Restructuring and Other Charges

3 Months Ended

Nov. 30, 2011

Notes to Condensed Consolidated Financial Statements [Abstract]

We have implemented a number of important operational changes and initiatives to transition our business to more effectively support our students and improve their educational outcomes. As part of this transition, we implemented a strategic reduction in force and a real estate rationalization plan in fiscal year 2011. These initiatives were designed to streamline our operations and better align our operations with our business strategy, refined business model and outlook. The following table details the charges incurred for the three months ended November 30, 2011 and 2010, and the cumulative costs associated with these initiatives, which have all been included in restructuring and other charges on our Condensed Consolidated Statements of Income:



	Three Months Ended November 30,				Cumulative Costs for Restructuring Activities
($ in thousands)	2011		2010		Cumulative Costs for Restructuring Activities
Real estate rationalization
Lease obligation costs, net	$	5,211	$	—	$	23,013
Interest accretion	351		—		351
Asset impairments	—		—		1,265
Reduction in force - Severance and other benefits	—		3,846		3,846
Restructuring and other charges	$	5,562	$	3,846	$	28,475

The following table details the changes in our associated restructuring liability during the three months ended November 30, 2011, which is included in other liabilities on our Condensed Consolidated Balance Sheets:



($ in thousands)
Balance at August 31, 2011	$	17,802
Lease obligation costs, net	5,211
Interest accretion	351
Payments	(362		)
Balance at November 30, 2011	$	23,002

During fiscal year 2011, we initiated a plan to rationalize our real estate portfolio in Phoenix, Arizona through space consolidation and reorganization. The plan consists of abandoning all, or a portion of, four leased facilities, all of which are classified as operating leases. As of November 30, 2011, we were not using two of the facilities and determined we will no longer derive a future economic benefit from the respective facilities. Accordingly, we recorded charges representing the fair value of our future contractual lease obligations under the operating leases on the respective cease-use dates resulting in $5.2 million and $17.8 million during the first quarter of fiscal year 2012 and the fourth quarter of fiscal year 2011, respectively. We measured the lease obligations at fair value using a discounted cash flow approach encompassing significant unobservable inputs. The estimation of future cash flows includes non-cancelable contractual lease costs over the remaining terms of the leases, partially offset by estimated future sublease rental income, which involves significant judgment. Our estimate of the amount and timing of sublease rental income considered expected sublease agreements, current commercial real estate market data and conditions, comparable transaction data and qualitative factors specific to the facility. The estimates will be subject to adjustment as market conditions change or as new information becomes available, including the execution of sublease agreements. During the first quarter of fiscal year 2012, we also recorded charges for interest accretion associated with the lease obligations. These charges are included in our University of Phoenix reportable segment.

We expect to abandon the remaining two facilities in fiscal year 2012 and incur additional charges associated with initially recognizing the net lease obligation and other costs. These charges will be recorded on the respective cease-use dates for the facilities, and will be included in our University of Phoenix reportable segment.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

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