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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM          TO             

Commission File Number: 0-23245

 

PERDOCEO EDUCATION CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

36-3932190

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

231 N. Martingale Road

Schaumburg, Illinois

60173

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (847781-3600

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

PRDO

 

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

  

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.    Yes      No  

Number of shares of registrant’s common stock, par value $0.01, outstanding as of May 1, 2020: 69,061,469

 


PERDOCEO EDUCATION CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets

1

 

 

 

 

Unaudited Condensed Consolidated Statements of Income and Comprehensive Income

2

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

3

 

 

Unaudited Condensed Consolidated Statements of Cash Flows

4

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

32

 

 

 

Item 4.

Controls and Procedures

33

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

34

 

 

 

Item 1A.

Risk Factors

34

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 6.

Exhibits

35

 

 

SIGNATURES

37

 

 

 


PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

(unaudited)

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents, unrestricted

 

$

37,932

 

 

$

108,687

 

Restricted cash

 

 

4,000

 

 

 

-

 

Total cash, cash equivalents and restricted cash

 

 

41,932

 

 

 

108,687

 

Short-term investments

 

 

243,651

 

 

 

185,488

 

Total cash and cash equivalents, restricted cash and short-term investments

 

 

285,583

 

 

 

294,175

 

Student receivables, gross

 

 

66,638

 

 

 

84,874

 

Allowance for credit losses

 

 

(34,065

)

 

 

(29,856

)

Student receivables, net

 

 

32,573

 

 

 

55,018

 

Receivables, other

 

 

1,576

 

 

 

1,381

 

Prepaid expenses

 

 

10,389

 

 

 

7,299

 

Inventories

 

 

553

 

 

 

576

 

Other current assets

 

 

1,619

 

 

 

1,936

 

Total current assets

 

 

332,293

 

 

 

360,385

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $95,588 and $92,933

   as of March 31, 2020 and December 31, 2019, respectively

 

 

28,349

 

 

 

26,006

 

Right of use asset, net

 

 

51,088

 

 

 

50,366

 

Goodwill

 

 

118,777

 

 

 

87,356

 

Intangible assets, net of amortization of $1,400 as of both March 31, 2020 and December 31, 2019

 

 

18,300

 

 

 

7,900

 

Student receivables, gross

 

 

3,172

 

 

 

3,352

 

Allowance for credit losses

 

 

(2,030

)

 

 

(2,108

)

Student receivables, net

 

 

1,142

 

 

 

1,244

 

Deferred income tax assets, net

 

 

50,701

 

 

 

60,169

 

Other assets

 

 

5,876

 

 

 

5,720

 

TOTAL ASSETS

 

$

606,526

 

 

$

599,146

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

$

12,419

 

 

$

11,784

 

Accounts payable

 

 

9,624

 

 

 

11,533

 

Accrued expenses:

 

 

 

 

 

 

 

 

Payroll and related benefits

 

 

12,532

 

 

 

27,616

 

Advertising and marketing costs

 

 

11,478

 

 

 

10,479

 

Income taxes

 

 

1,489

 

 

 

1,376

 

Other

 

 

15,745

 

 

 

16,378

 

Deferred revenue

 

 

29,002

 

 

 

24,647

 

Total current liabilities

 

 

92,289

 

 

 

103,813

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

 

51,699

 

 

 

52,391

 

Other liabilities

 

 

17,395

 

 

 

11,647

 

Total non-current liabilities

 

 

69,094

 

 

 

64,038

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding

 

 

-

 

 

 

-

 

Common stock, $0.01 par value; 300,000,000 shares authorized; 86,209,338

   and 85,953,253 shares issued, 69,061,469 and 70,151,357 shares

   outstanding as of March 31, 2020 and December 31, 2019, respectively

 

 

862

 

 

 

860

 

Additional paid-in capital

 

 

642,958

 

 

 

639,335

 

Accumulated other comprehensive (loss) income

 

 

(543

)

 

 

344

 

Retained earnings

 

 

47,177

 

 

 

18,071

 

Treasury stock, at cost; 17,147,869 and 15,801,896 shares as of March 31, 2020

   and December 31, 2019, respectively

 

 

(245,311

)

 

 

(227,315

)

Total stockholders' equity

 

 

445,143

 

 

 

431,295

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

606,526

 

 

$

599,146

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

 

 

