Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 05, 2015 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | LOPE | |
Entity Registrant Name | GRAND CANYON EDUCATION, INC. | |
Entity Central Index Key | 1,434,588 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 47,140,566 |
Consolidated Income Statements
Consolidated Income Statements - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
Net revenue | $ 174,726 | $ 158,594 | $ 368,853 | $ 326,026 |
Costs and expenses: | ||||
Instructional costs and services | 75,357 | 67,847 | 154,044 | 138,525 |
Admissions advisory and related, including $489 and $806 for the three months ended June 30, 2015 and 2014, respectively, and $994 and $1,611 for the six months ended June 30, 2015 and 2014, respectively, to related parties | 27,372 | 26,208 | 55,705 | 52,469 |
Advertising | 18,419 | 15,751 | 38,450 | 32,463 |
Marketing and promotional | 1,788 | 1,907 | 3,482 | 3,698 |
General and administrative | 9,534 | 8,994 | 18,930 | 17,548 |
Total costs and expenses | 132,470 | 120,707 | 270,611 | 244,703 |
Operating income | 42,256 | 37,887 | 98,242 | 81,323 |
Interest expense | (146) | (356) | (521) | (879) |
Interest and other income | 127 | 197 | 384 | 334 |
Income before income taxes | 42,237 | 37,728 | 98,105 | 80,778 |
Income tax expense | 16,461 | 14,659 | 38,150 | 31,421 |
Net income | $ 25,776 | $ 23,069 | $ 59,955 | $ 49,357 |
Earnings per share: | ||||
Basic income per share | $ 0.56 | $ 0.51 | $ 1.31 | $ 1.09 |
Diluted income per share | $ 0.55 | $ 0.49 | $ 1.27 | $ 1.05 |
Basic weighted average shares outstanding | 46,012 | 45,598 | 45,901 | 45,403 |
Diluted weighted average shares outstanding | 47,263 | 46,990 | 47,233 | 46,917 |
Consolidated Income Statements
Consolidated Income Statements (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
Admissions advisory and related expenses to related parties | $ 489 | $ 806 | $ 994 | $ 1,611 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 25,776 | $ 23,069 | $ 59,955 | $ 49,357 |
Other comprehensive income, net of tax: | ||||
Unrealized losses on available-for-sale securities, net of taxes of $70 and $8 for the three months ended June 30, 2015 and 2014, respectively, and $67 and $18 for the six months ended June 30, 2015 and 2014, respectively | (110) | (12) | (105) | (28) |
Unrealized gains (losses) on hedging derivatives, net of taxes of $40 and $95 for the three months ended June 30, 2015 and 2014, respectively, and $113 and $113 for the six months ended June 30, 2015 and 2014, respectively | 64 | (148) | (175) | (174) |
Comprehensive income | $ 25,730 | $ 22,909 | $ 59,675 | $ 49,155 |
Consolidated Statements of Com5
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Unrealized losses on available-for-sale securities, taxes | $ (70) | $ (8) | $ (67) | $ (18) |
Unrealized gains (losses) on hedging derivatives, taxes | $ 40 | $ (95) | $ (113) | $ (113) |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 50,710 | $ 65,238 |
Restricted cash, cash equivalents and investments | 63,696 | 67,840 |
Investments | 83,533 | 100,784 |
Accounts receivable, net | 8,158 | 7,605 |
Deferred income taxes | 6,441 | 6,149 |
Other current assets | 18,539 | 19,429 |
Total current assets | 231,077 | 267,045 |
Property and equipment, net | 588,275 | 478,170 |
Prepaid royalties | 3,503 | 3,650 |
Goodwill | 2,941 | 2,941 |
Other assets | 3,145 | 3,907 |
Total assets | 828,941 | 755,713 |
Current liabilities | ||
Accounts payable | 36,410 | 22,715 |
Accrued compensation and benefits | 23,101 | 23,995 |
Accrued liabilities | 14,883 | 13,533 |
Income taxes payable | 220 | 4,906 |
Student deposits | 64,895 | 69,584 |
Deferred revenue | 42,409 | 36,868 |
Due to related parties | 401 | 403 |
Current portion of capital lease obligations | 518 | 91 |
Current portion of notes payable | 6,620 | 6,616 |
Total current liabilities | 189,457 | 178,711 |
Capital lease obligations, less current portion | 170 | 406 |
Other noncurrent liabilities | 3,953 | 4,513 |
Deferred income taxes, noncurrent | 15,469 | 15,974 |
Notes payable, less current portion | 76,565 | 79,877 |
Total liabilities | $ 285,614 | $ 279,481 |
Commitments and contingencies | ||
Stockholders' equity | ||
Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at June 30, 2015 and December 31, 2014 | ||
Common stock, $0.01 par value, 100,000 shares authorized; 50,237 and 49,746 shares issued and 47,133 and 46,744 shares outstanding at June 30, 2015 and December 31, 2014, respectively | $ 502 | $ 497 |
Treasury stock, at cost, 3,104 and 3,002 shares of common stock at June 30, 2015 and December 31, 2014, respectively | (58,000) | (53,770) |
Additional paid-in capital | 170,194 | 158,549 |
Accumulated other comprehensive loss | (315) | (35) |
Retained earnings | 430,946 | 370,991 |
Total stockholders' equity | 543,327 | 476,232 |
Total liabilities and stockholders' equity | $ 828,941 | $ 755,713 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 50,237,000 | 49,746,000 |
Common stock, shares outstanding | 47,133,000 | 46,744,000 |
Treasury stock, shares | 3,104,000 | 3,002,000 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity - 6 months ended Jun. 30, 2015 - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock [Member] | Treasury Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Retained Earnings [Member] |
Beginning Balance at Dec. 31, 2014 | $ 476,232 | $ 497 | $ (53,770) | $ 158,549 | $ (35) | $ 370,991 |
Beginning Balance, Shares at Dec. 31, 2014 | 49,746 | 3,002 | ||||
Comprehensive income | 59,675 | (280) | 59,955 | |||
Restricted shares forfeited | 0 | $ 0 | $ 0 | 0 | 0 | 0 |
Restricted shares forfeited, Shares | 10 | |||||
Exercise of stock options | 2,700 | $ 2 | 2,698 | |||
Exercise of stock options, Shares | 167 | |||||
Excess tax benefits | 3,472 | 3,472 | ||||
Share-based compensation | 1,248 | $ 3 | $ (4,230) | 5,475 | ||
Share-based compensation, Shares | 324 | 92 | ||||
Ending Balance at Jun. 30, 2015 | $ 543,327 | $ 502 | $ (58,000) | $ 170,194 | $ (315) | $ 430,946 |
Ending Balance, Shares at Jun. 30, 2015 | 50,237 | 3,104 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows provided by operating activities: | ||
Net income | $ 59,955 | $ 49,357 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Share-based compensation | 5,512 | 4,837 |
Excess tax benefits from share-based compensation | (3,361) | (7,085) |
Provision for bad debts | 7,412 | 7,061 |
Depreciation and amortization | 16,387 | 14,000 |
Deferred income taxes | (1,077) | (862) |
Prepaid royalty impairment | 966 | |
Other including fixed asset impairments | 872 | 2,090 |
Changes in assets and liabilities: | ||
Restricted cash, cash equivalents and investments | 4,144 | 11,135 |
Accounts receivable | (7,965) | (8,359) |
Prepaid expenses and other | 1,373 | 2,062 |
Due to/from related parties | (2) | 46 |
Accounts payable | (1,083) | (1,151) |
Accrued liabilities and employee related liabilities | 422 | 2,087 |
Income taxes receivable/payable | (1,214) | 16,956 |
Deferred rent | (560) | (665) |
Deferred revenue | 5,541 | 8,870 |
Student deposits | (4,689) | (11,905) |
Net cash provided by operating activities | 81,667 | 89,440 |
Cash flows used in investing activities: | ||
Capital expenditures | (111,903) | (82,013) |
Purchases of investments | (25,023) | (87,217) |
Proceeds from sale or maturity of investments | 42,274 | 39,145 |
Net cash used in investing activities | (94,652) | (130,085) |
Cash flows (used in) provided by financing activities: | ||
Principal payments on notes payable and capital lease obligations | (3,374) | (3,346) |
Repurchase of common shares including shares withheld in lieu of income taxes | (4,230) | (5,338) |
Excess tax benefits from share-based compensation | 3,361 | 7,085 |
Net proceeds from exercise of stock options | 2,700 | 6,634 |
Net cash (used in) provided by financing activities | (1,543) | 5,035 |
Net decrease in cash and cash equivalents | (14,528) | (35,610) |
Cash and cash equivalents, beginning of period | 65,238 | 55,824 |
Cash and cash equivalents, end of period | 50,710 | 20,214 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 534 | 916 |
Cash paid for income taxes | 39,986 | 14,885 |
Supplemental disclosure of non-cash investing and financing activities | ||
Purchases of property and equipment included in accounts payable | 20,623 | 10,210 |
Purchases of equipment through capital lease obligations | 257 | |
Tax benefit of Spirit warrant intangible | 129 | 130 |
Shortfall tax expense from share-based compensation | $ 18 | $ 14 |
Nature of Business
Nature of Business | 6 Months Ended |
