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EX-32.2 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - National American University Holdings, Inc.nauh_ex322.htm
EX-32.1 - CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANE - National American University Holdings, Inc.nauh_ex321.htm
EX-31.2 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - National American University Holdings, Inc.nauh_ex312.htm
EX-31.1 - CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF - National American University Holdings, Inc.nauh_ex311.htm
EX-23.1 - CONSENTS OF EXPERTS AND COUNSEL - National American University Holdings, Inc.nauh_ex231.htm
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
Form 10-K/A
Amendment No. 2
 
☒   ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2016
    ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to__________
 
Commission File No. 001-34751
 
National American University Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
83-0479936
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
5301 S. Highway 16
57701
Rapid City, SD
(Zip Code)
(Address of principal executive offices)
 
(605) 721-5200
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
Common Stock, $.0001 par Value
 
The NASDAQ Stock Market
Title of each class
 
Name of each exchange on which registered
 
Securities registered pursuant to section 12(g) of the Act:
None
(Title of class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☑
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑ No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☑ No ☐
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  ☐
Accelerated filer  ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)
Smaller reporting company ☑
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No  ☑
 
As of February 28, 2017, there were 24,224,924 shares of Common Stock, $0.0001 par value per share outstanding.
 
The aggregate market value of the registrant’s common stock held by non-affiliates computed by reference to the price at which the common equity was last sold as of November 30, 2016, was approximately $19.7 million.
 
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant’s Definitive Proxy Statement for its 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.
 

 
 
 
 
 
EXPLANATORY NOTE
 
The registrant filed with the Securities and Exchange Commission an Annual Report on Form 10-K for the year ended May 31, 2016 on August 5, 2016, as amended by that certain Amendment No. 1 filed on September 13, 2016 (the “Form 10-K”). The registrant is filing this Amendment No. 2 solely (1) to correct an error of missing signature on the Report of Independent Registered Public Accounting Firm under Item 8 of the Form 10-K and (2) to correct an error of missing signature on Exhibit 23.1 Consent of Independent Registered Public Accounting Firm to the Form 10-K.
 
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by our principal executive officer and principal financial officer are being filed as exhibits to this Amendment No. 2. Except as expressly set forth in this Amendment No. 2, the Form 10-K has not been amended, updated or otherwise modified.
 
 
 
 
 
 
 
 
 
 
 
Item 8.  Financial Statements and Supplementary Data.
 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
National American University Holdings, Inc.
 
 
 
 
 
 
Page
Consolidated Annual Financial Statements:
 
 
Report of Independent Registered Public Accounting Firm
 
86
Consolidated Balance Sheets as of May 31, 2016 and 2015
 
87
Consolidated Statements of Income and Comprehensive Income for the fiscal years ended May 31, 2016, 2015 and 2014
 
88
Consolidated Statements of Stockholders’ Equity for the fiscal years ended May 31, 2016, 2015 and 2014
 
89
Consolidated Statements of Cash Flows for the fiscal years ended May 31, 2016, 2015 and 2014
 
90
Notes to Annual Consolidated Financial Statements
 
92
Financial Statement Schedules
All schedules are omitted because they are not applicable or not required.
 
 
 
 
 
 
85
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
National American University Holdings, Inc. and subsidiaries
Rapid City, South Dakota
 
We have audited the accompanying consolidated balance sheets of National American University Holdings, Inc. and subsidiaries (the "Company") as of May 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended May 31, 2016. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of National American University Holdings, Inc. and subsidiaries as of May 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
 
/s/ Deloitte & Touche
Minneapolis, MN
August 5, 2016
 
 
 
86
 

NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
AS OF MAY 31, 2016 AND 2015
 
 
 
 
 
 
(In thousands, except share and per share amounts)
 
 
 
 
 
 
 
 
May 31
 
 
May 31,
 
 
 
2016
 
 
2015
 
ASSETS
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
  Cash and cash equivalents
 $21,713 
 $23,300 
  Available for sale investments
  4,117 
  4,102 
  Student receivables — net of allowance of $723 and $1,583 at May 31, 2016
    
    
    and May 31, 2015, respectively
  3,011 
  14,358 
  Other receivables
  375 
  1,195 
  Income taxes receivable
  2,780 
  0 
  Deferred income taxes
  2,621 
  2,335 
  Prepaid and other current assets
  2,078 
  2,151 
           Total current assets
  36,695 
  47,441 
Total property and equipment - net
  31,273 
  36,390 
OTHER ASSETS:
    
    
  Condominium inventory
  621 
  385 
  Land held for future development
  312 
  312 
  Course development — net of accumulated amortization of $3,051 and $2,760 at
    
    
    May 31, 2016 and May 31, 2015, respectively
  817 
  804 
  Other
  998 
  1,212 
           Total other assets
  2,748 
  2,713 
TOTAL
 $70,716 
 $86,544 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
CURRENT LIABILITIES:
    
    
  Current portion of capital lease payable
 $285 
 $244 
  Accounts payable
  2,913 
  3,246 
  Dividends payable
  1,090 
  1,139 
  Income taxes payable
  110 
  1 
  Deferred income
  1,649 
  1,459 
  Accrued and other liabilities
  5,861 
  6,746 
           Total current liabilities
  11,908 
  12,835 
DEFERRED INCOME TAXES
  2,190 
  3,283 
OTHER LONG-TERM LIABILITIES
  4,686 
  6,047 
CAPITAL LEASE PAYABLE, NET OF CURRENT PORTION
  11,567 
  11,853 
COMMITMENTS AND CONTINGENCIES (Note 15)
    
    
STOCKHOLDERS' EQUITY:
    
    
  Common stock, $0.0001 par value (50,000,000 authorized; 28,472,129 issued and
    
    
    24,140,972 outstanding as of May 31, 2016; 28,262,241 issued and 25,191,414
    
    
    outstanding as of May 31, 2015)
  3 
  3 
  Additional paid-in capital
  58,893 
  58,336 
  Retained earnings
  4,012 
  13,751 
  Treasury stock, at cost (4,331,157 shares at May 31, 2016 and 3,070,827
    
    
    shares at May 31, 2015)
  (22,477)
  (19,455)
  Accumulated other comprehensive loss, net of taxes - unrealized loss on available
    
    
   for sale securities
  (2)
  (1)
Total National American University Holdings, Inc. stockholders' equity
  40,429 
  52,634 
Non-controlling interest
  (64)
  (108)
Total stockholders' equity
  40,365 
  52,526 
TOTAL
 $70,716 
 $86,544 
 
    
    
The accompanying notes are an integral part of these consolidated financial statements.
    
    
 
 
87
 
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 
 
FOR THE YEARS ENDED MAY 31, 2016, 2015 AND 2014
 
 
 
 
 
 
 
 
(In thousands, except share and per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
2015
 
 
2014
 
REVENUE:
 
 
 
 
 
 
 
 
 
  Academic revenue
 $88,697 
 $108,360 
 $117,099 
  Auxiliary revenue
  6,306 
  7,920 
  9,076 
  Rental income — apartments
  1,110 
  1,164 
  1,138 
  Condominium sales
  0 
  447 
  440 
 
    
    
    
           Total revenue
  96,113 
  117,891 
  127,753 
 
    
    
    
OPERATING EXPENSES:
    
    
    
  Cost of educational services
  26,093 
  28,551 
  29,478 
  Selling, general and administrative
  72,211 
  73,301 
  85,286 
  Auxiliary expense
  4,667 
  5,629 
  6,236 
  Cost of condominium sales
  0 
  368 
  386 
  Loss (gain) on disposition of property
  735 
  (1,710)
  114 
 
    
    
    
           Total operating expenses
  103,706 
  106,139 
  121,500 
 
    
    
    
OPERATING (LOSS) INCOME
  (7,593)
  11,752 
  6,253 
 
    
    
