5. Restructuring and Related Charges

During the third quarter of 2018, the Company incurred personnel related restructuring charges due to cost reduction efforts and management changes. These changes are primarily intended to integrate CEC successfully and establish an efficient ongoing cost structure for the Company.

In October 2013, the Company implemented a restructuring to better align the Company’s resources with student enrollments at the time. This restructuring included the closing of 20 physical locations and reductions in the number of campus-based and corporate employees. A liability for lease obligations, some of which continue through 2022, was recorded and is measured at fair value using a discounted cash flow approach encompassing significant unobservable inputs (Level 3). The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases discounted at the Company’s marginal borrowing rate of 4.5%, partially offset by estimated future sublease rental income discounted at credit-adjusted rates. The Company’s estimates, which involve significant judgment, also consider the amount and timing of sublease rental income based on subleases that have been executed and subleases expected to be executed based on current commercial real estate market data and conditions, and other qualitative factors specific to the facilities. The estimates are subject to adjustment as market conditions change or as new information becomes available, including the execution of additional sublease agreements.

The following details the changes in the Company’s restructuring liability during the nine months ended September 30, 2018 (in thousands):


	Lease and Related Costs, Net		Severance and Other Employee Separation Costs		Total
Balance at December 31, 2017(1)	$	8,781	$	—	$	8,781
Restructuring and other charges(2)		—		13,088		13,088
Payments		(2,069)		(439)		(2,508)
Adjustments(3)		107		—		107
Balance at September 30, 2018(1)	$	6,819	$	12,649	$	19,468

⁽¹⁾

The current portion of restructuring liabilities was $3.1 million and $7.9 million as of December 31, 2017 and September 30, 2018, respectively, which are included in accounts payable and accrued expenses. The long-term portion is included in other long-term liabilities.

⁽²⁾

Restructuring and other charges of $3.4 million and $13.1 million for the three and nine months ended September 30, 2017 and 2018, respectively, are included in Merger costs on the unaudited condensed consolidated statements of income.

⁽³⁾

Adjustments include accretion of interest on lease costs, partially offset by changes in the timing and expected income from sublease agreements.