3. INVESTMENT IN AND LOANS TO AFFILIATES:

Investment in and loans to affiliates

The table below presents the carrying amount of investments in and loans to affiliates as of March 31, 2013 and June 30, 2012:

	March 31, 2013		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	43,078	$	59,683
Provalliance	—		101,304
MY Style	230		—
	$	43,308	$	160,987

The table below presents the notes receivable from affiliates as of March 31, 2013 and June 30, 2012 recorded within other current assets on the Condensed Consolidated Balance Sheet:

	March 31, 2013		June 30, 2012
	(Dollars in thousands)
Empire Education Group, Inc.	$	—	$	26,412
MY Style	567		2,251
	$	567	$	28,663

Empire Education Group, Inc.

On August 1, 2007, the Company contributed its 51 wholly-owned accredited cosmetology schools to Empire Education Group, Inc. (EEG) in exchange for a 49.0 percent equity interest in EEG. In January 2008, the Company’s effective ownership interest increased to 55.1 percent. EEG operates 109 accredited cosmetology schools.

During the three months ended December 31, 2012, to reflect the continuation of declining enrollment, revenue and profitability in the for-profit secondary educational market, EEG updated its budgeted financial projections for future periods. As a result, the Company recorded a $17.9 million other than temporary impairment charge on its investment in EEG. The Company did not receive a tax benefit on the impairment charge. The exposure to loss related to the Company’s involvement with EEG is the carrying value of the investment. The Company did not impair its investment in EEG during the three months ended March 31, 2013 as EEG’s operating performance exceeded the financial projections utilized in the December 2012 impairment analysis. Due to economic, regulatory and other factors, the Company may be required to record additional noncash impairment charges related to its investment in EEG and such noncash impairments could be material to the Company’s consolidated balance sheet and results of operations. In addition, EEG may be required to record noncash impairment charges related to long-lived assets and goodwill, and our share of such noncash impairment charges could be material to the Company’s consolidated balance sheet and results of operations. The Company’s share of EEG’s goodwill balances as of March 31, 2013 is approximately $16 million. Based on the Company’s work associated with the investment impairment recorded during the three months ended December 31, 2012, the Company’s estimate of EEG’s fair value exceeds carrying value by 5 percent. Any meaningful underperformance against plan or reduced outlook by EEG, changes to the carrying value of EEG or further erosion in valuations of the for-profit secondary educational market could lead to a goodwill impairment charge recorded by EEG for which the Company would record 55.1 percent of the impairment given the Company’s present ownership.

During the three months ended March 31, 2013 and 2012, the Company recorded $1.2 and $1.5 million, respectively, of equity earnings related to its investment in EEG. During the nine months ended March 31, 2013 and 2012, the Company recorded $1.3 and $4.0 million, respectively, of equity earnings related to its investment in EEG.

The Company previously provided EEG with a $15.0 million revolving credit facility and outstanding loan, both of which matured during the three months ended December 31, 2012. The Company received $26.4 million in principal payments on the loan and revolving credit facility during the nine months ended March 31, 2013. During the three months ended March 31, 2012, the Company recorded $0.1 million of interest income related to the loan and revolving credit facility. During the nine months ended March 31, 2013 and 2012, the Company recorded less than $0.1 and $0.4 million, respectively, of interest income related to the loan and revolving credit facility.

The table below presents the summarized Statement of Operations information for EEG for the nine months ended March 31, 2013 and 2012:

	March 31, 2013		March 31, 2012
	(Dollars in thousands)
Gross revenues	$	126,399	$	139,180
Gross profit	41,664		50,769
Operating income	4,752		13,256
Net income	2,267		7,460

Provalliance

On September 27, 2012, the Company sold its 46.7 percent equity interest in Provalliance to the Provost Family for a purchase price of €80 million. During the three months ended September 30, 2012 the Company recorded a $0.6 million decrease in the fair value of the Provalliance Equity Put that automatically terminated upon closing of the share purchase agreement. Due to the sale of the Company’s investment in Provalliance, the Company liquidated its foreign entities with Euro denominated operations. During the three months ended September 30, 2012, the Company recognized $33.8 million from accumulated other comprehensive income into earnings, primarily representing a non-taxable foreign currency gain as a result of the liquidated Euro denominated operations.