Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

As a result of continued declines in student enrollments at KHE and the challenging industry operating environment, the Company performed an interim impairment review of its goodwill and long-lived assets at the KHE reporting unit. Due to the complexity and effort required to estimate the fair value of the KHE reporting unit in step one of the impairment test and the fair value of the assets and liabilities of the KHE reporting unit in the step two analysis, the Company derived the fair value estimates based on preliminary assumptions and analysis that are subject to change. The KHE reporting unit failed the preliminary step one goodwill test. As a result of the preliminary step two analysis, the Company recorded an estimated $248.6 million goodwill impairment charge. The Company estimated the fair value of the KHE reporting unit utilizing a discounted cash flow model, supported by a market approach. A substantial portion of the estimated impairment charge is due to the amount of unrecognized intangible assets identified in the preliminary step two analysis. Any adjustment to the estimated impairment charge will be recorded in the fourth quarter of 2015.

In the second quarter of 2014, as a result of regulatory changes impacting Kaplan's operations in China, Kaplan recorded an intangible asset impairment charge of $7.8 million, reported in discontinued operations. The Company estimated the fair value of the student and customer relationships using an income approach.

Amortization of intangible assets for the three months ended September 30, 2015 and 2014 was $4.5 million and $7.4 million, respectively. Amortization of intangible assets for the nine months ended September 30, 2015 and 2014 was $13.9 million and $13.0 million, respectively. Amortization of intangible assets is estimated to be approximately $4 million for the remainder of 2015, $17 million in 2016, $14 million in 2017, $13 million in 2018, $12 million in 2019 and $22 million thereafter.

In July 2014, the cable division sold wireless spectrum licenses that were purchased in 2006; a pre-tax non-operating gain of $75.2 million was recorded in the third quarter of 2014 in connection with these sales. As a result of the Cable spin-off, this amount is now recorded in discontinued operations.

The changes in the carrying amount of goodwill, by segment, were as follows:



(in thousands)	Education			Cable			Television Broadcasting		Other Businesses			Total
Balance as of December 31, 2014
Goodwill	$	1,057,226		$	85,488		$	168,345	$	145,992		$	1,457,051
Accumulated impairment losses	(102,259		)	—			—		(6,082		)	(108,341		)
	954,967			85,488			168,345		139,910			1,348,710
Measurement period adjustment	—			—			—		4,570			4,570
Impairment	(248,591		)	—			—		—			(248,591		)
Dispositions	(33,502		)	(85,488		)	—		(7,819		)	(126,809		)
Foreign currency exchange rate changes	(30,524		)	—			—		—			(30,524		)
Balance as of September 30, 2015
Goodwill	993,200			—			168,345		142,743			1,304,288
Accumulated impairment losses	(350,850		)	—			—		(6,082		)	(356,932		)
	$	642,350		$	—		$	168,345	$	136,661		$	947,356

The Company recorded a $4.6 million measurement period adjustment in the second quarter of 2015 upon the finalization of the purchase accounting related to deferred income taxes in connection with the acquisition of Residential Healthcare, Inc. The balance sheet as of December 31, 2014 has not been revised for the measurement period adjustment as the Company believes it is not material to the Company's financial position.

The changes in carrying amount of goodwill at the Company’s education division were as follows:



(in thousands)	Higher Education			Test Preparation			Kaplan International			Total
Balance as of December 31, 2014
Goodwill	$	409,884		$	166,098		$	481,244		$	1,057,226
Accumulated impairment losses	—			(102,259		)	—			(102,259		)
	409,884			63,839			481,244			954,967
Impairment	(248,591		)	—			—			(248,591		)
Dispositions	(28,738		)	—			(4,764		)	(33,502		)
Foreign currency exchange rate changes	(280		)	—			(30,244		)	(30,524		)
Balance as of September 30, 2015
Goodwill	380,866			166,098			446,236			993,200
Accumulated impairment losses	(248,591		)	(102,259		)	—			(350,850		)
	$	132,275		$	63,839		$	446,236		$	642,350

Other intangible assets consist of the following:



		As of September 30, 2015						As of December 31, 2014
(in thousands)	Useful Life Range	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
Noncompete agreements	2–5 years	$	1,681	$	1,232	$	449	$	2,500	$	1,590	$	910
Student and customer relationships	2–10 years	86,839		37,528		49,311		104,685		47,539		57,146
Databases and technology	3–5 years	10,518		9,367		1,151		10,501		8,827		1,674
Trade names and trademarks	2–10 years	53,140		22,709		30,431		55,452		19,724		35,728
Other	1–6 years (1)	2,184		1,712		472		8,969		7,480		1,489
		$	154,362	$	72,548	$	81,814	$	182,107	$	85,160	$	96,947
Indefinite-Lived Intangible Assets
Franchise agreements		$	—					$	496,321
Licensure and accreditation		994						6,781
Other		13,651						13,651
		$	14,645					$	516,753

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(1)	The Company’s other amortized intangible assets maximum useful life was 25 years as of December 31, 2014.

- 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.

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