Discontinued Operations

12 Months Ended

Dec. 31, 2011

Discontinued Operations [Abstract]

Discontinued Operations

5. DISCONTINUED OPERATIONS

On November 14, 2011, we completed the sale of our Istituto Marangoni schools in Milan, Paris and London. As a result of that transaction, we recorded a pretax gain of approximately $27.1 million, which represented the difference between the proceeds of $49.8 million received and the book value of the net assets sold. Included in the net assets of the business was a $2.8 million cumulative translation loss resulting from the effects of foreign currency on Istituto Marangoni's balance sheet. This loss had been included within other comprehensive income (loss) within the audited consolidated balance sheets. As a result of the sale, the cumulative translation loss, along with the remaining net assets of the business were written off. Excluded from the net assets of the business was $20.2 million of goodwill which was allocated to the remainder of the International reporting unit in accordance with FASB ASC Topic 350 Intangibles – Goodwill and Other. See Note 10 "Goodwill and Other Intangible Assets" of the notes to our consolidated financial statements for further discussion. All current and prior period financial statements have been recast to include the results of operations and financial position of Istituto Marangoni as a component of discontinued operations. In addition, discontinued operations include the results of operations for schools that have previously ceased operations or were sold.

Results of Discontinued Operations

Combined summary results of operations for our discontinued operations for the years ended December 31, 2011, 2010 and 2009, were as follows:

	For the Year Ended December 31,
	2011			2010			2009
	(Dollars in thousands)
Revenue	$	31,732		$	35,507		$	44,165
Income (loss) before income tax	$	20,694		$	(7,846	)	$	(101,842	)
Income tax benefit(1)		(2,078	)		(2,848	)		(36,196	)
Income (loss) from discontinued operations, net of tax	$	22,772		$	(4,998	)	$	(65,646	)

(1) The current year income tax benefit includes $0.3 million of income tax expense related to the sale of Istituto Marangoni. The tax gain related to this transaction was significantly less than the gain reflected within the income (loss) before income tax presented above primarily due to the $20.2 million of goodwill which was allocated to the remainder of the International reporting unit for book purposes, but which was included in the net assets sold for purposes of calculating the taxable gain.

Assets and Liabilities of Discontinued Operations

Assets and liabilities of discontinued operations on our consolidated balance sheets as of December 31, 2011 and 2010 include the following:

	As of December 31,
	2011		2010
	(Dollars in thousands)
Assets:
Current assets:
Cash and cash equivalents	$	—	$	28,838
Receivables, net		104		2,556
Prepaid expenses		—		3,071
Deferred income tax assets		3,224		4,786
Other current assets		—		731
Total current assets		3,328		39,982
Non-current assets:
Property and equipment, net		—		3,259
Goodwill		—		6,889
Intangible assets, net		—		8,541
Deferred income tax assets		15,421		15,342
Other assets, net		1,680		5,841
Total assets of discontinued operations	$	20,429	$	79,854
Liabilities:
Current Liabilities:
Accounts payable	$	3	$	3,227
Accrued payroll and related benefits		—		1,168
Accrued expenses		498		4,281
Deferred tuition revenue		—		23,512
Remaining lease obligations		7,902		12,802
Total current liabilities		8,403		44,990
Non-current liabilities:
Remaining lease obligations		37,935		37,576
Other long-term liabilities		—		931
Total liabilities of discontinued operations	$	46,338	$	83,497

Remaining Lease Obligations

A number of the campuses that ceased operations have remaining lease obligations that expire through 2019. A liability is recorded representing the fair value of the remaining lease obligation at the time in which the space is no longer being utilized. Changes in our future remaining lease obligations, which are reflected within current and non-current liabilities of discontinued operations on our consolidated balance sheets, for our discontinued operations for the years ended December 31, 2011, 2010 and 2009, were as follows:

	Balance, Beginning of Period		Charges Incurred  (1)		Net Cash Payments (2)			Other (3)			Balance, End of Period
	(Dollars in thousands)
For the twelve months ended December 31, 2011	$	50,378	$	7,658	$	(10,732	)	$	(1,467	)	$	45,837
For the twelve months ended December 31, 2010	$	71,163	$	6,334	$	(27,653	)	$	534		$	50,378
For the twelve months ended December 31, 2009	$	15,149	$	75,630	$	(26,185	)	$	6,569		$	71,163

(1) Includes charges for newly vacated spaces and subsequent adjustments for accretion, revised estimates, and variances between estimated and actual charges, net of any reversals for terminated lease obligations.

(2) See Note 9 "Leases" of the notes to our consolidated financial statements for the future minimum lease payments under operating leases for discontinued operations as of December 31, 2011.

(3) Includes existing prepaid rent and deferred rent liability balances for newly vacated spaces that are netted with the losses incurred in the period recorded.