INTANGIBLE ASSETS

6 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 10: INTANGIBLE ASSETS

Intangible assets relate mainly to acquired business operations. These assets consist of the acquisition fair value of certain identifiable intangible assets acquired and goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

Intangible assets consist of the following (in thousands):

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Amortization Period
Amortizable Intangible Assets:
Student Relationships	$	12,657	$	(8,324)	5 Years
Customer Relationships		42,900		(2,547)	10 Years
Non-compete Agreements		1,640		(1,226)	3 Years
Curriculum/Software		8,143		(2,206)	4 Years
Franchise Contracts		10,783		(1,148)	18 Years
Clinical Agreements		399		(93)	15 Years
Trade Names		1,163		(901)	10 Years
Proprietary Technology		500		(63)	4 Years
Total	$	78,185	$	(16,508)
Indefinite-lived Intangible Assets:
Trade Names	$	110,048
Trademarks		1,645
Ross Title IV Eligibility and Accreditations		14,100
Intellectual Property		13,940
Chamberlain Title IV Eligibility and Accreditations		1,200
Carrington Title IV Eligibility and Accreditations		20,200
AUC Title IV Eligibility and Accreditations		100,000
DeVry Brasil Accreditation		98,718
Total	$	359,851

	June 30, 2016
	Gross Carrying Amount		Accumulated Amortization
Amortizable Intangible Assets:
Student Relationships	$	14,530	$	(7,150)
Customer Relationships		400		(170)
Non-compete Agreements		940		(799)
Curriculum/Software		4,038		(1,914)
Franchise Contracts		10,968		(863)
Clinical Agreements		406		(81)
Trade Names		1,183		(858)
Total	$	32,465	$	(11,835)
Indefinite-lived Intangible Assets:
Trade Names	$	70,731
Trademarks		1,645
Ross Title IV Eligibility and Accreditations		14,100
Intellectual Property		13,940
Chamberlain Title IV Eligibility and Accreditations		1,200
Carrington Title IV Eligibility and Accreditations		20,200
AUC Title IV Eligibility and Accreditations		100,000
DeVry Brasil Accreditation		100,410
Total	$	322,226

	December 31, 2015
	Gross Carrying Amount		Accumulated Amortization
Amortizable Intangible Assets:
Student Relationships	$	11,739	$	(4,128)
Customer Relationships		400		(150)
Test Prep Relationships		808		(741)
Non-compete Agreements		940		(705)
Curriculum/Software		3,692		(1,587)
Outplacement Relationships		3,900		(1,894)
Franchise Contracts		8,861		(451)
Clinical Agreements		328		(55)
Trade Names		957		(645)
Total	$	31,625	$	(10,356)
Indefinite-lived Intangible Assets:
Trade Names	$	63,667
Trademarks		1,645
Ross Title IV Eligibility and Accreditations		14,100
Intellectual Property		13,940
Chamberlain Title IV Eligibility and Accreditations		1,200
Carrington Title IV Eligibility and Accreditations		60,700
AUC Title IV Eligibility and Accreditations		100,000
DeVry Brasil Accreditation		81,380
Total	$	336,632

Amortization expense for amortized intangible assets was $2.4 million and $5.7 million for the three and six months ended December 31, 2016, respectively, and $1.4 million and $2.6 million for the three and six months ended December 31, 2015, respectively. Estimated amortization expense for amortizable intangible assets for the next five fiscal years ending June 30 and in the aggregate, by reporting unit, is as follows (in thousands):

Fiscal Year	DeVry Brasil		Becker		Total
2017	$	3,635	$	7,482	$	11,117
2018		2,912		6,501		9,413
2019		2,093		6,422		8,515
2020		1,474		4,671		6,145
2021		923		4,440		5,363
Thereafter		7,125		19,686		26,811

All amortizable intangible assets except student relationships and customer relationships are being amortized on a straight-line basis. The amount being amortized for student relationships is based on the estimated progression of the students through the respective Faculdade Boa Viagem (“FBV”), Centro Universitário Vale do Ipojuca (“Unifavip”), Damásio Educacional (“Damasio”) and Grupo Ibmec programs, giving consideration to the revenue and cash flow associated with both existing students and new applicants. The amount being amortized for customer relationships related to ACAMS is based on the estimated retention of the customers, giving consideration to the revenue and cash flow associated with these existing customers.

