Short-Term and Long-Term Investments

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Short-Term and Long-Term Investments

2. Short-Term and Long-Term Investments

As of September 30, 2014, the Company held auction rate securities that had experienced failed auctions totaling $6,000,000 at par value, all of which had been purchased through and are held by a broker-dealer affiliate of Bank of America, N.A. (the “Failed Auction Securities”). The Failed Auction Securities held by the Company are Aaa/AA+/A3/BBB rated by major credit rating agencies, collateralized by student loans, and guaranteed by the U.S. Department of Education under the Federal Family Education Loan Program. Management is not aware of any reason to believe any of the issuers of the Failed Auction Securities are presently at risk of default. Through September 30, 2014, the Company has continued to receive interest payments on the Failed Auction Securities in accordance with the terms of their respective indentures. Management believes the Company ultimately should be able to liquidate all of the Failed Auction Securities without significant loss primarily due to the overall quality of the issues held and the collateral securing the substantial majority of the underlying obligations. However, current conditions in the auction rate securities market have led management to conclude the recovery period for the Failed Auction Securities exceeds 12 months. As a result, the Company continued to classify the Failed Auction Securities as long-term as of September 30, 2014.

The following is a summary of available-for-sale securities (in thousands):

September 30, 2014	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Failed Auction Securities	$	6,000	$	—	$	1,036	$	4,964
Brokered certificates of deposit		710		1		—		711
	$	6,710	$	1	$	1,036	$	5,675

December 31, 2013	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Failed Auction Securities	$	6,000	$	—	$	1,175	$	4,825
Brokered certificates of deposit		820		6		—		826
	$	6,820	$	6	$	1,175	$	5,651

All of the Failed Auction Securities as of September 30, 2014 have been in an unrealized loss position for greater than 12 months.

The amortized cost and estimated fair value of available-for-sale securities on September 30, 2014, by contractual maturities, are shown below (in thousands):

	Cost		Estimated Fair Value
Due in one year or less	$	540	$	541
Due in two to ten years		170		170
Due in ten to twenty years		—		—
Due in twenty to forty years		6,000		4,964
	$	6,710	$	5,675

Based on the fair value measurements described in Note 3, the fair value of the Failed Auction Securities on September 30, 2014, with a par value of $6,000,000, was estimated by the Company to be approximately $4,964,000, an increase in fair value of $139,000 from December 31, 2013. The gross unrealized loss of $1,036,000 on the Failed Auction Securities consists of two types of estimated loss: an aggregate credit loss of $356,000 and an aggregate temporary impairment of $680,000. In determining the amount of credit loss, the Company compared the present value of cash flows expected to be collected to the amortized cost basis of the securities, considering credit default risk probabilities and changes in credit ratings as significant inputs, among other factors (See Note 3).

The following table represents a rollforward of the activity related to the credit (gain) loss recognized in earnings on available-for-sale auction rate securities held by the Company for the nine months ended September 30 (in thousands):

	2014			2013
Balance at the beginning of the period	$	395		$	317
Changes in the amount related to credit (gain) loss for which other-than-temporary impairment was not previously recognized		(39	)		85
Reduction for security sold during the period		—			(7	)
Balance at the end of the period	$	356		$	395

At this time, the Company has no intent to sell any of the impaired Failed Auction Securities and does not believe it is more likely than not the Company will be required to sell any of these securities. If current market conditions deteriorate further, the Company may be required to record additional unrealized losses. If the credit rating of the security deteriorates, the Company may be required to adjust the carrying value of these investments through impairment charges recorded in the Condensed Consolidated Statements of Operations, and any such impairment adjustments may be material.

Based on the Company’s ability to access cash and cash equivalents and its expected operating cash flows, management does not anticipate the current lack of liquidity associated with the Failed Auction Securities held will affect the Company’s ability to execute its current operating plan.