INVESTMENT IN AFFILIATES:

Investment in affiliates

The table below presents the carrying amount of investments in affiliates:



	March 31, 2014		June 30, 2013
	(Dollars in thousands)
Empire Education Group, Inc. (1)	$	44,783	$	43,098
MY Style	212		221
	$	44,995	$	43,319

_____________________________

(1)

The Company utilized consolidation of variable interest entities guidance to determine whether or not its investment in EEG was a variable interest entity (VIE), and if so, whether the Company was the primary beneficiary of the VIE. The Company concluded that EEG was not a VIE based on the fact that EEG had sufficient equity at risk. The Company accounts for EEG as an equity investment under the voting interest model, as the Company has granted the other shareholder of EEG an irrevocable proxy to vote a certain number of the Company’s shares such that the other shareholder of EEG has voting control of 51.0% of EEG’s common stock, as well as the right to appoint four of the five members of EEG’s Board of Directors.

Empire Education Group, Inc.

During the three months ended March 31, 2014 and 2013, the Company recorded $0.0 and $1.2 million, respectively, of equity earnings related to its investment in Empire Education Group, Inc. (EEG). During the nine months ended March 31, 2014 and 2013, the Company recorded $1.7 and $1.3 million, respectively, of equity earnings related to its investment in EEG. The exposure to loss related to the Company’s involvement with EEG is the carrying value of the investment.

During the nine months ended March 31, 2013, the Company recorded an other than temporary impairment charge on its investment in EEG of $17.9 million. This non-cash charge was the result of EEG updating its financial projections for future periods to reflect declining enrollment, revenue and profitability in the for-profit secondary educational market during the nine months ended March 31, 2013.

Based on the Company’s fiscal year 2013 assessment of the carrying value of its investment in EEG, the Company’s estimate of EEG’s fair value exceeds carrying value by approximately 5 percent. The Company continues to monitor EEG’s performance and trends in the for-profit secondary educational market to assess the carrying value of its investment. In the event EEG's performance or trends change unfavorably, EEG could be required to impair its goodwill. As of March 31, 2014, the Company’s share of EEG’s goodwill balance is approximately $16 million.

MY Style

During the nine months ended March 31, 2014, the Company recovered $3.1 million on its previously impaired investments in MY Style’s parent company, Yamano Holding Corporation (Yamano), reported in equity in income (loss) of affiliated companies on the unaudited Condensed Consolidated Statement of Operations. During fiscal year 2011, the Company had estimated the fair values of the Yamano Class A and Class B Preferred Stock to be negligible and recorded an other than temporary non-cash impairment.