate Business Schools and Programs accredits our Executive Master of Business Administration degree program, Master of Business Administration degree program, and our Bachelor of Science degree programs in Accounting, Business Administration, Marketing, Finance and Economics, and Entrepreneurial Studies. | 2007 – 2017 | ||
College of Nursing and Health Sciences | • The Commission on Collegiate Nursing Education accredits our Bachelor of Science in Nursing and Master of Science in Nursing degree programs. | 2006 – 2016 (B.S.) 2006 – 2011 (M.S.) | ||
• The Arizona State Board of Nursing approves our Bachelor of Science in Nursing and Master of Science in Nursing degree programs. | 2006 – 2016 (B.S.) 2006 – 2011 (M.S.) | |||
• The Commission on Accreditation of Athletic Training Education accredits our Athletic Training Program. | 2008 – 2013 |
• | the College of Doctoral Studies, which utilizes innovative technology, collaboration, and learning communities to develop expert practitioners and researchers who can become leaders in the disciplines and communities they serve; |
• | the College of Education, which has a 60-year history as one of Arizona’s leading teacher’s colleges and consistently graduates teachers who meet or exceed state averages on the Arizona Educator Proficiency Assessment exams; |
• | the Ken Blanchard College of Business, which has a well-known brand among our target student population, an advisory board that includes nationally recognized business leaders, and a reputation for offering career-oriented degree programs, including an Executive MBA and programs in leadership, business, and entrepreneurship; |
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• | the College of Nursing and Health Sciences, which has a strong reputation within the Arizona healthcare community and is the second largest nursing program in Arizona; |
• | the College of Liberal Arts, which develops and provides many of the general education course requirements in our other colleges and also serves as one of the vehicles through which we offer programs in additional targeted disciplines; and |
• | the College of Fine Arts and Production, which was reintroduced in 2010 and which continues the long and highly regarded tradition that the University has in the Fine Arts. |
College of Doctoral Studies | ||
Degree Program | Emphasis | |
Doctor of Education | • Organizational Leadership — Organizational Development | |
• Organizational Leadership — Higher Education Leadership | ||
• Organizational Leadership — Effective Schools | ||
• Organizational Leadership — Behavioral Health | ||
• Organizational Leadership — Instructional Leadership |
College of Education | Ken Blanchard College of Business | |||||
Degree Program | Emphasis | Degree Program | Emphasis | |||
Master of Arts | • Teaching — Professional Learning Communities | Ken Blanchard Executive MBA | ||||
• Teaching — Teaching Leadership | ||||||
Master of Education | • Education Administration — Institutional Recommendation (“IR”) | Master of Business Administration | • Accounting • Corporate | |||
• Educational Leadership — Non-IR | • Finance | |||||
• Health Systems Management | ||||||
• Elementary Education — IR | • Marketing | |||||
• Elementary Education — Non-IR | • Leadership | |||||
• Curriculum and Instruction: Reading— Elementary | • Strategic Human Resources Management | |||||
• Curriculum and Instruction: Reading — Secondary | Master of Public Administration | • Government and Policy | ||||
• Curriculum and Instruction: Technology | • Health Care Management | |||||
• Secondary Education — IR | ||||||
• Secondary Education — Non-IR | Master of Science | • Leadership | ||||
• Special Education for Certified Special Educators | • Leadership — Disaster Preparedness & Executive Fire Leadership | |||||
• Teaching English to Speakers of Other Languages | ||||||
• Special Education — IR | ||||||
• Special Education — Non-IR | Bachelor of Science | • Accounting | ||||
• Early Childhood Education — IR | • Business Administration | |||||
• Early Childhood Education — Non-IR | • Applied Management | |||||
• Finance and Economics | ||||||
• Entrepreneurial Studies | ||||||
• Marketing | ||||||
• Public Safety Administration | ||||||
• Sports Management | ||||||
• Public Safety and Emergency Management |
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College of Education | College of Fine Arts and Production | |||||
Degree Program | Emphasis | Degree Program | Emphasis | |||
Bachelor of Science | • Elementary/Special Education | Bachelor of Arts | • Dance Education* | |||
• Elementary Education — Early Childhood | • Digital Film — Production* | |||||
Education | • Digital Film — Screenwriting* | |||||
• Elementary Education — English | • Music Education* | |||||
• Elementary Education — Math | • Music — Piano* | |||||
• Elementary Education — Science | • Music — Voice* | |||||
• Secondary Education — Biology* | • Theatre and Drama* | |||||
• Secondary Education — Business Education | ||||||
• Secondary Education — Chemistry* | ||||||
• Secondary Education — Mathematics | ||||||
• Secondary Education — Social Studies | ||||||
• Secondary Education — Physical Education* | ||||||
• Secondary Education — English | ||||||
• Early Childhood Education |
College of Nursing and Health Sciences | College of Liberal Arts | |||||
Degree Program | Emphasis | Degree Program | Emphasis | |||
Master of Science | • Nursing — Family Nurse Practitioner* | Master of Science | • Criminal Justice — Law Enforcement | |||
• Nursing — Acute Care Nurse Practitioner | ||||||
• Nursing — Leadership in Healthcare Systems | • Criminal Justice — Legal Studies | |||||
• Nursing — Clinical Nurse Specialist (Education Focus)* | • Psychology — Industrial and Organizational Psychology | |||||
• Nursing — Clinical Nurse Specialist* | • Psychology — General Psychology | |||||
• Nursing — Nursing Education | ||||||
• Professional Counseling | Master of Arts | • Christian Studies | ||||
• Addiction Counseling | • Christian Studies — Pastoral Ministry | |||||
• Marriage and Family Therapy | • Christian Studies — Urban Ministry | |||||
• Health Care Administration | • Christian Studies — Youth Ministry | |||||
• Health Care Informatics | • Christian Studies — Christian Leadership | |||||
Master of Public Health Science | ||||||
Bachelor of Science | • Nursing* | Bachelor of Science | • Justice Studies | |||
• Biology — Pre-Medicine* | • Psychology | |||||
• Biology — Pre-Pharmacy* | • Sociology | |||||
• Biology — Pre-Physician Assistant* | ||||||
• Health Science: Professional Development and Advanced Patient Care | ||||||
• Respiratory Care | Bachelor of Arts | • Communications | ||||
• Medical Imaging Sciences | • English Literature | |||||
• Athletic Training* | • Interdisciplinary Studies | |||||
• Addiction Counseling | • Christian Studies | |||||
• Exercise Science — Athletic Coaching | • History | |||||
• Exercise Science — Health Education | ||||||
• Exercise Science — Physical Education | ||||||
• Exercise Science — Pre-Physical Therapy | ||||||
• Health Care Administration |
* | Indicates program was offered on ground only |
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December 31, 2010(1) | December 31, 2009 | |||||||||||||||
# of Students | % of Total | # of Students | % of Total | |||||||||||||
Graduate degree(2) | 17,732 | 42.7 | % | 16,097 | 42.7 | % | ||||||||||
Undergraduate degree | 23,750 | 57.3 | % | 21,612 | 57.3 | % | ||||||||||
Total | 41,482 | 100.0 | % | 37,709 | 100.0 | % | ||||||||||
December 31, 2010(1) | December 31, 2009 | |||||||||||||||
# of Students | % of Total | # of Students | % of Total | |||||||||||||
Online(3) | 37,734 | 91.0 | % | 34,596 | 91.7 | % | ||||||||||
Ground(4) | 3,748 | 9.0 | % | 3,113 | 8.3 | % | ||||||||||
Total | 41,482 | 100.0 | % | 37,709 | 100.0 | % | ||||||||||
(1) | Enrollment at December 31, 2010 represents individual students who attended a course during the last two months of the calendar quarter. Prior to our transition to BBAY, enrollment had been defined as individual students that attended a course in a term that was in session as of the end of the quarter. | |
(2) | Includes 1,186 and 315 students pursuing doctoral degrees at December 31, 2010 and 2009, respectively. | |
(3) | As of December 31, 2010 and 2009, 45.5% and 44.5%, respectively, of our online students were pursuing graduate or doctoral degrees. | |
(4) | Includes our traditional on-campus students, as well as our professional studies students. |
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• | availability of career-oriented and accredited program offerings; | ||
• | the types of degrees offered and marketability of those degrees; | ||
• | reputation, regulatory approvals, and compliance history of the school; | ||
• | convenient, flexible and dependable access to programs and classes; | ||
• | qualified and experienced faculty; | ||
• | level of student support services; | ||
• | cost of the program; | ||
• | marketing and selling effectiveness; and | ||
• | the time necessary to earn a degree. |
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• | whether the institution and the program were approved by the state in which the graduate seeks licensure, or by a professional association; | ||
• | whether the program from which the student graduated meets all requirements for professional licensure in that state; | ||
• | whether the institution and the program are accredited and, if so, by what accrediting commissions; and | ||
• | whether the institution’s degrees are recognized by other states in which a student may seek to work. |
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• | The Association of Collegiate Business Schools and Programs accredits our Executive Master of Business Administration degree program, Master of Business Administration degree program and our Bachelor of Science degree programs in Accounting, Business Administration, Marketing, and Entrepreneurship; | ||
• | The Commission on Collegiate Nursing Education accredits our Bachelor of Science in Nursing and Master of Science in Nursing degree programs; and | ||
• | The Commission on Accreditation of Athletic Training Education accredits our Athletic Training Program. |
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• | comply with all applicable Title IV program requirements; | ||
• | have an adequate number of qualified personnel to administer the Title IV programs; | ||
• | have acceptable standards for measuring the satisfactory academic progress of its students; | ||
• | not have student loan cohort default rates above specified levels; | ||
• | have various procedures in place for awarding, disbursing and safeguarding Title IV funds and for maintaining required records; | ||
• | administer the Title IV programs with adequate checks and balances in its system of internal controls; | ||
• | not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension; | ||
• | provide financial aid counseling to its students; | ||
• | refer to the Department of Education’s Office of Inspector General any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving the Title IV programs; | ||
• | submit all required reports and financial statements in a timely manner; and | ||
• | not otherwise appear to lack administrative capability. |
• | require the institution to repay Title IV funds its students previously received; | ||
• | transfer the institution from the advance method of payment of Title IV funds to heightened cash monitoring status or the reimbursement system of payment; | ||
• | place the institution on provisional certification status; or | ||
• | commence a proceeding to impose a fine or to limit, suspend or terminate the institution’s participation in the Title IV programs. |
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• | equity ratio, which measures the institution’s capital resources, financial viability and ability to borrow; | ||
• | primary reserve ratio, which measures the institution’s ability to support current operations from expendable resources; and | ||
• | net income ratio, which measures the institution’s ability to operate at a profit or within its means. |
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• | Programs with at least 45% of their former students paying down the principal on their federal loans, or with graduates having a debt-to-earnings ratio of less than 20% of discretionary income or 8% of total income, would be deemed fully eligible for Title IV funding. These programs would be required to disclose both their repayment rates and debt-to-earnings ratios unless they pass both of the preceding tests. | ||
• | Programs with less than 35% of their former students paying down the principal on their federal loans, and with graduates having a debt-to-earnings ratio above 30% of discretionary income and 12% of total income, would be deemed ineligible for Title IV funding. Such programs would have lost Title IV eligibility as of July 1, 2012, although institutions would have been required to warn students in the programs about the high debt-to-earnings ratio effective July 1, 2011. In order to mitigate against large and immediate displacements of students as of the July 1, 2012 deadline, the Department of Education further proposed that no more than 5% of a single institution’s programs would be declared ineligible as of that date, with the lowest-performing programs immediately losing eligibility and the remaining non-compliant programs losing eligibility one year later. | ||
• | Programs that are not fully eligible or ineligible under the above standards would be restricted programs and subject to limits on enrollment growth. Such institutions also would be required to demonstrate employer support for the program and warn consumers and current students of high debt levels. |
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Item 1A. | Risk Factors |
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• | A proposal to modify the standards relating to the payment of incentive compensation to employees involved in student recruitment and enrollment; | ||
• | A proposal to modify the standards relating to misrepresentations by employees and third parties on behalf of institutions; |
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• | A proposal to modify state authorization of online programs; and | ||
• | A proposal to adopt a definition of “gainful employment” for purposes of the requirement placed on proprietary schools that participate in Title IV student financial aid programs that a program of study prepare students for gainful employment in a recognized occupation. |
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• | Programs with at least 45% of their former students paying down the principal on their federal loans, or with graduates having a debt-to-earnings ratio of less than 20% of discretionary income or 8% of total income, would be deemed fully eligible for Title IV funding. These programs would be required to disclose both their repayment rates and debt-to-earnings ratios unless they pass both of the preceding tests. | ||
• | Programs with less than 35% of their former students paying down the principal on their federal loans, and with graduates having a debt-to-earnings ratio above 30% of discretionary income and 12% of total income, would be deemed ineligible for Title IV funding. Such programs would have lost Title IV eligibility as of July 1, 2012, although institutions would have been required to warn students in the programs about the high debt-to-earnings ratio effective July 1, 2011. In order to mitigate against large and immediate displacements of students as of the July 1, 2012 deadline, the Department of Education further proposed that no more than 5% of a single institution’s programs would be declared ineligible as of that date, with the lowest-performing programs immediately losing eligibility and the remaining non-compliant programs losing eligibility one year later. | ||
