##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-34211
 
 GRAND CANYON EDUCATION, INC.
 (Exact name of registrant as specified in its charter)
 
 DELAWARE(State or other jurisdiction of 
Incorporation or organization)
    
    20-3356009(I.R.S. Employer
Identification No.)
 3300 W. Camelback Road
Phoenix, Arizona 85017  (Address, including zip code, of principal executive offices)
 (602) 639-7500
(Registrants telephone number, including area code)
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



GRAND CANYON EDUCATION, INC.
FORM 10-Q
INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1 Financial Statements
    
    
    3Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4 Controls and Procedures
    
    
    21PART II  OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    21Item 1A Risk Factors
    
    
    22Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3 Defaults Upon Senior Securities
    
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    
    22Item 5 Other Information
    
    
    23Item 6 Exhibits
    
    
    23SIGNATURES
    
    
    24Exhibit 10.1Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 GRAND CANYON EDUCATION, INC.
 Statements of Operations
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(In thousands, except per share amounts)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008UnauditedNet revenue
    
    $
    59,400
    
    
    $
    34,566
    
    
    $
    118,364
    
    
    $
    70,275Costs and expenses:Instructional costs and services
    
    
    20,047
    
    
    
    12,408
    
    
    
    38,379
    
    
    
    24,028Selling and promotional, including $1,779 and $1,413 for
the three months ended June 30, 2009 and 2008,
respectively, and $3,391 and $2,925 for the six months
ended June 30, 2009 and 2008, respectively, to related
parties
    
    
    20,631
    
    
    
    14,887
    
    
    
    40,301
    
    
    
    27,473General and administrative
    
    
    8,688
    
    
    
    6,419
    
    
    
    17,521
    
    
    
    10,960Royalty to former owner
    
    
    74
    
    
    
    466
    
    
    
    148
    
    
    
    1,488Total costs and expenses
    
    
    49,440
    
    
    
    34,180
    
    
    
    96,349
    
    
    
    63,949Operating income
    
    
    9,960
    
    
    
    386
    
    
    
    22,015
    
    
    
    6,326Interest expense
    
    
    (420
    )
    
    
    (694
    )
    
    
    (1,087
    )
    
    
    (1,507
    )Interest income
    
    
    121
    
    
    
    179
    
    
    
    229
    
    
    
    432Income (loss) before income taxes
    
    
    9,661
    
    
    
    (129
    )
    
    
    21,157
    
    
    
    5,251Income tax expense (benefit)
    
    
    3,846
    
    
    
    (49
    )
    
    
    8,439
    
    
    
    2,027Net income (loss)
    
    
    5,815
    
    
    
    (80
    )
    
    
    12,718
    
    
    
    3,224Preferred dividends
    
    
    
    
    
    
    (268
    )
    
    
    
    
    
    
    (521
    )Net income (loss) available to common stockholders
    
    $
    5,815
    
    
    $
    (348
    )
    
    $
    12,718
    
    
    $
    2,703Net income (loss) per common share:Basic
    
    $
    0.13
    
    
    $
    (0.02
    )
    
    $
    0.28
    
    
    $
    0.14Diluted
    
    $
    0.13
    
    
    $
    (0.02
    )
    
    $
    0.28
    
    
    $
    0.08Shares used in computing net income (loss) per common share:Basic
    
    
    44,846
    
    
    
    19,142
    
    
    
    45,159
    
    
    
    19,089Diluted
    
    
    45,051
    
    
    
    19,142
    
    
    
    45,437
    
    
    
    32,623
 The accompanying notes are an integral part of these financial statements.
  3




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##### Table of Contents



GRAND CANYON EDUCATION, INC.
 Balance Sheets
 June 30,
    
    
    December 31,(In thousands, except share data)
    
    2009
    
    
    2008(Unaudited)ASSETS:Current assetsCash and cash equivalents
    
    $
    24,742
    
    
    $
    35,152Restricted cash and cash equivalents
    
    
    6,230
    
    
    
    2,197Accounts receivable, net of allowance for
doubtful accounts of $7,110 and $6,356 at
June 30, 2009 and December 31, 2008,
respectively
    
    
    10,612
    
    
    
    9,442Income taxes receivable
    
    
    1,398
    
    
    
    1,576Deferred income taxes
    
    
    3,087
    
    
    
    2,603Other current assets
    
    
    2,330
    
    
    
    2,629Total current assets
    
    
    48,399
    
    
    