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | 1. Nature of Business Grand Canyon Education, Inc. (together with its subsidiaries, the “University”, “we” or “us”) is a comprehensive regionally accredited university that offers over 160 graduate and undergraduate degree programs across eight colleges both online and on ground at our 200+ acre campus in Phoenix, Arizona, at leased facilities and at facilities owned by third party employers of our students. Our undergraduate programs are designed to be innovative and to meet the future needs of employers, while providing students with the needed critical thinking and effective communication skills developed through a Christian, liberal arts foundation. The University is accredited by The Higher Learning Commission. The University’s wholly-owned subsidiaries are primarily used to facilitate expansion of the University campus. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the University and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation. Unaudited Interim Financial Information The accompanying unaudited interim consolidated financial statements of the University have been prepared in accordance with U.S. generally accepted accounting principles and pursuant to the rules and regulations of the United States Securities and Exchange Commission and the instructions to Form 10-Q and Article 10 of the Securities Exchange Act of 1934, consistent in all material respects with those applied in its financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management are necessary for the fair presentation of the interim periods presented. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the University’s audited financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 from which the December 31, 2014 balance sheet information was derived. Restricted Cash, Cash Equivalents and Investments A significant portion of the University’s revenue is received from students who participate in government financial aid and assistance programs. Restricted cash, cash equivalents and investments primarily represent amounts received from the federal and state governments under various student aid grant and loan programs, such as Title IV (“Title IV”) of the Higher Education Act of 1965, as amended (the “Higher Education Act”). The University receives these funds subsequent to the completion of the authorization and disbursement process and holds them for the benefit of the student. The U.S. Department of Education (“Department of Education”) requires Title IV funds collected in advance of student billings to be restricted until the course begins. The University records all of these amounts as a current asset in restricted cash, cash equivalents and investments. The majority of these funds remains as restricted for an average of 60 to 90 days from the date of receipt. Investments The University considers its investments in municipal bond, mutual funds and municipal securities as available-for-sale securities. Available-for-sale securities are carried at fair value, determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets, with unrealized gains and losses, net of tax, reported as a separate component of other comprehensive income. Unrealized losses considered to be other-than-temporary are recognized currently in earnings. Amortization of premiums, accretion of discounts, interest and dividend income and realized gains and losses are included in interest and other income. Note Receivable The University purchased a note receivable from a financial institution at fair market value in the fourth quarter of 2012 for $27,000. The note bore interest at 11%, which represented the 6% rate of the loan plus the 5% default rate. The principal and most of the interest due on the note was paid in March 2013 resulting in the full return on investment of the note receivable and an additional gain in interest income and other income of $2,187 on the loan. However, the borrower has disputed certain amounts remaining due under the note agreement, including default interest in the amount of $432, a late payment penalty in the amount of $1,392, and a statutory trustee’s fee in the amount of $139. The funds disputed by the borrower, plus interest thereon, were deposited into an escrow account with the clerk of the Maricopa County Superior Court pending resolution of the disputed issues. In the third quarter of 2013, the court ruled in favor of the University with respect to the late penalty and default interest accrued thereon. Accordingly, the University recorded interest and other income of $1,459 for the year ended December 31, 2013. The court ordered the late penalty funds and interest thereon to be released to the University on October 28, 2013 unless prior to said date, borrower filed with the court a formal notice of appeal and simultaneously deposited an additional $344 into escrow with the clerk of the court representing continued interest accruing on the late penalty pending an appeal. On October 28, 2013 borrower deposited with the clerk of the court the required cash bond in the amount of $344 and filed its formal notice of appeal. The briefing and oral argument phases of the appeal have been completed and the University is awaiting a written decision from the Court of Appeals. On June 26, 2015, the trial court heard oral argument on the University’s request for an award of its attorneys’ fees as the prevailing party. The University is awaiting a written decision and formal judgment from the trial court regarding the remaining default interest, attorneys’ fees, and interest thereon. Derivatives and Hedging Derivative financial instruments are recorded on the balance sheet as assets or liabilities and re-measured at fair value at each reporting date. For derivatives designated as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Derivative financial instruments enable the University to manage its exposure to interest rate risk. The University does not engage in any derivative instrument trading activity. Credit risk associated with the University’s derivatives is limited to the risk that a derivative counterparty will not perform in accordance with the terms of the contract. Exposure to counterparty credit risk is considered low because these agreements have been entered into with institutions with strong credit ratings, and such institutions are expected to perform fully under the terms of the agreements. On February 27, 2013, the University entered into an interest rate corridor to manage its 30 Day LIBOR interest exposure related to its variable rate debt. The fair value of the interest rate corridor instrument as of June 30, 2015 and December 31, 2014 was $1,040 and $1,332, respectively, which is included in other assets. The fair value of this derivative instrument was determined using a hypothetical derivative transaction and Level 2 of the hierarchy of valuation inputs. This derivative instrument was originally designated as a cash flow hedge of variable rate debt obligations. The adjustment of $288 for the six months ended June 30, 2015, for the effective portion of the loss on the derivative is included as a component of other comprehensive income, net of taxes. The interest rate corridor instrument reduces variable interest rate risk starting March 1, 2013 through December 20, 2019 with a notional amount of $83,333 as of June 30, 2015. The corridor instrument’s terms permits the University to hedge its interest rate risk at several thresholds; the University pays variable interest monthly based on the 30 Day LIBOR rates until that index reaches 1.5%. If 30 Day LIBOR is equal to 1.5% through 3.0%, the University pays 1.5%. If 30 Day LIBOR exceeds 3.0%, the University pays actual 30 Day LIBOR less 1.5%. As of June 30, 2015, no derivative ineffectiveness was identified. Any ineffectiveness in the University’s derivative instrument designated as a hedge is reported in interest expense in the income statement. For the six months ended June 30, 2015, $4 of credit risk was recorded in interest expense for the interest rate corridor. At June 30, 2015, the University does not expect to reclassify gains or losses on derivative instruments from accumulated other comprehensive income (loss) into earnings during the next 12 months. Fair Value of Financial Instruments As of June 30, 2015, the carrying value of cash and cash equivalents, investments, accounts receivable, accounts payable and accrued compensation and benefits and accrued liabilities approximate their fair value based on the liquidity or the short-term maturities of these instruments. The carrying value of notes payable approximates fair value as it is based on a variable rate index. The carrying value of capital lease obligations approximate fair value based upon market interest rates available to the University for debt of similar risk and maturities. Derivative financial instruments are carried at fair value, determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the asset or liability. The fair value of investments, primarily municipal securities (including municipal bond portfolios), were determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets. The unit of account used for valuation is the individual underlying security. The municipal securities are comprised of city and county bonds related to schools, water and sewer, utilities, transportation, healthcare and