    
OTHER INCOME (EXPENSE):
    
    
    
  Interest income
  87 
  148 
  142 
  Interest expense
  (870)
  (891)
  (770)
  Other income — net
  178 
  178 
  149 
 
    
    
    
           Total other expense
  (605)
  (565)
  (479)
 
    
    
    
(LOSS) INCOME BEFORE INCOME TAXES
  (8,198)
  11,187 
  5,774 
 
    
    
    
INCOME TAX BENEFIT (EXPENSE)
  2,894 
  (4,433)
  (2,306)
 
    
    
    
NET (LOSS) INCOME
  (5,304)
  6,754 
  3,468 
 
    
    
    
NET (INCOME) LOSS  ATTRIBUTABLE TO
    
    
    
          NON-CONTROLLING INTEREST
  (44)
  (38)
  17 
 
    
    
    
NET (LOSS) INCOME ATTRIBUTABLE TO NATIONAL
    
    
    
          AMERICAN UNIVERSITY HOLDINGS, INC. AND
    
    
    
          SUBSIDIARIES
  (5,348)
  6,716 
  3,485 
 
    
    
    
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX
    
    
    
       Unrealized (losses) gains on investments, net of tax (expense)
    
    
    
  benefit of $1, $(2), and $1 for 2016, 2015 and 2014, respectively
  (1)
  2 
  (10)
 
    
    
    
 
    
    
    
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO
    
    
    
         NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
 $(5,349)
 $6,718 
 $3,475 
 
    
    
    
 
    
    
    
Basic net (loss) earnings per share attributable to National
 $(0.22)
 $0.27 
 $0.14 
          American University Holdings, Inc.
    
    
    
Diluted net (loss) earnings per share attributable to National
 $(0.22)
 $0.27 
 $0.14 
          American University Holdings, Inc.
    
    
    
Basic weighted average shares outstanding
  24,651,521 
  25,160,729 
  25,093,096 
Diluted weighted average shares outstanding
  24,651,521 
  25,165,732 
  25,094,361 
 
    
    
    
The accompanying notes are an integral part of these consolidated financial statements.
    
    
    
 
 
88
 
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FOR THE YEARS ENDED MAY 31, 2016, 2015, AND 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except share and per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity attributable to National American University Holdings, Inc. and Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
other
 
 
 
 
 
Total
 
 
 
Common
 
 
paid-in
 
 
Retained
 
 
Treasury
 
 
comprehensive
 
 
Non-controlling
 
 
stockholders'
 
 
 
stock
 
 
capital
 
 
earnings
 
 
stock
 
 
income (loss)
 
 
interest
 
 
equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance - May 31, 2013
 $3 
 $57,656 
 $12,610 
 $(19,359)
 $7 
 $(129)
 $50,788 
 
    
    
    
    
    
    
    
Purchase of 17,190 shares common
    
    
    
    
    
    
    
   stock for the treasury
  0 
  0 
  0 
  (64)
  0 
  0 
  (64)
Share based compensation expense
  0 
  1,535 
  0 
  0 
  0 
  0 
  1,535 
Dividends declared ($0.045 per share)
  0 
  0 
  (4,522)
  0 
  0 
  0 
  (4,522)
Net income (loss)
  0 
  0 
  3,485 
  0 
  0 
  (17)
  3,468 
Other comprehensive loss, net of tax
  0 
  0 
  0 
  0 
  (10)
  0 
  (10)
Balance - May 31, 2014
 $3 
 $59,191 
 $11,573 
 $(19,423)
 $(3)
 $(146)
 $51,195 
 
    
    
    
    
    
    
    
Purchase of 10,454 shares common
    
    
    
    
    
    
    
   stock for the treasury
  0 
  0 
  0 
  (32)
  0 
  0 
  (32)
Share based compensation expense
  0 
  (855)
  0 
  0 
  0 
  0 
  (855)
Dividends declared ($0.045 per share)
  0 
  0 
  (4,538)
  0 
  0 
  0 
  (4,538)
Net income
  0 
  0 
  6,716 
  0 
  0 
  38 
  6,754 
Other comprehensive income, net of tax
  0 
  0 
  0 
  0 
  2 
  0 
  2 
Balance - May 31, 2015
 $3 
 $58,336 
 $13,751 
 $(19,455)
 $(1)
 $(108)
 $52,526 
 
    
    
    
    
    
    
    
Purchase of 1,260,330 shares
    
    
    
    
    
    
    
   common stock for the treasury
  0 
  0 
  0 
  (3,022)
  0 
  0 
  (3,022)
Share based compensation expense
  0 
  557 
  0 
  0 
  0 
  0 
  557 
Dividends declared ($0.045 per share)
  0 
  0 
  (4,391)
  0 
  0 
  0 
  (4,391)
Net (loss) income
  0 
  0 
  (5,348)
  0 
  0 
  44 
  (5,304)
Other comprehensive loss, net of tax
  0 
  0 
  0 
  0 
  (1)
  0 
  (1)
Balance - May 31, 2016
 $3 
 $58,893 
 $4,012 
 $(22,477)
 $(2)
 $(64)
 $40,365 
 
    
    
    
    
    
    
    
 
The accompanying notes are an integral part of these consolidated financial statements.
 
    
    
    
 
 
89
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
 
 
 
 
FOR THE YEARS ENDED MAY 31, 2016, 2015, AND 2014
 
 
 
 
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
2015
 
 
2014
 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Net (loss) income
 $(5,304)
 $6,754 
 $3,468 
Adjustments to reconcile net (loss) income to net cash flows provided by (used in)
    
    
    
   operating activities:
    
    
    
Depreciation and amortization
  5,596 
  6,127 
  6,356 
Loss (gain) on disposition of property and equipment
  735 
  (1,710)
  114 
Provision for uncollectable tuition
  5,403 
  5,602 
  3,879 
Noncash compensation expense
  557 
  (855)
  1,535 
Deferred income taxes
  (1,379)
  (1,534)
  (1,881)
Changes in assets and liabilities:
    
    
    
Student and other receivables
  6,764 
  (4,332)
  (16,383)
Prepaid and other current assets
  73 
  (53)
  (1,257)
Condominium inventory
  (236)
  367 
  382 
Other assets
  202 
  (19)
  66 
Income taxes receivable/payable
  (2,671)
  (1,157)
  1,280 
Accounts payable
  (372)
  230 
  (1,839)
Deferred income
  190 
  149 
  146 
Accrued and other liabilities
  (891)
  (337)
  92 
Other long-term liabilities
  (1,361)
  (384)
  (48)
 
    
    
    
Net cash flows provided by (used in) operating activities
  7,306 
  8,848 
  (4,090)
 
    
    
    
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
    
Purchases of available for sale investments
  (3,897)
  (50,141)
  (36,980)
Proceeds from sale of available for sale investments
  3,881 
  61,478 
  42,277 
Purchases of property and equipment
  (959)
  (1,311)
  (4,532)
Proceeds from sale of property and equipment
  75 
  3,628 
  503 
Course development
  (304)
  (143)
  (247)
Payment of deposit on property and equipment
  0 
  0 
  (200)
Payments received on contract for deed
  6 
  160 
  296 
Payments received on note receivable
  0 
  1,390 
  641 
Other
  11 
  8 
  (31)
 
    
    
    
Net cash flows (used in) provided by investing activities
  (1,187)
  15,069 
  1,727 
 
    
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
    
Repayments of capital lease payable
  (244)
  (206)
  (157)
Purchase of treasury stock
  (3,022)
  (32)
  (64)
Dividends paid
  (4,440)
  (4,533)
  (4,392)
 
    
    
    
Net cash flows used in financing activities
  (7,706)
  (4,771)
  (4,613)
 
    
    
    
 
    
    
    
 
    
    
 
(Continued)
 
The accompanying notes are an integral part of these consolidated financial statements.
    
