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Goodwill and Other Intangible Assets
12 Months Ended
Dec. 31, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

10. GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying value of goodwill was $241.2 million and $243.5 million as of December 31, 2023 and 2022, respectively.

A reconciliation of the changes in the carrying value of goodwill during the years ended December 31, 2023 and 2022 is as follows (dollars in thousands):

 

 

As of December 31,

 

 

 

2023

 

 

2022

 

 

 

CTU

 

 

AIUS

 

 

Total

 

 

CTU

 

 

AIUS

 

 

Total

 

Balance, beginning of year

 

$

133,133

 

 

$

110,407

 

 

$

243,540

 

 

$

73,728

 

 

$

88,851

 

 

$

162,579

 

Business acquisitions (1)

 

 

(2,378

)

 

 

-

 

 

 

(2,378

)

 

 

59,405

 

 

 

21,556

 

 

 

80,961

 

Balance, end of year

 

$

130,755

 

 

$

110,407

 

 

$

241,162

 

 

$

133,133

 

 

$

110,407

 

 

$

243,540

 

___________________

(1) The negative adjustment for the year ended December 31, 2023 relates to purchase accounting adjustments finalized during the period.

In assessing the fair value for CTU and AIUS, we performed a qualitative assessment as of October 1, 2023 to determine if we believe it is more likely than not that our reporting unit’s carrying values exceed their respective fair values. When performing the qualitative assessment, management first considered events and circumstances that may affect the fair value of the reporting unit to determine whether it is necessary to perform the quantitative impairment test. Management focused on the significant inputs, including its projections of revenue growth, operating expense leverage and the discount rate used in the prior year quantitative assessment, and any events or circumstances that could affect the significant inputs. These events and circumstances included, but were not limited to, financial performance, future expectations of financial performance, legal, regulatory, contractual, competitive, economic, political, business or other factors, and industry and market considerations, such as a deteriorating operating environment or increased competition. Management evaluated all events and circumstances, including positive or mitigating factors, that could affect the significant inputs used to determine fair value. Additionally, management evaluated its most recent quantitative assessment to determine by how much the previous fair value exceeded the carrying value for each indefinite-lived intangible asset.

The determination of estimated fair value of each reporting unit requires significant estimates and assumptions, and as such, these fair value measurements are categorized as Level 3 per ASC Topic 820. These estimates and assumptions primarily include, but are not limited to, the discount rate, terminal growth rates, operating cash flow projections and capital expenditure forecasts. Due to the inherent uncertainty involved in deriving those estimates, actual results could differ from those estimates. We evaluate the merits of each significant assumption used, both individually and in the aggregate, to assess the fair value of each reporting unit for reasonableness.

As of December 31, 2023 and 2022, the net book value of intangible assets other than goodwill are as follows (dollars in thousands):

 

 

December 31, 2023

 

 

December 31, 2022

 

 

 

 

Cost

 

 

Accumulated Amortization

 

 

Accumulated Impairments

 

 

Net Book Value

 

 

Cost

 

 

Accumulated Amortization

 

 

Accumulated Impairments

 

 

Net Book Value

 

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Course curriculum

 

$

2,790

 

 

$

(1,817

)

 

$

-

 

 

$

973

 

 

$

2,790

 

 

$

(1,461

)

 

$

-

 

 

$

1,329

 

 

Customer relationships

 

 

38,090

 

 

 

(15,502

)

 

 

(111

)

 

 

22,477

 

 

 

38,090

 

 

 

(10,815

)

 

 

(111

)

 

 

27,164

 

 

Developed technology

 

 

8,820

 

 

 

(2,490

)

 

 

(5,513

)

 

 

817

 

 

 

8,820

 

 

 

(1,022

)

 

 

(461

)

 

 

7,337

 

 

Trade names

 

 

13,060

 

 

 

(3,803

)

 

 

(5,205

)

 

 

4,052

 

 

 

13,060

 

 

 

(2,683

)

 

 

(543

)

 

 

9,834

 

 

Net book value, amortizable intangible
   assets:

 

$

62,760

 

 

$

(23,612

)

 

$

(10,829

)

 

$

28,319

 

 

$

62,760

 

 

$

(15,981

)

 

$

(1,115

)

 

$

45,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accreditation rights

 

 

 

 

 

 

 

 

 

 

$

1,000

 

 

 

 

 

 

 

 

 

 

 

$

1,000

 

 

CTU trade name

 

 

 

 

 

 

 

 

 

 

 

6,900

 

 

 

 

 

 

 

 

 

 

 

 

6,900

 

 

Non-amortizable intangible assets

 

 

 

 

 

 

 

 

 

 

 

7,900

 

 

 

 

 

 

 

 

 

 

 

 

7,900

 

 

Intangible assets, net

 

 

 

 

 

 

 

 

 

 

$

36,219

 

 

 

 

 

 

 

 

 

 

 

$

53,564

 

 

 

Amortizable intangible assets are amortized on a straight-line basis over their remaining estimated useful lives, which range from two to fourteen years. Amortization expense was $7.6 million, $7.3 million and $4.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

During the year ended December 31, 2023, we recorded $9.7 million of asset impairment charges related to certain definite-lived intangible assets within the CTU segment as a result of a decline in projected cash flows associated with these assets. The fair value of these definite-lived intangible assets were determined to be zero based upon the projected cash flow estimates for the remaining useful life. During the year ended December 31, 2022, we recorded $1.1 million of asset impairment charges related to certain of our definite-lived intangible assets within the AIUS segment as a result of a decline in cash flows associated with those intangible assets. The fair value of these definite-lived intangible assets were determined to be zero based upon the projected cash flow estimates for the remaining useful life of the primary asset.

On June 30, 2023, the Company entered into a non-cash asset purchase agreement with Le Cordon Bleu International B.V. ("LCBI"), a company incorporated in The Netherlands, to sell Perdoceo's outright rights to the Le Cordon Bleu ("LCB") brand, trade names and rights for North America in exchange for 1.8 million outstanding shares of Perdoceo's stock. The fair value of the 1.8 million shares received was $22.1 million, resulting in a non-cash gain on sale of asset of $22.1 million recorded within other miscellaneous income (expense) on our consolidated statements of income with the offset being recorded as an addition to treasury stock on our consolidated balance sheet.

As of December 31, 2023, net intangible assets include certain accreditation rights and trade names that are considered to have indefinite useful lives and, in accordance with FASB ASC Topic 350—Intangibles—Goodwill and Other, are not subject to amortization but rather reviewed for impairment on at least an annual basis by applying a fair-value-based test.

We performed our annual impairment testing of other indefinite-lived intangible asset balances as of October 1, 2023 utilizing the qualitative assessment approach and concluded that no indicators existed that would suggest that it is more likely than not that the assets would be impaired. We monitor the operating results and revenue projections related to our CTU trade name and accreditation rights on a quarterly basis for signs of possible declines in estimated fair value. When performing the qualitative assessment, management considered events and circumstances that may affect the fair value of the intangible assets to determine whether it is necessary to perform the quantitative impairment test. These events and circumstances included, but were not limited to, financial performance, future expectations of financial performance, legal, regulatory, contractual, competitive, economic, political, business, and industry and market considerations. Management evaluated these events and circumstances, including positive or mitigating factors, that could affect the significant inputs used to determine fair value.