Indefinite-lived intangible assets related to trademarks, trade names, Title IV eligibility, accreditations and intellectual property are not amortized, as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets to the reporting entity.

In accordance with GAAP, goodwill and indefinite-lived intangibles arising from a business combination are not amortized and charged to expense over time. Instead, these assets must be reviewed annually for impairment or more frequently if circumstances arise indicating potential impairment. DeVry Group’s annual impairment review was most recently completed during the fourth quarter of fiscal year 2016, at which time there were impairment losses recorded related to Carrington goodwill and the Carrington Accreditation and Title IV Eligibility indefinite-lived intangible asset totaling $48.2 million. No impairment loss associated with recorded goodwill or indefinite-lived intangible assets for any other reporting unit was realized as estimated fair values exceeded carrying amounts.

DeVry Group had six reporting units which contained goodwill as of the second quarter of fiscal year 2017. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management and the Board. If the carrying amount of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized to the extent the “implied fair value” of the reporting unit goodwill is less than the carrying amount of the goodwill. In analyzing the results of operations and business conditions of all six reporting units as of December 31, 2016, it was determined that no triggering event had occurred during the first six months of fiscal year 2017 that would indicate the carrying value of a reporting unit had exceeded its fair value.

For indefinite-lived intangible assets, management first analyzes qualitative factors including results of operations and business conditions of the seven reporting units that contained indefinite-lived intangible assets, significant changes in cash flows at the individual indefinite-lived intangible asset level, if applicable, as well as how much previously calculated fair values exceed carrying values to determine if it is more likely than not that the intangible assets associated with these reporting units have been impaired. Based on its analysis, management has determined that, as of December 31, 2016, no triggering event had occurred during the first six months of fiscal year 2017 that would indicate the carrying value of an indefinite-lived intangible asset had exceeded its fair value.

These interim triggering event conclusions were based on the fact that the qualitative analysis of DeVry Group’s reporting units and indefinite-lived intangible assets resulted in no impairment indicators as of the end of fiscal year 2016, except at the Carrington and DeVry University reporting units, and that no interim events or deviations from planned operating results occurred as of December 31, 2016, that would cause management to reassess these conclusions.

In regards to Carrington, the first six months of fiscal year 2017 revenue was in-line with and operating income was better than the fiscal year 2017 operating plan which was used in the May 31, 2016 impairment analysis; thus, management believes that no indicator of further impairment currently exists with this reporting unit. Should declines in student enrollment at Carrington result in financial performance that is significantly below management expectations, the carrying value of this reporting unit may exceed its fair value and indefinite-lived intangible assets could be impaired. This could require a write-off of up to $20.2 million.

Although the DeVry University reporting unit experienced a 23.9% decline in revenue in the first six months of fiscal year 2017 as compared to the year-ago period, operating income was in-line with the operating plan which was used in the May 31, 2016 impairment analysis. This reporting unit is expected to meet planned positive operating results for fiscal year 2017. As a result, management did not believe business conditions had deteriorated such that it was more likely than not that the fair value of DeVry University was below carrying value for this reporting unit or its associated indefinite-lived intangible assets as of December 31, 2016. Based on the May 31, 2016 impairment review, DeVry University’s current and forecasted profitability is sufficient to maintain a fair value greater than its carrying value. The fair value of this reporting unit exceeded its carrying value by 6% as of the May 31, 2016 valuation date. DeVry University has been able to adjust operating expenses to offset in excess of 90% of the revenue declines experienced over the last two years. This has resulted in positive cash flows sufficient to produce a fair value in excess of the carrying value of this reporting unit. Management monitors enrollment and financial performance of the reporting unit. Should management not be able to adjust costs to offset future declines in student enrollment and revenue, resulting in financial performance that is significantly below management expectations, the carrying value of this reporting unit may exceed its fair value, and goodwill and indefinite-lived intangible assets could be impaired. Also, regulatory changes and the outcome of legal or regulatory actions could have a material adverse effect on the financial condition, results of operations and cash flows of DeVry University and impose significant restrictions on the ability of DeVry University to operate. These scenarios could require a write-off of up to $23.8 million of indefinite-lived intangible assets and goodwill.