    
    
 
 
90
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
 
 
 
 
FOR THE YEARS ENDED MAY 31, 2016, 2015, AND 2014
 
 
 
 
 
 
 
 
 
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
2015
 
 
2014
 
 
 
 
 
 
 
 
 
 
 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 $(1,587)
 $19,146 
 $(6,976)
 
    
    
    
CASH AND CASH EQUIVALENTS -- Beginning of year
  23,300 
  4,154 
  11,130 
 
    
    
    
CASH AND CASH EQUIVALENTS -- End of year
 $21,713 
 $23,300 
 $4,154 
 
    
    
    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND
    
    
    
NON-CASH INFORMATION:
    
    
    
Cash paid for income taxes, net of refunds
 $1,156 
 $7,124 
 $2,907 
Cash paid for interest
 $871 
 $885 
 $787 
Tenant improvements on capital lease financed through note receivable
 $0 
 $0 
 $2,000 
Property and equipment purchases included in accounts payable
 $63 
 $24 
 $419 
Dividends declared and unpaid at May 31, 2016, 2015, and 2014
 $1,090 
 $1,139 
 $1,134 
 
    
    
    
 
    
    
 
(Concluded)
 
The accompanying notes are an integral part of these consolidated financial statements.
    
    
    
 
 
91
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED MAY 31, 2016, 2015 AND 2014
(In thousands, except share and per share amounts)
 
1.  
STATEMENT PRESENTATION AND BASIS OF CONSOLIDATION
 
The accompanying financial statements are presented on a consolidated basis. The accompanying financial statements include the accounts of National American University Holdings, Inc. (the “Company”), its subsidiary, Dlorah, Inc. (“Dlorah”), and its divisions, National American University (“NAU” or the “University”), Fairway Hills, the Fairway Hills Park and Recreational Association, the Park West Owners’ Association, the Vista Park Owners’ Association, and the Company’s interest in Fairway Hills Section III Partnership (the “Partnership”).  The Partnership is 50% owned by Dlorah and 50% owned by individual family members, most of whom are either direct or indirect stockholders of the Company.
 
The Partnership is deemed to be a variable interest entity (“VIE”) under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810-10, Consolidation. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the purpose and design of the VIE, the risks that the VIE was designed to create and pass along to other entities, the activities of the VIE that most significantly impact the VIE’s economic performance and which entity could direct those activities.  The Company assesses it’s VIE determination with respect to an entity on an ongoing basis and has not identified any additional VIEs in which it holds a significant interest.
 
The Company has determined that the Partnership qualifies as a VIE and that the Company is the primary beneficiary of the Partnership.  Accordingly, the Company consolidated assets, liabilities, and net income of the Partnership within its consolidated balance sheets and statements of operations and comprehensive income and appropriately presented the balances as non-controlling interest within the consolidated balance sheets.  As of May 31, 2016 and 2015, the consolidated balance sheets include Partnership assets of $611 and $685, respectively, and Partnership liabilities of $91 and $94, respectively.  The consolidated statements of operations and comprehensive income include Partnership net income (loss) of $88, $75, and $(34), for the years ended May 31, 2016, 2015, and 2014, respectively.
 
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Throughout the notes to consolidated financial statements, amounts in tables are in thousands of dollars, except for per share data as otherwise designated.  The Company’s fiscal year end is May 31.  These financial statements include consideration of subsequent events through issuance.  All intercompany transactions and balances have been eliminated in consolidation.
 
Unless the context otherwise requires, the terms “we”, “us”, “our” and the “Company” used throughout this document refer to National American University Holdings, Inc. and its wholly owned subsidiary, Dlorah, Inc., which owns and operates National American University, sometimes referred to as “NAU” or the “University”.
 
 
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Estimates — The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. On an ongoing basis, the Company evaluates the estimates and assumptions, including those related to bad debts, income taxes and certain accruals. Actual results could differ from those estimates.
 
2.  
NATURE OF OPERATIONS
 
National American University Holdings, Inc., formerly known as Camden Learning Corporation, was incorporated in the State of Delaware on April 10, 2007.  On November 23, 2009, Dlorah, Inc., a South Dakota corporation (“Dlorah”), became a wholly-owned subsidiary of the Company pursuant to an Agreement and Plan of Reorganization between the Company and Dlorah.
 
The Company’s common stock is listed as NAUH on the NASDAQ Global Market.  The Company, through Dlorah, owns and operates National American University. NAU is a regionally accredited, proprietary, multi-campus institution of higher learning, offering associate, bachelors, masters and doctoral degree programs in allied health, legal studies, education, business, accounting and information technology. Courses are offered through educational sites and online.  During the fiscal year ended May 31, 2016, operations include educational sites located in Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, South Dakota, and Texas; distance learning service center in Texas; and distance learning operations and central administration offices in Rapid City, South Dakota. A substantial portion of NAU’s academic income is dependent upon federal student financial aid programs, employer tuition assistance, and contracts to provide online course development, hosting and technical assistance to other educational institutions.  To maintain eligibility for financial aid programs, NAU must comply with U.S. Department of Education requirements, including the maintenance of certain financial ratios.
 
The Company, through Dlorah’s Fairway Hills real estate division, also manages apartment units and develops and sells multi-family residential real estate in Rapid City, South Dakota.
 
Approximately 92% of the Company’s total revenues for each of the years ended May 31, 2016, 2015, and 2014, respectively, were derived from NAU’s academic revenue.
 
3.  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cash and Cash Equivalents — The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash is held in bank accounts that periodically exceed insured limits; however, no losses have occurred, and the Company feels the risk of loss is not significant.
 
Investments — The Company’s investments consist of certificates of deposit. These securities are classified as “available-for-sale.” Available-for-sale securities represent securities carried at fair value in the consolidated balance sheets. Certain of the Company’s certificates of deposit have maturity dates greater than one year.  However, these certificates of deposit can be accessed at any time and are convertible to cash on demand.  As such, the Company has classified these amounts as current assets in the consolidated balance sheets.  Unrealized gains and losses deemed to be temporary are reported net of taxes and included in other comprehensive income within stockholders’ equity. Realized gains and losses and declines in value deemed to be other-than-temporary on available-for-sale securities are included in other income – net in the consolidated statements of operations. Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available. The cost basis for realized gains and losses on available-for-sale securities is determined on a specific identification basis.  During the year ended May 31, 2015, all U.S. Treasury debt securities were liquidated. Proceeds from the sale or call of investments totaled $3,881, $61,478 and $42,277 for the years ended May 31, 2016, 2015 and 2014, respectively.
 
 
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The Company’s investments were comprised of the following at May 31:
 
 
 
2016
 
 
2015
 
 
 
Amortized Cost
 
 
Gross Unrealized Holding Gains
 
 
Gross Unrealized Holding Losses
 
 
Fair Value
 
 
Amortized Cost
 
 
Gross Unrealized Holding Gains
 
 
Gross Unrealized Holding Losses
 
 
Fair Value
 
Certificate of Deposits
 $4,119 
 $- 
 $(2 
  ) 
 $4,117 
 $4,102 
 $- 
 $- 
 $4,102 
 
As of May 31, 2016, the Company’s investments all mature in one to three years.
 
Declines in the fair value of individual securities classified as available-for-sale below their amortized cost that are determined to be other than temporary result in write-downs of the individual securities to their fair value, with the resulting write-downs included in current earnings as realized losses. Unrealized losses that may occur are generally due to changes in interest rates and, as such, are considered by the Company to be temporary. Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investments in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The Company had no impairments during the year ended May 31, 2016.
 
