COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

14. COMMITMENTS AND CONTINGENCIES

Lease Commitments—The Company leases office premises, educational facilities and various equipment for varying periods through the year 2032 at basic annual rentals (excluding taxes, insurance, and other expenses under certain leases) as follows:

Year Ending December 31,	Finance Obligation			Operating Leases		Capital Leases
2014	$	1,546		$	21,223	$	2,494
2015		1,546			19,429		2,494
2016		1,546			15,680		2,556
2017		-			14,628		2,678
2018		-			13,644		2,678
Thereafter		-			34,913		37,137
		4,638			119,517		50,037
Less amount representing interest		(4,638	)		-		(24,094	)
	$	-		$	119,517	$	25,943

On December 28, 2001, the Company completed a sale and a leaseback of four owned facilities to a third party for net proceeds of approximately $8.8 million. The initial term of the lease is 15 years with two ten-year extensions. The lease is an operating lease that starts at $1.2 million in the first year and increases annually by the consumer price index. The lease includes an option near the end of the initial lease term to purchase the facilities at fair value, as defined. The net proceeds received have been reflected in the consolidated balance sheet as a finance obligation. The lease payments are included as a component of interest expense.

Rent expense, included in operating expenses in the accompanying consolidated statements of operations for the three years ended December 31, 2013, 2012 and 2011 is $21.9 million, respectively. Interest expense related to the financing obligation in the accompanying statements of operations for the years ended December 31, 2013, 2012 and 2011 is $1.5 million, respectively.

Litigation and Regulatory Matters—In the ordinary conduct of business, the Company is subject to periodic lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters.  Although the Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it, the Company does not believe that any currently pending legal proceeding to which it is a party will have a material effect on our business, financial condition, results of operations or cash flows.

On November 21, 2012, the Company received a Civil Investigation Demand from the Attorney General of the Commonwealth of Massachusetts relating to their investigation of whether the Company and certain of its academic institutions have complied with certain Massachusetts state consumer protection and finance laws.  On July 29, 2013 and January 17, 2014, the Company received follow-up Civil Investigative Demands.  Pursuant to the Civil Investigative Demands, the Attorney General has requested from the Company and certain of its academic institutions documents and detailed information from the time period January 1, 2008 to the present.  The Company has responded to these requests and intends to continue cooperating with the Attorney General's Office.

Student Loans—At December 31, 2013, the Company had outstanding net loan commitments to its students to assist them in financing their education of approximately $26.5 million.

Vendor Relationship—The Company is party to two agreements with Snap-on Industrial ("Snap-on") which expire on June 30, 2014 and December 31, 2014.  The Company has agreed to grant Snap-on exclusive rights to certain automotive campuses to display advertising and supply certain tools with the exception of one pre-existing vendor contract.  The Company earns credits that are redeemable for certain tools and equipment based on the sales to students and to the Company.

Executive Employment Agreements—The Company entered into employment contracts with key executives that provide for continued salary payments if the executives are terminated for reasons other than cause, as defined in the agreements. The future employment contract commitments for such employees were approximately $8.9 million at December 31, 2013.

Change in Control Agreements—In the event of a change of control several key executives will receive continued salary payments based on their employment agreements.

Surety Bonds—Each of the Company's campuses must be authorized by the applicable state education agency in which the campus is located to operate and to grant degrees, diplomas or certificates to its students. The campuses are subject to extensive, ongoing regulation by each of these states. In addition, our campuses are required to be authorized by the applicable state education agencies of certain other states in which our campuses recruit students. The Company is required to post surety bonds on behalf of our campuses and education representatives with multiple states to maintain authorization to conduct our business. At December 31, 2013, the Company has posted surety bonds in the total amount of approximately $16.9 million.