10. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for continuing operations during the years ended December 31, 2011 and 2010 are as follows by segment:


	CTU			AIU		Health Education			Culinary Arts			Art & Design		International			Total
	(Dollars in thousands)
Goodwill balance as of December 31, 2009⁽¹⁾	$	46,148		$	41,418	$	136,610		$	75,148		$	32,626	$	38,342		$	370,292
Goodwill impairment		—			—		—			(1,400	)		—		—			(1,400	)
Acquisition of IUM		—			—		—			—			—		8,360			8,360
Effect of foreign currency exchange rate changes		—			—		—			—			—		(2,665	)		(2,665	)

Goodwill balance as of December 31, 2010	$	46,148		$	41,418	$	136,610		$	73,748		$	32,626	$	44,037		$	374,587

Goodwill impairment		(210	)		—		(94,739	)		(73,748	)		—		—			(168,697	)
Acquisition of Everblue		—			—		—			—			8,853		—			8,853
Effect of foreign currency exchange rate changes		—			—		—			—			—		(2,117	)		(2,117	)

Goodwill balance as of December 31, 2011	$	45,938		$	41,418	$	41,871		$	—		$	41,479	$	41,920		$	212,626

(1)

Goodwill balances as of December 31, 2009 and 2010 were restated to reflect goodwill reassigned to AIU and CTU in accordance with FASB ASC Topic 350 as a result of the change in organizational structure which occurred in the first quarter of 2011. In addition, the goodwill balance for the International reporting unit as of December 31, 2009 reflects the amount of goodwill which remained within the International reporting unit following the sale of Istituto Marangoni; in accordance with FASB ASC Topic 350.

As a result of the organization restructure which occurred in the first quarter 2011, we reassigned the goodwill balances to each reporting unit in accordance with FASB ASC Topic 350—Intangibles—Goodwill and Other. Of the $87.6 million goodwill balance previously reported for the University reporting unit, $46.2 million was assigned to CTU and $41.4 million was assigned to AIU. In addition, in accordance with FASB ASC Paragraph 350-20-35-30, we performed an analysis at the time of this reassignment and concluded there was no goodwill impairment for either CTU or AIU following the reallocation. There were no changes to Art & Design's goodwill balance, as it was and remains a stand-alone reporting unit for goodwill impairment testing purposes.

During the second quarter of 2011, we made the decision to teach out one of our campuses within the CTU segment. In accordance with FASB ASC Topic 350, we calculated the amount of goodwill attributable to this school and recorded the related impairment of this goodwill as a result of the decision to cease operations. An impairment charge of $0.2 million was recorded in the second quarter 2011.

In connection with the acquisition of Everblue Training Institute in December 2011, we recorded goodwill of approximately $8.9 million in the fourth quarter 2011.

We performed our annual impairment testing of goodwill as of October 1, 2011. In connection with our annual impairment analysis, we determined that the Health Education reporting unit and Culinary Arts reporting unit were impaired as a result of their carrying values exceeding their relative fair values. The decline in fair value for each of these reporting units was primarily a result of the overall decline in new student interest due to economic conditions, new regulatory impacts, negative publicity regarding the industry and extended student decision-making timelines. These factors are expected to negatively impact our future operating results, and as a result the fair value calculation for each of these reporting units declined below their carrying values.

In addition, during the fourth quarter 2011, in conjunction with the quarterly review process, we concluded that certain indicators existed to suggest certain of our reporting units were at risk of failing the first step of the goodwill impairment test as of December 31, 2011. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. These indicators include, but are not limited to, the recent decline in our stock price, loss of key executive leaders and a marked decline in new student interest which negatively impacted our overall student population.

In calculating the fair value for each of our reporting units, we performed extensive valuation analyses, utilizing both income and market approaches, in our goodwill assessment process. The following describes the valuation methodologies used to derive the fair value of our reporting units:

•

Income Approach: To determine the estimated fair value of each reporting unit, we discount the expected cash flows which are developed by management. We estimate our future cash flows after considering current economic conditions and trends, estimated future operating results, our views of growth rates and anticipated future economic and regulatory conditions. The discount rate used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in our future expected cash flows and the rate of return an outside investor would expect to earn. To estimate cash flows beyond the final year of our models, we use a terminal value approach. We incorporate the present value of the resulting terminal value into our estimate of fair value.

•

Market-Based Approach: To corroborate the results of the income approach described above, we estimate the fair value of our reporting units using several market-based approaches, including the guideline company method, which focuses on comparing our risk profile and growth prospects to select reasonably similar publicly traded companies.