Student Receivables — Student receivables are recorded at estimated net realizable value and are revised periodically based on estimated future collections. Interest and service charges are applied to all past due student receivables; however, collections are first applied to principal balances until such time that the entire principal balance has been received. Student accounts are charged off only when reasonable collection means are exhausted. Bad debt expense is included in selling, general and administrative expenses on the consolidated statements of operations.
 
 
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Other Receivables — Other Receivables consist primarily of the current portion of institutional receivables, which are amounts due from students and are stated at net realizable value. Long-term portion of these institutional receivables are included in other assets.
 
Property and Equipment — Property and equipment are stated at cost. Renewals and improvements exceeding five hundred dollars are capitalized, while repairs and maintenance are expensed when incurred. Upon the retirement, sale or disposition of assets, costs and related accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in loss (gain) in disposition of property. For financial statement purposes, depreciation includes the depreciation of the capital lease asset in the amount of $530 for each of the fiscal years 2016, 2015 and 2014.  Total depreciation and amortization expense in operating expenses was $5,596, $6,127, and $6,356 for the fiscal years 2016, 2015 and 2014, respectively.  The amortization portion of these amounts relates to capitalized course development costs and was $291, $339, and $354 for the fiscal years 2016, 2015 and 2014, respectively. Depreciation is computed using the straight-line method over the following estimated useful lives:
 
 
 
Years
 
Buildings and building improvements
 
19–40
 
Land improvements
 
10–20
 
Furniture, vehicles, and equipment
 
5–15
 
 
For tax purposes, depreciation is computed using the straight-line and accelerated methods.
 
Property and equipment — net consists of the following as of May 31 (in thousands):
 
 
 
2016
 
 
2015
 
Land
 $119 
 $119 
Land improvements
  23 
  23 
Buildings and building improvements
  39,759 
  40,718 
Furniture, vehicles, and equipment
  27,904 
  28,171 
Total gross property and equipment
  67,805 
  69,031 
Less accumulated depreciation
  (36,532)
  (32,641)
Total net property and equipment
 $31,273 
 $36,390 
 
Condominium Inventory — Condominium inventory is stated at cost (including capitalized interest). Condominium construction costs are accumulated on a specific identification basis. Under the specific identification basis, cost of revenues includes all applicable land acquisition, land development and specific construction costs (including direct and indirect costs) of each condominium paid to third parties. Land acquisition, land development and condominium construction costs do not include employee related benefit costs. The specific construction and allocated land costs of each condominium, including models, are included in direct construction. Allocated land acquisition and development costs are estimated based on the total costs expected in a project. Direct construction also includes amounts paid through the closing date of the condominium for construction materials and contractor costs. Condominium inventory is recorded as a long term asset due to the normal operating cycle being greater than one year.
 
 
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Capitalized Course Development Costs — The University internally develops curriculum and electronic instructional materials for certain courses. The curriculum is primarily developed by employees and contractors. The curriculum is integral to the learning system. Customers do not acquire the curriculum or future rights to it.
 
The Company capitalizes course development costs. Costs that qualify for capitalization are external direct costs, payroll, and payroll-related costs. Costs related to general and administrative functions are not capitalizable and are expensed as incurred. Capitalization ends at such time that the course and/or material is available for general use by faculty and students. After becoming available for general use, the costs are amortized on a course-by-course basis over a period of three to five years. After the amortization period commences, the cost of maintenance and support is expensed as incurred, because it does not provide future benefit. If it is determined that the curriculum will not be used, the capitalized curriculum costs are written off and expensed in the period of this determination.
 
Impairment of Long-Lived Assets — Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows, or internal and external appraisals, as applicable. Assets to be held for sale are carried at the lower of carrying value or fair value, less cost to sell.
 
During November 2015, the Company announced the closure of the Denver campus, effective February 29, 2016.  In January 2016, the Company announced the closure of two additional campuses: Weldon Spring, Missouri and Tigard, Oregon, both effective March 1, 2016.  Due to the closure of these three campuses, undepreciated leasehold improvements and other fixed assets of $85, $328 and $394, respectively, were fully written off during the year ended May 31, 2016.  The write-down is included in loss on disposition of property, within the NAU segment, in the consolidated financial statements. The Company had no impairments in 2015 or 2014.
 
Deferred Income Taxes — Deferred income taxes are provided using the asset and liability method whereby deferred tax assets and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized.
 
Non-Controlling Interest — The non-controlling interest presented on the consolidated statements of operations and comprehensive income represents the individual owners’ share of the Partnership’s income or loss. The consolidated balance sheet amount “Non-controlling interest” represents the individual owners’ share of the Partnership obligations in excess of Partnership assets. The Company has determined the non-controlling owners have a legal obligation to fund such deficits and believes it is fully collectable at May 31, 2016.
 
 
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Leases — Leases in which the risk of ownership is retained by the lessor are classified as operating leases.  Leases which substantially transfer all of the benefits and risks inherent in ownership to the lessee are classified as capital leases.  Assets acquired under capital leases are depreciated on the same basis as owned property and equipment or the related lease term, whichever is shorter.  Leasehold improvements are depreciated over the depreciable lives of the corresponding fixed asset or the related lease term, whichever is shorter.
 
Academic Revenue Recognition — Academic revenue represents tuition revenue and the revenue generated through NAU’s teaching relationships with other non-related party institutions. Tuition revenue and affiliate revenue is recorded ratably over the length of respective courses. Academic revenue also includes certain fees and charges assessed at the start of each term. The portion of tuition and registration fee payments received but not earned is recorded as deferred income and reflected as a current liability on the consolidated balance sheets, as such amount represents revenue that the Company expects to earn within the next year. Academic revenue is reported net of adjustments for refunds and scholarships. If a student withdraws prior to the completion of the academic term, the respective portion of tuition and registration fees that the Company already received and is not entitled to are refunded back to the students and the Department of Education. Refunds and scholarships are recorded during the respective terms. For students that have withdrawn from all classes during an academic term, the University estimates the expected receivable balance that is due from such students and records a provision to reduce academic revenue for that amount calculated based on historical collection trends and adjusted for known current factors. The amount is then recognized as academic revenue at the time the receivable is collected (e.g. cash basis).
 
Auxiliary Revenue — Auxiliary revenue represents revenues from the University’s bookstore operations. Revenue is recognized as items are sold and is recorded net of any applicable sales tax. The Company does not have book inventory because the book operation is outsourced to a third party vendor. Since the Company has the discrete ability to set book prices and maintains inventory and credit risk, we utilize gross reporting of revenue and expenses. Books sales revenue is recorded as auxiliary revenue and the related costs are recorded as auxiliary expense.
 
Rental Income — Rental income is primarily obtained from tenants of three apartment complexes under short-term operating leases. Tenants are required to pay rent on a monthly basis. Rent not paid by the end of the month is considered past due, while significant amounts paid in advance are included in deferred income on the consolidated balance sheets. If a tenant becomes 60 days past due, eviction procedures are started.
 
Rental Expense — The University accounts for rent expense under its long-term operating leases using the straight-line method. Certain of the University’s operating leases contain rent escalator provisions. Accordingly, a $5,432 and $6,047, deferred rent and tenant improvement liability at May 31, 2016 and 2015, respectively, is recorded in accrued and other liabilities and other long-term liabilities on the consolidated balance sheets.
 
Advertising — The University follows the policy of expensing the cost of advertising as incurred. Advertising costs of $10,734, $9,807 and $12,077 for 2016, 2015 and 2014, respectively, are included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive income.
 
 
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4.  
RECENTLY ADOPTED AND NEW ACCOUNTING PRONOUNCEMENTS
 
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, provides more useful information to users of the consolidated financial statements through improved disclosure requirements, and simplifies the preparation of the consolidated financial statements by reducing the number of requirements to which an entity must refer.   The ASU outlines five steps to achieve proper revenue recognition: identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the entity satisfies the performance obligation.  This standard is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  This standard will be effective for the Company’s fiscal year 2019 in the first quarter ending August 31, 2018.  The Company is currently evaluating and has not yet determined the impact implementation will have on the Company’s consolidated financial statements.
 
