NOTE 8: 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):

	As of September 30, 2016
	Gross Carrying Amount		Accumulated Amortization			Weighted Average Amortization Period
Amortizable Intangible Assets:
Student Relationships	$	14,333	$	(8,107	)	5 Years
Customer Relationships		42,900		(1,367	)	10 Years
Non-compete Agreements		1,640		(1,012	)	3 Years
Curriculum/Software		8,151		(1,635	)	4 Years
Franchise Contracts		10,818		(1,002	)	18 Years
Clinical Agreements		401		(87	)	15 Years
Trade Names		1,167		(875	)	10 Years
Proprietary Technology		500		(31	)	4 Years
Total	$	79,910	$	(14,116	)
Indefinite-lived Intangible Assets:
Trade Names	$	110,162
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		99,048
Total	$	360,295

	As of September 30, 2015
	Gross Carrying Amount		Accumulated Amortization
Amortizable Intangible Assets:
Student Relationships	$	6,111	$	(3,360	)
Customer Relationships		400		(140	)
Test Prep Relationships		808		(539	)
Non-compete Agreements		940		(658	)
Curriculum/Software		1,922		(1,506	)
Outplacement Relationships		3,900		(1,829	)
Franchise Contracts		8,864		(328	)
Clinical Agreements		328		(49	)
Trade Names		957		(622	)
Total	$	24,230	$	(9,031	)
Indefinite-lived Intangible Assets:
Trade Names	$	45,566
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		67,200
AUC Title IV Eligibility and Accreditations		100,000
DeVry Brasil Accreditation		45,291
Total	$	288,942

Amortization expense for amortized intangible assets was $3.3 million and $1.2 million for the three months ended September 30, 2016 and 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	$	4,704	$	7,482	$	12,186
2018		3,281		6,501		9,782
2019		2,259		6,422		8,681
2020		1,529		4,671		6,200
2021		933		4,440		5,373
Thereafter		7,149		19,686		26,835

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 first quarter of fiscal year 2017. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management. 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 September 30, 2016, it was determined that no triggering event had occurred 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 September 2016, no triggering event had occurred 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 September 30, 2016, that would cause management to reassess these conclusions.

In regards to Carrington, first quarter of fiscal year 2017 revenue and operating income was better than those projected in 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 24.2% decline in revenue as compared to the year-ago quarter and generated an operating loss (as planned) in the first quarter of fiscal year 2017, 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 September 30, 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 in the first quarter of fiscal year 2017 was not materially different from the budgeted amounts used in the impairment analysis as of May 31, 2016; 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 September 30, 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 September 30, 2016, intangible assets from business combinations totaled $426.1 million and goodwill totaled $854.2 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 as of September 30, 2016 (in thousands):

Reporting Unit	As of September 30, 2016
American University of the Caribbean School of Medicine	$	68,321
Ross University School of Medicine and Ross University School of Veterinary Medicine		237,173
Chamberlain College of Nursing		4,716
DeVry Brasil		215,140
Becker Professional Education		306,642
DeVry University		22,196
Total	$	854,188

The table below summarizes goodwill balances by reporting segment as of September 30, 2016 (in thousands):

Reporting Segment	As of September 30, 2016
Medical and Healthcare	$	310,210
International and Professional Education		521,782
Business, Technology and Management		22,196
Total	$	854,188

The table below summarizes the changes in the carrying amount of goodwill by segment as of September 30, 2016 (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
Foreign currency exchange rate changes		-		-			(19,150	)		-		(19,150	)
Balance at September 30, 2015		495,927		(86,933	)		101,989			22,196		533,179
Purchase Accounting Adjustment		-		-			4,575			-		4,575
Acquisitions		-		-			116,007			-		116,007
Impairments		-		(98,784	)		-			-		(98,784	)
Foreign currency exchange rate changes		-		-			33,030			-		33,030
Balance at June 30, 2016		495,927		(185,717	)		255,601			22,196		588,007
Purchase Accounting Adjustment		-		-			(4,481	)		-		(4,481	)
Acquisitions		-		-			274,672			-		274,672
Foreign currency exchange rate changes		-		-			(4,010	)		-		(4,010	)
Balance at September 30, 2016	$	495,927	$	(185,717	)	$	521,782		$	22,196	$	854,188

The increase in the goodwill balance from June 30, 2016 in the International and Professional Education segment is the result of the addition of $274.7 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 currency, fluctuations in the respective local currency’s value 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 as of September 30, 2016 (in thousands):

Reporting Segment	As of September 30, 2016
Medical and Healthcare	$	157,700
International and Professional Educational		200,950
Business, Technology and Management		1,645
Total	$	360,295

Total indefinite-lived intangible assets increased by $38.1 million from June 30, 2016. The increase is the result of the addition of $39.9 million with the acquisition of ACAMS. This 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.