housing. Because these securities are held by the University as investments, assessment of non-performance risk is not applicable as such considerations are only applicable in evaluating the fair value measurements for liabilities. Revenue Recognition Net revenues consist primarily of tuition and fees derived from courses taught by the University online, on ground at its approximately 200+ acre campus in Phoenix, Arizona, at leased facilities and at facilities owned by third party employers of our students, as well as from related educational resources that the University provides to its students, such as access to online materials. Tuition revenue and most fees from related educational resources are recognized pro-rata over the applicable period of instruction, net of scholarships provided by the University. For the six months ended June 30, 2015 and 2014, the University’s revenue was reduced by approximately $76,947 and $63,632, respectively, as a result of scholarships that the University offered to students. The University also maintains an institutional tuition refund policy, which provides for the refund of all or a portion of a student’s tuition if the student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override the University’s policy to the extent in conflict. If a student withdraws at a time when only a portion, or none, of the tuition is refundable, then in accordance with its revenue recognition policy, the University continues to recognize the tuition that was not refunded pro-rata over the applicable period of instruction. However, for students that have taken out financial aid to pay their tuition and for which a return of such money to the Department of Education (a “Return to Title IV”) is required as a result of his or her withdrawal, the University recognizes revenue after a student withdraws only at the time of cash collection. Sales tax collected from students is excluded from net revenues. Collected but unremitted sales tax is included as an accrued liability in the consolidated balance sheets. The University also charges online students an upfront learning management fee, which is deferred and recognized over the average expected term of a student. Costs that are direct and incremental to new online students are also deferred and recognized ratably over the average expected term of a student. Deferred revenue and student deposits in any period represent the excess of tuition, fees, and other student payments received as compared to amounts recognized as revenue on the income statement and are reflected as current liabilities in the accompanying consolidated balance sheet. The University’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned. Other revenues may be recognized as sales occur or services are performed. Allowance for Doubtful Accounts The University records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. The University determines the adequacy of its allowance for doubtful accounts based on an analysis of its historical bad debt experience, current economic trends, the aging of the accounts receivable and student status. The University applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status. The University writes off accounts receivable balances at the earlier of the time the balances were deemed uncollectible or one year after the revenue is generated. The University accelerates the write off of inactive student accounts such that the accounts are written off by day 150. The University reflects accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection. Bad debt expense is recorded as an instructional costs and services expense in the consolidated income statement. Long-Lived Assets (other than goodwill) The University evaluates the recoverability of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Instructional Costs and Services Instructional costs and services consist primarily of costs related to the administration and delivery of the University’s educational programs. This expense category includes salaries, benefits and share-based compensation for full-time and adjunct faculty and administrative personnel, information technology costs, bad debt expense, curriculum and new program development costs (which are expensed as incurred) and costs associated with other support groups that provide services directly to the students. This category also includes an allocation of depreciation, amortization, rent, and occupancy costs attributable to the provision of educational services, primarily at the University’s Phoenix, Arizona campus. Admissions Advisory and Related Admissions advisory and related expenses include salaries and benefits for admissions advisory personnel and revenue share expense. This category also includes an allocation of depreciation, amortization, rent and occupancy costs attributable to the admissions advisory personnel. Advertising Advertising expenses include brand advertising, marketing leads and other branding activities. Advertising costs are expensed as incurred. Marketing and Promotional Marketing and promotional expenses include salaries, benefits and share-based compensation for marketing personnel, and other promotional expenses. This category also includes an allocation of depreciation, amortization, rent, and occupancy costs attributable to marketing and promotional activities. Marketing and promotional costs are expensed as incurred. General and Administrative General and administrative expenses include salaries, benefits and share-based compensation of employees engaged in corporate management, finance, human resources, compliance, and other corporate functions. General and administrative expenses also include an allocation of depreciation, amortization, rent, and occupancy costs attributable to the departments providing general and administrative functions. Commitments and Contingencies The University accrues for contingent obligations when it is probable that a liability has been incurred and the amount is reasonably estimable. When the University becomes aware of a claim or potential claim, the likelihood of any loss exposure is assessed. If it is probable that a loss will result and the amount of the loss is estimable, the University records a liability for the estimated loss. If the loss is not probable or the amount of the potential loss is not estimable, the University will disclose the claim if the likelihood of a potential loss is reasonably possible and the amount of the potential loss could be material. Estimates that are particularly sensitive to future changes include tax, legal, and other regulatory matters, which are subject to change as events evolve, and as additional information becomes available during the administrative and litigation process. The University expenses legal fees as incurred. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Segment Information The University operates as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of both its ground and online students regardless of geography. The University’s Chief Executive Officer manages the University’s operations as a whole and no expense or operating income information is generated or evaluated on any component level. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued “Revenue from Contracts with Customers.” The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. After the FASB amended the standard in July 2015, the standard is effective for us January 1, 2018 and early adoption is permitted effective January 1, 2017. The University is currently evaluating the impact that the standard will have on our financial condition, results of operations and disclosures. The University has determined that no other recent accounting pronouncements have a potential material impact to its operations or otherwise would have a material impact on its financial statements. |
Investments
Investments | 6 Months Ended |
Jun. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | 3. Investments The following is a summary of amounts included in restricted and unrestricted investments as of June 30, 2015 and December 31, 2014. The University considered all investments as available for sale. As of June 30, 2015 Adjusted Gross Gross Estimated Municipal securities $ 83,658 $ 41 $ (166 ) $ 83,533 Municipal bond mutual fund $ 55,533 $ — $ (173 ) $ 55,360 Total restricted and unrestricted investments $ 139,191 $ 41 $ (339 ) $ 138,893 As of December 31, 2014 Adjusted Gross Gross Estimated Municipal securities $ 83,364 $ 51 $ (177 ) $ 83,238 Municipal bond mutual fund $ 85,386 $ — $ — $ 85,386 Total restricted and unrestricted investments $ 168,750 $ 51 $ (177 ) $ 168,624 The cash flows of municipal securities are backed by the issuing municipality’s credit worthiness. All municipal securities are due in one year or less as of June 30, 2015. As of June 30, 2015, the net unrealized loss on available-for-sale securities was $182, net of taxes. |
Net Income Per Common Share
Net Income Per Common Share | 6 Months Ended |
Jun. 30, 2015 | |