• | Programs that are not fully eligible or ineligible under the above standards would be restricted programs and subject to limits on enrollment growth. Such institutions also would be required to demonstrate employer support for the program and warn consumers and current students of high debt levels. |
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• | the reduced availability of, or higher interest rates and other costs associated with, Title IV loan funds or other sources of financial aid; |
• | the emergence of more successful competitors; |
• | factors related to our marketing, including the costs and effectiveness of Internet advertising and broad-based branding campaigns and recruiting efforts; |
• | performance problems with our online systems; |
• | failure to maintain institutional and specialized accreditations; |
• | the requirements of the education agencies that regulate us which restrict schools’ initiation of new programs and modification of existing programs; |
• | the requirements of the education agencies that regulate us which restrict the ways schools can compensate their recruitment personnel; |
• | increased regulation of online education, including in states in which we do not have a physical presence; |
• | restrictions that may be imposed on graduates of online programs that seek certification or licensure in certain states; |
• | student dissatisfaction with our services and programs; |
• | the results of the ongoing program review by the Department of Education, and possible remedial actions or other liability resulting therefrom; |
• | damage to our reputation or other adverse effects as a result of negative publicity in the media, in industry or governmental reports, or otherwise, affecting us or other companies in the for-profit postsecondary education sector; |
• | price reductions by competitors that we are unwilling or unable to match; |
• | a decline in the acceptance of online education; |
• | an adverse economic or other development that affects job prospects in our core disciplines; and | ||
• | a decrease in the perceived or actual economic benefits that students derive from our programs. |
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• | incur additional indebtedness or liens; | ||
• | sell, assign, lease, transfer or otherwise dispose of any part of our assets other than in the ordinary course of business; |
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• | make investments or capital contributions to any individual or entity; |
• | enter into any consolidation, merger, or other combination, or become a partner in a partnership, a member of a joint venture, or a member of a limited liability company; |
• | acquire or purchase a business or all or substantially all of the assets of a business in an aggregate amount exceeding an amount equal to 25% of our tangible net worth; and |
• | engage in any business activities substantially different from our present business. |
• | inadequate Internet infrastructure; |
• | security and privacy concerns; |
• | the unavailability of cost-effective Internet service and other technological factors; and |
• | changes in government regulation of Internet use. |
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• | inability to maintain uniform standards, controls, policies, and procedures; |
• | distraction of management’s attention from normal business operations during the integration process; |
• | inability to obtain, or delay in obtaining, approval of the acquisition from the necessary regulatory agencies, or the imposition of operating restrictions or a letter of credit requirement on us or on the acquired school by any of those regulatory agencies; |
• | expenses associated with the integration efforts; and |
• | unidentified issues not discovered in our due diligence process, including legal contingencies. |
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• | our quarterly or annual earnings or earnings of other companies in our industry; |
• | the public’s reaction to our press releases, our other public announcements, and our filings with the SEC; |
• | changes in earnings estimates or recommendations by research analysts who track our common stock or the stocks of other companies in our industry; |
• | changes in our number of enrolled students; |
• | new or proposed laws or regulations or new or proposed interpretations of laws or regulations applicable to our business; |
• | seasonal variations in our student population; |
• | damage to our reputation or other adverse effects as a result of negative publicity in the media, in industry or governmental reports, or otherwise, affecting us or other companies in the for-profit postsecondary education sector; |
• | the availability and cost of Title IV funds, other student financial aid, and private loans; |
• | the failure to maintain or keep in good standing our regulatory approvals and accreditations; |
• | changes in accounting standards, policies, guidance, interpretations, or principles; |
• | changes in general conditions in the U.S. and global economies or financial markets, including those resulting from war, incidents of terrorism, or responses to such events; |
• | an adverse economic or other development that affects job prospects in our core disciplines; |
• | litigation involving our University, or investigations or audits by regulators into the operations of our University or our competitors, including the ongoing program review being conducted by the Department of Education; and |
• | sales of common stock by our directors, executive officers, and significant stockholders. |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
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Item 4. | (Removed and Reserved) |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
High | Low | |||||||
2009 | ||||||||
First Quarter | $ | 20.80 | $ | 12.53 | ||||
Second Quarter | $ | 17.35 | $ | 12.74 | ||||
Third Quarter | $ | 19.52 | $ | 15.69 | ||||
Fourth Quarter | $ | 19.88 | $ | 15.96 | ||||
2010 | ||||||||
First Quarter | $ | 27.23 | $ | 18.15 | ||||
Second Quarter | $ | 28.46 | $ | 22.83 | ||||
Third Quarter | $ | 24.70 | $ | 15.33 | ||||
Fourth Quarter | $ | 23.26 | $ | 16.90 |
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* | $100 invested on 11/20/08 in stock or 10/31/08 in index, including reinvestment of dividends. Fiscal year ending December 31. |
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11/08 | 11/08 | 12/08 | 1/09 | 2/09 | 3/09 | 4/09 | 5/09 | |||||||||||||||||||||||||
Grand Canyon Education, Inc. | 100.00 | 125.23 | 158.48 | 146.24 | 143.63 | 145.65 | 137.97 | 114.43 | ||||||||||||||||||||||||
S&P 500 | 100.00 | 92.83 | 93.81 | 85.91 | 76.76 | 83.48 | 91.47 | 96.59 | ||||||||||||||||||||||||
NASDAQ Composite | 100.00 | 89.99 | 92.81 | 87.08 | 81.62 | 89.96 | 100.59 | 104.30 | ||||||||||||||||||||||||
New Peer Group | 100.00 | 112.86 | 110.37 | 114.62 | 103.04 | 91.28 | 77.84 | 74.49 |
6/09 | 7/09 | 8/09 | 9/09 | 10/09 | 11/09 | 12/09 | ||||||||||||||||||||||
Grand Canyon Education, Inc. | 141.60 | 147.76 | 146.84 | 150.46 | 136.88 | 161.77 | 160.42 | |||||||||||||||||||||
S&P 500 | 96.78 | 104.10 | 107.86 | 111.88 | 109.80 | 116.39 | 118.64 | |||||||||||||||||||||
NASDAQ Composite | 108.02 | 116.39 | 118.59 | 125.08 | 120.89 | 126.96 | 134.06 | |||||||||||||||||||||
New Peer Group | 89.68 | 87.84 | 84.18 | 91.49 | 76.19 | 75.97 | 80.07 |
1/10 | 2/10 | 3/10 | 4/10 | 5/10 | 6/10 | 7/10 | ||||||||||||||||||||||
Grand Canyon Education, Inc. | 168.52 | 183.54 | 220.59 | 204.05 | 207.26 | 197.72 | 204.81 | |||||||||||||||||||||
S&P 500 | 114.37 | 117.91 | 125.03 | 127.00 | 116.86 | 110.74 | 118.50 | |||||||||||||||||||||
NASDAQ Composite | 127.40 | 132.92 | 142.25 | 145.46 | 133.36 | 125.34 | 133.98 | |||||||||||||||||||||
New Peer Group | 77.94 | 80.92 | 86.97 | 84.01 | 79.13 | 64.69 | 71.06 |
8/10 | 9/10 | 10/10 | 11/10 | 12/10 | ||||||||||||||||
Grand Canyon Education, Inc. | 143.88 | 185.06 | 158.73 | 160.68 | 165.32 | |||||||||||||||
S&P 500 | 113.15 | 123.25 | 127.94 | 127.96 | 136.51 | |||||||||||||||
NASDAQ Composite | 126.21 | 141.37 | 149.55 | 148.93 | 158.26 | |||||||||||||||
New Peer Group | 52.47 | 66.91 | 51.37 | 50.97 | 60.29 |
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Item 6. | Selected Financial and Other Data |
Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Restated | (In thousands, except per share data) | |||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Net revenue | $ | 385,625 | $ | 261,902 | $ | 161,309 | $ | 99,326 | $ | 72,111 | ||||||||||
Costs and expenses: | ||||||||||||||||||||
Instructional costs and services(1) | 178,548 | 101,608 | 62,915 | 45,307 | 35,951 | |||||||||||||||
Selling and promotional | 112,493 | 85,405 | 65,551 | 35,148 | 20,093 | |||||||||||||||
General and administrative(1) | 26,621 | 21,603 | 18,360 | 10,744 | 10,347 | |||||||||||||||
Contract termination fee | 9,233 | — | — | — | — | |||||||||||||||
Litigation loss | — | 5,200 | — | — | — | |||||||||||||||
Estimated exit costs | 258 | 1,218 | — | — | — | |||||||||||||||
Royalty to former owner | 296 | 296 | 1,686 | 3,782 | 2,678 | |||||||||||||||
Total costs and expenses | 327,449 | 215,330 | 148,512 | 94,981 | 69,069 | |||||||||||||||
Operating income | 58,176 | 46,572 | 12,797 | 4,345 | 3,042 | |||||||||||||||
Interest expense | (889 | ) | (1,613 | ) | (2,897 | ) | (2,975 | ) | (2,827 | ) | ||||||||||
Interest income | 168 | 324 | 640 | 1,172 | 912 | |||||||||||||||
Income before income taxes | 57,455 | 45,283 | 10,540 | 2,542 | 1,127 | |||||||||||||||
Income tax expense | 22,249 | 17,979 | 3,855 | 1,016 | 529 | |||||||||||||||
Net income | 35,206 | 27,304 | 6,685 | 1,526 | 598 | |||||||||||||||
Preferred dividends | — | — | (938 | ) | (349 | ) | (527 | ) | ||||||||||||
Net income available to common stockholders | $ | 35,206 | $ | 27,304 | $ | 5,747 | $ | 1,177 | $ | 71 | ||||||||||
Earnings per common share | ||||||||||||||||||||
Basic | $ | 0.77 | $ | 0.60 | $ | 0.26 | $ | 0.06 | $ | 0.00 | ||||||||||
Diluted | $ | 0.76 | $ | 0.60 | $ | 0.17 | $ | 0.03 | $ | 0.00 | ||||||||||
Shares used in computing earnings per common share | ||||||||||||||||||||
Basic | 45,722 | 45,184 | 22,185 | 18,923 | 18,853 | |||||||||||||||
Diluted | 46,396 | 45,503 | 33,430 | 35,143 | 36,858 |
Year Ended December 31, | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||
Restated | (In thousands) | |||||||||||||||||||||
Other Data: | ||||||||||||||||||||||
Capital expenditures | $ | 62,627 | $ | 60,265 | $ | 8,374 | $ | 7,406 | $ | 2,387 | ||||||||||||
Depreciation and amortization | $ | 11,812 | $ | 7,664 | $ | 5,095 | $ | 3,300 | $ | 2,396 | ||||||||||||
Adjusted EBITDA(2) | $ | 85,824 | $ | 65,119 | $ | 25,675 | $ | 11,723 | $ | 9,074 | ||||||||||||
Period end enrollment(3): | ||||||||||||||||||||||
Online | 37,734 | 34,596 | 21,955 | 12,497 | 8,406 | |||||||||||||||||
Ground | 3,748 | 3,113 | 2,681 | 2,257 | 2,256 |
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As of December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Restated | (In thousands) | |||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents and marketable securities | $ | 33,637 | $ | 63,101 | $ | 35,627 | $ | 18,930 | $ | 11,535 | ||||||||||
Restricted cash, cash equivalents and investments | 52,938 | 3,233 | 5,125 | 7,578 | 5,900 | |||||||||||||||
Total assets | 275,096 | 174,738 | 116,990 | 88,568 | 61,232 | |||||||||||||||
Capital lease obligations (including short-term) | 1,824 | 1,619 | 30,509 | 29,228 | 29,728 | |||||||||||||||
Notes payable (including short-term) | 23,907 | 26,088 | 1,744 | 2,408 | 2,462 | |||||||||||||||
Preferred stock | — | — | — | 31,948 | 21,390 | |||||||||||||||
Total stockholders’/members’ equity (deficit) | 127,501 | 86,028 | 53,590 | (10,386 | ) | (11,723 | ) |
(1) | All amounts presented reflect the reclassification of bad debt expense from General and administrative expense to Instructional costs and services expense as disclosed in Note 3 to our financial statements included herein. | |
(2) | Adjusted EBITDA is defined as net income plus interest expense net of interest income, plus income tax expense, and plus depreciation and amortization (EBITDA), as adjusted for (i) the amortization of prepaid royalty payments recorded in conjunction with a settlement of a dispute with our former owner, as discussed in Note 3 to our financial statements that are included in Item 8,Financial Statements and Supplementary Data; (ii) management fees and expenses that are no longer paid; (iii) contributions made to Arizona school tuition organizations in lieu of the payment of state income taxes, which we typically make in the fourth quarter of a fiscal year; (iv) litigation losses, if any; (v) exit costs, if any; (vi) contract termination fees, if any; and (vii) share-based compensation. | |
(3) | Enrollment at December 31, 2010 represents individual students who attended a course during the last two months of the calendar quarter. Prior to our transition to BBAY, enrollment had been defined as individual students that attended a course in a term that was in session as of the end of the quarter. |
• | cash expenditures for capital expenditures or contractual commitments; | ||
• | changes in, or cash requirement for, our working capital requirements; |
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• | interest expense, or the cash required to replace assets that are being depreciated or amortized; and |
• | the impact on our reported results of earnings or charges resulting from the items for which we make adjustments to our EBITDA, as described above and set forth in the table below. |
Year Ended December 31, | ||||||||||||
(In thousands) | 2010 | 2009 | 2008 | |||||||||
Restated | ||||||||||||
Net income | $ | 35,206 | $ | 27,304 | $ | 6,685 | ||||||
Plus: interest expense net of interest income | 721 | 1,289 | 2,257 | |||||||||
Plus: income tax expense | 22,249 | 17,979 | 3,855 | |||||||||
Plus: depreciation and amortization | 11,812 | 7,664 | 5,095 | |||||||||
EBITDA | 69,988 | 54,236 | 17,892 | |||||||||
Plus: royalty to former owner(a) | 296 | 296 | 1,686 | |||||||||
Plus: management fees and expenses(b) | — | — | 356 | |||||||||
Plus: contributions made in lieu of state income taxes(c) | 1,000 | 750 | 750 | |||||||||
Plus: litigation loss(d) | — | 5,200 | — | |||||||||
Plus: exit costs(e) | 258 | 1,218 | — | |||||||||
Plus: contract termination fee(f) | 9,233 | — | — | |||||||||
Plus: share-based compensation(g) | 5,049 | 3,419 | 4,991 | |||||||||
Adjusted EBITDA | $ | 85,824 | $ | 65,119 | $ | 25,675 | ||||||
(a) | Reflects the royalty fee arrangement with the former owner of Grand Canyon University in which we agreed to pay a stated percentage of cash revenue generated by our online programs. As a result of the settlement of a dispute with the former owner, we are no longer obligated to pay this royalty, although the settlement includes a prepayment of future royalties that we amortize over time. See Note 3 to our financial statements that are included in Item 8,Financial Statements and Supplementary Data. | |
(b) | Reflects management fees and expenses to the general partner of Endeavour Capital Fund IV, L.P., one of our significant stockholders. Concurrent with the completion of the initial public offering in November 2008, the professional services agreement pursuant to which these fees and expenses were paid terminated by its terms. | |
(c) | Reflects contributions made to various Arizona school tuition organizations to assist with funding for education. In connection with such contributions made we received a dollar-for-dollar state income tax credit, which resulted in a reduction in our effective income tax rate to 39.1%, 39.7% and 36.6% for the years ended December 31, 2010, 2009 and 2008, respectively. Had these contributions not been made, our effective tax rate would have been 39.9%, 40.7% and 40.8%, for 2010, 2009 and 2008, respectively. Such contributions are viewed by our management to be made in lieu of payments of state income taxes and are therefore excluded from evaluation of our core operating performance. | |