    53,599Property and equipment, net
    
    
    58,146
    
    
    
    41,399Restricted cash and investments (of which $0
and $2,928 is restricted at June 30, 2009 and
December 31, 2008, respectively)
    
    
    483
    
    
    
    3,403Prepaid royalties
    
    
    7,677
    
    
    
    8,043Goodwill
    
    
    2,941
    
    
    
    2,941Deferred income taxes
    
    
    8,216
    
    
    
    7,404Other assets
    
    
    644
    
    
    
    201Total assets
    
    $
    126,506
    
    
    $
    116,990LIABILITIES AND STOCKHOLDERS EQUITY:Current liabilitiesAccounts payable
    
    $
    9,753
    
    
    $
    5,770Accrued liabilities
    
    
    11,178
    
    
    
    9,674Income taxes payable
    
    
    67
    
    
    
    172Deferred revenue and student deposits
    
    
    20,183
    
    
    
    14,262Due to related parties
    
    
    1,666
    
    
    
    1,197Current portion of capital lease obligations
    
    
    801
    
    
    
    1,125Current portion of notes payable
    
    
    2,108
    
    
    
    357Total current liabilities
    
    
    45,756
    
    
    
    32,557Capital lease obligations, less current portion
    
    
    1,212
    
    
    
    29,384Notes payable, less current portion and other
    
    
    25,573
    
    
    
    1,459Total liabilities
    
    
    72,541
    
    
    
    63,400Commitments and contingenciesStockholders equityPreferred stock, $0.01 par value, 10,000,000
shares authorized; 0 shares issued and
outstanding at June 30, 2009 and December 31,
2008
    
    
    
    
    
    
    Common stock, $0.01 par value, 100,000,000
shares authorized; 44,576,417 and 45,465,160
shares issued and outstanding at June 30, 2009
and December 31, 2008, respectively
    
    
    446
    
    
    
    455Additional paid-in capital
    
    
    52,469
    
    
    
    64,808Accumulated other comprehensive income
    
    
    21
    
    
    
    16Accumulated earnings (deficit)
    
    
    1,029
    
    
    
    (11,689
    )Total stockholders equity
    
    
    53,965
    
    
    
    53,590Total liabilities and stockholders equity
    
    $
    126,506
    
    
    $
    116,990
 The accompanying notes are an integral part of these financial statements.
  4




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GRAND CANYON EDUCATION, INC.
 Statement of Stockholders Equity
(In thousands, except share data)
 (Unaudited)
 AccumulatedAdditional
    
    
    Other
    
    
    AccumulatedCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    EarningsShares
    
    
    Par Value
    
    
    Capital
    
    
    Income
    
    
    (Deficit)
    
    
    TotalBalance at December 31, 2008
    
    
    45,465,160
    
    
    $
    455
    
    
    $
    64,808
    
    
    $
    16
    
    
    $
    (11,689
    )
    
    $
    53,590Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,718
    
    
    
    12,718Unrealized losses on
available for-sale
securities, net of taxes of
$3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,723Share-based compensation
    
    
    
    
    
    
    
    
    
    
    1,577
    
    
    
    
    
    
    
    
    
    
    
    1,577Exercise of stock options
    
    
    20,605
    
    
    
    
    
    
    
    247
    
    
    
    
    
    
    
    
    
    
    
    247Excess tax benefits from
share-based compensation
    
    
    
    
    
    
    
    
    
    
    323
    
    
    
    
    
    
    
    
    
    
    
    323Repurchase and retirement
of shares of the Companys
common stock
    
    
    (909,348
    )
    
    
    (9
    )
    
    
    (14,486
    )
    
    
    
    
    
    
    
    
    
    
    (14,495
    )Balance at June 30, 2009
    
    
    44,576,417
    
    
    $
    446
    
    
    $
    52,469
    
    
    $
    21
    
    
    $
    1,029
    
    
    $
    53,965
 The accompanying notes are an integral part of these financial statements.
  5




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GRAND CANYON EDUCATION, INC.
 Statements of Cash Flows
 Six Months Ended June 30,(In thousands)
    
    2009
    
    
    2008(Unaudited)Cash flows provided by (used in) operating activities:Net income
    
    $
    12,718
    
    
    $
    3,224Adjustments to reconcile net income to net cash provided by (used in) operating activities:Share-based compensation
    
    
    1,577
    
    
    