Earnings Per Share [Abstract] | |
Net Income Per Common Share | 4. Net Income Per Common Share Basic net income per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the assumed conversion of all potentially dilutive securities, consisting of stock options and restricted stock awards, for which the estimated fair value exceeds the exercise price, less shares which could have been purchased with the related proceeds, unless anti-dilutive. For employee equity awards, repurchased shares are also included for any unearned compensation adjusted for tax. The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted earnings per common share. Three Months Ended Six Months Ended 2015 2014 2015 2014 Denominator: Basic weighted average shares outstanding 46,012 45,598 45,901 45,403 Effect of dilutive stock options and restricted stock 1,251 1,392 1,332 1,514 Diluted weighted average shares outstanding 47,263 46,990 47,233 46,917 Diluted weighted average shares outstanding exclude the incremental effect of shares that would be issued upon the assumed exercise of stock options and vesting of restricted stock. For the six months ended June 30, 2015 and 2014, approximately 345 and 117, respectively, of the University’s stock options outstanding were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive. These options and restricted stock awards could be dilutive in the future. |
Allowance for Doubtful Accounts
Allowance for Doubtful Accounts | 6 Months Ended |
Jun. 30, 2015 | |
Receivables [Abstract] | |
Allowance for Doubtful Accounts | 5. Allowance for Doubtful Accounts Balance at Charged to Deductions (1) Balance at Six months ended June 30, 2015 $ 6,472 7,412 (7,953 ) $ 5,931 Six months ended June 30, 2014 $ 9,678 7,061 (8,970 ) $ 7,769 (1) Deductions represent accounts written off, net of recoveries. |
Property and Equipment, net
Property and Equipment, net | 6 Months Ended |
Jun. 30, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | 6. Property and Equipment, net Property and equipment, net consist of the following: June 30, December 31, Land $ 87,746 $ 76,537 Land improvements 9,613 8,800 Buildings 297,254 298,124 Buildings and leasehold improvements 46,212 45,855 Equipment under capital leases 5,568 5,310 Computer equipment 81,627 75,990 Furniture, fixtures and equipment 38,675 38,162 Internally developed software 22,895 20,813 Other 1,099 1,099 Construction in progress 125,360 20,693 716,049 591,383 Less accumulated depreciation and amortization (127,774 ) (113,213 ) Property and equipment, net $ 588,275 $ 478,170 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 7. Commitments and Contingencies Leases The University leases certain land, buildings and equipment under non-cancelable operating leases expiring at various dates through 2022. Future minimum lease payments under operating leases due each year are as follows at June 30, 2015: 2015 (remaining six months) $ 3,363 2016 5,374 2017 3,935 2018 3,432 2019 3,022 Thereafter 4,869 Total minimum payments $ 23,995 Total rent expense and related taxes and operating expenses under operating leases for the six months ended June 30, 2015 and 2014 were $3,880 and $3,910, respectively. Legal Matters From time to time, the University is a party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which are covered by insurance. When the University is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the University records a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the University discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. With respect to the majority of pending litigation matters, the University’s ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential losses related to those matters are not considered probable. Upon resolution of any pending legal matters, the University may incur charges in excess of presently established reserves. Management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on the University’s financial condition, results of operations or cash flows. Tax Reserves, Non-Income Tax Related From time to time the University has exposure to various non-income tax related matters that arise in the ordinary course of business. At June 30, 2015 and December 31, 2014, the University reserved approximately $647 and $659, respectively, for tax matters where its ultimate exposure is considered probable and the potential loss can be reasonably estimated. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | 8. Share-Based Compensation Incentive Plan Restricted Stock During the six months ended June 30, 2015, the University granted 315 shares of common stock with a service vesting condition to certain of its executives, officers, faculty and employees. The restricted shares have voting rights and vest in five annual installments of 20% starting on March 1, 2016 and each of the four anniversaries of the vesting date following the date of grant. Upon vesting, shares will be held in lieu of taxes equivalent to the minimum statutory tax withholding required to be paid when the restricted stock vests. During the six months ended June 30, 2015, the University withheld 92 shares of common stock in lieu of taxes at a cost of $4,230 on the restricted stock vesting dates. In May 2015, the University granted 9 shares of common stock to certain of the non-employee members of the University’s board of directors. The restricted shares granted to these directors have voting rights and vest on the earlier of (a) the one year anniversary of the date of grant or (b) immediately prior to the following year’s annual stockholders’ meeting. A summary of the activity related to restricted stock granted under the University’s Incentive Plan since December 31, 2014 is as follows: Total Weighted Average Fair Value per Share Outstanding as of December 31, 2014 1,033 $ 28.75 Granted 324 $ 45.66 Vested (270 ) $ 26.92 Forfeited, canceled or expired (10 ) $ 27.88 Outstanding as of June 30, 2015 1,077 $ 34.30 Stock Options During the six months ended June 30, 2015, no options were granted. A summary of the activity related to stock options granted under the University’s Incentive Plan since December 31, 2014 is as follows: Summary of Stock Options Outstanding Total Weighted Weighted Aggregate Outstanding as of December 31, 2014 2,452 $ 14.83 Granted — $ — Exercised (167 ) $ 16.14 Forfeited, canceled or expired (7 ) $ 15.98 Outstanding as of June 30, 2015 2,278 $ 14.73 4.34 $ 63,018 Exercisable as of June 30, 2015 2,061 $ 14.59 4.19 $ 57,306 Available for issuance as of June 30, 2015 1,928 (1) Aggregate intrinsic value represents the value of the University’s closing stock price on June 30, 2015 ($42.40) in excess of the exercise price multiplied by the number of shares underlying options outstanding or exercisable, as applicable. Share-based Compensation Expense The table below outlines share-based compensation expense for the six months ended June 30, 2015 and 2014 related to restricted stock and stock options granted: 2015 2014 Instructional costs and services $ 3,304 $ 2,874 Admissions advisory and related expenses 93 80 Marketing and promotional 93 131 General and administrative 2,022 1,752 Share-based compensation expense included in operating expenses 5,512 4,837 Tax effect of share-based compensation (2,205 ) (1,935 ) Share-based compensation expense, net of tax $ 3,307 $ 2,902 |
Regulatory
Regulatory | 6 Months Ended |
Jun. 30, 2015 | |
Text Block [Abstract] | |
Regulatory | 9. Regulatory The University is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act and the regulations promulgated thereunder by the Department of Education, subject the University to significant regulatory scrutiny on the basis of numerous standards that schools must satisfy in order to participate in the various federal student financial assistance programs under Title IV. To participate in Title IV programs, an institution must be authorized to offer its programs of instruction by the relevant agency of the state in which it is located, accredited by an accrediting agency recognized by the Department of Education and certified as eligible by the Department of Education. The Department of Education will certify an institution to participate in Title IV programs only after the institution has demonstrated compliance with the Higher Education Act and the Department of Education’s extensive regulations regarding institutional eligibility. An institution must also demonstrate its compliance to the Department of Education on an ongoing basis. As of June 30, 2015, management believes the University is in compliance with the applicable regulations in all material respects. Because the University operates in a highly regulated industry, like other industry participants, it may be subject from time to time to investigations, claims of non-compliance, or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions, or common law causes of action. While there can be no assurance that regulatory agencies or third parties will not undertake investigations or make claims against the University, or that such claims, if made, will not have a material adverse effect on the University’s business, results of operations or financial condition, management believes the University is in compliance with applicable regulations in all material respects. |