(d) | Reflects an accrual of $5.2 million for the litigation settlement on ourqui tammatter, which became final in December 2010. See Item 8,Financial Statements and Supplementary Data, and Part I, Item 3,Legal Proceedings. | |
(e) | Represents exit costs related to the closure of a student services facility in Utah, including termination benefits, relocation expenses and the future lease payments, plus the write off of leasehold improvements associated with the leased space. | |
(f) | Represents contract termination fees related to the termination of our Mind Streams revenue sharing arrangement, which was reached in December 2010. See Item 8,Financial Statements and Supplementary Data. | |
(g) | Reflects share-based compensation expense relating to stock and option grants made to employees and directors in connection with our initial public offering and thereafter. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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• | Programs with at least 45% of their former students paying down the principal on their federal loans, or with graduates having a debt-to-earnings ratio of less than 20% of discretionary income or 8% of total income, would be deemed fully eligible for Title IV funding. These programs would be required to disclose both their repayment rates and debt-to-earnings ratios unless they pass both of the preceding tests. | ||
• | Programs with less than 35% of their former students paying down the principal on their federal loans, and with graduates having a debt-to-earnings ratio above 30% of discretionary income and 12% of total income, would be deemed ineligible for Title IV funding. Such programs would have lost Title IV eligibility as of July 1, 2012, although institutions would have been required to warn students in the programs about the high debt-to-earnings ratio effective July 1, 2011. In order to mitigate against large and immediate displacements of students as of the July 1, 2012 deadline, the Department of Education further proposed that no more than 5% of a single institution’s programs would be declared ineligible as of that date, with the lowest-performing programs immediately losing eligibility and the remaining non-compliant programs losing eligibility one year later. | ||
• | Programs that are not fully eligible or ineligible under the above standards would be restricted programs and subject to limits on enrollment growth. Such institutions also would be required to demonstrate employer support for the program and warn consumers and current students of high debt levels. |
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• | Enrollment, Net Revenue, and Operating Income Growth — We achieved significant enrollment growth for the fiscal year ended December 31, 2010 as compared to the fiscal year ended December 31, 2009 despite a change in our enrollment calculation that reduces our reported enrollment count. As part of our transition to BBAY, we calculate period end enrollment as including only individual students who attended a course during the last two months of the calendar quarter. Prior to our transition to BBAY, enrollment had been defined as individual students that attended a course in a term that was in session as of the end of the quarter. Another factor contributing to the 47.3% increase in net revenue over the same period was the significant increase in the revenue per student as a result of the number of students taking four credit courses between years, which was slightly offset by lower tuition increases. For our 2010-11 academic year, which began in May 2010, we increased tuition for students in our online and professional studies programs from 0.0% to 5.7%, depending on the program, with an estimated blended rate increase of 3.5% as compared to increases of 2.3% to 15.5%, depending on the program, with an estimated blended rate increase of 5.0% for the prior academic year. Tuition for our traditional ground programs had no increase for our 2010-11 academic year, as compared to 6.6% increase for the prior academic year. Tuition increases have not historically been, and may not in the future be, consistent across our programs due to market conditions and differences in operating costs of individual programs. Operating income was $73.5 million for the fiscal year ended December 31, 2010, an increase of 57.9% over the $46.6 million in operating income for 2009. |
• | Capital Expenditures — Our capital expenditures in 2010 of $62.6 million were primarily related to the expansion of our physical campus and significant investments in technology innovation to support our students and staff. In 2010, we completed construction on our 55,000 square foot recreation center for both student-athletes and on-campus students, a new dormitory that can hold up to 600 students, and a new College of Education classroom building. We started development on a 140,000 square foot arena that will open in September 2011, a new 500-bed dormitory and a food court restaurant that will be completed in August 2011. These investments are to support our growing on-campus student population as well as enhance the brand of the University. |
• | Investing in Innovative Educational Tools — During 2010, we entered into an agreement with an affiliated entity to develop a new learning management system for use by Grand Canyon University. Through this agreement we prepaid perpetual license fees, acquired source code rights for the software developed, and prepaid maintenance and service fees for the first seven years of use for an aggregate amount of $4.9 million. We anticipate the conversion to this new learning management platform for our online delivered coursework by the third quarter of 2011. |
• | Conversion to Borrower Based, Non-Term Financial Aid System — In the second quarter of 2010, we completed the conversion of our students records system from DataTel to Campus Vue. As described above, the move to BBAY has, in some circumstances, significantly reduced the amount of living expenses a student is eligible to receive, while allowing our students to take more frequent breaks between classes. We estimate that the conversion to BBAY resulted in lower net revenues between approximately $30 million to $37 million during the second half of 2010. In connection with this conversion, we incurred approximately $4.0 million of costs due to unanticipated delays in information processing which are included in instructional costs and services in 2010. In addition as a result of our move to BBAY, we receive a greater proportion of student financial aid prior to the time courses have begun, which has resulted in the shift of unrestricted cash to restricted cash and caused a significant increase in our restricted cash amount between December 31, 2009 and December 31, 2010. |
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• | Settlement of Qui Tam Law Suit — In recent years, several for-profit education companies have been faced with whistleblower lawsuits, known as“qui tam” cases, brought by current or former employees alleging that their institution had made impermissible incentive payments to admissions employees. In this regard, on September 11, 2008, we were served with aqui tamlawsuit that had been filed against us in August 2007 in the United States District Court for the District of Arizona by a then-current employee on behalf of the federal government. During the third quarter of fiscal year 2009, we accrued $5.2 million for the proposed settlement of this litigation, which became final in December 2010. Subject to the distribution of the settlement amount from escrow in accordance with the terms of the settlement agreement, this matter is now resolved. See Item 8,Financial Statements and Supplementary Data, and Part I, Item 3,Legal Proceedings. |
• | Contract termination fees with a related party — We were a party to a Collaboration Agreement with Mind Streams, L.L.C., which is a company owned and operated, in part, by Gail Richardson, the father of Brent D. Richardson, the University’s Executive Chairman, and Christopher C. Richardson, the University’s General Counsel and a director. Under this agreement, Mind Streams identified qualified applicants for admission to the University in return for which it was paid a stated percentage of the net revenue (calculated as tuition actually received, less scholarships, refunds, and allowances) derived by us from those identified applicants that matriculated at the University. As a result of new rules adopted by the U.S. Department of Education and effective July 1, 2011, we determined that revenue sharing arrangement like the Collaboration Agreement, and the manner in which we pay amounts due Mind Streams under the Collaboration Agreement, will most likely no longer be permitted. Accordingly, we and Mind Streams entered into a termination agreement, dated December 30, 2010. The amount paid by us settles both the future amounts that would have been due to Mind Streams’ under the original terms of the agreement as well as the value of an acquired database of student leads. In the aggregate, we expensed $9.2 million in 2010 relating to the termination of this contract. |
• | Internal control over financial reporting. As of December 31, 2010, in connection with the restatement of our 2010 financial statements discussed above, we concluded that a material weakness existed in our internal control over financial reporting. SeeItem 9A — Controls and Procedures. We have implemented certain changes in our internal controls in an effort to remediate this material weakness. As of the date of this filing, we believe the measures we have under taken have remediated the material weakness we have identified. |
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December 31, | ||||||||||||||||||||||||
2010(1) | 2009 | 2008 | ||||||||||||||||||||||
# of Students | % of Total | # of Students | % of Total | # of Students | % of Total | |||||||||||||||||||
Graduate degree(2) | 17,732 | 42.7 | % | 16,097 | 42.7 | % | 13,031 | 52.9 | % | |||||||||||||||
Undergraduate degree | 23,750 | 57.3 | % | 21,612 | 57.3 | % | 11,605 | 47.1 | % | |||||||||||||||
Total | 41,482 | 100.0 | % | 37,709 | 100.0 | % | 24,636 | 100.0 | % | |||||||||||||||
December 31, | ||||||||||||||||||||||||
2010(1) | 2009 | 2008 | ||||||||||||||||||||||
# of Students | % of Total | # of Students | % of Total | # of Students | % of Total | |||||||||||||||||||
Online(3) | 37,734 | 91.0 | % | 34,596 | 91.7 | % | 21,955 | 89.1 | % | |||||||||||||||
Ground(4) | 3,748 | 9.0 | % | 3,113 | 8.3 | % | 2,681 | 10.9 | % | |||||||||||||||
Total | 41,482 | 100.0 | % | 37,709 | 100.0 | % | 24,636 | 100.0 | % | |||||||||||||||
(1) | Enrollment at December 31, 2010 represents individual students who attended a course during the last two months of the calendar quarter. Prior to our transition to BBAY, enrollment had been defined as individual students that attended a course in a term that was in session as of the end of the quarter. | |
(2) | Includes 1,186, 315 and 56 students pursuing doctoral degrees at December 31, 2010, 2009 and 2008, respectively. | |
(3) | As of December 31, 2010 and 2009, 45.5% and 44.5%, respectively, of our online students were pursuing graduate or doctoral degrees. | |
(4) | Includes our traditional on-campus students, as well as our professional studies students. |
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net revenue | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Operating expenses | ||||||||||||
Instructional cost and services | 46.3 | 38.8 | 39.0 | |||||||||
Selling and promotional | 29.2 | 32.6 | 40.6 | |||||||||
General and administrative | 6.9 | 8.2 | 11.4 | |||||||||
Litigation loss | 0.0 | 2.0 | 0.0 | |||||||||
Contract termination fees to related party | 2.4 | 0.0 | 0.0 | |||||||||
Exit costs | 0.1 | 0.5 | 0.0 | |||||||||
Royalty to former owner | 0.1 | 0.1 | 1.0 | |||||||||
Total operating expenses | 84.9 | 82.2 | 92.1 | |||||||||
Operating income | 15.1 | 17.8 | 7.9 | |||||||||
Interest expense | (0.2 | ) | (0.6 | ) | (1.8 | ) | ||||||
Interest income | 0.0 | 0.1 | 0.4 | |||||||||
Income before income taxes | 14.9 | 17.3 | 6.5 | |||||||||
Income tax expense | 5.8 | 6.9 | 2.4 | |||||||||
Net income | 9.1 | 10.4 | 4.1 | |||||||||
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 Year | 2-3 Years | 4-5 Years | 5 Years | ||||||||||||||||
Long term notes payable(1) | $ | 23.9 | $ | 2.0 | $ | 3.5 | $ | 18.0 | $ | 0.4 | ||||||||||
Capital lease obligations(2) | 1.8 | 1.7 | 0.1 | 0.0 | 0.0 | |||||||||||||||
Purchase obligations | 44.2 | 42.2 | 1.8 | 0.2 | 0.0 | |||||||||||||||
Operating lease obligations(3) | 53.6 | 4.8 | 12.7 | 12.1 | 24.0 | |||||||||||||||
Total contractual obligations | $ | 123.5 | $ | 50.7 | $ | 18.1 | $ | 30.3 | $ | 24.4 | ||||||||||
(1) | See Note 8, “Notes Payable and Other Noncurrent Liabilities,” to our financial statements, included in Item 8,Financial Statements and Supplementary Data, for a discussion of our long term notes payable and other obligations. | |
(2) | See Note 9, “Capital Lease Obligations,” to our financial statements, included in Item 8,Financial Statements and Supplementary Data, for a discussion of our capital lease obligations. | |
(3) | See Note 10, “Commitments and Contingencies,” to our financial statements, included in Item 8,Financial Statements and Supplementary Data, for a discussion of our operating lease obligations. |
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Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
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Item 8. | Financial Statements and Supplementary Data |
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Grand Canyon Education, Inc.
/s/ Ernst & Young LLP |
February 22, 2011, except for Note 2, as to which the date is November 14, 2011
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As of December 31, | ||||||||
(In thousands, except par value) | 2010 | 2009 | ||||||
Restated | ||||||||
ASSETS: | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 33,637 | $ | 62,571 | ||||
Restricted cash, cash equivalents and investments (of which $170 is unrestricted at December 31, 2009) | 52,178 | 3,403 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $30,112 (Restated) and $7,553 at December 31, 2010 and 2009, respectively | 17,983 | 13,802 | ||||||
Income taxes receivable | 8,415 | — | ||||||
Deferred income taxes | 16,078 | 6,685 | ||||||
Other current assets | 4,834 | 3,785 | ||||||
Total current assets | 133,125 | 90,246 | ||||||
Property and equipment, net | 123,999 | 67,370 | ||||||
Restricted cash | 760 | — | ||||||
Investments | — | 360 | ||||||
Prepaid royalties | 6,579 | 7,311 | ||||||
Goodwill | 2,941 | 2,941 | ||||||
Deferred income taxes | 2,800 | 5,956 | ||||||
Other assets | 4,892 | 554 | ||||||
Total assets | $ | 275,096 | $ | 174,738 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 15,693 | $ | 8,762 | ||||
Accrued compensation and benefits | 13,633 | 11,898 | ||||||
Accrued liabilities | 9,477 | 6,205 | ||||||
Accrued litigation loss | 5,200 | 5,200 | ||||||
Accrued exit costs | 64 | 832 | ||||||
Income taxes payable | 829 | 2,261 | ||||||
Student deposits | 48,873 | 5,149 | ||||||
Deferred revenue | 15,034 | 18,055 | ||||||
Due to related parties | 10,346 | 1,174 | ||||||
Current portion of capital lease obligations | 1,673 | 751 | ||||||
Current portion of notes payable | 2,026 | 2,105 | ||||||
Total current liabilities | 122,848 | 62,392 | ||||||
Capital lease obligations, less current portion | 151 | 868 | ||||||
Other noncurrent liabilities | 2,715 | 1,467 | ||||||
Notes payable, less current portion and other | 21,881 | 23,983 | ||||||
Total liabilities | 147,595 | 88,710 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity | ||||||||
Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at December 31, 2010 and 2009 | — | — | ||||||
Common stock, $0.01 par value, 100,000 shares authorized; 45,811 and 45,658 shares issued and 45,761 and 45,658 shares outstanding at December 31, 2010 and 2009, respectively | 458 | 457 | ||||||
Treasury stock, at cost, 50 and 0 shares of common stock at December 31, 2010 and 2009, respectively | (782 | ) | — | |||||
Additional paid-in capital | 77,449 | 70,100 | ||||||
Accumulated other comprehensive loss | (445 | ) | (144 | ) | ||||
Accumulated earnings | 50,821 | 15,615 | ||||||
Total stockholders’ equity | 127,501 | 86,028 | ||||||
Total liabilities and stockholders’ equity | $ | 275,096 | $ | 174,738 | ||||
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Year Ended December 31, | ||||||||||||
(In thousands, except per share amounts) | 2010 | 2009 | 2008 | |||||||||
Restated | ||||||||||||
Net revenue | $ | 385,625 | $ | 261,902 | $ | 161,309 | ||||||
Costs and expenses: | ||||||||||||
Instructional costs and services | 178,548 | 101,608 | 62,915 | |||||||||
Selling and promotional, including $8,777 in 2010; $6,736 in 2009; and $5,895 in 2008, to related parties | 112,493 | 85,405 | 65,551 | |||||||||
General and administrative | 26,621 | 21,603 | 18,360 | |||||||||
Litigation loss | — | 5,200 | — | |||||||||
Contract termination fees to related party | 9,233 | — | — | |||||||||
Exit costs | 258 | 1,218 | — | |||||||||
Royalty to former owner | 296 | 296 | 1,686 | |||||||||
Total costs and expenses | 327,449 | 215,330 | 148,512 | |||||||||
Operating income | 58,176 | 46,572 | 12,797 | |||||||||
Interest expense | (889 | ) | (1,613 | ) | (2,897 | ) | ||||||
Interest income | 168 | 324 | 640 | |||||||||
Income before income taxes | 57,455 | 45,283 | 10,540 | |||||||||
Income tax expense | 22,249 | 17,979 | 3,855 | |||||||||
Net income | 35,206 | 27,304 | 6,685 | |||||||||
Preferred dividends | — | — | (938 | ) | ||||||||
Net income available to common stockholders | $ | 35,206 | $ | 27,304 | $ | 5,747 | ||||||
Earnings per share: | ||||||||||||
Basic income per share | $ | 0.77 | $ | 0.60 | $ | 0.26 | ||||||
Diluted income per share | $ | 0.76 | $ | 0.60 | $ | 0.17 | ||||||
Basic weighted average shares outstanding | 45,722 | 45,184 | 22,185 | |||||||||
Diluted weighted average shares outstanding | 46,396 | 45,503 | 33,430 | |||||||||
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Year Ended December 31, | |||||||||||||
(In thousands) | 2010 | 2009 | 2008 | ||||||||||
Restated | |||||||||||||
Net income | $ | 35,206 | $ | 27,304 | $ | 6,685 | |||||||
Other comprehensive income (loss), net of tax: | |||||||||||||
Unrealized losses on hedging derivatives | (278 | ) | (167 | ) | — | ||||||||
Unrealized gains (losses) on available for sale securities | (4 | ) | 7 | (63 | ) | ||||||||
Realized gains on available for sale securities | (19 | ) | — | — | |||||||||
Comprehensive income | $ | 34,905 | $ | 27,144 | $ | 6,622 | |||||||
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(In thousands)
Preferred Stock | Stockholders’ (Deficit) Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A Convertible | Series C | Additional | Other | |||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Paid-in | Comprehensive | Accumulated | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Income (Loss) | Earnings (Deficit) | Total | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 6 | $ | 18,610 | 4 | $ | 13,338 | 19,036 | $ | 190 | — | $ | — | $ | 7,719 | $ | 79 | $ | (18,374 | ) | $ | (10,386 | ) | ||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | 6,685 | 6,685 | ||||||||||||||||||||||||||||||||||||
Unrealized losses on available for-sale securities, net of taxes of $42 | — | — | — | — | — | — | — | — | — | (63 | ) | — | (63 | ) | ||||||||||||||||||||||||||||||||||
Undeclared dividends on Series C Preferred Stock | — | — | — | 938 | — | — | — | — | (938 | ) | — | — | (938 | ) | ||||||||||||||||||||||||||||||||||
Issuance of Blanchard shares | — | — | — | — | 183 | 2 | — | — | 2,994 | — | — | 2,996 | ||||||||||||||||||||||||||||||||||||
Cancellation of IAS warrant, net of $2,316 deferred taxes | — | — | — | — | — | — | — | — | (3,684 | ) | — | — | (3,684 | ) | ||||||||||||||||||||||||||||||||||
Exercise of warrant | — | — | — | — | 909 | 9 | — | 517 | — | — | 526 | |||||||||||||||||||||||||||||||||||||
Conversion of Series A and Series C Convertible Preferred Stock to Common Stock | (6 | ) | (18,610 | ) | (4 | ) | (14,276 | ) | 13,104 | 131 | — | 32,755 | — | — | 32,886 | |||||||||||||||||||||||||||||||||
Stock issued in initial public offering, net of issuance costs | — | — | — | — | 12,075 | 121 | — | 128,635 | — | — | 128,756 | |||||||||||||||||||||||||||||||||||||
Special distribution to stockholders from initial public offering proceeds | — | — | — | — | — | — | — | — | (108,675 | ) | — | (108,675 | ) | |||||||||||||||||||||||||||||||||||
Restricted stock granted to Chief Executive Officer | — | — | — | — | 109 | 1 | — | 1,310 | — | — | 1,311 | |||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | 3,563 | — | — | 3,563 | ||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | 49 | 1 | — | — | 591 | — | — | 592 | ||||||||||||||||||||||||||||||||||||
Excess tax benefit from share-based compensation | — | — | — | — | — | — | — | — | 21 | — | — | 21 | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | — | $ | — | — | $ | — | 45,465 | $ | 455 | — | $ | — | $ | 64,808 | $ | 16 | $ | (11,689 | ) | $ | 53,590 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | 27,304 | 27,304 | ||||||||||||||||||||||||||||||||||||
Unrealized losses on hedging derivatives, net of taxes of $111 | — | — | — | — | — | — | — | — | — | (167 | ) | — | (167 | ) | ||||||||||||||||||||||||||||||||||
Unrealized gains on available for-sale securities, net of taxes of $5 | — | — | — | — | — | — | — | — | — | 7 | — | 7 | ||||||||||||||||||||||||||||||||||||
Repurchase and retirement of the Company’s common stock | — | — | — | — | (909 | ) | (9 | ) | — | — | (14,486 | ) | — | — | (14,495 | ) | ||||||||||||||||||||||||||||||||
Stock issued in offering, net of issuance costs | — | — | — | — | 1,000 | 10 | — | — | 14,870 | — | — | 14,880 | ||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | 3,419 | — | — | 3,419 | ||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | 102 | 1 | — | — | 1,225 | — | — | 1,226 | ||||||||||||||||||||||||||||||||||||
Excess tax benefit | — | — | — | — | — | — | — | — | 264 | — | — | 264 | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2009 | — | $ | — | — | $ | — | 45,658 | $ | 457 | — | $ | — | $ | 70,100 | $ | (144 | ) | $ | 15,615 | $ | 86,028 | |||||||||||||||||||||||||||
Net income (Restated) | — | — | — | — | — | — | — | — | — | — | 35,206 | 35,206 | ||||||||||||||||||||||||||||||||||||
Unrealized losses on hedging derivatives, net of taxes of $273 | — | — | — | — | — | — | — | — | — | (278 | ) | — | (278 | ) | ||||||||||||||||||||||||||||||||||
Unrealized losses on available for-sale securities, net of taxes of $3 | — | — | — | — | — | — | — | — | — | (4 | ) | — | (4 | ) | ||||||||||||||||||||||||||||||||||
Realized gains on available for-sale securities, net of taxes of $12 | — | — | — | — | — | — | — | — | — | (19 | ) | — | (19 | ) | ||||||||||||||||||||||||||||||||||
Common stock purchased for treasury | — | — | — | — | — | — | 50 | (782 | ) | — | — | — | (782 | ) | ||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | 9 | — | — | — | 5,049 | — | — | 5,049 | ||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | 144 | 1 | — | — | 1,746 | — | — | 1,747 | ||||||||||||||||||||||||||||||||||||
Excess tax benefits | — | — | — | — | — | — | — | — | 554 | — | — | 554 | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2010 (Restated) | — | $ | — | — | $ | — | 45,811 | $ | 458 | 50 | $ | (782 | ) | $ | 77,449 | $ | (445 | ) | $ | 50,821 | $ | 127,501 | ||||||||||||||||||||||||||
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Year Ended December 31, | |||||||||||||
(In thousands) | 2010 | 2009 | 2008 | ||||||||||
Restated | |||||||||||||
Cash flows provided by operating activities: | |||||||||||||
Net income | $ | 35,206 | $ | 27,304 | $ | 6,685 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Share-based compensation | 5,049 | 3,419 | 4,991 | ||||||||||
Excess tax benefits from share-based compensation | (736 | ) | (247 | ) | (21 | ) | |||||||
Amortization of notes payable issuance costs | 63 | 42 | — | ||||||||||
Provision for bad debts | 38,511 | 14,016 | 8,465 | ||||||||||
Depreciation and amortization | 12,108 | 7,960 | 5,095 | ||||||||||
Non-capitalizable system conversion costs | 4,013 | — | — | ||||||||||
Litigation loss | — | 5,200 | — | ||||||||||
Exit costs | (768 | ) | 832 | — | |||||||||
Deferred income taxes | (6,013 | ) | (2,523 | ) | (245 | ) | |||||||
Other | 23 | (14 | ) | (106 | ) | ||||||||
Changes in assets and liabilities: | |||||||||||||
Accounts receivable | (46,705 | ) | (18,376 | ) | (10,793 | ) | |||||||
Prepaid expenses and other | (4,746 | ) | (377 | ) | (751 | ) | |||||||
Due to/from related parties | 9,172 | (23 | ) | 468 | |||||||||
Accounts payable | 2,510 | 2,155 | 927 | ||||||||||
Accrued liabilities | 5,007 | 8,928 | 3,596 | ||||||||||
Income taxes receivable/payable | (9,293 | ) | 3,929 | (1,624 | ) | ||||||||
Deferred revenue | (3,021 | ) | 7,419 | 5,392 | |||||||||
Student deposits | 43,724 | 1,523 | (1,499 | ) | |||||||||
Prepaid royalties to former owner | — | — | (5,920 | ) | |||||||||
Royalty payable to former owner | — | — | (7,428 | ) | |||||||||
Deposit with former owner | — | — | 3,000 | ||||||||||
Net cash provided by operating activities | 84,104 | 61,167 | 10,232 | ||||||||||
Cash flows used in investing activities: | |||||||||||||
Capital expenditures | (62,627 | ) | (60,265 | ) | (8,374 | ) | |||||||
Change in restricted cash and cash equivalents | (49,666 | ) | 1,844 | 2,083 | |||||||||
Purchases of investments | — | — | (2,627 | ) | |||||||||
Proceeds from sale or maturity of investments | 487 | — | 2,570 | ||||||||||
Net cash used in investing activities | (111,806 | ) | (58,421 | ) | (6,348 | ) | |||||||
Cash flows (used in) provided by financing activities: | |||||||||||||
Principal payments on notes payable and capital lease obligations | (2,933 | ) | (2,415 | ) | (1,357 | ) | |||||||
Repayment on line of credit | — | — | (6,000 | ) | |||||||||
Proceeds from notes payable and line of credit | — | 25,547 | — | ||||||||||
Notes payable issuance costs | — | (317 | ) | — | |||||||||
Repurchase of outstanding shares | (782 | ) | (14,495 | ) | — | ||||||||
Repurchase of Institute Warrant | — | — | (6,000 | ) | |||||||||
Repayment of Institute Note Payable | — | — | (1,250 | ) | |||||||||
Proceeds from related party payable on preferred stock | — | — | 5,725 | ||||||||||
Net proceeds from issuance of common stock | — | 14,880 | 128,756 | ||||||||||
Payment of special distribution | — | — | (108,675 | ) | |||||||||
Proceeds from exercise of warrant | — | — | 526 | ||||||||||
Net proceeds from exercise of stock options | 1,747 | 1,226 | 592 | ||||||||||
Excess tax benefits from share-based compensation | 736 | 247 | 21 | ||||||||||
Net cash (used in) provided by financing activities | (1,232 | ) | 24,673 | 12,338 | |||||||||
Net (decrease) increase in cash and cash equivalents | (28,934 | ) | 27,419 | 16,222 | |||||||||
Cash and cash equivalents, beginning of year | 62,571 | 35,152 | 18,930 | ||||||||||
Cash and cash equivalents, end of year | $ | 33,637 | $ | 62,571 | $ | 35,152 | |||||||
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Year Ended December 31, | ||||||||||||
(In thousands) | 2010 | 2009 | 2008 | |||||||||
Supplemental disclosure of cash flow information | ||||||||||||
Cash paid during the year for interest | $ | 769 | $ | 1,802 | $ | 3,709 | ||||||
Cash paid during the year for income taxes | $ | 37,703 | $ | 16,307 | $ | 5,274 | ||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||
Purchase of equipment through notes payable and capital lease obligations | $ | 957 | $ | 2,116 | $ | 2,481 | ||||||
Purchases of property and equipment included in accounts payable and deferred rent | $ | 4,421 | $ | 1,098 | $ | 1,292 | ||||||
Settlement of capital lease obligation | $ | — | $ | 30,020 | $ | — | ||||||
Removal of Utah leasehold improvements | $ | — | $ | 274 | $ | — | ||||||
Accretion of dividends on Series C convertible preferred stock | $ | — | $ | — | $ | 938 | ||||||
Value assigned to Blanchard shares | $ | — | $ | — | $ | 2,996 | ||||||
Assumption of future obligations under gift annuities | $ | — | $ | — | $ | 887 | ||||||
Deferred tax on repurchase of Institute Warrant | $ | — | $ | — | $ | 2,316 | ||||||
Conversion of Series A and Series C convertible preferred stock | $ | — | $ | — | $ | 32,886 |
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(In thousands of dollars, except share and per share data)
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2010 | ||||||||
Twelve Months | Twelve Months | |||||||
Ended | Ended | |||||||
December 31, | December 31, | |||||||
As Reported(1) | As Restated | |||||||
Net revenue | $ | 385,825 | $ | 385,625 | ||||
Costs and expenses: | ||||||||
Instructional costs and services | 163,396 | 178,548 | ||||||
Selling and promotional | 112,493 | 112,493 | ||||||
General and administrative | 26,621 | 26,621 | ||||||
Contract termination fees | 9,233 | 9,233 | ||||||
Royalty to former owner | 296 | 296 | ||||||
Estimated exit costs | 258 | 258 | ||||||
Total costs and expenses | 312,297 | 327,449 | ||||||
Operating income | 73,528 | 58,176 | ||||||
Net interest expense | (721 | ) | (721 | ) | ||||
Income before income taxes | 72,807 | 57,455 | ||||||
Income tax expense | 28,442 | 22,249 | ||||||
Net income available to common stockholders | $ | 44,365 | $ | 35,206 | ||||
Earnings per share: | ||||||||
Basic income per share(1) | $ | 0.97 | $ | 0.77 | ||||
Diluted income per share(1) | $ | 0.96 | $ | 0.76 | ||||
Basic weighted average shares outstanding | 45,722 | 45,722 | ||||||
Diluted weighted average shares outstanding | 46,396 | 46,396 | ||||||
(1) | The As Reported amounts reflect the reclassification of bad debt expense from General and administrative to Instructional costs and services as disclosed in Note 3. |
As of December 31, 2010 | ||||||||
As Reported | As Restated | |||||||
Accounts receivable, net of allowance for doubtful accounts of $14,961 (as reported) and $30,112 (as restated) | $ | 33,334 | 17,983 | |||||
Deferred income taxes — current | 9,886 | 16,078 | ||||||
Total current assets | 142,284 | 133,125 | ||||||
Total assets | 284,255 | 275,096 | ||||||
Accumulated earnings | 59,980 | 50,821 | ||||||
Total stockholders’ equity | 136,660 | 127,501 | ||||||
Total liabilities and stockholders’ equity | 284,255 | 275,096 |
Year Ended December 31, 2010 | ||||||||
As Reported | As Restated | |||||||
Net income | $ | 44,365 | 35,206 | |||||
Provision for bad debts | 23,360 | 38,511 | ||||||
Deferred income taxes | 179 | (6,013 | ) | |||||
Changes in accounts receivable | (46,905 | ) | (46,705 | ) | ||||
Net cash provided by operating activities | 84,104 | 84,104 |
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• | $26,750 in cash; |
• | the assumption of a $1,500 note payable to a third party (the “Kirksville Note”); |
• | the issuance by the University to the Institute of a warrant (the “Institute Warrant”) to purchase a 10.0% non-dilutable equity interest in the University for an exercise price of $1 during a one month period beginning in July 1, 2011 subject to a right for the University to repurchase the warrant at any time prior to its exercise for $6,000. |
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(In thousands of dollars, except share and per share data)
• | the satisfaction in full of all past royalties due to the Institute under the Royalty Agreement and the elimination of the existing obligation to pay royalties for online student revenues in perpetuity; |