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, that will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances.  This standard will be effective for the Company’s fiscal year ending May 31, 2017.  The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.
 
In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis, which requires reevaluation of all legal entities under a revised consolidation model.  The standard will specifically affect limited partnerships and similar legal entities, the evaluation of fees paid to a decision maker or a service provider as a variable interest, the effect of fee arrangements and related parties on the primary beneficiary determination, and certain investment funds.  This standard will be effective for the Company’s fiscal year 2017 during the first quarter ending August 31, 2016.  The Company has evaluated the impact implementation will have on the Company’s consolidated financial statements, and does not expect it to be significant.
 
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which no longer requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position.  Instead, deferred tax liabilities and assets will be classified as noncurrent.  For public business entities, this update will be effective for financial statements issued for annual periods beginning after December 15, 2016, and for interim periods within those annual periods.  The Company has elected early adoption and will implement the accounting update effective for the Company’s fiscal year 2017 in the first quarter ending August 31, 2016.  This accounting update will require reclassification of all current deferred tax liabilities and assets to noncurrent in the consolidated balance sheets, which will have an immaterial impact on the Company’s consolidated financial statements.
 
 
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In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities which address written aspects of recognition, measurement, presentation and disclosure of financial instruments. This standard will be effective for the Company’s fiscal year ending 2019 in the first quarter ending August 31, 2018. The Company is currently evaluating the impact that the standard will have on the consolidated financial statements.
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. If the available accounting election is made, leases with a term of twelve months or less can be accounted for similar to existing guidance for operating leases. The standard will be effective for the Company’s fiscal year ending 2020 in the first quarter ending August 31, 2019. The Company is currently evaluating and has not yet determined the impact implementation will have on the Company’s consolidated financial statements.
 
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to simplify various aspects of share-based accounting.  Specifically, the standard (1) requires all excess tax benefits and deficiencies to be recognized as income tax expense/benefit in the income statement as discrete items in the reporting period in which they occur, with no charges to additional paid-in capital; (2) requires excess tax benefits to be classified as operating cash flows; (3) allows an accounting election to account for forfeitures when they occur, instead of as they are expected to vest; (4) allows awards settled in cash to qualify for equity classification if withholding is up to the maximum statutory tax rates in the applicable jurisdictions; (5) clarifies that cash paid by an employer to taxing authorities when directly withholding shares for tax-withholding purposes should be classified as a financing activity in the cash flow statement.  This standard will be effective for the Company’s fiscal year ending 2018, in the first quarter ending August 31, 2017.  The Company is currently evaluating and has not yet determined the impact implementation will have on the consolidated financial statements.
 
5.  
DEPARTMENT OF EDUCATION REQUIREMENTS
 
The University extends unsecured credit to a portion of the students who are enrolled throughout the campuses for tuition and other educational costs. A substantial portion of credit extended to students is repaid through the students’ participation in various federal financial aid programs authorized by Title IV Higher Education Act of 1965, as amended (the “Higher Education Act”). The University is required under 34 CFR 600.5(d) to maintain at least 10% of its revenues (calculated on a cash basis) from non-Title IV program funds, commonly referred to as the “90/10 Rule”. An institution is subject to loss of eligibility to participate in Title IV programs if it fails to meet the 10% threshold for two consecutive fiscal years. If the Company were to violate the 90/10 Rule, it would become ineligible to participate in Title IV programs as of the first day of the fiscal year following the second consecutive fiscal year in which it exceeded the 90% Title IV program funds threshold and would be unable to regain eligibility for two fiscal years thereafter. The University believes they are in compliance with this requirement for the years ended May 31, 2016, 2015 and 2014, as shown in the underlying calculation:
 
 
99
 
 
 
 
2016
 
 
 
2015
 
 
 
2014
 
 
Title IV HEA
 
 
 
 
 
 
 
 
 
 
 
 
  funds received
 $90,238 
 
 $106,305 
 
 $107,333 
 
Academic revenue
 $103,904 
    =86.85%
 $119,200 
   =89.18%
 $120,169 
   =89.32%
  (cash basis)
    
 
    
 
    
 
 
To participate in Title IV Programs, a school must be authorized to offer its programs of instruction by relevant state education agencies, be accredited by an accrediting commission recognized by the U.S. Department of Education (the “Department of Education”), and be certified as an eligible institution by the Department of Education. For this reason, educational institutions are subject to extensive regulatory requirements imposed by all of these entities. After an educational institution receives the required certifications by the appropriate entities, the educational institution must demonstrate compliance with the Department of Education’s regulations pertaining to Title IV Programs on an ongoing basis. Included in these regulations is the requirement that the Company must satisfy specific standards of financial responsibility.
 
The Department of Education evaluates educational institutions for compliance with these standards each year, based upon an educational institution’s annual audited financial statements, as well as following any changes in ownership. Under regulations which took effect July 1, 1998, the Department of Education calculates an educational institution’s composite score for financial responsibility based on its (i) equity ratio, which measures the educational institution’s capital resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures the educational institution’s ability to support current operations from expendable resources; and (iii) net income ratio, which measures the educational institution’s ability to operate at a profit. This composite score can range from -1 to +3.
 
An educational institution that does not meet the Department of Education’s minimum composite score requirements of 1.5 may establish its financial responsibility by posting a letter of credit or complying with additional monitoring procedures as defined by the Department of Education. Based on the consolidated financial statements for the 2016, 2015 and 2014 fiscal years, the University’s calculations result in a composite score of 1.8, 3.0, and 2.3, respectively. Therefore the University currently meets the minimum composite score requirement as most recently required by the Department of Education.
 
Finally, to remain eligible to participate in Title IV programs, an educational institution’s student loan cohort default rates must remain below certain specified levels. An educational institution loses eligibility to participate in Title IV programs if its cohort default rate equals or exceeds 40% for any given year or 30% for three consecutive years. Our official cohort default rates for federal fiscal years 2012 and 2011 are 20.8% and 21.4%, respectively.  The draft cohort rate for federal fiscal year 2013 is 23.7%. 
 
 
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The University’s current certification to participate in the Title IV programs, which is not provisional, was effective in June 2013 and extends through March 31, 2019.
 
6.  
CONDOMINIUM PROJECT
 
The Company built 24 condominium units to be sold to the general public called Vista Park. These condominium units are accounted for within condominium inventory within the consolidated balance sheets, and the sales of the condominium units are recorded within condominium sales within the consolidated statements of income and comprehensive income. No units were sold in the year ended May 31, 2016; a total of twelve units were sold from the inception of the project through year ended May 31, 2016.
 
7.  
CONTRACT FOR DEED
 
The Company signed a contract for deed on its former Rapid City campus on March 28, 2013 for $4,000 (see Note 9 for capital lease on new campus).  The sale did not meet the accounting requirements to be consummated and was not recorded at this time.  On July 11, 2014, the contract for deed was settled.  The Company collected the outstanding proceeds, which included $3,230 of principal and $85 of interest that was offset by $59 of lease-back payments and maintenance expenses related to the long-term operating lease.  All remaining liens on the property were released and deemed sold, resulting in a gain of $1,743.
 
 
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8.  
LINES OF CREDIT
 
The University maintained a $3,000 unsecured revolving line of credit with Great Western Bank that was subject to annual renewals and matured on May 31, 2016.  The Company chose not to renew the line for the next fiscal year due to adequate cash available.  Advances under the line bore interest at prime (3.50% at May 31, 2016).  No advances were made on this line of credit in 2016, 2015 or 2014.
 