Treasury Stock
Treasury Stock | 6 Months Ended |
Jun. 30, 2015 | |
Equity [Abstract] | |
Treasury Stock | 10. Treasury Stock The Board of Directors has authorized the University to repurchase up to $75,000 in aggregate of common stock, from time to time, depending on market conditions and other considerations. The expiration date on the repurchase authorization has been extended to September 30, 2016. Repurchases occur at the University’s discretion. Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant. Since its approval of the share repurchase plan, the University has purchased 2,787 shares of common stock at an aggregate cost of $49,135. During the six months ended June 30, 2015 the University did not repurchase any shares of common stock. At June 30, 2015, there remained $25,865 available under its share repurchase authorization. Shares repurchased in lieu of taxes are not included in the repurchase plan totals as they were approved in conjunction with the restricted share awards. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the University and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation. |
Unaudited Interim Financial Information | Unaudited Interim Financial Information The accompanying unaudited interim consolidated financial statements of the University have been prepared in accordance with U.S. generally accepted accounting principles and pursuant to the rules and regulations of the United States Securities and Exchange Commission and the instructions to Form 10-Q and Article 10 of the Securities Exchange Act of 1934, consistent in all material respects with those applied in its financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management are necessary for the fair presentation of the interim periods presented. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the University’s audited financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 from which the December 31, 2014 balance sheet information was derived. |
Restricted Cash, Cash Equivalents and Investments | Restricted Cash, Cash Equivalents and Investments A significant portion of the University’s revenue is received from students who participate in government financial aid and assistance programs. Restricted cash, cash equivalents and investments primarily represent amounts received from the federal and state governments under various student aid grant and loan programs, such as Title IV (“Title IV”) of the Higher Education Act of 1965, as amended (the “Higher Education Act”). The University receives these funds subsequent to the completion of the authorization and disbursement process and holds them for the benefit of the student. The U.S. Department of Education (“Department of Education”) requires Title IV funds collected in advance of student billings to be restricted until the course begins. The University records all of these amounts as a current asset in restricted cash, cash equivalents and investments. The majority of these funds remains as restricted for an average of 60 to 90 days from the date of receipt. |
Investments | Investments The University considers its investments in municipal bond, mutual funds and municipal securities as available-for-sale securities. Available-for-sale securities are carried at fair value, determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets, with unrealized gains and losses, net of tax, reported as a separate component of other comprehensive income. Unrealized losses considered to be other-than-temporary are recognized currently in earnings. Amortization of premiums, accretion of discounts, interest and dividend income and realized gains and losses are included in interest and other income. |
Note Receivable | Note Receivable The University purchased a note receivable from a financial institution at fair market value in the fourth quarter of 2012 for $27,000. The note bore interest at 11%, which represented the 6% rate of the loan plus the 5% default rate. The principal and most of the interest due on the note was paid in March 2013 resulting in the full return on investment of the note receivable and an additional gain in interest income and other income of $2,187 on the loan. However, the borrower has disputed certain amounts remaining due under the note agreement, including default interest in the amount of $432, a late payment penalty in the amount of $1,392, and a statutory trustee’s fee in the amount of $139. The funds disputed by the borrower, plus interest thereon, were deposited into an escrow account with the clerk of the Maricopa County Superior Court pending resolution of the disputed issues. In the third quarter of 2013, the court ruled in favor of the University with respect to the late penalty and default interest accrued thereon. Accordingly, the University recorded interest and other income of $1,459 for the year ended December 31, 2013. The court ordered the late penalty funds and interest thereon to be released to the University on October 28, 2013 unless prior to said date, borrower filed with the court a formal notice of appeal and simultaneously deposited an additional $344 into escrow with the clerk of the court representing continued interest accruing on the late penalty pending an appeal. On October 28, 2013 borrower deposited with the clerk of the court the required cash bond in the amount of $344 and filed its formal notice of appeal. The briefing and oral argument phases of the appeal have been completed and the University is awaiting a written decision from the Court of Appeals. On June 26, 2015, the trial court heard oral argument on the University’s request for an award of its attorneys’ fees as the prevailing party. The University is awaiting a written decision and formal judgment from the trial court regarding the remaining default interest, attorneys’ fees, and interest thereon. |
Derivatives and Hedging | Derivatives and Hedging Derivative financial instruments are recorded on the balance sheet as assets or liabilities and re-measured at fair value at each reporting date. For derivatives designated as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Derivative financial instruments enable the University to manage its exposure to interest rate risk. The University does not engage in any derivative instrument trading activity. Credit risk associated with the University’s derivatives is limited to the risk that a derivative counterparty will not perform in accordance with the terms of the contract. Exposure to counterparty credit risk is considered low because these agreements have been entered into with institutions with strong credit ratings, and such institutions are expected to perform fully under the terms of the agreements. On February 27, 2013, the University entered into an interest rate corridor to manage its 30 Day LIBOR interest exposure related to its variable rate debt. The fair value of the interest rate corridor instrument as of June 30, 2015 and December 31, 2014 was $1,040 and $1,332, respectively, which is included in other assets. The fair value of this derivative instrument was determined using a hypothetical derivative transaction and Level 2 of the hierarchy of valuation inputs. This derivative instrument was originally designated as a cash flow hedge of variable rate debt obligations. The adjustment of $288 for the six months ended June 30, 2015, for the effective portion of the loss on the derivative is included as a component of other comprehensive income, net of taxes. The interest rate corridor instrument reduces variable interest rate risk starting March 1, 2013 through December 20, 2019 with a notional amount of $83,333 as of June 30, 2015. The corridor instrument’s terms permits the University to hedge its interest rate risk at several thresholds; the University pays variable interest monthly based on the 30 Day LIBOR rates until that index reaches 1.5%. If 30 Day LIBOR is equal to 1.5% through 3.0%, the University pays 1.5%. If 30 Day LIBOR exceeds 3.0%, the University pays actual 30 Day LIBOR less 1.5%. As of June 30, 2015, no derivative ineffectiveness was identified. Any ineffectiveness in the University’s derivative instrument designated as a hedge is reported in interest expense in the income statement. For the six months ended June 30, 2015, $4 of credit risk was recorded in interest expense for the interest rate corridor. At June 30, 2015, the University does not expect to reclassify gains or losses on derivative instruments from accumulated other comprehensive income (loss) into earnings during the next 12 months. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments As of June 30, 2015, the carrying value of cash and cash equivalents, investments, accounts receivable, accounts payable and accrued compensation and benefits and accrued liabilities approximate their fair value based on the liquidity or the short-term maturities of these instruments. The carrying value of notes payable approximates fair value as it is based on a variable rate index. The carrying value of capital lease obligations approximate fair value based upon market interest rates available to the University for debt of similar risk and maturities. Derivative financial instruments are carried at fair value, determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the asset or liability. The fair value of investments, primarily municipal securities (including municipal bond portfolios), were determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets. The unit of account used for valuation is the individual underlying security. The municipal securities are comprised of city and county bonds related to schools, water and sewer, utilities, transportation, healthcare and housing. Because these securities are held by the University as investments, assessment of non-performance risk is not applicable as such considerations are only applicable in evaluating the fair value measurements for liabilities. |