    Excess tax benefits from share-based compensation
    
    
    (9
    )
    
    
    Provision for bad debts
    
    
    6,587
    
    
    
    4,052Depreciation and amortization
    
    
    3,386
    
    
    
    2,269Deferred income taxes
    
    
    (1,296
    )
    
    
    (186
    )Other
    
    
    (14
    )
    
    
    (112
    )Changes in assets and liabilities:Accounts receivable
    
    
    (7,757
    )
    
    
    (3,868
    )Prepaid expenses and other
    
    
    333
    
    
    
    (266
    )Due to/from related parties
    
    
    469
    
    
    
    288Accounts payable
    
    
    2,942
    
    
    
    619Accrued liabilities
    
    
    1,729
    
    
    
    576Income taxes receivable/payable
    
    
    396
    
    
    
    1,405Deposit with former owner
    
    
    
    
    
    
    3,000Royalty payable to former owner
    
    
    
    
    
    
    (7,428
    )Prepaid royalties to former owner
    
    
    
    
    
    
    (5,920
    )Deferred revenue and student deposits
    
    
    5,921
    
    
    
    604Net cash provided by (used in) operating activities
    
    
    26,982
    
    
    
    (1,743
    )Cash flows used in investing activities:Capital expenditures
    
    
    (11,111
    )
    
    
    (3,504
    )Purchase of campus land and buildings
    
    
    (35,505
    )
    
    
    Change in restricted cash and cash equivalents
    
    
    (1,108
    )
    
    
    2,064Purchases of investments
    
    
    
    
    
    
    (2,499
    )Proceeds from sale or maturity of investments
    
    
    
    
    
    
    2,470Net cash used in investing activities
    
    
    (47,724
    )
    
    
    (1,469
    )Cash flows provided by (used in) financing activities:Principal payments on notes payable and capital lease obligations
    
    
    (976
    )
    
    
    (719
    )Proceeds from debt
    
    
    25,547
    
    
    
    Repurchase of common shares
    
    
    (14,495
    )
    
    
    Repayment on line of credit
    
    
    
    
    
    
    (6,000
    )Proceeds from related party payable on preferred stock
    
    
    
    
    
    
    5,725Repurchase of Institute Warrant
    
    
    
    
    
    
    (6,000
    )Repurchase of Institute Note Payable
    
    
    
    
    
    
    (1,250
    )Amount paid related to initial public offering
    
    
    
    
    
    
    (2,484
    )Excess tax benefits from share-based compensation
    
    
    9
    
    
    
    Net proceeds from exercise of stock options
    
    
    247
    
    
    
    Net cash provided by (used in) financing activities
    
    
    10,332
    
    
    
    (10,728
    )Net decrease in cash and cash equivalents
    
    
    (10,410
    )
    
    
    (13,940
    )Cash and cash equivalents, beginning of period
    
    
    35,152
    
    
    
    18,930Cash and cash equivalents, end of period
    
    $
    24,742
    
    
    $
    4,990Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    1,276
    
    
    $
    2,382Cash paid for income taxes
    
    $
    9,402
    
    
    $
    762Supplemental disclosure of non-cash investing and financing activitiesPurchase of equipment through notes payable and capital lease obligations
    
    $
    2,116
    
    
    $
    760Purchases of property and equipment included in accounts payable
    
    $
    1,041
    
    
    $
    479Settlement
of capital lease obligation
    
    $
    30,020
    
    
    $
    Tax benefit of Spirit warrant intangible
    
    $
    314
    
    
    $
    Value assigned to Blanchard shares
    
    $
    
    
    
    $
    2,996Assumption of future obligations under gift annuities
    
    $
    
    
    
    $
    887Accretion of dividends on Series C convertible preferred stock
    
    $
    
    
    
    $
    521
 The accompanying notes are an integral part of these financial statements.
  6




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GRAND CANYON EDUCATION, INC.
 Notes to Financial Statements
(In thousands, except share and per share data)
(Unaudited)
 1. Nature of Business
  2. Summary of Significant Accounting Policies
 Unaudited Interim Financial Information
  Revenue Recognition
  Derivatives and Hedging
       Fair Value of Financial Instruments
  Comprehensive Income
  Use of Estimates
   7




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GRAND CANYON EDUCATION, INC.
 Notes to Financial Statements
(In thousands, except share and per share data)
(Unaudited)
 Segment Information
  Reclassifications
  Recent Accounting Pronouncements
    3. Spirit Transaction
   4. Earnings Per Share
   8