9.  
LEASES
 
The University leases building facilities for branch operations and equipment for classroom operations under operating leases with various terms and conditions. Total rent expense for the years ended May 31, 2016, 2015 and 2014, was $5,737, $6,037, and $6,025, respectively, which is included in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive income.
 
Future minimum lease payments on non-cancelable operating leases for the five years ending May 31 are as follows (in thousands)-
 
2017
 
$
6,028
 
2018
 
 
6,039
 
2019
 
 
5,769
 
2020
 
 
5,213
 
2021
 
 
4,139
 
Thereafter
 
 
9,376
 
 
Future minimum lease payments include the remaining lease payments for the Tigard and Weldon Spring campuses. The associated lease payments were not accelerated because we are still receiving economic benefit from the leases.  The Denver campus lease terminated on February 29, 2016; therefore, is not included in the payments listed above.
 
As part of ongoing operations, the Company entered into a capital lease arrangement for additional space that houses the corporate headquarters, distance learning operations, and the new Rapid City campus operations (see Note 7).  During the year ended May 31, 2014, the Company increased its capital lease obligation by $2,000 to account for tenant improvements.  The Company initially paid for the improvements and reached an agreement with the lessor to be reimbursed for the amount under the terms of a $2,000 note receivable.  The note receivable required monthly payments of $14 at 6% that directly offset the monthly payments to the lessor under the capital lease obligation.  In June 2014, the landlord of the property paid the $1,373 remaining balance of the note receivable.
 
The Company is obligated to make future payments under the capital lease obligation, which totaled $20.3 million, had a net present value of $11.9 million as of May 31, 2016, and was recognized as current and non-current capital lease payable of $285 and $11,567 at May 31, 2016 and $244 and $11,853 at May 31, 2015, respectively.  The asset totals $10,600, and accumulated depreciation totals $2,429 and $1,899 at May 31, 2016 and 2015, respectively.  The net amount is included in net property and equipment in the consolidated balance sheets.
 
 
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The following is a schedule of future minimum commitments under the revised capital lease obligation as of May 31, 2016:
 
2017
 $1,137 
2018
  1,159 
2019
  1,183 
2020
  1,207 
2021
  1,231 
Thereafter
  14,370 
Total future minimum lease obligation
 $20,287 
Less: Imputed interest on capital leases
  (8,435)
Net present value of lease obligations
 $11,852 
 
10.  
STOCKHOLDERS’ EQUITY
 
The authorized capital stock for the Company is 51,100,000 shares, consisting of (i) 50,000,000 shares of common stock, par value $0.0001 and (ii) 1,000,000 shares of preferred stock, par value $0.0001, and (iii) 100,000 shares of class A common stock, par value $0.0001.  Of the authorized shares, 24,140,972 and 25,191,414 shares of common stock were outstanding as of May 31, 2016 and 2015, respectively.  No shares of preferred stock or Class A common stock were outstanding at May 31, 2016 and 2015.
 
Stock Repurchase Plan
On August 6, 2015, the Company’s Board of Directors authorized the repurchase of up to 350,000 shares, for aggregate consideration not to exceed $1.25 million, of the Company’s outstanding common stock in both open market and privately negotiated transactions. The plan is authorized for a period of one year from August 10, 2015.  The timing and actual number of shares purchased depends on a variety of factors such as price, corporate and regulatory requirements, and other prevailing market conditions. 
 
During the year ended May 31, 2016, the Company repurchased 353,581 shares for $868 under this authorization.  In addition, the Company repurchased 853,073 shares of its outstanding common stock for $2,039 from a single unrelated shareholder.  This repurchase was approved by the Company’s Board of Directors and was separate from the August 6, 2015 repurchase authorization.
 
On February 12, 2016, the Company announced that its Board of Directors authorized the Company to repurchase up to $500 worth of shares of its common stock in open market or privately negotiated transactions, at a price of $1.75 or less per share, for aggregate consideration not to exceed $500, to be implemented during a period of one year from the date the stock repurchase plan is announced to the public.   During the year ended May 31, 2016, the Company repurchased 30,440 shares for $50 under this authorization.
 
During the years ended May 31, 2016 and 2015, respectively, $65 and $32 of additions to treasury stock resulted from the settlement of stock-based compensation.
 
 
103
 
 
Stock-Based Compensation
 
In December 2009, the Company adopted the 2009 Stock Option and Compensation Plan (the “Plan”) pursuant to which the Company may grant restricted stock awards, restricted stock units and stock options to aid in recruiting and retaining employees, officers, directors and other consultants. Restricted stock awards accrue dividends that are paid when the shares vest.  Restricted stock unit awards do not accrue dividends prior to vesting.  Grants are issued at prices determined by the compensation committee, generally equal to the closing price of the stock on the date of the grant, vest over various terms (generally three years), and expire ten years from the date of the grant.  The Plan allows vesting based upon performance criteria.  Certain option and share awards provide for accelerated vesting if there is a change in control of the Company (as defined in the Plan).  The fair value of stock options granted is calculated using the Black-Scholes option pricing model.  Share options issued under the Plan may be incentive stock options or nonqualified stock options.  At May 31, 2016, all stock options issued have been nonqualified stock options.  A total of 1,300,000 shares were authorized by the Plan.  Shares forfeited or canceled are eligible for reissuance under the Plan.  At May 31, 2016, 431,397 shares of common stock remain available for issuance under the Plan.
 
In October 2013, the Company’s Board of Directors adopted the 2013 Restricted Stock Unit Plan (the “2013 Plan”) authorizing the issuance of up to 750,000 shares of the Company’s stock to participants in the 2013 Plan. The Company may grant restricted stock awards or restricted stock units to aid in recruiting and retaining employees, officers, directors and other consultants.  Restricted stock awards accrue dividends that are paid when the shares vest.  Restricted stock unit awards do not accrue dividends prior to vesting.  Restricted stock grants are issued at prices determined by the compensation committee, generally equal to the closing price of the stock on the date of the grant and vest over various terms.  Shares forfeited or canceled are eligible for reissuance under the Plan. At May 31, 2016, 750,000 shares of common stock remain available for issuance under the 2013 Plan.
 
Restricted stock
 
The fair value of restricted stock awards was calculated using the Company’s stock price as of the associated grant date, and the expense is accrued ratably over the vesting period of the award.
 
During the year ended May 31, 2015, the Company awarded 42,155 restricted stock awards with time based vesting at a grant date fair value of $3.11 per share to members of the board of directors. These shares vested on October 20, 2015.  During the year ended May 31, 2015, 580,000 RSUs granted June 1, 2013 under the 2013 Plan were canceled and the related compensation expense previously recorded of $1,170 was reversed as the performance criteria was not attained.
 
During the quarter ended November 30, 2015, the Company issued 187,500 restricted stock units (“RSUs”) with performance based vesting under the 2013 Plan.  The number of shares to be earned was determined by the Company’s profitability and other operating metrics during the year ended May 31, 2016.  The grant date fair value of the RSUs was $3.06 per share.  No expense was recorded as targeted profitability and operating metrics were not attained and all shares were canceled on May 31, 2016.
 
104
 
 
During the year ended May 31, 2016, the Company awarded 40,485 restricted stock awards with time based vesting at a grant date fair value of $2.47 per share to members of the board of directors. Shares vest one year from the grant date and require board service for the entire year.
 
Compensation expense associated with restricted stock awards, totaled $116 for the year ended May 31, 2016.  For the year ended May 31, 2015 compensation expense for restricted stock awards totaled $122, and a reversal of $1,170 associated with the performance based restricted stock units canceled was recorded.  For the year ended May 31, 2014, compensation totaled $82 for restricted stock awards and $1,170 for performance based restricted stock units.  At May 31, 2016, unamortized compensation cost of restricted stock awards totaled $35.  The unamortized cost is expected to be recognized over a weighted-average period of 0.4 years as of May 31, 2016.
 