Revenue Recognition | Revenue Recognition Net revenues consist primarily of tuition and fees derived from courses taught by the University online, on ground at its approximately 200+ acre campus in Phoenix, Arizona, at leased facilities and at facilities owned by third party employers of our students, as well as from related educational resources that the University provides to its students, such as access to online materials. Tuition revenue and most fees from related educational resources are recognized pro-rata over the applicable period of instruction, net of scholarships provided by the University. For the six months ended June 30, 2015 and 2014, the University’s revenue was reduced by approximately $76,947 and $63,632, respectively, as a result of scholarships that the University offered to students. The University also maintains an institutional tuition refund policy, which provides for the refund of all or a portion of a student’s tuition if the student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override the University’s policy to the extent in conflict. If a student withdraws at a time when only a portion, or none, of the tuition is refundable, then in accordance with its revenue recognition policy, the University continues to recognize the tuition that was not refunded pro-rata over the applicable period of instruction. However, for students that have taken out financial aid to pay their tuition and for which a return of such money to the Department of Education (a “Return to Title IV”) is required as a result of his or her withdrawal, the University recognizes revenue after a student withdraws only at the time of cash collection. Sales tax collected from students is excluded from net revenues. Collected but unremitted sales tax is included as an accrued liability in the consolidated balance sheets. The University also charges online students an upfront learning management fee, which is deferred and recognized over the average expected term of a student. Costs that are direct and incremental to new online students are also deferred and recognized ratably over the average expected term of a student. Deferred revenue and student deposits in any period represent the excess of tuition, fees, and other student payments received as compared to amounts recognized as revenue on the income statement and are reflected as current liabilities in the accompanying consolidated balance sheet. The University’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned. Other revenues may be recognized as sales occur or services are performed. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The University records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. The University determines the adequacy of its allowance for doubtful accounts based on an analysis of its historical bad debt experience, current economic trends, the aging of the accounts receivable and student status. The University applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status. The University writes off accounts receivable balances at the earlier of the time the balances were deemed uncollectible or one year after the revenue is generated. The University accelerates the write off of inactive student accounts such that the accounts are written off by day 150. The University reflects accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection. Bad debt expense is recorded as an instructional costs and services expense in the consolidated income statement. |
Long-Lived Assets (other than goodwill) | Long-Lived Assets (other than goodwill) The University evaluates the recoverability of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. |
Instructional Costs and Services | Instructional Costs and Services Instructional costs and services consist primarily of costs related to the administration and delivery of the University’s educational programs. This expense category includes salaries, benefits and share-based compensation for full-time and adjunct faculty and administrative personnel, information technology costs, bad debt expense, curriculum and new program development costs (which are expensed as incurred) and costs associated with other support groups that provide services directly to the students. This category also includes an allocation of depreciation, amortization, rent, and occupancy costs attributable to the provision of educational services, primarily at the University’s Phoenix, Arizona campus. |
Admissions Advisory and Related | Admissions Advisory and Related Admissions advisory and related expenses include salaries and benefits for admissions advisory personnel and revenue share expense. This category also includes an allocation of depreciation, amortization, rent and occupancy costs attributable to the admissions advisory personnel. |
Advertising | Advertising Advertising expenses include brand advertising, marketing leads and other branding activities. Advertising costs are expensed as incurred. |
Marketing and Promotional | Marketing and Promotional Marketing and promotional expenses include salaries, benefits and share-based compensation for marketing personnel, and other promotional expenses. This category also includes an allocation of depreciation, amortization, rent, and occupancy costs attributable to marketing and promotional activities. Marketing and promotional costs are expensed as incurred. |
General and Administrative | General and Administrative General and administrative expenses include salaries, benefits and share-based compensation of employees engaged in corporate management, finance, human resources, compliance, and other corporate functions. General and administrative expenses also include an allocation of depreciation, amortization, rent, and occupancy costs attributable to the departments providing general and administrative functions. |
Commitments and Contingencies | Commitments and Contingencies The University accrues for contingent obligations when it is probable that a liability has been incurred and the amount is reasonably estimable. When the University becomes aware of a claim or potential claim, the likelihood of any loss exposure is assessed. If it is probable that a loss will result and the amount of the loss is estimable, the University records a liability for the estimated loss. If the loss is not probable or the amount of the potential loss is not estimable, the University will disclose the claim if the likelihood of a potential loss is reasonably possible and the amount of the potential loss could be material. Estimates that are particularly sensitive to future changes include tax, legal, and other regulatory matters, which are subject to change as events evolve, and as additional information becomes available during the administrative and litigation process. The University expenses legal fees as incurred. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. |
Segment Information | Segment Information The University operates as a single educational delivery operation using a core infrastructure that serves the curriculum and educational delivery needs of both its ground and online students regardless of geography. The University’s Chief Executive Officer manages the University’s operations as a whole and no expense or operating income information is generated or evaluated on any component level. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued “Revenue from Contracts with Customers.” The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. After the FASB amended the standard in July 2015, the standard is effective for us January 1, 2018 and early adoption is permitted effective January 1, 2017. The University is currently evaluating the impact that the standard will have on our financial condition, results of operations and disclosures. The University has determined that no other recent accounting pronouncements have a potential material impact to its operations or otherwise would have a material impact on its financial statements. |