 

For the Quarter Ended March 31,

 

 

 

2020

 

 

2019

 

REVENUE:

 

 

 

 

 

 

 

 

Tuition and fees

 

$

170,394

 

 

$

157,228

 

Other

 

 

600

 

 

 

625

 

Total revenue

 

 

170,994

 

 

 

157,853

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

26,911

 

 

 

26,327

 

General and administrative

 

 

103,529

 

 

 

99,322

 

Depreciation and amortization

 

 

2,639

 

 

 

2,233

 

Asset impairment

 

 

612

 

 

 

-

 

Total operating expenses

 

 

133,691

 

 

 

127,882

 

Operating income

 

 

37,303

 

 

 

29,971

 

 

 

 

 

 

 

 

 

 

OTHER INCOME:

 

 

 

 

 

 

 

 

Interest income

 

 

1,487

 

 

 

1,440

 

Interest expense

 

 

(41

)

 

 

(42

)

Miscellaneous (expense) income

 

 

(13

)

 

 

226

 

Total other income

 

 

1,433

 

 

 

1,624

 

 

 

 

 

 

 

 

 

 

PRETAX INCOME

 

 

38,736

 

 

 

31,595

 

Provision for income taxes

 

 

9,604

 

 

 

6,407

 

INCOME FROM CONTINUING OPERATIONS

 

 

29,132

 

 

 

25,188

 

 

 

 

 

 

 

 

 

 

LOSS FROM DISCONTINUED OPERATIONS, net of tax

 

 

(26

)

 

 

(397

)

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

29,106

 

 

 

24,791

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(48

)

 

 

(52

)

Unrealized (loss) gain on investments

 

 

(839

)

 

 

399

 

     Total other comprehensive (loss) income

 

 

(887

)

 

 

347

 

COMPREHENSIVE INCOME

 

$

28,219

 

 

$

25,138

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE - BASIC:

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.42

 

 

$

0.36

 

Loss from discontinued operations

 

 

-

 

 

 

(0.01

)

Net income per share

 

$

0.42

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE - DILUTED:

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.41

 

 

$

0.35

 

Loss from discontinued operations

 

 

-

 

 

 

-

 

Net income per share

 

$

0.41

 

 

$

0.35

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

Basic

 

 

69,839

 

 

 

69,837

 

Diluted

 

 

71,714

 

 

 

71,492

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2


 

PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

 

 

Issued Shares

 

 

$0.01 Par

Value

 

 

Purchased Shares

 

 

Cost

 

 

Additional Paid-in Capital

 

 

Comprehensive Income (Loss)

 

 

Retained Earnings

 

 

Total

 

BALANCE, January 1, 2020

 

 

85,953

 

 

$

860

 

 

 

(15,802

)

 

$

(227,315

)

 

$

639,335

 

 

$

344

 

 

$

18,071

 

 

$

431,295

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,106

 

 

 

29,106

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(48

)

 

 

-

 

 

 

(48

)

Unrealized loss on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(839

)

 

 

-

 

 

 

(839

)

Treasury stock purchased

 

 

-

 

 

 

-

 

 

 

(1,284

)

 

 

(17,309

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,309

)

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,212

 

 

 

-

 

 

 

-

 

 

 

3,212

 

Common stock issued

 

 

256

 

 

 

2

 

 

 

(62

)

 

 

(687

)

 

 

411

 

 

 

-

 

 

 

-

 

 

 

(274

)

BALANCE, March 31, 2020

 

 

86,209

 

 

$

862

 

 

 

(17,148

)

 

$

(245,311

)

 

$

642,958

 

 

$

(543

)

 

$

47,177

 

 

$

445,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

 

 

Issued Shares

 

 

$0.01 Par

Value

 

 

Purchased Shares

 

 

Cost

 

 

Additional Paid-in Capital

 

 

Comprehensive Income (Loss)

 

 

Accumulated Deficit

 

 

Total

 

BALANCE, January 1, 2019

 

 

85,174

 

 

$

852

 

 

 

(15,401

)

 

$

(220,700

)

 

$

628,295

 

 

$

(298

)

 

$

(52,946

)

 

$

355,203

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,791

 

 

 

24,791

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(52

)

 

 

-

 

 

 

(52

)

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

399

 

 

 

-

 

 

 

399

 

Adjustment for change in accounting method

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,035

 

