Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2013

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, 2013, $11.5 million at par, were invested in tax free, auction rate student ("ARS") loan educational bonds that are classified as available-for-sale and, therefore, are carried at fair value on the financial statements.  As of June 30, 2013, all of the Company’s auction rate student loan bonds were associated with unsuccessful auctions. The investments have contractual maturities that currently range from June 1, 2034 to May 1, 2040.  As of June 30, 2013, 70% of ARS holdings, at par, held AAA (or equivalent) ratings from recognized rating agencies.  The remaining ARS holdings, at par, held high grade investment (AA+) ratings from recognized rating agencies. Since the first auction failures in February 2008 when the Company had approximately $198.5 million ARS at par, the Company has received approximately $187.0 million of calls from issuers, at par, plus accrued interest at the time of the call.  There were $9.8 million in calls, at par, during the six months ended June 30, 2013.

The estimated fair value of all auction rate security investments as of June 30, 2013 and December 31, 2012 was determined 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 Company has analyzed the potential impact of a 50 basis point change to the rate of return, discount rate, and liquidity discount rate inputs noting that this would not materially impact the recorded fair value. The estimated fair value of these investments could vary significantly in future measurement periods.

The amortized cost and fair value of available-for-sale investments at June 30, 2013 and December 31, 2012 were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	( in thousands)
June 30, 2013
Long-term:
Auction rate student loan educational bonds	$	11,475	$	—	$	684	$	10,791

December 31, 2012
Long-term:
Auction rate student loan educational bonds	$	21,300	$	—	$	1,284	$	20,016

The contractual maturities, calls received subsequent to June 30, 2013, and announced calls of available-for-sale securities at June 30, 2013 are detailed in the table below. The table is prepared based on information known to management as of June 30, 2013 as well as unannounced calls that were received prior to filing date of this report. 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	10,791		11,475
	$	10,791	$	11,475

The unrealized loss of $0.7 million is recorded as an adjustment to accumulated other comprehensive loss and the Company has not recognized any other than temporary impairments in the consolidated statements of comprehensive income.   During the three and six month periods ended June 30, 2013 the Company recorded unrealized gains of $0.6 million due to the reversal of prior period recorded unrealized losses as the Company received $9.8 million in calls, at par during these periods. There were no other changes in other comprehensive income for the three and six months ended June 30, 2013 and the unrealized losses on available-for-sale securities of $0.7 million is the only component of accumulated other comprehensive loss at June 30, 2013. There were not any realized gains or losses related to these investments for the three and six months ended June 30, 2013 and 2012. The Company can not currently project when liquidity will be obtained from these investments.

The Company continues to evaluate 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 $187.0 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 nor has the Company sold any investments for less than par value of the underlying securities.

• These investments represented 2.1% and 4.3% of the Company's total assets, at June 30, 2013 and December 31, 2012, respectively.

• There have not been any significant changes in collateralization or significant declines in ratings of the underlying securities since the first failed auction.  All of the Company's auction rate security portfolio, as of June 30, 2013, is in senior positions of investment grade rated securities and are backed by the U.S. government.

• The Company is aware of continued trends in 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 economic conditions and unemployment rates.  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.

• 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 comprehensive 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, 2013 and 2012.

	Available-for-sale debt securities
	(in thousands)
	2013			2012
Balance, January 1	$	20,016		$	50,569
Settlements	(9,825		)	(31,325		)
Purchases	—			—
Issuances	—			—
Sales	—			—
Transfers in to (out of) Level 3	—			—
Total gains or losses (realized/unrealized):
Included in earnings	—			—
Included in other comprehensive income, net of tax	600			1,797
Balance, June 30,	$	10,791		$	21,041

Municipal bonds of $1.4 million at June 30, 2013 and $1.3 million at December 31, 2012 are stated at amortized cost, are classified as held-to-maturity and are included in restricted cash in other non-current assets. Differences between amortized cost and fair value of municipal bonds are not considered material.