Investments (Tables)
Investments (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of Amounts Included in Restricted Investments and Unrestricted Investments | The following is a summary of amounts included in restricted and unrestricted investments as of June 30, 2015 and December 31, 2014. The University considered all investments as available for sale. As of June 30, 2015 Adjusted Gross Gross Estimated Municipal securities $ 83,658 $ 41 $ (166 ) $ 83,533 Municipal bond mutual fund $ 55,533 $ — $ (173 ) $ 55,360 Total restricted and unrestricted investments $ 139,191 $ 41 $ (339 ) $ 138,893 As of December 31, 2014 Adjusted Gross Gross Estimated Municipal securities $ 83,364 $ 51 $ (177 ) $ 83,238 Municipal bond mutual fund $ 85,386 $ — $ — $ 85,386 Total restricted and unrestricted investments $ 168,750 $ 51 $ (177 ) $ 168,624 |
Net Income Per Common Share (Ta
Net Income Per Common Share (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Earnings Per Share [Abstract] | |
Summary of Weighted Average Number of Common Shares Outstanding | The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted earnings per common share. Three Months Ended Six Months Ended 2015 2014 2015 2014 Denominator: Basic weighted average shares outstanding 46,012 45,598 45,901 45,403 Effect of dilutive stock options and restricted stock 1,251 1,392 1,332 1,514 Diluted weighted average shares outstanding 47,263 46,990 47,233 46,917 |
Allowance for Doubtful Accoun23
Allowance for Doubtful Accounts (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Receivables [Abstract] | |
Schedule of Allowance for Doubtful Accounts | Balance at Charged to Deductions (1) Balance at Six months ended June 30, 2015 $ 6,472 7,412 (7,953 ) $ 5,931 Six months ended June 30, 2014 $ 9,678 7,061 (8,970 ) $ 7,769 (1) Deductions represent accounts written off, net of recoveries. |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Property, Plant and Equipment [Abstract] | |
Summary of Property and Equipment, Net | Property and equipment, net consist of the following: June 30, December 31, Land $ 87,746 $ 76,537 Land improvements 9,613 8,800 Buildings 297,254 298,124 Buildings and leasehold improvements 46,212 45,855 Equipment under capital leases 5,568 5,310 Computer equipment 81,627 75,990 Furniture, fixtures and equipment 38,675 38,162 Internally developed software 22,895 20,813 Other 1,099 1,099 Construction in progress 125,360 20,693 716,049 591,383 Less accumulated depreciation and amortization (127,774 ) (113,213 ) Property and equipment, net $ 588,275 $ 478,170 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Minimum Lease Payments under Operating Leases | Future minimum lease payments under operating leases due each year are as follows at June 30, 2015: 2015 (remaining six months) $ 3,363 2016 5,374 2017 3,935 2018 3,432 2019 3,022 Thereafter 4,869 Total minimum payments $ 23,995 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Activity Related to Restricted Stock Granted under Incentive Plan | A summary of the activity related to restricted stock granted under the University’s Incentive Plan since December 31, 2014 is as follows: Total Weighted Average Fair Value per Share Outstanding as of December 31, 2014 1,033 $ 28.75 Granted 324 $ 45.66 Vested (270 ) $ 26.92 Forfeited, canceled or expired (10 ) $ 27.88 Outstanding as of June 30, 2015 1,077 $ 34.30 |
Summary of Activity Related to Stock Options Granted under Company's Incentive Plan | A summary of the activity related to stock options granted under the University’s Incentive Plan since December 31, 2014 is as follows: Summary of Stock Options Outstanding Total Weighted Weighted Aggregate Outstanding as of December 31, 2014 2,452 $ 14.83 Granted — $ — Exercised (167 ) $ 16.14 Forfeited, canceled or expired (7 ) $ 15.98 Outstanding as of June 30, 2015 2,278 $ 14.73 4.34 $ 63,018 Exercisable as of June 30, 2015 2,061 $ 14.59 4.19 $ 57,306 Available for issuance as of June 30, 2015 1,928 (1) Aggregate intrinsic value represents the value of the University’s closing stock price on June 30, 2015 ($42.40) in excess of the exercise price multiplied by the number of shares underlying options outstanding or exercisable, as applicable. |
Share-Based Compensation Expense | The table below outlines share-based compensation expense for the six months ended June 30, 2015 and 2014 related to restricted stock and stock options granted: 2015 2014 Instructional costs and services $ 3,304 $ 2,874 Admissions advisory and related expenses 93 80 Marketing and promotional 93 131 General and administrative 2,022 1,752 Share-based compensation expense included in operating expenses 5,512 4,837 Tax effect of share-based compensation (2,205 ) (1,935 ) Share-based compensation expense, net of tax $ 3,307 $ 2,902 |
Nature of Business - Additional
Nature of Business - Additional Information (Detail) - 6 months ended Jun. 30, 2015 | DegreesColleges |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of area of the company's campus in Phoenix, Arizona | 200+ acre campus |
Number of colleges in Phoenix, Arizona | 8 |
Number of degree programs offered in Phoenix, Arizona and online | Degrees | 160 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Dec. 31, 2012 | |
Summary Of Significant Accounting Policies [Line Items] | |||||||
Average days from the date of receipt in which funds remain as restricted cash and cash equivalents | 60 to 90 days | ||||||
Note receivable from a financial institution at fair market value | $ 27,000,000 | ||||||
Interest rate on notes | 11.00% | ||||||
Interest rate on loan | 6.00% | ||||||
Default rate | 5.00% | ||||||
Interest income and other income on the loan | $ 2,187,000 | $ 1,459,000 | |||||
Default interest amount | $ 432,000 | 432,000 | |||||
Late payment penalty amount | 1,392,000 | 1,392,000 | |||||
Statutory trustee's fee amount | 139,000 | 139,000 | |||||
Additional amount deposited in escrow | 344,000 | $ 344,000 | |||||
Date of order for late penalty funds | Oct. 28, 2013 | ||||||
Period of LIBOR interest rate | 30 days | ||||||
Effective portion of loss on derivative included as a component of other comprehensive income, net of taxes | (64,000) | $ 148,000 | $ 175,000 | $ 174,000 | |||
Description of area of the company's campus in Phoenix, Arizona | 200+ acre campus | ||||||
Reduction in revenue due to scholarships offered to students | $ 76,947,000 | $ 63,632,000 | |||||
Period for write off of inactive student accounts | 150 days | ||||||
Interest Rate Corridor [Member] | |||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||
Notional amount of derivative instrument | $ 83,333,000 | $ 83,333,000 | |||||
Description of interest rate risk hedge at several thresholds | The University pays variable interest monthly based on the 30 Day LIBOR rates until that index reaches 1.5%. If 30 Day LIBOR is equal to 1.5% through 3.0%, the University pays 1.5%. If 30 Day LIBOR exceeds 3.0%, the University pays actual 30 Day LIBOR less 1.5%. | ||||||
Maximum percentage of variable interest rates based on LIBOR | 1.50% | ||||||
Debt instrument, description of variable rate basis | LIBOR | ||||||
Percentage of amount paid by University | 1.50% | ||||||
Minimum percentage of LIBOR | 1.50% | 1.50% | |||||
Maximum percentage of LIBOR | 3.00% | 3.00% | |||||
Percentage deducted from LIBOR for actual payment | 1.50% | ||||||
Interest expense on derivatives related to credit risk | $ 4,000 | ||||||
Cash Flow Hedging [Member] | |||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||
Effective portion of loss on derivative included as a component of other comprehensive income, net of taxes | 288,000 | ||||||
Other Assets [Member] | |||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||
Fair values of interest rate corridor instrument | $ 1,040,000 | $ 1,040,000 | $ 1,332,000 | ||||
Minimum [Member] | |||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||
Number of days from the date of receipt in which funds remain as restricted cash and cash equivalents | 60 days | ||||||
Maximum [Member] | |||||||
Summary Of Significant Accounting Policies [Line Items] | |||||||
Number of days from the date of receipt in which funds remain as restricted cash and cash equivalents | 90 days |
Investments - Summary of Amount
Investments - Summary of Amounts Included in Restricted Investments and Unrestricted Investments (Detail) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | $ 139,191 | $ 168,750 |
Gross Unrealized Gains | 41 | 51 |
Gross Unrealized (Losses) | (339) | (177) |
Estimated Fair Value | 138,893 | 168,624 |
Municipal Securities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | 83,658 | 83,364 |
Gross Unrealized Gains | 41 | 51 |
Gross Unrealized (Losses) | (166) | (177) |
Estimated Fair Value | 83,533 | 83,238 |
