Goodwill And Intangible Assets

6 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

Goodwill

In connection with the Transaction on June 1, 2006, the Company recorded approximately $2.6 billion of goodwill, which was allocated to its four reporting units: The Art Institutes, Argosy University, Brown Mackie Colleges and South University. The Company formally evaluates the carrying amount of goodwill for each of its reporting units on April 1 of each fiscal year. In addition, the Company performs an evaluation on an interim basis if it determines that recent events or prevailing conditions indicate a potential impairment of goodwill. A significant amount of judgment is involved in determining whether an indicator of impairment has occurred between annual impairment tests. These indicators include, but are not limited to, overall financial performance such as adverse changes in recent forecasts of operating results, industry and market considerations, the Company's market capitalization, updated business plans and regulatory and legal developments.

As disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Use of Estimates and Critical Accounting Policies" of the Company's 2013 Annual Report on Form 10-K, the fair value of The Art Institutes reporting unit exceeded its carrying value by more than 15 percent at March 31, 2013. During the quarter ended December 31, 2013, management observed declining application trends for future academic terms, particularly at The Art Institutes reporting unit, and performed a sensitivity analysis of its fair value using the most recently completed long range forecast and available earnings multiples of the Company's peer group.

As a result of the sensitivity analysis performed in the current quarter, management continues to believe that the fair value of The Art Institutes exceeds its carrying value by more than 10 percent at December 31, 2013; accordingly, the Company does not believe that it is more-likely-than-not that the fair value of The Art Institutes has decreased below its carrying value at December 31, 2013. Management also considered the results of the most recently completed long range forecast and available earnings multiples for the potential impact on the fair values of the Argosy University and South University reporting units and, based on its analysis, management does not believe that it is more-likely-than-not that the fair values of these reporting units have decreased below their carrying values at December 31, 2013. Consequently, management concluded that none of the Company's reporting units experienced any triggering event that would have required a step one interim goodwill impairment analysis at December 31, 2013.

A roll forward of the Company's consolidated goodwill balance from June 30, 2012 to June 30, 2013 is as follows (in thousands):



	June 30, 2012		Impairment			June 30, 2013
The Art Institutes	$	861,619	$	(294,460	)	$	567,159
Argosy University	63,445		—			63,445
South University	38,486		—			38,486
Total goodwill	$	963,550	$	(294,460	)	$	669,090

The entire goodwill balance attributed to the Brown Mackie Colleges reporting unit was written off in connection with impairment charges incurred in fiscal 2012; therefore, it was not considered in the sensitivity analysis described above. The Company's goodwill balance did not change between June 30, 2013 and December 31, 2013.

Intangible Assets

The Company also evaluates indefinite-lived intangible assets annually on April 1 for impairment and on an interim basis if it determines that recent events or prevailing conditions indicate these assets could be potentially impaired. The Company does not believe that it is more-likely-than-not that the fair values of its indefinite-lived intangible assets have decreased below their respective carrying values at December 31, 2013; consequently, management concluded that no triggering event occurred in the current quarter that would have required an interim evaluation of these assets. Intangible assets other than goodwill consisted of the following amounts (in thousands):



	December 31, 2013					June 30, 2013					December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
The Art Institutes trade name	$	190,000	$	—		$	190,000	$	—		$	218,000	$	—
Licensing, accreditation and Title IV program participation	95,862		—			95,862		—			95,862		—
Curriculum and programs	45,315		(33,800		)	43,575		(32,596		)	41,172		(30,392		)
Student contracts, applications and relationships	39,511		(37,937		)	39,511		(37,381		)	39,511		(36,826		)
Favorable leases and other	19,403		(18,375		)	19,424		(17,960		)	19,435		(17,401		)
Total intangible assets	$	390,091	$	(90,112	)	$	388,372	$	(87,937	)	$	413,980	$	(84,619	)

The Company considers The Art Institutes reporting unit trade name to have a useful life similar to that of the overall business and assigned it an indefinite life for accounting purposes. State licenses and accreditations of the Company’s schools, as well as their eligibility for Title IV program participation, are periodically renewed in cycles ranging from every one to up to every ten years depending upon government and accreditation regulations. Because the Company considers these renewal processes to be a routine aspect of the overall business, these assets are originally assigned indefinite lives and annual costs to renew are expensed as incurred.

Amortization of intangible assets was approximately $1.5 million and $1.6 million for the three months ended December 31, 2013 and 2012, respectively, and $3.0 million and $3.2 million for the six months ended December 31, 2013 and 2012. Total estimated amortization of the Company’s intangible assets for each of the fiscal years ending June 30, 2014 through 2018 was as follows at December 31, 2013 (in thousands):



Fiscal years	Amortization Expense
2014 (remainder)	$	2,882
2015	5,266
2016	3,910
2017	2,008
2018	51

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References+ Details