A summary of restricted share awards activity as of May 31, 2016 and 2015, and the changes during the years then ended is presented below:
 
Restricted Shares
 
Shares
 
 
Weighted Average Grant Date Fair Value
 
Non-vested shares at May 31, 2014
  608,170 
 $4.01 
Granted
  42,155 
  3.11 
Vested
  (28,170)
  3.55 
Forfeited
  (580,000)
  4.03 
Non-vested shares at May 31, 2015
  42,155 
 $3.11 
Granted
  40,485 
  2.47 
Vested
  (42,155)
  3.11 
Forfeited
  0 
  0 
Non-vested shares at May 31, 2016
  40,485 
 $2.47 
 
Unrestricted stock
 
Unrestricted stock is issued to certain employees in settlement of a portion of their salaries and bonuses.  Compensation expense in the consolidated statements of operations and comprehensive income associated with these unrestricted stock issuances totaled $320, $166 and $261, respectively, for the years ended May 31, 2016, 2015, and 2014.
 
Stock options
 
The Company accounts for stock option-based compensation by estimating the fair value of options granted using a Black-Scholes option valuation model. The Company recognizes the expense for grants of stock options on a straight-line basis in the consolidated statements of operations and comprehensive income as selling, general and administrative expense based on their fair value over the requisite service period.
 
For stock options issued during the years ended May 31, 2016 and 2015, the following assumptions were used to determine fair value:
 
 
105
 
 
Assumptions used:
 
2016
 
 
2015
 
Expected term (in years)
  5.75 
  5.50 
Expected volatility
  50.40%
  51.40%
Weighted average risk free interest rate
  1.54%
  1.52%
Weighted average risk free interest rate range
  1.54-1.54%
  1.52-1.52%
Weighted average expected dividend
  5.92 
  5.79%
Weighted average expected dividend range
  5.92-5.92%
  5.79-5.79%
Weighted average fair value
 $0.84 
 $0.88 
 
Expected volatilities are based on historic volatilities from the traded shares of NAUH.  The expected term of options granted is the safe harbor period. The risk-free interest rate for periods matching the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend is based on the historic dividend of the Company.
 
A summary of option activity under the Plan as of May 31, 2016 and 2015, and changes during the years then ended is presented below:
 
 
Stock Options
 
Shares
 
 
Weighted average exercise price
 
 
Weighted average remaining
contractual life
(in years)
 
 
Aggregate
intrinsic
value
 
Outstanding at May 31, 2014
  75,750 
 $7.17 
  7.6 
 $0 
Granted
  12,500 
  3.11 
    
    
Exercised
  0 
  0 
    
    
Forfeited or canceled
  (9,500)
  8.70 
    
    
Outstanding at May 31, 2015
  78,750 
 $6.34 
  7.1 
 $0 
Exercisable at May 31, 2015
  66,250 
 $6.85 
  6.8 
 $0 
 
Outstanding at May 31, 2015
  78,750 
 $6.34 
  7.1 
 $0 
Granted
  148,475 
  3.06 
    
    
Exercised
  0 
  0 
    
    
Forfeited or canceled
  (34,875)
  4.67 
    
    
Outstanding at May 31, 2016
  192,350 
 $4.11 
  8.4 
 $0 
Exercisable at May 31, 2016
  192,350 
 $4.11 
  8.4 
 $0 
 
The Company recorded compensation expense for stock options of $121, $27 and $22, for the years ended May 31, 2016, 2015 and 2014, respectively, in the consolidated statements of operations.  As of May 31, 2016, there was no unrecognized compensation cost related to unvested stock option based compensation arrangements granted under the Plan.
 
The Company plans to issue new shares as settlement of options exercised. There were no options exercised during the years ended May 31, 2016 or 2015.
 
Dividends
The following table presents details of the Company’s fiscal 2016 and 2015 dividend payments:
 
 
106
 
 
Date declared
Record date
Payment date
 
Per share
 
April 7, 2014
June 30, 2014
July 11, 2014
 $0.0450 
August 11, 2014
September 30, 2014
October 10, 2014
 $0.0450 
October 6, 2014
December 31, 2014
January 16, 2015
 $0.0450 
January 24, 2015
March 31, 2015
April 17, 2015
 $0.0450 
April 13, 2015
June 30, 2015
July 10, 2015
 $0.0450 
August 10, 2015
September 30, 2015
October 9, 2015
 $0.0450 
October 5, 2015
December 31, 2015
January 15, 2016
 $0.0450 
January 23, 2016
March 31, 2016
April 8, 2016
 $0.0450 
April 4, 2016
June 30, 2016
July 8, 2016
 $0.0450 
 
11.  
EMPLOYEE COMPENSATION PLANS
 
Employee Benefit Plan Payable — The Company sponsors a 401(k) plan for its University employees, which provides for a discretionary match, net of forfeitures, of up to 5%. The University uses certain consistently applied operating ratios to determine contributions. The University’s matching contributions paid were $514, $0, and $735 during the years ended May 31, 2016, 2015 and 2014, respectively. At May 31, 2016 and 2015, $49 and $708 was accrued for the University’s match, respectively. Of the $708 accrual at May 31, 2015, $194 was reversed in the year ending May 31, 2016 due to a change in estimate.
 
Compensation Plans — The Company has entered into employment agreements, as amended, with Dr. Ronald Shape, Chief Executive Officer and Dr. Jerry Gallentine, President, that require, among other things, an annual incentive payment as defined in the agreements. The incentive payments are paid in installments each year, are recorded in selling, general and administrative expenses and accrued in other liabilities in the consolidated financial statements, and total $0, $390 and $197 for 2016, 2015 and 2014, respectively.  In addition, as part of the Chief Executive Officer compensation plan, $100 annually will be paid in equal monthly installments converted to the Company’s common stock shares based on the closing price on the last day of the month.
 
In addition, the Company has an approved Senior Executive Level Officer Compensation Plan and a Named Executive Officer Compensation Plan.  Each compensation plan has a base salary component, quarterly achievement award component and an annual achievement award component as defined in the agreements.
 
 
107
 
 
12.  
SELF-INSURED HEALTH INSURANCE
 
The Company maintains a self-insured health insurance plan for employees.  Under this plan, the Company pays a monthly fee to its administrator, as well as claims submitted by its participants.  As there generally is a lag between the time a claim is incurred by a participant and the time the claim is submitted, the Company has recorded a liability for outstanding claims of $381 and $340 at May 31, 2016 and 2015, respectively.  Such liability is reported within accrued and other liabilities in the consolidated balance sheets.
 
13.  
INCOME TAXES
 
Components of the provision for income taxes for the years ended May 31, 2016, 2015 and 2014, were as follows:
 
 
 
2016
 
 
2015
 
 
2014
 
Current tax (benefit) expense:
 
 
 
 
 
 
 
 
 
  Federal
 $(1,579)
 $5,216 
 $3,678 
  State
  64 
  751 
  509 
 
  (1,515)
  5,967 
  4,187 
 
    
    
    
Deferred tax (benefit):
    
    
    
  Federal
  (1,183)
  (1,396)
  (1,740)
  State
  (196)
  (138)
  (141)
 
  (1,379)
  (1,534)
  (1,881)
Total tax (benefit) expense
 $(2,894)
 $4,433 
 $2,306 
 
The effective tax rate varies from the statutory federal income tax rate for the following reasons:
 
 
 
2016
 
 
2015
 
 
2014
 
 
 
 
 
 
 
 
 
 
 
Statutory
 
 
(34.0
)%
 
 
34.0
%
 
 
34.0
%
State income taxes — net of federal benefit
 
 
(1.9
)
 
 
3.6
 
 
 
4.2
 
Permanent differences and other
 
 
0.6
 
 
 
2.0
 
 
 
1.7
 
Effective income tax rate
 
 
(35.3
)%
 
 
39.6
%
 
 
39.9
%
 
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred assets (liabilities) as of May 31 were as follows:
 
 
108
 
 
 
 
2016
 
 
2015
 
Deferred income tax assets:
 
 
 
 
 
 
  Account receivable allowances
 $317 
 $616 
  Bad debt write-offs
  2,131 
  1,544 
  Other
  60 
  130 
  Accrued salaries
  623 
  717 
  Start up costs
  246 
  276 
  Capital lease obligations
  4,445 
  4,536 
  Net operating loss carryforwards - expires 2021-2036
  155 
  - 
  Deferred rent
  2,037 
  2,268 
           Total deferred income tax assets
  10,014 
  10,087 
Deferred income tax liabilities:
    
    
  Fixed assets and course development
  (9,133)
  (10,493)
  Prepaid expenses
  (450)
  (542)
           Total deferred income tax liabilities
  (9,583)
  (11,035)
Net deferred income tax assets (liabilities)
 $431 
 $(948)
 
The Company considered a valuation allowance for the deferred income tax assets. No valuation allowance was recorded for the past three years because we believe it is more likely than not that all deferred tax asset will be realized.
 