Municipal Bond Mutual Fund [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | 55,533 | 85,386 |
Gross Unrealized (Losses) | (173) | |
Estimated Fair Value | $ 55,360 | $ 85,386 |
Investments - Additional Inform
Investments - Additional Information (Detail) - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands | Total |
Schedule of Available-for-sale Securities [Line Items] | |
Unrealized net (losses) gains on available-for-sale securities | $ 182 |
Municipal Securities [Member] | |
Schedule of Available-for-sale Securities [Line Items] | |
Maturity period of investments | One year or less |
Net Income Per Common Share - S
Net Income Per Common Share - Summary of Weighted Average Number of Common Shares Outstanding (Detail) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Denominator: | ||||
Basic weighted average shares outstanding | 46,012 | 45,598 | 45,901 | 45,403 |
Effect of dilutive stock options and restricted stock | 1,251 | 1,392 | 1,332 | 1,514 |
Diluted weighted average shares outstanding | 47,263 | 46,990 | 47,233 | 46,917 |
Net Income Per Common Share - A
Net Income Per Common Share - Additional Information (Detail) - shares shares in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Stock Option And Restricted Stock Awards [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
University's stock options and restricted stock awards outstanding were excluded from the calculation of diluted earnings | 345 | 117 |
Allowance for Doubtful Accoun33
Allowance for Doubtful Accounts - Schedule of Allowance for Doubtful Accounts (Detail) - Allowance for Doubtful Accounts Receivable [Member] - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Financing Receivable, Allowance for Credit Losses [Line Items] | ||
Balance at Beginning of Period | $ 6,472 | $ 9,678 |
Charged to Expense | 7,412 | 7,061 |
Deductions | (7,953) | (8,970) |
Balance at End of Period | $ 5,931 | $ 7,769 |
Property and Equipment, net - S
Property and Equipment, net - Summary of Property and Equipment, Net (Detail) - USD ($) $ in Thousands | Jun. 30, 2015 | Dec. 31, 2014 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 716,049 | $ 591,383 |
Less accumulated depreciation and amortization | (127,774) | (113,213) |
Property and equipment, net | 588,275 | 478,170 |
Land [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 87,746 | 76,537 |
Land Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 9,613 | 8,800 |
Buildings [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 297,254 | 298,124 |
Buildings and Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 46,212 | 45,855 |
Equipment under Capital Leases [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 5,568 | 5,310 |
Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 81,627 | 75,990 |
Furniture, Fixtures and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 38,675 | 38,162 |
Internally Developed Software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 22,895 | 20,813 |
Other [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 1,099 | 1,099 |
Construction in Progress [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 125,360 | $ 20,693 |
Commitments and Contingencies -
Commitments and Contingencies - Future Minimum Lease Payments under Operating Leases (Detail) $ in Thousands | Jun. 30, 2015USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2015 (remaining six months) | $ 3,363 |
2,016 | 5,374 |
2,017 | 3,935 |
2,018 | 3,432 |
2,019 | 3,022 |
Thereafter | 4,869 |
Total minimum payments | $ 23,995 |
Commitments and Contingencies36
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Total rent expense and related taxes and operating expenses, under operating leases | $ 3,880 | $ 3,910 | |
Tax reserves, non-income tax related | $ 647 | $ 659 |
Share-Based Compensation - Addi
Share-Based Compensation - Additional Information (Detail) shares in Thousands, $ in Thousands | 1 Months Ended | 6 Months Ended |
May. 31, 2015Anniversariesshares | Jun. 30, 2015USD ($)Anniversariesshares | |
Non-employee [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares granted | 9 | |
Number of anniversaries of the vesting date following the date of grant | Anniversaries | 1 | |
Restricted shares granted to directors have voting rights and vesting description | The restricted shares granted to these directors have voting rights and vest on the earlier of (a) the one year anniversary of the date of grant or (b) immediately prior to the following year's annual stockholders' meeting. | |
Restricted Stock Grants [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares granted | 324 | |
Number of anniversaries of the vesting date following the date of grant | Anniversaries | 4 | |
Shares withheld for taxes | 92 | |
Common stock in lieu of taxes | $ | $ 4,230 | |
Restricted Stock Grants [Member] | Executive Officers [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares granted | 315 | |
Percentage of shares to vest each year | 20.00% | |
Vesting period | 5 years |
Share-Based Compensation - Summ
Share-Based Compensation - Summary of Activity Related to Restricted Stock Granted under Incentive Plan (Detail) - 6 months ended Jun. 30, 2015 - Restricted Stock Grants [Member] - $ / shares shares in Thousands | Total |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Total Shares, Outstanding, Beginning Balance | 1,033 |
Total Shares, Granted | 324 |
Total Shares, Vested | (270) |
Total Shares, Forfeited, canceled or expired | (10) |
Total Shares, Outstanding, Ending Balance | 1,077 |
Weighted Average Grant Date Fair Value, Beginning Balance | $ 28.75 |
Weighted Average Grant Date Fair Value, Granted | 45.66 |
Weighted Average Grant Date Fair Value, Vested | 26.92 |
Weighted Average Grant Date Fair Value, Forfeited, cancelled or expired | 27.88 |
Weighted Average Grant Date Fair Value, Ending Balance | $ 34.30 |
Share-Based Compensation - Su39
Share-Based Compensation - Summary of Activity Related to Stock Options Granted under Company's Incentive Plan (Detail) - Jun. 30, 2015 - Employee Stock Option [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Total |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Total Shares outstanding, Beginning balance | 2,452 |
Total Shares, Granted | 0 |
Total Shares, Exercised | (167) |
Total Shares, Forfeited, canceled or expired | (7) |
Total Shares outstanding, Ending balance | 2,278 |
Total Shares, Exercisable | 2,061 |
Total Shares, Available for issuance | 1,928 |
Weighted Average Exercise Price per Share Outstanding, Beginning balance | $ 14.83 |
Weighted Average Exercise Price per Share, Granted | 0 |
Weighted Average Exercise Price per Share, Exercised | 16.14 |
Weighted Average Exercise Price per Share, Forfeited, canceled or expired | 15.98 |
Weighted Average Exercise Price per Share Outstanding, Ending balance | 14.73 |
Weighted Average Exercise Price per Share, Exercisable | $ 14.59 |
Weighted Average Remaining Contractual Term (Years), Outstanding | 4 years 4 months 2 days |
Weighted Average Remaining Contractual Term (Years), Exercisable | 4 years 2 months 9 days |
Aggregate Intrinsic Value, Outstanding | $ 63,018 |
Aggregate Intrinsic Value, Exercisable | $ 57,306 |
Share-Based Compensation - Su40
Share-Based Compensation - Summary of Activity Related to Stock Options Granted under Company's Incentive Plan (Parenthetical) (Detail) | Jun. 30, 2015$ / shares |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Value of closing stock price | $ 42.40 |
Share-Based Compensation - Shar
Share-Based Compensation - Share-Based Compensation Expense (Detail) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Share-based compensation expense | $ 5,512 | $ 4,837 |
Tax effect of share-based compensation | (2,205) | (1,935) |
Share-based compensation expense, net of tax | 3,307 | 2,902 |
Instructional Costs and Services [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Share-based compensation expense | 3,304 | 2,874 |
Admissions Advisory and Related Expenses [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Share-based compensation expense | 93 | 80 |
Marketing and Promotional [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Share-based compensation expense | 93 | 131 |
General and Administrative [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Share-based compensation expense | $ 2,022 | $ 1,752 |
Treasury Stock - Additional Inf
Treasury Stock - Additional Information (Detail) - USD ($) shares in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Stockholders Equity [Line Items] | ||
Expiration date on repurchase authorizations | Sep. 30, 2016 | |
Common Stock [Member] | ||
Stockholders Equity [Line Items] | ||
Common stock acquired, shares | 0 | 2,787 |
Since Approval of Share Repurchase Plan [Member] | ||
Stockholders Equity [Line Items] | ||
Aggregate cost shares of common stock | $ 49,135,000 | |
Remaining authorized repurchase amount | 25,865,000 | |
Maximum [Member] | ||
Stockholders Equity [Line Items] | ||
Authorization amount for repurchase of common stock | $ 75,000,000 |