Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Equity Method Investments Disclosure [Abstract]

Fair Value Disclosures [Text Block]

Investments and Fair Value Measurements

All of the Company’s long-term investment balances at June 30, 2012 and December 31, 2011 were invested in tax free, auction rate student ("ARS") loan educational bonds that are classified as available-for-sale.  The investments typically have an interest reset provision of 35 days with contractual maturities that currently range from June 1, 2034 to May 1, 2040.  At the reset date, the Company has the option to roll the investments and reset the interest rate or sell the investments in an auction. The Company receives the par value of the investment plus accrued interest on the reset date if the underlying investment is sold. As of June 30, 2012, 100% of ARS holdings, at par, were backed by the U.S. government and held AAA (or equivalent) ratings from recognized rating agencies.  

Municipal bonds are classified as held to maturity, are carried at amortized cost and are included in other assets per the consolidated balance sheet and were $1.3 million at June 30, 2012 and December 31, 2011. Differences between amortized cost and fair value of municipal bonds are not considered material. Auction rate securities are classified as available-for-sale and therefore are carried at fair value as estimated using Level 3 fair value inputs. The amortized cost and fair value of available-for-sale investments at June 30, 2012 and December 31, 2011 were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	( in thousands)
June 30, 2012
Long-term:
Auction rate student loan educational bonds	$	22,325	$	—	$	1,284	$	21,041

December 31, 2011
Long-term:
Auction rate student loan educational bonds	$	53,650	$	—	$	3,081	$	50,569

The contractual maturities and announced calls of available-for-sale securities at June 30, 2012 are detailed in the table below. The table is prepared based on information known to management as of June 30, 2012. As management receives intents to call from issuers, the associated securities are changed from their contractual maturities to the date received in the respective call notice.

	Fair Value		Amortized Cost
Due within one year	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	—		—
Due after ten years through May 1, 2040	21,041		22,325
	$	21,041	$	22,325

Estimated fair value of all auction rate security investments as of June 30, 2012 and December 31, 2011 was calculated using unobservable, Level 3 inputs, due to the lack of observable market inputs specifically related to student loan ARS as a result of auction failures beginning in February 2008.  The fair value of these investments as of the June 30, 2012 and December 31, 2011 measurement dates could not be determined with precision based on lack of observable market data and could vary significantly in future measurement periods.

The Company performs an internal cash flow analysis on an individual investment basis to estimate fair value of ARS using inputs determined based on management's understanding of market conditions as well as information derived from other publicly available third party sources. The Company also obtains estimated fair value of ARS from third party financial advisors. The Company obtains an understanding of assumptions in models used by third party financial institutions to estimate fair value. All of this information is considered when determining the estimated fair value of these instruments as recorded in the consolidated financial statements. The Company has analyzed the potential impact of a 50 basis point change to the rate of return, discount rate, and liquidity discount rate noting that this would not materially impact the recorded fair value.

The table below shows the inputs in the Company's cash flow models as of June 30, 2012 for the remaining ARS investments compared to the inputs used in cash flow models as of December 31, 2011. Inputs used in Company models of all securities held as of June 30, 2012 and December 31, 2011, excluding investments whose fair value is estimated to be par value as of the reporting period due to call notices being received by the Company were as follows:

	June 30, 2012	December 31, 2011
Average life of underlying loans	2-12 years	2-12 years
Rate of return	0.53-3.09%	0.68-2.92%
Discount rate	0.36-1.15%	0.48-1.14%
Liquidity discount rate	0.30-1.05%	0.55-1.16%

The unrealized loss of $1.3 million on ARS is recorded as accumulated other comprehensive loss.  During the three month period ended June 30, 2012 the Company recorded unrealized gains of $1.8 million due to the reversal of prior period recorded unrealized losses as the Company received $31.3 million in calls, at par, during the three months ended June 30, 2012. There were not any realized gains or losses related to these investments for the three month and six month periods ended June 30, 2012 and 2011. The Company can not currently project when liquidity will be obtained from these investments and plans to continue to hold such securities until the securities are called, redeemed, or resecuritized by the debt issuers.

The Company has evaluated the unrealized loss on these securities to determine whether the decline in fair value is other than temporary. Management has concluded the decline in fair value to be temporary based on the following considerations.

• Since auction failures began in February 2008, the Company has received approximately $176.1 million as the result of calls by issuers.   The Company received par value for the amount of these calls plus accrued interest. There have not been any defaults on scheduled interest payments.

• Based on the Company's financial operating results, current cash balances, operating cash flows and debt free balance sheet, the Company does not have the intent to sell such securities at a discount and it is not more likely than not to be required to sell the securities before they recover their value. 

• There have not been any significant changes in collateralization and ratings of the underlying securities since the first failed auction.  All of the Company's auction rate security portfolio, as of June 30, 2012, is in senior positions of AAA (or equivalent) rated securities that are backed by the U.S. government.

• The Company is aware of recent increases in default rates of the underlying student loans that are the assets to the trusts issuing the auction rate security debt, which management believes is due to current overall negative economic conditions.  As the underlying loans are guaranteed by the U.S. Government, defaults of the loans accelerate payment of the underlying loan to the trust.  As trusts are no longer recycling repayment money for new loans, accelerated repayment of any student loan to the underlying trust would increase cash flows of the trust which would potentially result in partial calls by the underlying trusts.

• As trusts are no longer recycling underlying loan repayment money for new loans, excess funds are being used to pay down debt of the trust therefore potentially resulting in partial calls of securities held by the Company prior to contractual maturities.

• The Company is aware of recent transactions taking place in secondary markets as well as tender offers for ARS at sub par pricing. At this time, the Company does not intend to tender any holdings at sub par pricing. As ARS debt holders tender ARS debt back to trusts at sub par pricing, the overall equity of the trusts is strengthened.

• Current market activity and the lack of severity or extended decline do not warrant such action at this time.

Management will monitor its investments and ongoing market conditions in future periods to assess impairments considered to be other than temporary. Should fair value continue to remain below cost or decrease significantly from current levels due to credit related issues, the Company may be required to record an other than temporary impairment of these investments, through a charge in the consolidated statement of income although the factors currently do not warrant such a charge.

The table below presents a rollforward for all assets and liabilities, measured at fair value, on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2012 and 2011.

	Available-for-sale debt securities
	(in thousands)
	2012			2011
Balance, January 1	$	50,569		$	88,694
Settlements	(31,325		)	(21,650		)
Purchases	—			—
Issuances	—			—
Sales	—			—
Transfers in to (out of) Level 3	—			—
Total gains or losses (realized/unrealized):
Included in earnings	—			—
Included in other comprehensive loss, net of tax	1,797			—
Balance, June 30,	$	21,041		$	67,044