Operating income and cash flows at all other reporting units for the first six months of fiscal year 2017 were not materially different from the budgeted amounts used in the impairment analysis as of May 31, 2016. Full year operating results are also forecast to not materially differ from the full year operating plan. Thus, management does not believe any of the reporting units or their associated indefinite-lived intangible assets fair values would have declined enough to fall below the carrying values as of December 31, 2016.

Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. Management bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates which could lead to additional impairments of intangible assets.

At December 31, 2016, intangible assets from business combinations totaled $421.5 million and goodwill totaled $854.8 million. Together, these assets equaled approximately 55% of total assets as of such date, and any impairment could significantly affect future results of operations.

The table below summarizes goodwill balances by reporting unit (in thousands):

	December 31,		June 30		December 31,
Reporting Unit	2016		2016		2015
AUC	$	68,321	$	68,321	$	68,321
RUSM and RUSVM		237,173		237,173		237,173
Chamberlain		4,716		4,716		4,716
Carrington		-		-		5,811
DeVry Brasil		216,050		223,558		172,274
Becker		306,382		32,043		32,503
DeVry University		22,196		22,196		22,196
Total	$	854,838	$	588,007	$	542,994

The table below summarizes goodwill balances by reporting segment (in thousands):

	December 31,		June 30,		December 31,
Reporting Segment	2016		2016		2015
Medical and Healthcare	$	310,210	$	310,210	$	316,021
International and Professional Education		522,432		255,601		204,777
Business, Technology and Management		22,196		22,196		22,196
Total	$	854,838	$	588,007	$	542,994

The table below summarizes the changes in the carrying amount of goodwill by segment (in thousands):

	Medical and Healthcare				International		Business,
			Accumulated		and		Technology
			Impairment		Professional		and
	Gross		Losses		Education		Management		Total
Balance at June 30, 2014	$	495,927	$	(86,933)	$	88,689	$	22,196	$	519,879
Acquisitions		-		-		55,915		-		55,915
Foreign currency exchange rate changes		-		-		(23,465)		-		(23,465)
Balance at June 30, 2015		495,927		(86,933)		121,139		22,196		552,329
Acquisitions		-		-		104,613		-		104,613
Impairments		-		(92,973)		-		-		(92,973)
Foreign currency exchange rate changes		-		-		(20,975)		-		(20,975)
Balance at December 31, 2015		495,927		(179,906)		204,777		22,196		542,994
Purchase Accounting Adjustments		-		-		4,575		-		4,575
Acquisitions		-		-		11,394		-		11,394
Impairments		-		(5,811)		-		-		(5,811)
Foreign currency exchange rate changes		-		-		34,855		-		34,855
Balance at June 30, 2016		495,927		(185,717)		255,601		22,196		588,007
Purchase Accounting Adjustments		-		-		(3,122)		-		(3,122)
Acquisitions		-		-		274,620		-		274,620
Foreign currency exchange rate changes		-		-		(4,667)		-		(4,667)
Balance at December 31, 2016	$	495,927	$	(185,717)	$	522,432	$	22,196	$	854,838

The increase in the goodwill balance from June 30, 2016 in the International and Professional Education segment is the result of the addition of $274.6 million with the acquisition of ACAMS. The increase was partially offset by a change in the value of the Brazilian Real as compared to the U.S. dollar. Since DeVry Brasil goodwill is recorded in local Brazilian currency, fluctuations in the value of the Brazilian Real in relation to the U.S. dollar will cause changes in the balance of this asset.

The table below summarizes the indefinite-lived intangible asset balances by reporting segment (in thousands):

	December 31,		June 30,		December 31,
Reporting Segment	2016		2016		2015
Medical and Healthcare	$	157,700	$	157,700	$	198,200
International and Professional Education		200,506		162,881		136,787
Business, Technology and Management		1,645		1,645		1,645
Total	$	359,851	$	322,226	$	336,632

Total indefinite-lived intangible assets increased by $37.6 million from June 30, 2016. The increase is the result of the addition of $39.9 million with the acquisition of ACAMS. The increase was partially offset by a change in the value of the Brazilian Real as compared to the U.S. dollar. Since DeVry Brasil intangible assets are recorded in the local Brazilian currency, fluctuations in the value of the Brazilian Real in relation to the U.S. dollar will cause changes in the balance of these assets.

- 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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