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GRAND CANYON EDUCATION, INC.
 Notes to Financial Statements
(In thousands, except share and per share data)
(Unaudited)
  Three Months Ended June 30,
    
    
    Six Month Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Denominator:Basic common shares outstanding
    
    
    44,846,224
    
    
    
    19,142,399
    
    
    
    45,158,536
    
    
    
    19,089,004Effect of dilutive preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,870,178Effect of dilutive warrants and contingently issuable common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,625,788Effect of dilutive stock options and restricted stock
    
    
    204,395
    
    
    
    
    
    
    
    278,388
    
    
    
    38,346Diluted common shares outstanding
    
    
    45,050,619
    
    
    
    19,142,399
    
    
    
    45,436,924
    
    
    
    32,623,316
  5. Valuation and Qualifying Accounts
 Balance at
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Charged to
    
    
    
    
    
    
    End ofYear
    
    
    Expense
    
    
    Deductions(1)
    
    
    PeriodAllowance for doubtful accounts receivable:Six months ended June 30, 2009
    
    $
    6,356
    
    
    
    6,587
    
    
    
    (5,833
    )
    
    $
    7,110Six months ended June 30, 2008
    
    $
    12,158
    
    
    
    4,052
    
    
    
    (768
    )
    
    $
    15,442
 (1)
    
    Deductions represent accounts written off, net of recoveries. 6. Accrued Liabilities
  June 30,
    
    
    December 31,2009
    
    
    2008Accrued compensation and benefits
    
    $
    7,317
    
    
    $
    5,340Accrued interest
    
    
    94
    
    
    
    284Deferred rent
    
    
    39
    
    
    
    34Tax reserves, non-income tax related
    
    
    233
    
    
    
    710FIN 48 accrual
    
    
    244
    
    
    
    299Other accrued expenses
    
    
    3,251
    
    
    
    3,007$
    11,178
    
    
    $
    9,674
 7. Commitments and Contingencies
 Leases
  2009
    
    $
    1,5902010
    
    
    3,7912011
    
    
    3,4912012
    
    
    2,9962013
    
    
    2,846Thereafter
    
    
    13,055Total minimum payments
    
    $
    27,769
  Legal Matters
   9




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GRAND CANYON EDUCATION, INC.
 Notes to Financial Statements
(In thousands, except share and per share data)
(Unaudited)
   qui tam qui tam qui tam
  Tax Reserves, Non-Income Tax Related
  8. Income Taxes
   9. Share-Based Compensation
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Instructional costs and services
    
    $
    90
    
    
    $
    
    
    
    $
    173
    
    
    $
    Selling and promotional
    
    
    43
    
    
    
    
    
    
    
    78
    
    
    
    General and administrative
    
    
    662
    
    
    
    
    
    
    
    1,305
    
    
    
    Stock-based compensation expense included in operating expenses
    
    
    795
    
    
    
    
    
    
    
    1,556
    
    
    
    Tax effect of share-based compensation
    
    
    (318
    )
    
    
    
    
    
    
    (622
    )
    
    
    Share-based compensation expense, net of tax
    
    $
    477
    
    
    $
    
    
    
    $
    934
    
    
    $
    
  10




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GRAND CANYON EDUCATION, INC.
 Notes to Financial Statements
(In thousands, except share and per share data)
(Unaudited)
 10. Regulatory
          11




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of our historical results of operations and our liquidity and capital
resources should be read in conjunction with the financial statements and related notes that appear
elsewhere in this report.
 Forward-Looking Statements
 Managements Discussion and Analysis of
Financial Condition and Results of Operations
  
    
    our failure to comply with the extensive regulatory framework applicable to our
industry, including Title IV of the Higher Education Act and the regulations thereunder,
state laws and regulatory requirements, and accrediting commission requirements;
    
    the results of the ongoing investigation by the Department of Educations Office of
Inspector General and the pending qui tamaction regarding the manner in which we have
compensated our enrollment personnel, and possible remedial actions or other liability
resulting therefrom;
    
    the ability of our students to obtain federal Title IV funds, state financial aid,
and private financing;
    
    risks associated with changes in applicable federal and state laws and regulations
and accrediting commission standards;
    
    our ability to hire and train new, and develop and train existing, enrollment
counselors;
    
    the pace of growth of our enrollment;
    
    our ability to convert prospective students to enrolled students and to retain
active students;
    
    our success in updating and expanding the content of existing programs and
developing new programs in a cost-effective manner or on a timely basis;
    
    industry competition, including competition for qualified executives and other
personnel;
    
    risks associated with the competitive environment for marketing our programs;
    
    failure on our part to keep up with advances in technology that could enhance the
online experience for our students;
    
    our ability to manage future growth effectively;
    
    general adverse economic conditions or other developments that affect job prospects
in our core disciplines; and
    
    other factors discussed under the headings Risk Factors and Managements
Discussion and Analysis of Financial Condition and Results of Operations.
   12