The Company follows the guidance of ASC Topic 740, Income Taxes, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, which requires that income tax positions must be more likely than not to be sustained based solely on their technical merits in order to be recognized. The Company has recorded no liability for uncertain tax positions. In the event the Company had uncertain tax positions, the Company would elect to record interest and penalties from unrecognized tax benefits in the tax provision.
 
The Company files income tax returns in the U.S. federal jurisdiction and various states. Because of closure of an Internal Revenue Service examination, the Company is generally no longer subject to U.S. federal income tax or state and local tax examinations for years before 2012.
 
14.  
EARNINGS PER SHARE
 
Basic earnings per share (“EPS”) is computed by dividing net income attributable to the Company by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share reflect the potential dilution that could occur assuming vesting, conversion or exercise of all dilutive unexercised options and restricted stock.
 
The following is a reconciliation of the numerator and denominator for the basic and diluted EPS computations:
 
 
109
 
 
 
 
For the year ended May 31,
 
 
 
2016
 
 
2015
 
 
2014
 
Numerator:
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to National American
 
 
 
 
 
 
 
 
 
    University Holdings, Inc.
 $(5,349)
 $6,718 
 $3,475 
Denominator:
    
    
    
Weighted average shares outstanding used to compute
    
    
    
     basic net income per common share
  24,651,521 
  25,160,729 
  25,093,096 
Incremental shares issuable upon the assumed exercise of
    
    
    
     stock options
  - 
  - 
  - 
Incremental shares issuable upon the assumed vesting of
    
    
    
     restricted shares
  - 
  5,003 
  1,265 
Common shares used to compute diluted net income per
    
    
    
     share
  24,651,521 
  25,165,732 
  25,094,361 
Basic net (loss) income per common share
  (0.22)
 $0.27 
 $0.14 
 
    
    
    
Diluted net (loss) income per common share
 $(0.22)
 $0.27 
 $0.14 
 
A total of 192,350, 78,750 and 75,750 shares of common stock subject to issuance upon exercise of stock options for the years ended May 31, 2016, 2015 and 2014, respectively, have been excluded from the calculation of diluted EPS as the effect would have been anti-dilutive.
 
A total of 82,640 shares of common stock subject to vesting and issuance upon exercise of restricted stock for the year ended May 31, 2016 (7,446 of these shares had potential dilutive impact for the year ended May 31, 2016), have been excluded from the calculation of diluted EPS as the effect would have been antidilutive.

15.  
COMMITMENTS AND CONTINGENCIES
 
From time to time, NAU is a party to various claims, lawsuits or other proceedings relating to the conduct of its business. Although the outcome of litigation cannot be predicted with certainty and some claims, lawsuits or other proceedings may be disposed of unfavorably, management believes, based on facts presently known, that the outcome of such legal proceedings and claims, lawsuits or other proceedings will not have a material effect on the Company’s consolidated financial position, cash flows or future results of operations.
 
On November 21, 2014, the U.S. Department of Education notified NAU of its final audit determination with respect to the Title IV compliance audit for the period June 1, 2012 through May 31, 2013.  The final audit determination asserts that NAU improperly disbursed Title IV program funds to students at the Wichita West campus location before it was approved as an additional location for Title IV program participation requirements by the Department in August 2013.  This resulted in a requirement to return approximately $664 in Title IV funds and assessed interest to the Department, as it is deemed a return of previously recorded revenue.  This amount was timely remitted and is shown as a direct reduction of academic revenue during the year ended May 31, 2015.
 
 
110
 
 
16.  
FAIR VALUE MEASUREMENTS
 
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Following is a description of each category in the fair value hierarchy and the financial assets and liabilities of the Company that are included in each category at May 31, 2016 and 2015:
 
Level 1 – Quoted prices in active markets for identical assets or liabilities. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted market prices.
 
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The type of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using observable inputs.  Level 2 assets consist of certificates of deposit that are valued at cost, which approximates fair value.  Level 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments.  For instance:
 
·
Determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating and instrument type, and subjectively selecting an individual security or multiple securities that are deemed most similar to the security being priced; and
·
Determining whether a market is considered active requires management judgment.
 
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The type of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation. The Company does not have any Level 3 assets or liabilities.
 
The following table summarizes certain information for assets and liabilities measured at fair value on a recurring basis:
 
 
 
Quoted prices in
active markets
(level 1)
 
 
Other observable inputs
(level 2)
 
 
Unobservable
inputs
(level 3)
 
 
Fair value
 
May 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
Investments:
Certificates of deposit
 $0 
 $4,117 
 $0 
 $4,117 
Money market accounts included  in cash equivalents
  38 
  0 
  0 
  38 
Total assets at fair value
 $38 
 $4,117 
 $0 
 $4,155 
 
    
    
    
    
May 31, 2015
    
    
    
    
 
    
    
    
    
Investments:
Certificates of deposit
 $244 
 $3,858 
 $0 
 $4,102 
Money market accounts included in cash equivalents
  269 
  0 
  0 
  269 
Total assets at fair value
 $513 
 $3,858 
 $0 
 $4,371 
 
 
111
 
 
Following is a summary of the valuation techniques for assets and liabilities recorded in the consolidated balance sheets at fair value on a recurring basis:
 
Certificates of Deposit (“CD’s”) and money market accounts:  Investments which have closing prices readily available from an active market are used as being representative of fair value.  The Company classifies these investments as level 1.  Market prices for certain CD’s are obtained from quoted prices for similar assets.  The Company classifies these investments as level 2.
 
Fair value of financial instruments:  The Company’s financial instruments include cash and cash equivalents, CD’s and money market accounts, receivables, payables, and capital lease payables.  The carrying values approximated fair values for cash and cash equivalents, receivables, and payables because of the short term nature of these instruments.  CD’s and money market accounts are recorded at fair values as indicated in the preceding disclosures.  The estimated fair value of capital lease obligations is $11,852 and $12,097 at May 31, 2016 and 2015, respectively, which approximates book value.
 
17.  
SEGMENT REPORTING
 
Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business.
 
The Company operates two reportable segments: NAU and other. The NAU segment contains the revenues and expenses associated with the University operations. The Company considers each campus location to be an operating segment, and they are aggregated into the NAU segment for financial reporting purposes. The Other segment contains primarily real estate.  General administrative costs of the Company are allocated to specific divisions of the Company. The following table presents the reportable segment financial information, in thousands:
 
 
112
 
 
 
 
For the year ended May 31,
 
 
For the year ended May 31,
 
 
For the year ended May 31,
 
 
 
2016
 
 
2015
 
 
2014
 
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
Consolidated
 
 
 
NAU
 
 
Other
 
 
Total