 

 

1,035

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,369

 

 

 

-

 

 

 

-

 

 

 

1,369

 

Common stock issued

 

 

485

 

 

 

5

 

 

 

(155

)

 

 

(2,532

)

 

 

104

 

 

 

-

 

 

 

-

 

 

 

(2,423

)

BALANCE, March 31, 2019

 

 

85,659

 

 

$

857

 

 

 

(15,556

)

 

$

(223,232

)

 

$

629,768

 

 

$

49

 

 

$

(27,120

)

 

$

380,322

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3


PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

For the Quarter Ended March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

29,106

 

 

$

24,791

 

Adjustments to reconcile net income to net

 

 

 

 

 

 

 

 

cash provided by operating activities:

 

 

 

 

 

 

 

 

Asset impairment

 

 

612

 

 

 

-

 

Depreciation and amortization expense

 

 

2,639

 

 

 

2,233

 

Bad debt expense

 

 

12,862

 

 

 

11,709

 

Compensation expense related to share-based awards

 

 

3,212

 

 

 

1,369

 

Deferred income taxes

 

 

9,468

 

 

 

6,778

 

Changes in operating assets and liabilities

 

 

(9,131

)

 

 

(33,935

)

Net cash provided by operating activities

 

 

48,768

 

 

 

12,945

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of available-for-sale investments

 

 

(111,753

)

 

 

(138,700

)

Sales of available-for-sale investments

 

 

52,893

 

 

 

135,062

 

Purchases of property and equipment

 

 

(1,015

)

 

 

(479

)

Business acquisition

 

 

(38,065

)

 

 

-

 

Net cash used in investing activities

 

 

(97,940

)

 

 

(4,117

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Issuance of common stock

 

 

413

 

 

 

109

 

Purchase of treasury stock

 

 

(17,309

)

 

 

-

 

Payments of employee tax associated with stock compensation

 

 

(687

)

 

 

(2,532

)

Net cash used in financing activities

 

 

(17,583

)

 

 

(2,423

)

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(66,755

)

 

 

6,405

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of the period

 

 

108,687

 

 

 

32,731

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of the period

 

$

41,932

 

 

$

39,136

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

4


PERDOCEO EDUCATION CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. DESCRIPTION OF THE COMPANY

Perdoceo’s academic institutions offer a quality postsecondary education primarily online to a diverse student population, along with campus-based and blended learning programs. Our two regionally accredited universities – Colorado Technical University (“CTU”) and American InterContinental University (“AIU”) provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. Both universities offer students industry-relevant and career-focused degree programs that are designed to meet the educational needs of today’s busy adults. CTU and AIU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath® learning platform and using data analytics and technology to support students and enhance learning. Perdoceo is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

A listing of individual campus locations and web links to Perdoceo’s institutions can be found at www.perdoceoed.com.  

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “the Company,” “Perdoceo” and “PEC” refer to Perdoceo Education Corporation and our wholly-owned subsidiaries. The terms “institution” and “university” refer to an individual, branded, for-profit educational institution owned by us and includes its campus locations. The term “campus” refers to an individual main or branch campus operated by one of our institutions.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the quarter ended March 31, 2020 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2020.

The unaudited condensed consolidated financial statements presented herein include the accounts of Perdoceo Education Corporation and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

         Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a postsecondary education provider that offers a variety of academic programs. We organize our business across two reporting segments: CTU and AIU (collectively referred to as the “University Group”).

          On March 2, 2020, the Company acquired substantially all of the assets of Trident University International (“Trident University”). Trident University’s operations were brought within the AIU segment, preserving the “Trident” name and programs as part of AIU’s operations. Results of operations related to the acquisition of substantially all of the assets of Trident University (the “Trident acquisition”) are not material to our consolidated results of operations and are included in the unaudited condensed consolidated financial statements from the date of acquisition. See Note 3 “Business Acquisition” for further information.

Effective January 1, 2020, we implemented FASB ASC Topic 326 – Financial Instruments - Credit Losses. This guidance requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected and credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The guidance under Topic 326 impacts accounting for credit losses with the most significant relevance to our accounting for credit losses related to student receivables. The guidance under Topic 326 did not materially impact our presentation of our financial condition, results of operations and disclosures. See Note 7 “Student Receivables” for further information.   