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Overview
   Critical Accounting Policies and Use of Estimates
   13




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June 30,2009
    
    
    2008# of Students
    
    
    % of Total
    
    
    # of Students
    
    
    % of TotalMasters or doctoral degree(1)
    
    
    13,841
    
    
    
    50.1
    %
    
    
    10,051
    
    
    
    60.9
    %Bachelors degree
    
    
    13,781
    
    
    
    49.9
    %
    
    
    6,459
    
    
    
    39.1
    %Total
    
    
    27,622
    
    
    
    100.0
    %
    
    
    16,510
    
    
    
    100.0
    %
 June 30,2009
    
    
    2008# of Students
    
    
    % of Total
    
    
    # of Students
    
    
    % of TotalOnline
    
    
    26,234
    
    
    
    95.0
    %
    
    
    14,847
    
    
    
    89.9
    %Ground(2)
    
    
    1,388
    
    
    
    5.0
    %
    
    
    1,663
    
    
    
    10.1
    %Total
    
    
    27,622
    
    
    
    100.0
    %
    
    
    16,510
    
    
    
    100.0
    %
 (1)
    
    Includes 228 students pursuing doctoral degrees at June 30, 2009.(2)
    
    Includes a small number of our traditional ground students that
are taking courses during the summer, as well as our
professional students. Factors affecting comparability
  Public company expenses
  14




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Settlement with former owner
 Management fees and expenses
 Share-based and other executive compensation
 General and administrative expenses and tax expense
 License agreement
 Spirit transaction and related borrowings
 Results of Operations
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Operating expensesInstructional cost and services
    
    
    33.7
    
    
    
    35.9
    
    
    
    32.4
    
    
    
    34.2Selling and promotional
    
    
    34.7
    
    
    
    43.1
    
    
    
    34.0
    
    
    
    39.1General and administrative
    
    
    14.6
    
    
    
    18.6
    
    
    
    14.8
    
    
    
    15.6Royalty to former owner
    
    
    0.1
    
    
    
    1.3
    
    
    
    0.1
    
    
    
    2.1Total operating expenses
    
    
    83.2
    
    
    
    98.9
    
    
    
    81.4
    
    
    
    91.0Operating income
    
    
    16.8
    
    
    
    1.1
    
    
    
    18.6
    
    
    
    9.0Interest expense
    
    
    (0.7
    )
    
    
    (2.0
    )
    
    
    (0.9
    )
    
    
    (2.1
    )Interest income
    
    
    0.2
    
    
    
    0.5
    
    
    
    0.2
    
    
    
    0.6Income (loss) before income taxes
    
    
    16.3
    
    
    
    (0.4
    )
    
    
    17.9
    
    
    
    7.5Income tax expense (benefit)
    
    
    6.5
    
    
    
    (0.1
    )
    
    
    7.1
    
    
    
    2.9Net income (loss)
    
    
    9.8
    
    
    
    (0.2
    )
    
    
    10.7
    
    
    
    4.6
  15




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##### Table of Contents



Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008
 Net revenue
 Instructional cost and services expenses
 Selling and promotional expenses
 General and administrative expenses
 Royalty to former owner
  16




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##### Table of Contents



Interest expense
 Interest income
 Income tax expense (benefit)
 Net income (loss)
 Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
 Net revenue
 Instructional cost and services expenses
 Selling and promotional expenses
 General and administrative expenses
 Royalty to former owner
  17




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##### Table of Contents



Interest expense
 Interest income
 Income tax expense
 Net income
 Seasonality
  Liquidity and Capital Resources
 Liquidity
   Cash Flows
 Operating Activities
 Investing Activities
 Financing Activities
  18




