Restructuring and Other Charges

12 Months Ended

Aug. 31, 2011

Notes to Consolidated Financial Statements [Abstract]

As discussed in Note 3, Changes in Presentation, we have recently implemented a number of important operational changes and initiatives to transition our business to more effectively support our students and improve their educational outcomes. As part of this transition, we implemented a strategic reduction in force in November 2010 and a real estate rationalization plan in the fourth quarter of fiscal year 2011. These initiatives, which are discussed further below, were designed to streamline our operations and better align our operations with our business strategy, refined business model and outlook. The following table details the charges incurred in fiscal year 2011 associated with these initiatives, which are presented in restructuring and other charges on our Consolidated Statements of Income:



	Charge for Year Ended
($ in thousands)	August 31, 2011
Real estate rationalization - Lease obligation costs, net	$	13,052
Real estate rationalization - Asset impairments	6,015
Reduction in force - Severance and other benefits	3,846
Restructuring and other charges	$	22,913

Real Estate Rationalization

During the fourth quarter of fiscal year 2011, we initiated a plan to rationalize our real estate portfolio in Phoenix, Arizona through space consolidation and reorganization. The plan consists of abandoning all, or a portion of, four leased facilities, all of which are classified as operating leases. As of August 31, 2011, we were not using one of the facilities and we determined will no longer derive a future economic benefit from the facility. Accordingly, we accrued $13.1 million in other liabilities on our Consolidated Balance Sheets representing the fair value of our future contractual lease obligation under the respective operating lease. We measured the lease obligation at fair value using a discounted cash flow approach encompassing significant unobservable inputs. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining term of the lease, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considered current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facility. This estimate will be subject to adjustment as market conditions change or as new information becomes available, including the execution of sublease agreements. We also wrote-off $6.0 million of certain assets, including leasehold improvements, at the facility for which we do not expect a future economic benefit. The lease obligation and asset impairment charges are included in our University of Phoenix reportable segment.

We expect to abandon the remaining three facilities in fiscal year 2012 and incur additional charges associated with initially recognizing the net lease obligations and other costs. The majority of these charges will be recorded on the respective cease-use dates for each facility and will be included in our University of Phoenix reportable segment.

Reduction in Force

We implemented a strategic reduction in force primarily at University of Phoenix in November 2010 that eliminated approximately 700 full-time positions, principally among admissions personnel. In connection with this reduction in force, we incurred a $3.8 million charge consisting of severance and other fringe benefit costs. This charge is included in our University of Phoenix reportable segment and was paid in the second quarter of fiscal year 2011.