Fair Value Of Financial Instruments

12 Months Ended

Jun. 30, 2014

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's own assumptions of what market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level One - Quoted prices for identical instruments in active markets.

Level Two - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations for which all significant inputs are observable market data.

Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity.

In some cases, the inputs used to measure fair value may meet the definition of more than one level of fair value hierarchy. The lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.

The following table presents the carrying amounts and fair values of the interest rate swap liabilities, which are measured at fair value on a recurring basis based on the framework described in Note 9, "Derivative Instruments," and the fair values of the Company's debt, which is recorded at carrying value (in thousands):



	June 30, 2014								June 30, 2013
	Carrying Value		Level 1		Level 2		Level 3		Carrying Value		Level 1		Level 2		Level 3
Recurring:
Interest rate swap liability	$	11,223	$	—	$	11,223	$	—	$	20,232	$	—	$	20,232	$	—
Disclosure only:
Variable rate debt	1,067,552		—		824,715		—		1,078,818		—		962,134		—
Fixed rate debt	215,909		—		—		232,102		206,422		—		—		206,422

The fair values of the Company’s variable rate debt at the dates presented above were based on each instrument’s trading value in markets that are not active. The Company's fixed rate debt is comprised of the Company's Cash Pay/PIK Notes, on which there is currently no observable trading; therefore, the fair value of the Cash Pay/PIK Notes at June 30, 2014 was estimated using a premium of 107.5, which is the current call price. Cash and cash equivalents, restricted cash, student accounts receivable, notes receivable, the revolving credit facility, accounts payable and accrued expenses have fair values that approximate their carrying values.

As described in Note 4, "Property and Equipment" and Note 5, "Goodwill and Intangible Assets," the Company recorded asset impairments during fiscal 2014 and fiscal 2013. This resulted in the following assets being measured at fair value on a non-recurring basis using Level Three inputs:


•	goodwill at The Art Institutes reporting unit at March 31, 2014 and March 31, 2013;


•	the trade name for The Art Institutes reporting unit at June 30, 2014, March 31, 2014 and March 31, 2013;


•	the licensing, accreditation and Title IV program participation assets at The Art Institutes reporting units at June 30, 2014;


•	certain long-lived assets at the Brown Mackie Colleges and Argosy University reporting units.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details