Effective January 1, 2020, the Company reclassified non-current assets of discontinued operations within other non-current assets and current liabilities of discontinued operations within current other accrued expenses. This reclassification was not material to our condensed consolidated balance sheets. Prior period amounts were recast to be comparable to current year reporting.       

3. BUSINESS ACQUISITION

On March 2, 2020, the Company acquired substantially all of the assets of Trident University, a regionally accredited university offering online undergraduate, master’s and doctoral programs with a strong focus on graduate programs. Trident University’s operations were brought within the scope of the state licensure, accreditation and Department of Education approval of AIU, with Trident University relinquishing its accreditor and Department approvals. Trident University’s programs are now offered by AIU under the “Trident” name. The combined institution continues to serve existing and future students with a broader range of program offerings and resources.

5


On the date of acquisition, the Company made a cash payment of $38.1 million for the Trident University assets. Pursuant to the purchase agreement, $4.0 million of this payment was set aside in an escrow account to secure indemnification obligations of the seller after closing and is reflected as restricted cash on our condensed consolidated balance sheets. A subsequent cash payment will be made to the seller after finalization of Trident University’s results measured in terms of its revenue and EBITDA (as determined pursuant to the purchase agreement for the transaction) during the 12-month period ended December 31, 2019 and a final working capital adjustment calculated pursuant to the purchase agreement. The Company estimates that this subsequent cash payment will be approximately $6.0 million. The initial payment was, and the post-closing payment will be, fully funded with the Company’s available cash balances generated from operating activities.

The estimated purchase price of approximately $44 million was allocated to estimated fair values of acquired tangible and identifiable intangible assets of $53.1 million and assumed liabilities of $9.3 million as of March 2, 2020. The net assets acquired assume a working capital adjustment that is subject to finalization. Intangible assets acquired include a trade name with an estimated fair value of $1.0 million and student relationships and course curriculum with an aggregate estimated fair value of $9.4 million. Based on our preliminary purchase price allocation, we have recorded goodwill of $31.4 million. We expect substantially all of this goodwill balance to be deductible for income tax reporting purposes. Subsequent adjustments may be made to the purchase price allocation once the purchase price is finalized.

The following table summarizes the preliminary estimated fair values of assets acquired and liabilities assumed as of March 2, 2020 (dollars in thousands):

 

 

 

March 2, 2020

 

Assets:

 

 

 

 

Student receivables, net

 

$

6,213

 

Other current assets

 

 

912

 

Property and equipment

 

 

3,932

 

Intangible assets subject to amortization

 

 

 

 

Trade name (useful life of 5 years)

 

 

1,000

 

Student relationships (useful life of 3 years)

 

 

8,000

 

Course curriculum (useful life of 3 years)

 

 

1,400

 

Goodwill

 

 

31,421

 

Other non-current assets

 

 

270

 

         Total assets acquired

 

$

53,148

 

Liabilities:

 

 

 

 

Accounts payable and other accrued liabilities

 

$

2,582

 

Deferred revenue

 

 

4,749

 

Loan discharge reserve

 

 

1,900

 

Other long-term liabilities

 

 

46

 

         Total liabilities assumed

 

$

9,277

 

 

 

 

 

 

Net assets acquired

 

$

43,871

 

 

4. RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting guidance adopted in 2020

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. For all entities, ASU 2020-04 is effective as of March 22, 2020 through December 22, 2022. We have evaluated and adopted this guidance effective March 22, 2020. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in this ASU provide clarifications which align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software or software licenses. The accounting for the service element of a hosting arrangement that is a service

6


contract is not affected by these amendments. We have evaluated and adopted this guidance effective January 1, 2020. The adoption did not significantly impact the presentation of our financial condition, results of operation and disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU include removals from, modifications of and additions to the disclosure requirements on fair value measurements, including the consideration of costs and benefits. The guidance removed the requirements of the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. This ASU also added additional requirements regarding changes in unrealized gains and losses for the period included in other comprehensive (loss) income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. We have evaluated and adopted this guidance effective January 1, 2020. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected and credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The standard replaces today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. We completed the assessment of our evaluation of the new standard on our accounting policies and adopted this guidance effective January 1, 2020 using a modified retrospective approach without restating prior comparative periods. The adoption of this guidance did not significantly impact the presentation of our financial condition, results of operations and disclosures.

Recent accounting guidance not yet adopted

In December