The determination of estimated fair value of each reporting unit requires significant estimates and assumptions. 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 making those estimates, actual results could differ from those estimates. We evaluate the merits of each significant assumption, both individually and in the aggregate, used to determine the fair value of each reporting unit for reasonableness.

As a result of the annual impairment test as of October 1, 2011, we recorded goodwill impairment charges of $94.7 million, and $73.7 million within Health Education and Culinary Arts, respectively. Of the total charge, $47.8 million will be deductible for income tax purposes. As of December 31, 2011, following the completion of our additional impairment test on each of the reporting units, the carrying values for each of our reporting units did not exceed their respective fair value which resulted in no impairment to any of our reporting units as of December 31, 2011.

As of December 31, 2011 and 2010, the cost basis, accumulated amortization and net book value of intangible assets for continuing operations are as follows:


	December 31, 2011							December 31, 2010
	Cost		Accumulated Amortization			Net Book Value		Cost		Accumulated Amortization			Net Book Value
	(Dollars in thousands)
Amortizable intangible assets:
Accreditation rights	$	9,212	$	(8,312	)	$	900	$	3,610	$	(602	)	$	3,008
Covenants not-to-compete		59		(25	)		34		62		(11	)		51
Courseware		14,569		(10,394	)		4,175		14,636		(8,770	)		5,866
Other		365		(252	)		113		371		(203	)		168

Amortizable intangible assets, net	$	24,205	$	(18,983	)	$	5,222	$	18,679	$	(9,586	)	$	9,093

Non-amortizable intangible assets:
Accreditation, licensing, and Title IV Program participation rights						$	1,706						$	7,330
Trade names							70,258							93,799

Non-amortizable intangible assets							71,964							101,129

Intangible assets, net						$	77,186						$	110,222

Amortizable intangible assets are amortized on a straight-line basis over their estimated remaining useful lives, which range from less than one year to fifteen years. As of December 31, 2011, net intangible assets include certain accreditation, licensing, and Title IV Program participation 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.

During the second quarter of 2011, we made the decision to simplify our structure and consolidate many of our institutions under one institution for purposes of Title IV Program funding. Accordingly, we determined that the accreditation rights associated with several of our institutions should no longer be classified as indefinite-lived, and were reclassified to definite-lived. We assigned remaining useful lives of up to six months based upon the timing of when the accreditation rights for these institutions were expected to cease to exist. Due to our decision and in accordance with FASB ASC Topic 350, we performed an impairment test for each of these accreditation rights as of June 30, 2011. Fair value of the accreditation rights was determined by using the lost income approach. As a result, we recorded a $2.5 million asset impairment charge in the second quarter 2011 related to several of our institutions. Of the $2.5 million impairment charge, $2.0 million was recorded within Health Education and $0.5 million was recorded within Art & Design. The remaining net book value of $3.1 million related to these accreditation rights was recorded as amortization expense within Health Education through December 31, 2011.

We performed our annual impairment testing of indefinite-lived intangible asset balances as of October 1, 2011 and determined that the carrying value of the Le Cordon Bleu trade name exceeded its estimated fair value. In accordance with FASB ASC Topic 820—Fair Value Measurement, we utilized the relief from royalty method under the income approach, which requires amongst other things, an estimate for a reasonable royalty rate to calculate the estimated fair value of our trade name. The decline in fair value for the Le Cordon Bleu trade name was primarily a result of the overall decline in new student interest due to economic conditions, negative publicity regarding the industry and extended student decision-making timelines. These factors are expected to negatively impact our future operating results, and as a result the fair value calculation for the LCB trade name declined below its carrying value.

In addition, during the fourth quarter 2011, management concluded that certain indicators existed to suggest further impairment of the LCB trade name which resulted in the requirement for additional testing on an interim basis. As discussed above, these indicators include, but are not limited to, the recent decline in our stock price, loss of key executive leaders and a marked decline in new student interest which negatively impacted our overall student population. As a result of the testing performed in 2011, a $20.4 million impairment charge related to the LCB trade name was recorded in the fourth quarter of 2011.

Amortization expense from continuing operations was $7.0 million, $1.2 million and $1.1 million, for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, estimated future amortization expense from continuing operations is as follows:


	(Dollars in thousands)
2012	$	2,476
2013		1,373
2014		692
2015		103
2016		103
2017 and thereafter		475

Total	$	5,222