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##### Table of Contents



Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    2-3 Years
    
    
    4-5 Years
    
    
    5 YearsLong term debt and notes payable(1)
    
    $
    27.4
    
    
    $
    1.1
    
    
    $
    6.1
    
    
    $
    3.6
    
    
    $
    16.6Capital lease obligations(1)
    
    
    2.0
    
    
    
    0.4
    
    
    
    1.6
    
    
    
    0.0
    
    
    
    0.0Purchase obligations(2)
    
    
    8.9
    
    
    
    4.9
    
    
    
    3.3
    
    
    
    0.4
    
    
    
    0.3Operating lease obligations
    
    
    27.8
    
    
    
    1.6
    
    
    
    10.3
    
    
    
    15.7
    
    
    
    0.2Total contractual obligations
    
    $
    66.1
    
    
    $
    8.0
    
    
    $
    21.3
    
    
    $
    19.7
    
    
    $
    17.1
 (1)
    
    The material changes since December 31, 2008 are a result of the
acquisition of the land and buildings comprising our ground campus in
April 2009. In connection with this acquisition, we reduced our
capital lease obligations for the buildings that we had previously
leased and increased our debt obligations pursuant to the loan
agreement with a financial institution that we entered into for the
sole purpose of financing the acquisition of the campus land and
buildings.(2)
    
    The purchase obligation amounts include expected spending by period
under contracts that were in effect at June 30, 2009. Less than one
year represents spend from July 1, 2009 through December 31, 2009.  Off-Balance Sheet Arrangements
  Non-GAAP Discussion
     
    
    cash expenditures for capital expenditures or contractual commitments;
    
    changes in, or cash requirements for, our working capital requirements;
    
    interest expense, or the cash requirements necessary to service interest or
principal payments on our indebtedness;
    
    the cost or cash required to replace assets that are being depreciated or
amortized; and
    
    the impact on our reported results of earnings or charges resulting from (i)
royalties to our former owner, including amortization of royalties prepaid in connection
with our settlement, (ii) management fees and expenses that were payable until completion
of our initial public offering, and (iii) share-based compensation.
   19




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited, in thousands)Net income (loss)
    
    $
    5,815
    
    
    $
    (80
    )
    
    $
    12,718
    
    
    $
    3,224Plus: interest expense net of interest income
    
    
    299
    
    
    
    515
    
    
    
    858
    
    
    
    1,075Plus: income tax expense (benefit)
    
    
    3,846
    
    
    
    (49
    )
    
    
    8,439
    
    
    
    2,027Plus: depreciation and amortization
    
    
    1,680
    
    
    
    1,179
    
    
    
    3,238
    
    
    
    2,269EBITDA
    
    
    11,640
    
    
    
    1,565
    
    
    
    25,253
    
    
    
    8,595Plus: royalty to former owner (a)
    
    
    74
    
    
    
    466
    
    
    
    148
    
    
    
    1,488Plus: management fees and expenses (b)
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    211Plus: share-based compensation (c)
    
    
    813
    
    
    
    
    
    
    
    1,577
    
    
    
    Adjusted EBITDA
    
    $
    12,527
    
    
    $
    2,127
    
    
    $
    26,978
    
    
    $
    10,294
 (a)
    
    Reflects the royalty fee arrangement with our former owner in which we
agreed to pay a stated percentage of cash revenue generated by our
online programs. As a result of the settlement of a dispute with the
former owner, we are no longer obligated to pay this royalty, although
the settlement included a prepayment of future royalties that will be
amortized in 2009 and future periods.(b)
    
    Reflects management fees and expenses of $0.1 million and $0.2 million
for the three and six months periods ended June 30, 2008 to the
general partner of the Endeavour Entities. The agreement relating to
this arrangement has been terminated.(c)
    
    Reflects share-based compensation expense recorded in the first six
months of 2009 related to share-based compensation for stock options
granted to employees and directors in connection with our initial
public offering and additional equity awards granted in subsequent
periods.  20




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Impact of inflation.
 Market risk
  Interest rate risk
 
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting.
  
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   qui tam qui tam qui tam
  21




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##### Table of Contents



qui tam
  
 Item 1A.
    
    Risk Factors
  
    
    As a result of the Company re-classifying its online faculty from independent
contractors to employees, the risk factor containing the caption [a] reclassification of
our online faculty by federal or state authorities from independent contractor to employee
status could materially increase our costs is hereby removed.
    