• | the repurchase of the Institute Warrant; |
• | the acquisition by the University of the real property and related building located on the Campus that was owned by the Institute and not transferred in connection with the Ancillary Agreement; |
• | the termination of a sublease agreement pursuant to which the Institute leased office space on the Campus; |
• | the assumption by the Company of all future payment obligations in respect to certain gift annuities made to the school by donors prior to the acquisition; and |
• | the satisfaction in full of the $1,250 Institute Loan (including all accrued and unpaid interest thereon). |
Initial Payment | $ | 3,000 | ||
Optional Payment | 19,500 | |||
Total Payment to be allocated | $ | 22,500 | ||
1) Obligations settled | ||||
—Accrued royalties due under Royalty Agreement (as of April 15, 2008) | $ | 8,730 | ||
—Repurchase of Institute Warrant | 6,000 | |||
—Repayment of Institute Loan, including accrued interest | 2,257 | |||
—Other amounts due to the Institute | 327 | |||
2) Liabilities assumed | ||||
—Assumption of gift annuities obligation, at fair value | (887 | ) | ||
3) Cost to be allocated to assets acquired | ||||
—Real property and prepaid royalty asset | 6,073 | |||
Total fair value estimates | $ | 22,500 | ||
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(In thousands of dollars, except share and per share data)
108
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(In thousands of dollars, except share and per share data)
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(In thousands of dollars, except share and per share data)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Interest incurred | $ | 1,283 | $ | 1,808 | $ | 3,022 | ||||||
Interest capitalized | 394 | 195 | 125 | |||||||||
Interest expense | $ | 889 | $ | 1,613 | $ | 2,897 | ||||||
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(In thousands of dollars, except share and per share data)
111
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(In thousands of dollars, except share and per share data)
112
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(In thousands of dollars, except share and per share data)
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(In thousands of dollars, except share and per share data)
Accrued Exit | Accrued Exit | |||||||||||||||
Costs at | Costs at | |||||||||||||||
December 31, | Payments to | December 31, | ||||||||||||||
2009 | Exit Costs | Date | 2010 | |||||||||||||
Severance payments | $ | 503 | $ | — | $ | (503 | ) | $ | — | |||||||
Future lease payments, lease terminated in October 2010 | 288 | 107 | (395 | ) | — | |||||||||||
Leasehold improvements and other | 41 | 151 | (128 | ) | 64 | |||||||||||
Total | $ | 832 | $ | 258 | $ | (1,026 | ) | $ | 64 | |||||||
Accrued Exit | Accrued Exit | |||||||||||||||
Costs at | Costs at | |||||||||||||||
December 31, | Payments to | December 31, | ||||||||||||||
2008 | Exit Costs | Date | 2009 | |||||||||||||
Severance payments | $ | — | $ | 615 | $ | (112 | ) | $ | 503 | |||||||
Future lease payments, net of estimated sublease rentals | — | 288 | — | 288 | ||||||||||||
Leasehold improvements and other | — | 315 | (274 | ) | 41 | |||||||||||
Total | $ | — | $ | 1,218 | $ | (386 | ) | $ | 832 | |||||||
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(In thousands of dollars, except share and per share data)
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(In thousands of dollars, except share and per share data)
Balance at | Balance at | |||||||||||||||
Beginning of | Charged to | End of | ||||||||||||||
Year | Expense | Deductions(1) | Year | |||||||||||||
Allowance for doubtful accounts receivable: | ||||||||||||||||
Year ended December 31, 2010 (Restated) | $ | 7,553 | 38,511 | (15,952 | ) | $ | 30,112 | |||||||||
Year ended December 31, 2009 | $ | 6,356 | 14,016 | (12,819 | ) | $ | 7,553 | |||||||||
Year ended December 31, 2008 | $ | 12,158 | 8,465 | (14,267 | ) | $ | 6,356 |
(1) | Deductions represent accounts written off, net of recoveries. |
As of December 31, 2009 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | (Losses) | Value | |||||||||||||
Money Market Funds | $ | 43 | $ | — | $ | — | $ | 43 | ||||||||
Municipal Securities | 448 | 39 | (1 | ) | 487 | |||||||||||
Total | $ | 491 | $ | 39 | $ | (1 | ) | $ | 530 | |||||||
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(In thousands of dollars, except share and per share data)
As of December 31, | ||||||||
2010 | 2009 | |||||||
Land | $ | 8,282 | $ | 7,230 | ||||
Land improvements | 1,597 | 1,597 | ||||||
Buildings | 48,323 | 25,176 | ||||||
Equipment under capital leases | 4,502 | 3,545 | ||||||
Leasehold improvements | 11,407 | 3,692 | ||||||
Computer equipment | 36,742 | 22,327 | ||||||
Furniture, fixtures and equipment | 11,401 | 7,750 | ||||||
Internally developed software | 3,825 | 1,011 | ||||||
Other | 998 | 420 | ||||||
Construction in progress | 21,349 | 7,712 | ||||||
148,426 | 80,460 | |||||||
Less accumulated depreciation and amortization | (24,427 | ) | (13,090 | ) | ||||
Property and equipment, net | $ | 123,999 | $ | 67,370 | ||||
As of December 31, | ||||||||
2010 | 2009 | |||||||
Notes Payable | ||||||||
Note payable, monthly payment of $143; interest at 30 day LIBOR plus 2.25% (2.51% at December 31, 2010) through April 30, 2014 | $ | 22,829 | $ | 24,565 | ||||
Note payable; monthly payments of $20; interest at 3.9% through September 2011 | 178 | 407 | ||||||
Various Gift Annuities; quarterly payments of $34 extending through 2019; interest at 10% | 744 | 802 | ||||||
Equipment note; monthly payments of $6 extending through December 2011; interest at 6.6% | 67 | 136 | ||||||
Notes payable for vehicles requiring monthly payments with interest rates ranging from 8.8% to 11.0% extending into March 2013 | 89 | 178 | ||||||
23,907 | 26,088 | |||||||
Less: Current portion | 2,026 | 2,105 | ||||||
$ | 21,881 | $ | 23,983 | |||||
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(In thousands of dollars, except share and per share data)
2011 | $ | 2,026 | ||
2012 | 1,783 | |||
2013 | 1,750 | |||
2014 | 17,903 | |||
2015 | 93 | |||
Thereafter | 352 | |||
$ | 23,907 | |||
As of December 31, | ||||||||
2010 | 2009 | |||||||
Capital Lease Obligations | ||||||||
Capital leases for equipment (various leases extending into 2012, with implicit interest rates ranging from 4.0% to 6.9%, monthly payments totaling $62 and quarterly payments totaling $239) | $ | 1,824 | $ | 1,619 | ||||
1,824 | 1,619 | |||||||
Less: Current portion of capital lease obligations | 1,673 | 751 | ||||||
$ | 151 | $ | 868 | |||||
2011 | $ | 1,703 | ||
2012 and thereafter | 152 | |||
1,855 | ||||
Less: Portion representing interest | 31 | |||
Present value of minimum lease payments | $ | 1,824 | ||
2011 | $ | 4,754 | ||
2012 | 5,874 | |||
2013 | 6,802 | |||
2014 | 6,506 | |||
2015 | 5,628 | |||
Thereafter | 24,072 | |||
Total minimum payments | $ | 53,636 | ||
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(In thousands of dollars, except share and per share data)
119
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(In thousands of dollars, except share and per share data)
120
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(In thousands of dollars, except share and per share data)
121
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(In thousands of dollars, except share and per share data)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Denominator: | ||||||||||||
Basic common shares outstanding | 45,721,999 | 45,184,186 | 22,184,766 | |||||||||
Effect of dilutive preferred stock | — | — | 9,559,801 | |||||||||
Effect of dilutive warrants | — | — | 1,666,312 | |||||||||
Effect of contingently issuable common stock | — | — | 19,010 | |||||||||
Effect of dilutive stock options and restricted stock | 673,917 | 318,639 | — | |||||||||
Diluted common shares outstanding | 46,395,916 | 45,502,825 | 33,429,889 | |||||||||
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(In thousands of dollars, except share and per share data)
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(In thousands of dollars, except share and per share data)
Year Ended December 31, | |||||||||||||
2010 | 2009 | 2008 | |||||||||||
Restated | |||||||||||||
Current: | |||||||||||||
Federal | $ | 22,522 | $ | 16,587 | $ | 3,564 | |||||||
State | 5,163 | 3,515 | 432 | ||||||||||
27,685 | 20,102 | 3,996 | |||||||||||
Deferred: | |||||||||||||
Federal | (2,956 | ) | (1,498 | ) | 190 | ||||||||
State | (2,480 | ) | (625 | ) | (331 | ) | |||||||
(5,436 | ) | (2,123 | ) | (141 | ) | ||||||||
$ | 22,249 | $ | 17,979 | $ | 3,855 | ||||||||
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(In thousands of dollars, except share and per share data)
Year Ended December 31, | |||||||||||||
2010 | 2009 | 2008 | |||||||||||
Restated | |||||||||||||
Statutory U.S. federal income tax rate (benefit) | 35.0 | % | 35.0 | % | 35.0 | % | |||||||
State income taxes, net of federal tax benefit | 5.6 | 5.2 | 5.8 | ||||||||||
State tax credits, net of federal effect | (1.7 | ) | (1.5 | ) | (5.2 | ) | |||||||
Non deductible expenses | 0.4 | (0.1 | ) | 0.7 | |||||||||
Other | (0.6 | ) | 1.1 | 0.3 | |||||||||
Effective income tax rate (benefit) | 38.7 | % | 39.7 | % | 36.6 | % | |||||||
As of December 31, | |||||||||
2010 | 2009 | ||||||||
Restated | |||||||||
Current deferred tax asset (liability): | |||||||||
Accounts receivable allowance for doubtful accounts | $ | 14,713 | $ | 3,315 | |||||
State taxes | (1,512 | ) | (135 | ) | |||||
Estimated litigation loss | 2,275 | 2,247 | |||||||
Other | 602 | 1,258 | |||||||
Current deferred tax asset | 16,078 | 6,685 | |||||||
Non-current deferred tax asset (liability): | |||||||||
Depreciation and leases | (7,719 | ) | (605 | ) | |||||
Share-based compensation | 4,561 | 2,749 | |||||||
Unrealized gains on available for sale securities | — | (16 | ) | ||||||
Deferred rent | 543 | 376 | |||||||
Intangibles | 4,977 | 3,812 | |||||||
Other | 438 | (360 | ) | ||||||
Non-current deferred tax asset | 2,800 | 5,956 | |||||||
Net deferred tax asset | $ | 18,878 | $ | 12,641 | |||||
2010 | 2009 | |||||||
Unrecognized tax benefits, beginning of year | $ | 1,066 | $ | 748 | ||||
Tax positions taken during the current year | ||||||||
Increases | 34 | 390 | ||||||
Decreases | — | — | ||||||
Tax positions taken during a prior year | ||||||||
Increases | 235 | 7 | ||||||
Decreases | (505 | ) | (4 | ) | ||||
Decreases for settlements during the period | (226 | ) | (75 | ) | ||||
Reductions for lapses of applicable statute of limitations | — | — | ||||||
Unrecognized tax benefits, end of year | $ | 604 | $ | 1,066 | ||||
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(In thousands of dollars, except share and per share data)
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(In thousands of dollars, except share and per share data)
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(In thousands of dollars, except share and per share data)
Summary of Stock Options Outstanding | ||||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Remaining | Aggregate | ||||||||||||||
Total | Price per | Contractual | Intrinsic | |||||||||||||
Shares | Share | Term (Years) | Value ($)(1) | |||||||||||||
Outstanding as of December 31, 2007 | — | $ | — | |||||||||||||
Granted | 3,305,108 | 12.00 | ||||||||||||||
Exercised | (49,322 | ) | 12.00 | |||||||||||||
Forfeited, canceled or expired | (8,375 | ) | 12.00 | |||||||||||||
Outstanding as of December 31, 2008 | 3,247,411 | 12.00 | ||||||||||||||
Granted | 217,526 | 16.65 | ||||||||||||||
Exercised | (102,134 | ) | 12.00 | |||||||||||||
Forfeited, canceled or expired | (12,807 | ) | 12.00 | |||||||||||||
Outstanding as of December 31, 2009 | 3,349,996 | $ | 12.30 | |||||||||||||
Granted | 921,550 | 21.29 | ||||||||||||||
Exercised | (144,095 | ) | 12.12 | |||||||||||||
Forfeited, canceled or expired | (101,279 | ) | 17.45 | |||||||||||||
Outstanding as of December 31, 2010 | 4,026,172 | $ | 14.24 | 8.20 | $ | 21,540 | ||||||||||
Exercisable as of December 31, 2010 | 1,513,916 | $ | 12.11 | 7.90 | $ | 11,324 | ||||||||||
Available for issuance as of December 31, 2010 | 2,034,053 | |||||||||||||||
(1) | Aggregate intrinsic value represents the value of the University’s closing stock price on December 31, 2010 ($19.59) in excess of the exercise price multiplied by the number of options outstanding or exercisable. |
2010 | 2009 | 2008 | ||||||||||
Amounts related to options exercised: | ||||||||||||
Intrinsic value realized by optionee | $ | 1,407 | $ | 656 | $ | 249 | ||||||
Actual tax benefit realized by the University for tax deductions | $ | 563 | $ | 262 | $ | 98 |
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(In thousands of dollars, except share and per share data)
2010 | 2009 | 2008 | ||||||||||
Instructional costs and services | $ | 2,034 | $ | 771 | $ | 1,737 | ||||||
Selling and promotional | 233 | 116 | 1,322 | |||||||||
General and administrative | 2,782 | 2,532 | 619 | |||||||||
Share-based compensation expense included in operating expenses | 5,049 | 3,419 | 3,678 | |||||||||
Tax effect of share-based compensation | (2,020 | ) | (1,368 | ) | (1,454 | ) | ||||||
Share-based compensation expense, net of tax | $ | 3,029 | $ | 2,051 | $ | 2,224 | ||||||
Year Ended December 31, | 2010 | 2009 | 2008 | |||||||||
Weighted average fair value | $ | 10.74 | $ | 7.99 | $ | 5.68 | ||||||
Expected volatility | 47.50 | % | 47.46 | % | 46.13 | % | ||||||
Expected life (years) | 6.50 | 6.47 | 6.14 | |||||||||
Risk-free interest rate | 2.87 | % | 2.81 | % | 2.44 | % | ||||||
Dividend yield | 0 | % | 0 | % | 0 | % |
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(In thousands of dollars, except share and per share data)
Weighted | ||||||||
Average | ||||||||
Grant Date | ||||||||
Total | Fair Value | |||||||
Shares | per Share | |||||||
Outstanding as of December 31, 2007 | — | $ | — | |||||
Granted | 109,329 | 12.00 | ||||||
Vested | 109,329 | 12.00 | ||||||
Forfeited, canceled or expired | — | |||||||
Outstanding as of December 31, 2008 | 109,329 | 12.00 | ||||||
Granted | 8,737 | 14.88 | ||||||
Vested | — | |||||||
Forfeited, canceled or expired | — | |||||||
Outstanding as of December 31, 2009 | 118,066 | $ | 12.21 | |||||
Granted | 4,173 | 25.16 | ||||||
Vested | 8,737 | 14.88 | ||||||
Forfeited, canceled or expired | — | |||||||
Outstanding as of December 31, 2010 | 122,239 | $ | 12.66 | |||||
Vested as of December 31, 2010 | 118,066 | $ | 12.21 | |||||
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(In thousands of dollars, except share and per share data)
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(In thousands of dollars, except share and per share data)
2010 | ||||||||||||||||||||||||||||
Second Quarter | Second Quarter | Third Quarter | Third Quarter | Fourth Quarter | Fourth Quarter | |||||||||||||||||||||||
First Quarter | As Reported (2) | As Restated | As Reported (2) | As Restated | As Reported (2) | As Restated | ||||||||||||||||||||||
Net revenue | $ | 89,326 | $ | 97,522 | $ | 97,322 | $ | 98,946 | $ | 98,946 | $ | 100,031 | $ | 100,031 | ||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Instructional costs and services | 36,586 | 41,668 | 50,958 | 41,996 | 45,643 | 43,146 | 45,361 | |||||||||||||||||||||
Selling and promotional | 26,876 | 28,976 | 28,976 | 28,103 | 28,103 | 28,538 | 28,538 | |||||||||||||||||||||
General and administrative | 6,104 | 6,176 | 6,176 | 6,608 | 6,608 | 7,733 | 7,733 | |||||||||||||||||||||
Contract termination fees with a related party | — | — | — | — | — | 9,233 | 9,233 | |||||||||||||||||||||
Estimated exit costs | 89 | 74 | 74 | 74 | 74 | 74 | 74 | |||||||||||||||||||||
Royalty to former owner | 74 | 116 | 116 | 27 | 27 | 26 | 26 | |||||||||||||||||||||
Total costs and expenses | 69,729 | 77,010 | 86,300 | 76,808 | 80,455 | 88,750 | 90,965 | |||||||||||||||||||||
Operating income | 19,597 | 20,512 | 11,022 | 22,138 | 18,491 | 11,281 | 9,066 | |||||||||||||||||||||
