| Discontinued Operations |
5. DISCONTINUED OPERATIONS
As of June 30, 2015, the results of operations for campuses
that have ceased operations prior to 2015 and our LCB campuses that
are held for sale, are presented within discontinued operations.
Prior to January 1, 2015, our Transitional Group campuses met
the criteria for discontinued operations upon completion of their
teach-out. Commencing January 1, 2015, in accordance with new
guidance under ASC Topic 360, only campuses that meet the criteria
of a strategic shift upon disposal will be classified within
discontinued operations, among other criteria. During the second
quarter of 2015, we did not have any campuses that met the criteria
to be considered as a discontinued operation under the new
guidance. Prior periods have not been recast for this change in
guidance.
Results of Discontinued Operations
The summary of unaudited results of operations for our discontinued
operations for the quarters and years to date ended June 30,
2015 and 2014 were as follows (dollars in thousands):
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For the Quarter Ended
June 30, (1) |
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For the Year to Date Ended
June 30, (1) |
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2015 |
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2014 |
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2015 |
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2014 |
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Revenue
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$ |
42,019 |
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$ |
44,195 |
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$ |
86,763 |
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$ |
89,420 |
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Operating expenses:
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Educational services and facilities
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19,531 |
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29,519 |
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39,404 |
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62,166 |
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General and administrative
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24,014 |
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35,083 |
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49,074 |
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78,991 |
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Depreciation and amortization
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74 |
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5,025 |
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1 |
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10,511 |
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Asset impairment (2)
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9,687 |
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7,451 |
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9,687 |
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7,444 |
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Total operating expenses
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53,306 |
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77,078 |
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98,166 |
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159,112 |
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Loss before income tax
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$ |
(11,252 |
) |
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$ |
(33,046 |
) |
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$ |
(11,354 |
) |
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$ |
(69,527 |
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Income tax expense (3)
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— |
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— |
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— |
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— |
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Loss from discontinued operations, net of tax
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$ |
(11,252 |
) |
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$ |
(33,046 |
) |
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$ |
(11,354 |
) |
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$ |
(69,527 |
) |
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Net loss per diluted share
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$ |
(0.17 |
) |
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$ |
(0.49 |
) |
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$ |
(0.16 |
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$ |
(1.04 |
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Capital expenditures
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$ |
80 |
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$ |
419 |
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$ |
319 |
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$ |
604 |
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| (1) |
Includes the results of operations
for our LCB campuses that are held for sale, which met the criteria
to be considered discontinued operations under ASC Topic 360, in
addition to our Transitional Group campuses that completed their
teach-out prior to 2015. |
| (2) |
Asset impairment charges for the
current year quarter relate to impairment recorded for our LCB
campuses which are held for sale as a result of our fair value
analysis. |
| (3) |
Due to the valuation allowance
against our net deferred taxes, there is no income tax benefit
reported for the quarters and years to date ended June 30,
2015 and 2014. |
Assets and Liabilities of Discontinued Operations
Assets and liabilities of discontinued operations on our condensed
consolidated balance sheets for campuses that have ceased
operations or were sold as of June 30, 2015 and
December 31, 2014 include the following (dollars in
thousands):
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June 30,
2015 |
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December 31,
2014 |
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Assets:
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Current assets:
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Receivables, net
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$ |
280 |
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$ |
473 |
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Total current assets
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280 |
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473 |
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Non-current assets:
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Other assets, net
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853 |
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975 |
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Total assets of discontinued operations (1)
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$ |
1,133 |
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$ |
1,448 |
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Liabilities:
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Current liabilities:
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Accounts payable and accrued expenses
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$ |
170 |
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$ |
579 |
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Remaining lease obligations
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13,173 |
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14,927 |
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Total current liabilities
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13,343 |
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15,506 |
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Non-current liabilities:
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Remaining lease obligations
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14,820 |
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22,689 |
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Other
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164 |
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170 |
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Total liabilities of discontinued operations (1)
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$ |
28,327 |
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$ |
38,365 |
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| (1) |
Excludes assets and liabilities for
our LCB campuses which are presented within assets and liabilities
held for sale on our condensed consolidated balance sheets as of
June 30, 2015 and December 31, 2014. See Note 6
“Assets Held for Sale” for further details. |
Remaining Lease Obligations
A number of the campuses that ceased operations prior to
January 1, 2015 or vacated real estate properties for our LCB
campuses held for sale, have remaining lease obligations that
expire over time with the latest expiration in 2020. A liability is
recorded representing the fair value of the remaining lease
obligation at the time 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 and within liabilities held for sale on our
unaudited condensed consolidated balance sheets, for the quarters
and years to date ended June 30, 2015 and 2014 were as follows
(dollars in thousands):
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Balance,
Beginning
of Period |
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Charges
Incurred (1) |
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Net Cash
Payments |
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Other (2) |
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Balance,
End of
Period |
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For the quarter ended June 30, 2015
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$ |
33,441 |
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$ |
(215 |
) |
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$ |
(4,214 |
) |
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$ |
576 |
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$ |
29,588 |
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For the quarter ended June 30, 2014
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$ |
50,745 |
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$ |
6,100 |
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$ |
(6,026 |
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$ |
1,778 |
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$ |
52,597 |
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For the year to date ended June 30, 2015
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$ |
39,869 |
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$ |
(701 |
) |
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$ |
(10,156 |
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$ |
576 |
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$ |
29,588 |
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For the year to date ended June 30, 2014
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$ |
46,755 |
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$ |
13,419 |
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$ |
(12,790 |
) |
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$ |
5,213 |
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$ |
52,597 |
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| (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) |
Includes existing prepaid rent and
deferred rent liability balances for newly vacated spaces that are
netted with the losses incurred in the period recorded. |
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