    As a result of the expiration of the lock-up that was entered into by our
pre-initial public offering stockholders, the risk factor containing the caption [a]
substantial potion of our outstanding common stock will soon be released from restrictions
on resale and may be sold in the public market in the near future is hereby removed.
 
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 Recent Sales of Unregistered Securities
  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
   For
    
    
    Withhold / AgainstBrent D. Richardson
    
    
    27,519,046
    
    
    
    611,147Brian E. Mueller
    
    
    27,593,323
    
    
    
    536,870Christopher C. Richardson
    
    
    27,519,546
    
    
    
    610,647Chad N. Heath
    
    
    27,472,521
    
    
    
    657,672D. Mark Dorman
    
    
    27,207,740
    
    
    
    922,453David J. Johnson
    
    
    27,953,060
    
    
    
    177,133Jack A. Henry
    
    
    28,013,060
    
    
    
    117,133
  For
    
    Against
    
    Abstain28,125,885
    
    4,198
    
    110
  22




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##### Table of Contents



Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
  Number
    
    Description
    
    Method of Filing3.1
    
    
    Amended and Restated Certificate of Incorporation.
    
    Incorporated by
reference to
Exhibit 3.1 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.3.2
    
    
    Amended and Restated Bylaws.
    
    Incorporated by
reference to
Exhibit 3.2 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.4.1
    
    
    Specimen of Stock Certificate.
    
    Incorporated by
reference to
Exhibit 4.1 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.4.2
    
    
    Amended and Restated Investor Rights Agreement,
dated September 17, 2008, by and among Grand
Canyon Education, Inc. and the other parties
named therein.
    
    Incorporated by
reference to
Exhibit 4.2 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.1
    
    
    Purchase and Sale Agreement, dated April 27,
2009, by and among Grand Canyon Education, Inc.,
Spirit Master Funding, LLC, and Spirit Management
Company,
    
    Filed herewith.10.2
    
    
    Loan Agreement, dated April 27, 2009, by and
between Grand Canyon Education, Inc. and Bank of
America, N.A.
    
    Filed herewith.31.1
    
    
    Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
    
    Filed herewith.31.2
    
    
    Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
    
    Filed herewith.32.1
    
    
    Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 
    
    Filed herewith.32.2
    
    
    Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 
    
    Filed herewith.
 
    
    This certification is being furnished solely to accompany this report pursuant to 18 U.S.C.
Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is
not to be incorporated by reference into any filings of the Company, whether made before or
after the date hereof, regardless of any general incorporation language in such filing.  23




---



##### Table of Contents



SIGNATURES
  GRAND CANYON EDUCATION, INC.Date: August 3, 2009
    By:
    /s/ Daniel E. BachusDaniel E. BachusChief Financial Officer (Principal Financial Officer and Principal Accounting Officer)  24




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##### Table of Contents



Number
    
    Description
    
    Method of Filing3.1
    
    
    Amended and Restated Certificate of Incorporation.
    
    Incorporated by
reference to
Exhibit 3.1 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.3.2
    
    
    Amended and Restated Bylaws.
    
    Incorporated by
reference to
Exhibit 3.2 to
Amendment No. 6 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on November 12,
2008.4.1
    
    
    Specimen of Stock Certificate.
    
    Incorporated by
reference to
Exhibit 4.1 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.4.2
    
    
    Amended and Restated Investor Rights Agreement,
dated September 17, 2008, by and among Grand
Canyon Education, Inc. and the other parties
named therein.
    
    Incorporated by
reference to
Exhibit 4.2 to
Amendment No. 2 to
the Companys
Registration
Statement on Form
S-1 filed with the
SEC on September
29, 2008.10.1
    
    
    Purchase and Sale Agreement, dated April 27,
2009, by and among Grand Canyon Education, Inc.,
Spirit Master Funding, LLC, and Spirit Management
Company,
    
    Filed herewith.10.2
    
    
    Loan Agreement, dated April 27, 2009, by and
between Grand Canyon Education, Inc. and Bank of
America, N.A.
    
    Filed herewith.31.1
    
    
    Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
    
    Filed herewith.31.2
    
    
    Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
    
    Filed herewith.32.1
    
    
    Certification of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 
    
    Filed herewith.32.2
    
    
    Certification of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. 
    
    Filed herewith.
 
    
    This certification is being furnished solely to accompany this report pursuant to 18 U.S.C.
Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is
not to be incorporated by reference into any filings of the Company, whether made before or
after the date hereof, regardless of any general incorporation language in such filing.  25