Net interest expense | (283 | ) | (125 | ) | (125 | ) | (143 | ) | (143 | ) | (170 | ) | (170 | ) | ||||||||||||||
Income before income taxes | 19,314 | 20,387 | 10,897 | 21,995 | 18,348 | 11,111 | 8,896 | |||||||||||||||||||||
Income tax expense | 7,834 | 7,991 | 4,163 | 9,077 | 7,606 | 3,540 | 2,646 | |||||||||||||||||||||
Net income available to common stockholders | $ | 11,480 | $ | 12,396 | $ | 6,734 | $ | 12,918 | $ | 10,742 | $ | 7,571 | $ | 6,250 | ||||||||||||||
Earnings per share: | ||||||||||||||||||||||||||||
Basic income per share(1) | $ | 0.25 | $ | 0.27 | $ | 0.15 | $ | 0.28 | $ | 0.23 | $ | 0.17 | $ | 0.14 | ||||||||||||||
Diluted income per share(1) | $ | 0.25 | $ | 0.27 | $ | 0.14 | $ | 0.28 | $ | 0.23 | $ | 0.16 | $ | 0.13 | ||||||||||||||
Basic weighted average shares outstanding | 45,674 | 45,724 | 45,724 | 45,746 | 45,746 | 45,743 | 45,743 | |||||||||||||||||||||
Diluted weighted average shares outstanding | 46,325 | 46,557 | 46,557 | 46,351 | 46,351 | 46,346 | 46,346 | |||||||||||||||||||||
(1) | The sum of quarterly income per share may not equal annual income per share due to rounding. | |
(2) | The As Reported amounts reflect the reclassification of bad debt expense from General and administrative to Instructional costs and services as disclosed in Note 3. |
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(In thousands of dollars, except share and per share data)
2009 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Net revenue | $ | 55,459 | $ | 62,905 | $ | 66,084 | $ | 77,454 | ||||||||
Costs and expenses: | ||||||||||||||||
Instructional costs and services | 21,263 | 23,703 | 26,809 | 29,832 | ||||||||||||
Selling and promotional | 19,575 | 20,726 | 22,095 | 23,009 | ||||||||||||
General and administrative | 5,538 | 5,396 | 5,213 | 5,457 | ||||||||||||
Litigation loss | — | — | 5,200 | — | ||||||||||||
Estimated exit costs | — | — | — | 1,218 | ||||||||||||
Royalty to former owner | 74 | 74 | 74 | 74 | ||||||||||||
Total costs and expenses | 46,450 | 49,899 | 59,391 | 59,590 | ||||||||||||
Operating income | 9,009 | 13,006 | 6,693 | 17,864 | ||||||||||||
Net interest expense | (558 | ) | (300 | ) | (233 | ) | (198 | ) | ||||||||
Income before income taxes | 8,451 | 12,706 | 6,460 | 17,666 | ||||||||||||
Income tax expense | 3,376 | 5,063 | 2,969 | 6,571 | ||||||||||||
Net income available to common stockholders | $ | 5,075 | $ | 7,643 | $ | 3,491 | $ | 11,095 | ||||||||
Earnings per share: | ||||||||||||||||
Basic income per share(1) | $ | 0.11 | $ | 0.17 | $ | 0.08 | $ | 0.24 | ||||||||
Diluted income per share(1) | $ | 0.11 | $ | 0.17 | $ | 0.08 | $ | 0.24 | ||||||||
Basic weighted average shares outstanding | 45,474 | 44,846 | 44,783 | 45,636 | ||||||||||||
Diluted weighted average shares outstanding | 45,821 | 45,051 | 45,099 | 46,041 | ||||||||||||
(1) | The sum of quarterly income per share may not equal annual income per share due to rounding. |
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Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
(i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
(ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
(iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
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• | conducted a full review of our methodology for estimating the allowance for doubtful accounts |
• | established controls and procedures adequate to timely identify changes to the composition of our accounts receivable |
• | established controls and procedures to enhance our ability to monitor collection trends. |
Grand Canyon Education, Inc.
/s/ Ernst & Young LLP |
February 22, 2011, except for the effects of the material weakness described in the sixth paragraph above, as to which the date is November 14, 2011
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
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Item 11. | Executive Compensation |
• | Net revenue increased 47.3% to $385.8 million for fiscal 2010, compared to $261.9 million for fiscal 2009; |
• | Operating income increased 35.3% to $63.0 million for fiscal 2010, compared to $46.6 million for fiscal 2009. The operating margin for fiscal 2010 was 16.3%, compared to 17.8% for fiscal 2009; |
• | Adjusted EBITDA increased 39.2% to $90.7 million for fiscal 2010, compared to $65.1 million for fiscal 2009; |
• | Net income increased 39.5% to $38.1 million for fiscal 2010, compared to $27.3 million for fiscal 2009; and |
• | Diluted net income per share was $0.82 for fiscal 2010, compared to $0.60 for fiscal 2009 |
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• | The focus on the quality of our online student body resulted in an increase in the number of graduate students as a percentage of the total online student body to 45.5% in 2010 from 44.5% in 2009 and an increase in the number of our nursing and education students, who as a group have the highest graduation rates and lowest default rates, as a percentage of the total online student body to 19.3% and 49.6% in 2010 from 13.4% and 49.1% in 2009, respectively; |
• | The focus on the quality of our campus-based students and our ground campus resulted in an increase in the number of campus-based students from 3,113 in 2009 to 3,748 in 2010 and an increase in the average incoming G.P.A. of these students. While we currently expect to have between 4,200 and 4,500 campus-based students in fall 2011, we expect the quality of these students to continue to improve; |
• | We continued to focus on academic excellence initiatives, including a new learning system that we will begin to implement in the first half of 2011 and which we expect will increase student learning and faculty effectiveness and result in higher retention rates, as well as the build out of our instructional design team, who work to improve the curriculum, instruction and course sequencing in many of our programs. |
• | Strong alignment between company-wide and personal performance and payouts under our annual cash incentive plan; |
• | The absence of any multi-year guaranteed bonuses; |
• | Severance arrangements with our named executive officers that are limited to one year of base salary and benefits and limited acceleration of vesting; and |
• | Double-trigger change-in-control arrangements with our named executive officers. |
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• | the objectives of our compensation program (found in the section entitled “Objectives of Compensation Programs”); |
• | what our compensation program is designed to reward (also described in the section entitled “Objectives of Compensation Programs”); |
• | each element of compensation (set forth in the section entitled “Compensation Programs Design and Elements of Compensation”); |
• | why each element was chosen (described with each element of compensation, including base pay, short-term incentives and long-term incentives); |
• | how amounts and formulas for pay are determined (also described with each element of compensation, including base pay, short-term incentives and long-term incentives); and |
• | how each compensation element and our decisions regarding that element fit into the Company’s overall compensation objectives and affect decisions regarding other elements (described with each element of compensation). |
• | Compensation should be related to performance.We believe that the performance-based portion of an individual’s total compensation should increase as the individual’s business responsibilities increase. Thus, a material portion of executive compensation is linked to our and the individual’s performance, which also serves to align the named executive officers’ interests with those of our investors. |
• | Compensation should be competitive and cost effective.We believe that our compensation programs should foster an innovative, high integrity, and performance-oriented culture that serves to attract, motivate, and retain executives and other key employees with the appropriate skill sets to lead us through expected future growth in a dynamic, competitive, and highly regulated environment. Accordingly, we seek to provide compensation, in amounts and based on performance targets, necessary to achieve these goals and which is of fair value relative to other positions at the Company. |
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• | Founders with significant equity stakes require limited cash or equity incentives. As founders of our Company, Brent D. Richardson and Christopher C. Richardson have significant equity ownership in the Company. We believe that the Richardsons’ ownership stake provides a level of motivation that would not be appreciably enhanced through material cash bonus opportunities or the grant of further equity incentives. Accordingly, in 2010, the Richardsons were compensated solely through base salary, a limited bonus and limited perquisites. |
• | Cash should be the principal component of compensation.The Company’s compensation policy focuses most heavily on providing the opportunity for its named executive officers to earn total cash compensation at levels that enable the Company to achieve the motivation and retention goals described above, and to provide equity incentives as a reward for superior performance rather than as a substitute for cash compensation. |
• | Base salaries should generally be the largest component of cash compensation. Our compensation programs generally reflect our view that base salaries reflect compensation for the named executive officers to perform the essential elements of their respective jobs, and that cash bonuses are a reward for superior company and individual performance. In this regard, base salary should generally be the largest component of cash compensation. |
• | Cash incentives should be linked to performance.Under our Cash Incentive Plan, bonuses paid to our named executive officers are based on overall company and individual performance. |
• | Base salary.We typically agree upon a base salary with a named executive officer at the time of initial employment. The amount of base salary agreed upon, which is not at risk, reflects our views as to the individual executive’s past experience, future potential, knowledge, scope of anticipated responsibilities, skills, expertise, and potential to add value through performance, as well as competitive industry salary practices. Although minimum base salaries for each of our current named executive officers are set by their respective employment agreements, as described below, we review executive officer salaries annually and may increase them based on an evaluation of the Company’s performance for the year and the performance of the functional areas under an executive officer’s scope of responsibility. We also consider qualitative criteria, such as education and experience requirements, complexity, and scope or impact of the position compared to other executive positions internally. |
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• | Bonuses.We provide cash bonuses, which typically are at-risk, to recognize and reward our named executive officers based on our success and their individual performance in a given year. For 2010, we awarded performance-related bonuses based on the Cash Incentive Plan. The operation of this plan as it relates to our named executive officers is described in more detail below. |
• | Share-based compensation. Our Equity Incentive Plan had authorized 6,478,015 shares of common stock for grants as of December 31, 2010. Under the terms of this plan, the number of shares authorized for grants thereunder automatically increased on January 1, 2011 by 2.5% of the number of shares of our common stock issued and outstanding on December 31, 2010, to 7,621,065 shares. In 2010, our named executive officers received grants under this plan as part of an overall, annual grant made to company employees. |
• | Perquisites.We seek to compensate our named executive officers at levels that eliminate the need for material perquisites and enable each individual officer to provide for his or her own needs. Accordingly, in 2010, we provided limited perquisites to our named executive officers. See “Compensation of Executive Officers — Summary Compensation Table” for additional detail. |
• | Other.We offer other employee benefits to named executive officers for the purpose of meeting current and future health and security needs for the executives and their families. These benefits, which we generally offer to all eligible employees, include medical, dental, and life insurance benefits; short-term disability pay; long-term disability insurance; flexible spending accounts for medical expense reimbursements; a 401(k) retirement savings plan; and free tuition for a spouse or up to two children with no more than two participants receiving the tuition benefit at any one time. The 401(k) retirement savings plan is a defined contribution plan under Section 401(a) of the Code. Employees may make pre-tax contributions into the plan, expressed as a percentage of compensation, up to prescribed IRS annual limits, with such contributions subject to a matching Company contribution up to prescribed limits. |
• | Salary continuation.Each named executive officer would continue to receive salary payments for a period of 12 months following any qualifying termination of employment. |
• | Benefits continuation.Each named executive officer would continue to receive Company -paid premiums for continued group health benefits under COBRA during the 12-month salary continuation period. |
• | Partially accelerated vesting of stock options. Mr. Mueller, Dr. Meyer, and Mr. Bachus would receive partial acceleration of the vesting of certain of their stock options to the next vesting date immediately following the date of termination, in the event of a termination by us without Cause or by the executive for Good Reason. |
• | Fully accelerated vesting of stock options. In the event of a termination by us without Cause or by the executive for Good Reason within 12 months following a Change in Control, each named executive officer would receive full acceleration of the vesting of their stock options. |
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Target Bonus as a | ||||
Name | Percentage of Base Salary | |||
Brent D. Richardson | 8.4 | % | ||
Brian E. Mueller | 100.0 | % | ||
Dr. W. Stan Meyer | 75.0 | % | ||
Daniel E. Bachus | 75.0 | % | ||
Joseph N. Mildenhall | 50.0 | % | ||
Christopher C. Richardson | 50.0 | % | ||
Dr. Kathy Player | 50.0 | % |
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Goal | Threshold | Target | Maximum | |||
Revenue goal (50.0% of financial metric) | 95% of budget | 100% of budget | 105% of budget | |||
Adjusted EBITDA (50.0% of financial metric) | 95% of budget | 100% of budget | 107% of budget | |||
Bonus payout as a % of target bonus allocable to financial metrics | 50% | 100% | 150% |
Maximum | ||||||||||||
(105% of Budget for | ||||||||||||
Threshold | Target | Revenue/107% of Budget | ||||||||||
(95% of Budget) | (100% of Budget) | for Adjusted EBITDA | ||||||||||
Revenue | $ | 379,549,607 | $ | 399,525,902 | $ | 419,502,197 | ||||||
Adjusted EBITDA(1) | 80,407,672 | 84,639,655 | 90,564,431 |
(1) | The Threshold, Target, and Maximum amounts for the Adjusted EBITDA goal have been adjusted to reflect a change in the methodology used to calculate our allowance for doubtful accounts that caused the Company’s 2010 financial results to be restated. SeeItem 7,Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Adjusted | Individual | 2010 Bonus as | 2010 Bonus | |||||||||||||||||||||
Revenue | EBITDA | Goals | Percentage of | as Percentage | ||||||||||||||||||||
Performance | Performance | Performance | Target Bonus | of Base | 2010 | |||||||||||||||||||
Name | Payout (%) | Payout (%) | Payout (%) | (%) | Salary($) | Bonus ($) | ||||||||||||||||||
Brent D. Richardson | 66.0 | % | 110.0 | % | 100.0 | % | 90.4 | % | 7.6 | % | $ | 22,600 | ||||||||||||
Brian E. Mueller | 66.0 | % | 110.0 | % | 100.0 | % | 90.4 | % | 90.4 | % | $ | 542,400 | ||||||||||||
Dr. W. Stan Meyer | 66.0 | % | 110.0 | % | 93.8 | % | 89.2 | % | 66.9 | % | $ | 234,019 | ||||||||||||
Daniel E. Bachus | 66.0 | % | 110.0 | % | 100.0 | % | 90.4 | % | 67.8 | % | $ | 237,300 | ||||||||||||
Christopher C. Richardson | 66.0 | % | 110.0 | % | 100.0 | % | 90.4 | % | 45.2 | % | $ | 134,470 | ||||||||||||
Joseph N. Mildenhall | 66.0 | % | 110.0 | % | 100.0 | % | 90.4 | % | 45.2 | % | $ | 135,600 | ||||||||||||
Dr. Kathy Player | 66.0 | % | 110.0 | % | 85.0 | % | 87.4 | % | 43.7 | % | $ | 120,175 |
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Number of securities to be | Weighted-average | Number of securities | ||||||||||
issued upon exercise of | exercise price of | remaining available for | ||||||||||
outstanding options, | outstanding options, | future issuance under | ||||||||||
Plan Category | warrants and rights | warrants and rights | equity compensation plans | |||||||||
Equity Compensation Plans Approved by Securityholders | 4,443,962 | (1) | $ | 14.19 | 2,034,053 | (2) | ||||||
Equity Compensation Plans Not Approved by Securityholders | None | — | None | |||||||||
Total | 4,443,962 | (1) | $ | 14.19 | 2,034,053 | (2) | ||||||
(1) | Includes outstanding options to purchase shares of our common stock under our Equity Incentive Plan. | |
(2) | Includes shares available for future issuance under our Equity Incentive Plan. |
• | all stock option grants, restricted stock awards, and other equity based awards, which we collectively refer to as stock-based grants, must be approved by the Compensation Committee; |
• | the date for determining the strike price and similar measurements for stock-based awards will be the date of the meeting (or a date shortly after the meeting) or, in the case of an employee, director, or consultant not yet hired, appointed, or retained, respectively, the subsequent date of hire, appointment, or retention, as the case may be; |
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• | we will not intentionally grant stock-based awards before the anticipated announcement of materially favorable news or intentionally delay the grant of stock-based awards until after the announcement of materially unfavorable news; and |
• | the Compensation Committee will approve stock-based grants only for persons specifically identified at the meeting by management. |
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Name | Number of Shares Subject to Option | |||
Brian E. Mueller | 150,000 | |||
Dr. W. Stan Meyer | 80,000 | |||
Daniel E. Bachus | 80,000 | |||
Joseph N. Mildenhall | 80,000 | |||
Dr. Kathy Player | 15,000 |
• | We pay base salaries we believe are competitive and that are generally intended to constitute the largest component of cash compensation. We believe that this emphasis on paying competitive base salaries that are not at risk for performance discourages inappropriate risk taking; |
• | Our Cash Incentive Plan focuses on the achievement of company-wide revenue and adjusted EBITDA targets and individual non-financial performance metrics (which can include metrics based on compliance with regulatory or other risk management policies). We believe that the design of the Cash Incentive Plan prevents participants from being able to materially enhance their bonus prospects through excessive or inappropriate risk-taking; |
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• | The cash payments that may be made to our named executive officers under the Cash Incentive Plan are subject to stated maximum limits, which we believe mitigates any risks that our named executive officers may take; and |
• | The stock option grants made to our named executive officers, and all other employees, under the Equity Incentive Plan all vest in annual increments over a period of five years, which we believe discourages excessive or inappropriate short-term risk taking. |
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Compensation Committee: David J. Johnson (Chair) Chad N. Heath D. Mark Dorman |
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Stock | Options | Non-Equity Incentive Plan | All Other | |||||||||||||||||||||||||||||
Bonus | Awards | Awards | Compensation | Compensation | ||||||||||||||||||||||||||||
Name and Position | Year | Salary ($) | ($)(1) | ($) (2) | ($)(3) | ($)(4) | ($) (5) | Total | ||||||||||||||||||||||||
Brent D. Richardson | 2010 | $ | 297,500 | — | $ | — | $ | — | $ | 22,600 | $ | 17,408 | $ | 337,508 | ||||||||||||||||||
Executive Chairman | 2009 | 297,500 | — | — | — | 25,425 | 17,408 | 340,333 | ||||||||||||||||||||||||
2008 | 297,500 | 18,000 | — | — | — | 15,628 | 331,128 | |||||||||||||||||||||||||
Brian E. Mueller | 2010 | 555,384 | — | — | 1,067,000 | 542,400 | 2,580 | 2,167,364 | ||||||||||||||||||||||||
Chief Executive Officer and Director | 2009 | 500,000 | — | — | — | 508,500 | 20,205 | 1,028,705 | ||||||||||||||||||||||||
(Principal Executive Officer) (6) | 2008 | 246,154 | 250,000 | 1,311,948 | 6,533,489 | — | 7,740 | 8,349,331 | ||||||||||||||||||||||||
Dr. W. Stan Meyer | 2010 | 327,692 | — | — | 426,800 | 234,019 | 2,745 | 991,256 | ||||||||||||||||||||||||
Executive Vice President(6) | 2009 | 300,000 | — | — | — | 152,550 | 5,391 | 457,941 | ||||||||||||||||||||||||
2008 | 147,692 | 75,000 | — | 2,613,394 | — | — | 2,836,086 | |||||||||||||||||||||||||
Daniel E. Bachus | 2010 | 316,538 | — | — | 426,800 | 237,300 | 420 | 981,058 | ||||||||||||||||||||||||
Chief Financial Officer | 2009 | 275,000 | — | — | — | 139,838 | 323 | 415,161 | ||||||||||||||||||||||||
(Principal Financial Officer) (6) | 2008 | 132,212 | 68,750 | 2,352,058 | — | — | 2,553,020 | |||||||||||||||||||||||||
Christopher C. Richardson | 2010 | 297,500 | — | — | — | 134,470 | 2,527 | 434,497 | ||||||||||||||||||||||||
General Counsel and Director | 2009 | 297,500 | — | — | — | 76,275 | 5,244 | 379,019 | ||||||||||||||||||||||||
2008 | 297,500 | 18,000 | — | — | — | 7,750 | 323,250 | |||||||||||||||||||||||||
Mr. Joseph N. Mildenhall | 2010 | 300,000 | — | — | 266,750 | 135,600 | 2,963 | 705,313 | ||||||||||||||||||||||||
Chief Information Officer | 2009 | 78,075 | — | — | 580,650 | 44,356 | 17,887 | 720,968 | ||||||||||||||||||||||||
Dr. Kathy Player | 2010 | 275,000 | — | — | 266,750 | 120,175 | 2,610 | 664,535 | ||||||||||||||||||||||||
Grand Canyon University President | 2009 | 275,000 | — | — | — | 139,838 | 5,346 | 420,184 | ||||||||||||||||||||||||
2008 | 230,000 | 75,000 | — | 398,139 | — | 7,750 | 710,889 |
(1) | For Mr. Mueller, Dr. Meyer, Mr. Bachus and Dr. Player, the amounts in this column for 2008 reflect non-performance-related bonuses that were negotiated in connection with the employment agreements we entered into with them prior to our initial public offering, as well as, for Dr. Player only, an additional discretionary bonus of $6,250. All other amounts in this column reflect discretionary bonuses paid prior to the time we became a public company. | |
(2) | The amounts shown in this column reflect the compensation costs attributable to an unrestricted stock grant made to Mr. Mueller in 2008 in connection with out initial public offering. The compensation costs are based on the grant date fair value for the shares of common stock granted. Such grant date fair value has been calculated on the basis of the fair market value of our common stock on the grant date. No shares of stock were granted in any year prior to 2008. | |
(3) | The amounts shown in this column reflect the compensation costs attributable to the stock options granted to the named executive officers in 2010, 2009 and 2008. The compensation costs are based on the grant date fair value of each stock option and do not take into account any estimated forfeitures related to service-based vesting conditions, if any. Assumptions used in the calculation of the grant date fair value of each option granted during the 2010, 2009 and 2008 fiscal year are set forth in Notes 3 and 16 to our financial statements for the fiscal year ended December 31, 2010 included in our 2010 Annual Report on Form 10-K. No options were granted in any year prior to 2008. | |
(4) | The amounts in this column reflect non-equity incentive payments earned pursuant to our Cash Incentive Plan. |
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(5) | For Mr. Brent D. Richardson, the amounts in this column include the value of payments made by us on a Company-owned vehicle used by Mr. Richardson. In 2009 for Mr. Mueller, the amount in this column reflects the value of tuition-free enrollment for an additional child at Grand Canyon University (beyond the single spouse or child tuition benefit available to all full-time Company employees at that time). For Mr. Mueller, Dr. Meyer, Mr. Christopher D. Richardson, Mr. Joseph N. Mildenhall and Dr. Player, the amounts in this column reflect matching payments made by the Company under our 401(k) plan. In 2010 and 2009, the amounts in this column include company paid life insurance premiums for all named executive officers. | |
(6) | Mr. Mueller, Dr. Meyer, and Mr. Bachus commenced employment with us on July 1, 2008. Mr. Mildenhall commenced employment with us on September 16, 2009. |
All Other | ||||||||||||||||||||||||||||
Option | Exercise | |||||||||||||||||||||||||||
Awards: | or Base | Grant Date | ||||||||||||||||||||||||||
Number of | Price of | Fair Value | ||||||||||||||||||||||||||
Estimated Future Payouts Under Non- | Securities | Option | of Stock | |||||||||||||||||||||||||
Equity Incentive Plan Awards(1) | Underlying | Awards | and Option | |||||||||||||||||||||||||
Name | Grant Date | Threshold($) | Target($) | Maximum($) | Options (#) | ($/Sh) | Awards(2) | |||||||||||||||||||||
Brent D. Richardson | — | $ | 12,500 | $ | 25,000 | $ | 35,000 | — | — | — | ||||||||||||||||||
Brian E. Mueller | Feb. 25, 2010 | 300,000 | 600,000 | 840,000 | 100,000 | $ | 21.10 | $ | 1,067,000 | |||||||||||||||||||
Dr. W. Stan Meyer | Feb. 25, 2010 | 131,250 | 262,500 | 367,500 | 40,000 | 21.10 | 426,800 | |||||||||||||||||||||
Daniel E. Bachus | Feb. 25, 2010 | 131,250 | 262,500 | 367,500 | 40,000 | 21.10 | 426,800 | |||||||||||||||||||||
Christopher C. Richardson | — | 75,000 | 150,000 | 210,000 | — | — | — | |||||||||||||||||||||
Joseph N. Mildenhall | Feb. 25, 2010 | 74,375 | 148,750 | 208,250 | 25,000 | 21.10 | 266,750 | |||||||||||||||||||||
Dr. Kathy Player | Feb. 25, 2010 | 68,750 | 137,500 | 192,500 | 25,000 | 21.10 | 266,750 |
(1) | These amounts reflect the Threshold, Target and Maximum bonuses payable to our named executive officers under our Cash Incentive Plan. All such awards have been paid, and the actual amounts paid are set forth in the Summary Compensation Table above. | |
(2) | The dollar value reported in this column with respect to option awards represents the grant date fair value of each option award determined in accordance with the provisions of SFAS 123(R). A discussion of the valuation assumptions used in the SFAS 123(R) calculation of grant date fair value is set forth in Notes 3 and 16 to our financial statements for the fiscal year ended December 31, 2010, included in our 2010 Annual Report on Form 10-K. |
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Option Awards(1) | ||||||||||||||||||||||
Number of | Number of | Stock Awards | ||||||||||||||||||||
Securities | Securities | Number of | Market Value | |||||||||||||||||||
Underlying | Underlying | Shares of | of Shares of | |||||||||||||||||||
Unexercised | Unexercised | Option | Stock That | Stock That | ||||||||||||||||||
Options (#) | Options (#) | Exercise Price | Option Expiration | Have Not | Have Not | |||||||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | Vested | Vested | ||||||||||||||||
Brian E. Mueller | — | 100,000 | $ | 21.10 | February 25, 2020 | — | — | |||||||||||||||
437,315 | 655,973 | 12.00 | November 19, 2018 | — | — | |||||||||||||||||
Dr. W. Stan Meyer | — | 40,000 | 21.10 | February 25, 2020 | — | — | ||||||||||||||||
174,926 | 262,389 | 12.00 | November 19, 2018 | — | — | |||||||||||||||||
Daniel E. Bachus | — | 40,000 | 21.10 | February 25, 2020 | — | — | ||||||||||||||||
157,433 | 236,151 | 12.00 | November 19, 2018 | — | — | |||||||||||||||||
Joseph N. Mildenhall | — | 25,000 | 21.10 | February 25, 2020 | — | — | ||||||||||||||||
15,000 | 60,000 | 17.03 | September 16, 2019 | — | — | |||||||||||||||||
Dr. Kathy Player | — | 25,000 | 21.00 | February 25, 2020 | — | — | ||||||||||||||||
31,955 | 26,240 | 12.00 | November 19, 2018 | — | — |
(1) | For Dr. Player, 29,463 shares covered by her exercisable options were fully vested upon grant. The shares covered by the options granted to Mr. Mueller, Dr. Meyer, Mr. Bachus, Mr. Mildenhall and the remainder of Dr. Player’s options vest in five successive equal annual installments upon the completion of each year of service with us over the five year period measured from their grant date, subject to fully accelerated vesting in the event of a termination of employment by us without cause or by the executive for good reason within 12 months following a change in control of the Company. Mr. Mueller, Dr. Meyer, Mr. Bachus and Mr. Mildenhall also receive partially accelerated vesting through the next vesting date immediately following the date of termination, upon the termination of employment by us without cause or by the executive for good reason. |
Option Awards | ||||||||
Number of Shares Acquired | Value Realized | |||||||
Name | on Exercise (#) | on Exercise ($) | ||||||
Dr. Kathy Player | 15,000 | $ | 210,000 |
• | The agreements with each of Brent D. Richardson and Christopher C. Richardson provide for a base salary of $297,500, subject to annual review by the Compensation Committee, and entitle each to receive performance bonuses as determined by the Compensation Committee based upon the Company’s achievement of performance, budgetary, and other objectives, as set in advance by the Compensation Committee. The agreements do not set a target performance bonus as percentage of base salary, but leave such target to be determined by the Compensation Committee. In addition, and also as discussed elsewhere in this proxy statement, although Messrs. Richardson and Richardson are eligible to participate in the Equity Incentive Plan, we do not anticipate granting any material awards under the Equity Incentive Plan to them and their agreements do not provide for any such awards. |
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• | The agreements with each of Mr. Mueller, Dr. Meyer, Mr. Bachus, Mr. Mildenhall and Dr. Player provide for a base salary and a target bonus under our Cash Incentive Plan. Effective June 1, 2010, the Compensation Committee increased the base salaries of Mr. Mueller, Dr. Meyer and Mr. Bachus to $600,000, $350,000 and $350,000 from $500,000, $300,000 and $275,000, respectively, and also increased the target bonus for Dr. Meyer and Mr. Bachus to 75% of base salary from 50% of base salary. Mr. Mueller, Dr. Meyer, Mr. Bachus, Mr. Mildenhall, and Dr. Player are also eligible to receive equity incentive awards under our Equity Incentive Plan. |
• | Each agreement entitles the executive to receive customary and usual fringe benefits generally available to our senior management, and to be reimbursed for reasonable out-of-pocket business expenses. |
• | Each agreement entitles the executive to certain benefits upon his or her termination of employment under specified circumstances. |
• | a severance payment equivalent to 12 months of the executive’s base salary then in effect on the date of termination, payable in accordance with the Company’s regular payroll cycle commencing with the first payroll date occurring on or after the 60th day following the date of the executive’s termination of employment; |
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• | payment by us of the premiums required to continue the executive’s group health care coverage for a period of 12 months following the executive’s termination, under the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), provided that the executive timely elects to continue and remains eligible for these benefits under COBRA, and does not become eligible for health coverage through another employer during this period; and |
• | with respect to Mr. Mueller, Dr. Meyer, and Mr. Bachus, acceleration of the vesting of the next annual installment of the options granted to them in November 2008 that would otherwise have vested on the next vesting date following the termination of the executive’s employment. |
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Termination without Cause or for Good Reason | ||||||||||||||||||||||||
Termination without Cause or for Good Reason | following a Change in Control | |||||||||||||||||||||||
Acceleration of | ||||||||||||||||||||||||
Cash | Vesting of | Acceleration of | ||||||||||||||||||||||
Payment | Benefits | Options | Cash Payment | Benefits | Vesting of Options | |||||||||||||||||||
($)(1) | ($)(2) | ($)(3) | ($)(1) | ($)(2) | ($)(3) | |||||||||||||||||||
Brent D. Richardson | $ | 297,500 | $ | 14,681 | $ | — | $ | 297,500 | $ | 14,681 | $ | — | ||||||||||||
Brian E. Mueller | 600,000 | 14,681 | 1,659,611 | 600,000 | 14,681 | 4,978,834 | ||||||||||||||||||
Dr. W. Stan Meyer | 350,000 | 14,681 | 663,844 | 350,000 | 14,681 | 1,991,533 | ||||||||||||||||||
Daniel E. Bachus | 350,000 | 14,681 | 597,461 | 350,000 | 14,681 | 1,792,382 | ||||||||||||||||||
Joseph N. Mildenhall | 300,000 | 11,283 | 38,400 | 300,000 | 11,283 | 115,200 | ||||||||||||||||||
Christopher C. Richardson | 297,500 | 14,462 | — | 297,500 | 14,462 | — | ||||||||||||||||||
Dr. Kathy Player | 275,000 | 5,075 | — | 275,000 | 5,075 | 296,503 |
(1) | Assumes a termination date of December 31, 2010, and is based on the executive’s salary in effect at such date. | |
(2) | Reflects the cost related to the continuation of the executive’s health benefits for the period specified. | |
(3) | Calculated based on an assumed termination date of December 31, 2010 and the closing market price of our common stock on the Nasdaq Global Market on such date, less the applicable exercise price for each option for which vesting is accelerated. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accounting Fees and Services |
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Item 15. | Exhibits, Financial Statement Schedules |
Index to Financial Statements | Page | |||
Report of Independent Registered Public Accounting Firm | 96 | |||
Balance Sheets as of December 31, 2010 (restated) and 2009 | 98 | |||
Income Statements for the years ended December 31, 2010 (restated), 2009 and 2008 | 99 | |||
Statements of Comprehensive Income for the years ended December 31, 2010 (restated), 2009 and 2008 | 100 | |||
Statements of Preferred Stock and Stockholders Equity (Deficit) for the years ended December 31, 2010(restated), 2009 and 2008 | 101 | |||
Statements of Cash Flows for the years ended December 31, 2010 (restated), 2009 and 2008 | 102 | |||
Notes to Financial Statements | 104 |
Number | Description | Method of Filing | ||||
3.1 | Amended and Restated Certificate of Incorporation | Incorporated by reference to Exhibit 3.1 to Amendment No. 6 to the University’s Registration Statement on Form S-1 filed with the SEC on November 12, 2008. | ||||
3.2 | Second Amended and Restated Bylaws | Incorporated by reference to Exhibit 3.1 to the University’s Current Report on Form 8-K filed with the SEC on August 2, 2010. | ||||
4.1 | Specimen of Stock Certificate | Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
4.2 | Amended and Restated Investor Rights Agreement, dated September 17, 2008, by and among Grand Canyon Education, Inc. and the other parties named therein | Incorporated by reference to Exhibit 4.2 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
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Number | Description | Method of Filing | ||||
10.1 | Amended and Restated Executive Employment Agreement, dated September 10, 2008, by and between Grand Canyon Education, Inc. and Brent Richardson† | Incorporated by reference to Exhibit 10.1 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.2 | Amended and Restated Executive Employment Agreement, dated September 10, 2008, by and between Grand Canyon Education, Inc. and Christopher Richardson† | Incorporated by reference to Exhibit 10.2 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.3 | Executive Employment Agreement, dated September 1, 2008, by and between Grand Canyon Education, Inc. and Kathy Player† | Incorporated by reference to Exhibit 10.1 to the University’s Current Report on Form 8-K filed with the SEC on March 25, 2009. | ||||
10.4 | 2008 Equity Incentive Plan† | Incorporated by reference to Exhibit 10.4 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.5 | 2008 Employee Stock Purchase Plan† | Incorporated by reference to Exhibit 10.5 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.6 | License Agreement, dated June 30, 2004, by and between Blanchard Education, LLC and Significant Education, LLC | Incorporated by reference to Exhibit 10.15 to the University’s Registration Statement on Form S-1 filed with the SEC on May 13, 2008. | ||||
10.7 | Letter Agreement, dated February 6, 2006, by and between The Ken Blanchard Companies and Grand Canyon University | Incorporated by reference to Exhibit 10.16 to the University’s Registration Statement on Form S-1 filed with the SEC on May 13, 2008. | ||||
10.8 | Amendment to License Agreement, dated May 8, 2008, by and between Blanchard Education, LLC and Grand Canyon Education, Inc. | Incorporated by reference to Exhibit 10.17 to the University’s Registration Statement on Form S-1 filed with the SEC on May 13, 2008. | ||||
10.9 | Collaboration Agreement, dated July 11, 2005, by and between Mind Streams, LLC and Significant Education, LLC (as supplemented by Project One and Project Two) | Incorporated by reference to Exhibit 10.18 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
10.10 | Executive Employment Agreement, dated June 25, 2008, by and between Grand Canyon Education, Inc. and Daniel E. Bachus† | Incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
10.11 | Executive Employment Agreement, dated June 25, 2008, by and between Grand Canyon Education, Inc. and Brian E. Mueller† | Incorporated by reference to Exhibit 10.20 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
10.12 | Executive Employment Agreement, dated June 25, 2008, by and between Grand Canyon Education, Inc. and W. Stan Meyer† | Incorporated by reference to Exhibit 10.21 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
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Number | Description | Method of Filing | ||||
10.13 | Form of Director and Officer Indemnity Agreement | Incorporated by reference to Exhibit 10.21 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.14 | Purchase and Sale Agreement, dated April 27, 2009, by and among Grand Canyon Education, Inc., Spirit Master Funding, LLC, and Spirit Management Company | Incorporated by reference to Exhibit 10.1 to the University’s Quarterly Report on Form 10-Q filed with the SEC on August 3, 2009. | ||||
10.15 | Loan Agreement, dated April 27, 2009, by and between Grand Canyon Education, Inc. and Bank of America, N.A. | Incorporated by reference to Exhibit 10.2 to the University’s Quarterly Report on Form 10-Q filed with the SEC on August 3, 2009. | ||||
10.16 | Employment Agreement, dated September 16, 2009, by and between Grand Canyon Education, Inc. and Joseph N. Mildenhall† | Incorporated by reference to Exhibit 10.1 to the University’s Quarterly Report on Form 10-Q filed with the SEC on November 4, 2009. | ||||
10.17 | Amendment No. 1 to Loan Agreement, dated June 9, 2010, between Grand Canyon Education, Inc. and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to the University’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2010. | ||||
10.18 | Asset Purchase Agreement, dated December 30, 2010, between Grand Canyon Education, Inc. and Mind Streams, L.L.C. | Incorporated by reference to Exhibit 10.18 to the University’s Annual Report on Form 10-K filed with the SEC on February 22, 2011. | ||||
23.1 | Consent of Independent Registered Public Accounting Firm | Filed herewith. | ||||
24.1 | Power of Attorney | Previously filed with the University’s Annual Report on Form 10-K filed with the SEC on February 22, 2011. | ||||
31.1 | Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith. | ||||
31.2 | Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith. | ||||
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002†† | Filed herewith. | ||||
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002†† | Filed herewith. |
† | Indicates a management contract or any compensatory plan, contract or arrangement. |
†† | This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filings of the University, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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GRAND CANYON EDUCATION, INC. | ||||||
By: | /s/ Brian E. Mueller | |||||
Title: Chief Executive Officer |
Signature | Title | Date | ||
/s/ Brian E. Mueller | Chief Executive Officer and Director (Principal Executive Officer) | November 14, 2011 | ||
/s/ Daniel E. Bachus | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | November 14, 2011 | ||
/s/ * | Executive Chairman | November 14, 2011 | ||
/s/ * | Director | November 14, 2011 | ||
/s/ * | Director | November 14, 2011 | ||
/s/ * | Director | November 14, 2011 | ||
Director | November 14, 2011 | |||
/s/ * | Director | November 14, 2011 | ||
D. Mark Dorman | ||||
/s/ * | Director | November 14, 2011 |
* By: | /s/ Daniel E. Bachus | |||
Attorney-in-Fact |
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Number | Description | Method of Filing | ||||
3.1 | Amended and Restated Certificate of Incorporation | Incorporated by reference to Exhibit 3.1 to Amendment No. 6 to the University’s Registration Statement on Form S-1 filed with the SEC on November 12, 2008. | ||||
3.2 | Second Amended and Restated Bylaws | Incorporated by reference to Exhibit 3.1 to the University’s Current Report on Form 8-K filed with the SEC on August 2,2010. | ||||
4.1 | Specimen of Stock Certificate | Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
4.2 | Amended and Restated Investor Rights Agreement, dated September 17, 2008, by and among Grand Canyon Education, Inc. and the other parties named therein | Incorporated by reference to Exhibit 4.2 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.1 | Amended and Restated Executive Employment Agreement, dated September 10, 2008, by and between Grand Canyon Education, Inc. and Brent Richardson† | Incorporated by reference to Exhibit 10.1 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.2 | Amended and Restated Executive Employment Agreement, dated September 10, 2008, by and between Grand Canyon Education, Inc. and Christopher Richardson† | Incorporated by reference to Exhibit 10.2 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.3 | Executive Employment Agreement, dated September 1, 2008, by and between Grand Canyon Education, Inc. and Kathy Player† | Incorporated by reference to Exhibit 10.1 to the University’s Current Report on Form 8-K filed with the SEC on March 25, 2009. | ||||
10.4 | 2008 Equity Incentive Plan† | Incorporated by reference to Exhibit 10.4 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.5 | 2008 Employee Stock Purchase Plan† | Incorporated by reference to Exhibit 10.5 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.6 | License Agreement, dated June 30, 2004, by and between Blanchard Education, LLC and Significant Education, LLC | Incorporated by reference to Exhibit 10.15 to the University’s Registration Statement on Form S-1 filed with the SEC on May 13, 2008. | ||||
10.7 | Letter Agreement, dated February 6, 2006, by and between The Ken Blanchard Companies and Grand Canyon University | Incorporated by reference to Exhibit 10.16 to the University’s Registration Statement on Form S-1 filed with the SEC on May 13, 2008. | ||||
10.8 | Amendment to License Agreement, dated May 8, 2008, by and between Blanchard Education, LLC and Grand Canyon Education, Inc. | Incorporated by reference to Exhibit 10.17 to the University’s Registration Statement on Form S-1 filed with the SEC on May 13, 2008. |
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Number | Description | Method of Filing | ||||
10.9 | Collaboration Agreement, dated July 11, 2005, by and between Mind Streams, LLC and Significant Education, LLC (as supplemented by Project One and Project Two) | Incorporated by reference to Exhibit 10.18 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
10.10 | Executive Employment Agreement, dated June 25, 2008, by and between Grand Canyon Education, Inc. and Daniel E. Bachus† | Incorporated by reference to Exhibit 10.19 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
10.11 | Executive Employment Agreement, dated June 25, 2008, by and between Grand Canyon Education, Inc. and Brian E. Mueller† | Incorporated by reference to Exhibit 10.20 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
10.12 | Executive Employment Agreement, dated June 25, 2008, by and between Grand Canyon Education, Inc. and W. Stan Meyer† | Incorporated by reference to Exhibit 10.21 to Amendment No. 1 to the University’s Registration Statement on Form S-1 filed with the SEC on August 13, 2008. | ||||
10.13 | Form of Director and Officer Indemnity Agreement | Incorporated by reference to Exhibit 10.21 to Amendment No. 2 to the University’s Registration Statement on Form S-1 filed with the SEC on September 29, 2008. | ||||
10.14 | Purchase and Sale Agreement, dated April 27, 2009, by and among Grand Canyon Education, Inc., Spirit Master Funding, LLC, and Spirit Management Company | Incorporated by reference to Exhibit 10.1 to the University’s Quarterly Report on Form 10-Q filed with the SEC on August 3, 2009. | ||||
10.15 | Loan Agreement, dated April 27, 2009, by and between Grand Canyon Education, Inc. and Bank of America, N.A. | Incorporated by reference to Exhibit 10.2 to the University’s Quarterly Report on Form 10-Q filed with the SEC on August 3, 2009. | ||||
10.16 | Employment Agreement, dated September 16, 2009, by and between Grand Canyon Education, Inc. and Joseph N. Mildenhall† | Incorporated by reference to Exhibit 10.1 to the University’s Quarterly Report on Form 10-Q filed with the SEC on November 4, 2009. | ||||
10.17 | Amendment No. 1 to Loan Agreement, dated June 9, 2010, between Grand Canyon Education, Inc. and Bank of America, N.A. | Incorporated by reference to Exhibit 10.1 to the University’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2010. | ||||
10.18 | Asset Purchase Agreement, dated December 30, 2010, between Grand Canyon Education, Inc. and Mind Streams, L.L.C. | Incorporated by reference to Exhibit 10.18 to the University’s Annual Report on Form 10-K filed with the SEC on February 22, 2011. | ||||
23.1 | Consent of Independent Registered Public Accounting Firm | Filed herewith. | ||||
24.1 | Power of Attorney | Previously filed with the University’s Annual Report on Form 10-K filed with the SEC on February 22, 2011. | ||||
31.1 | Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith. |
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Number | Description | Method of Filing | ||||
31.2 | Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith. | ||||
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002†† | Filed herewith. | ||||
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002†† | Filed herewith. |
† | Indicates a management contract or any compensatory plan, contract or arrangement. | |
†† | This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filings of the University, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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