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INTANGIBLE ASSETS | 3 Months Ended
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Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract] |
INTANGIBLE ASSETS | NOTE 9: 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):
|  | September 30, 2018 |  |  |  |
|  | Gross ‎ Carrying ‎ Amount |  |  | Accumulated ‎ Amortization |  |  | Weighted Average ‎ Amortization ‎ Period |
Amortizable Intangible Assets: |  |  |  |  |  |  |  |  |  |  |  |
Student Relationships |  | $ | 7,713 |  |  | $ | (6,799 | ) |  |  | 5 Years |
Customer Relationships |  |  | 42,900 |  |  |  | (10,756 | ) |  |  | 10​​​​​​​ Years |
Curriculum/Software |  |  | 6,755 |  |  |  | (4,730 | ) |  |  | 4 Years |
Franchise Contracts |  |  | 8,677 |  |  |  | (1,768 | ) |  |  | 18 Years |
Clinical Agreements |  |  | 321 |  |  |  | (112 | ) |  |  | 15 Years |
Trade Names |  |  | 936 |  |  |  | (889 | ) |  |  | 10 Years |
Proprietary Technology |  |  | 500 |  |  |  | (281 | ) |  |  | 4 Years |
Total |  | $ | 67,802 |  |  | $ | (25,335 | ) |  |  |  |
Indefinite-Lived Intangible Assets: |  |  |  |  |  |  |  |  |  |  |  |
Trade Names |  | $ | 104,832 |  |  |  |  |  |  |  |  |
Ross Title IV Eligibility and Accreditations |  |  | 14,100 |  |  |  |  |  |  |  |  |
Intellectual Property |  |  | 13,940 |  |  |  |  |  |  |  |  |
Chamberlain Title IV Eligibility and Accreditations |  |  | 1,200 |  |  |  |  |  |  |  |  |
AUC Title IV Eligibility and Accreditations |  |  | 100,000 |  |  |  |  |  |  |  |  |
Adtalem Brazil Accreditation |  |  | 79,056 |  |  |  |  |  |  |  |  |
Total |  | $ | 313,128 |  |  |  |  |  |  |  |  |
|  | June 30, 2018 |
|  | Gross ‎ Carrying ‎ Amount |  |  | Accumulated ‎ Amortization |
Amortizable Intangible Assets: |  |  |  |  |  |  |  |
Student Relationships |  | $ | 8,193 |  |  | $ | (6,972 | )
Customer Relationships |  |  | 42,900 |  |  |  | (9,598 | )
Non-compete Agreements |  |  | 700 |  |  |  | (700 | )
Curriculum/Software |  |  | 6,833 |  |  |  | (4,265 | )
Franchise Contracts |  |  | 9,064 |  |  |  | (1,720 | )
Clinical Agreements |  |  | 336 |  |  |  | (112 | )
Trade Names |  |  | 976 |  |  |  | (904 | )
Proprietary Technology |  |  | 500 |  |  |  | (250 | )
Total |  | $ | 69,502 |  |  | $ | (24,521 | )
Indefinite-Lived Intangible Assets: |  |  |  |  |  |  |  |
Trade Names |  | $ | 106,132 |  |  |  |  |
Ross Title IV Eligibility and Accreditations |  |  | 14,100 |  |  |  |  |
Intellectual Property |  |  | 13,940 |  |  |  |  |
Chamberlain Title IV Eligibility and Accreditations |  |  | 1,200 |  |  |  |  |
AUC Title IV Eligibility and Accreditations |  |  | 100,000 |  |  |  |  |
Adtalem Brazil Accreditation |  |  | 82,578 |  |  |  |  |
Total |  | $ | 317,950 |  |  |  |  |
|  | September 30, 2017 |
|  | Gross ‎ Carrying ‎ Amount |  |  | Accumulated ‎ Amortization |
Amortizable Intangible Assets: |  |  |  |  |  |  |  |
Student Relationships |  | $ | 11,561 |  |  | $ | (8,860 | )
Customer Relationships |  |  | 42,900 |  |  |  | (6,092 | )
Non-compete Agreements |  |  | 700 |  |  |  | (674 | )
Curriculum/Software |  |  | 7,243 |  |  |  | (2,887 | )
Franchise Contracts |  |  | 11,088 |  |  |  | (1,643 | )
Clinical Agreements |  |  | 411 |  |  |  | (116 | )
Trade Names |  |  | 1,196 |  |  |  | (1,017 | )
Proprietary Technology |  |  | 500 |  |  |  | (156 | )
Total |  | $ | 75,599 |  |  | $ | (21,445 | )
Indefinite-Lived Intangible Assets: |  |  |  |  |  |  |  |
Trade Names |  | $ | 111,010 |  |  |  |  |
Ross Title IV Eligibility and Accreditations |  |  | 14,100 |  |  |  |  |
Intellectual Property |  |  | 13,940 |  |  |  |  |
Chamberlain Title IV Eligibility and Accreditations |  |  | 1,200 |  |  |  |  |
AUC Title IV Eligibility and Accreditations |  |  | 100,000 |  |  |  |  |
Adtalem Brazil Accreditation |  |  | 101,512 |  |  |  |  |
Total |  | $ | 341,762 |  |  |  |  |
Amortization expense for amortized intangible assets was $2.1 million and $2.5 million for the three months ended September 30, 2018 and 2017, 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):
|  | Professional |  |  | Adtalem |  |  |  |
Fiscal Year |  | Education |  |  | Brazil |  |  | Total |
2019 |  | $ | 6,422 |  |  | $ | 1,654 |  |  | $ | 8,076 |
2020 |  |  | 4,671 |  |  |  | 1,216 |  |  |  | 5,887 |
2021 |  |  | 4,440 |  |  |  | 742 |  |  |  | 5,182 |
2022 |  |  | 4,300 |  |  |  | 503 |  |  |  | 4,803 |
2023 |  |  | 4,119 |  |  |  | 503 |  |  |  | 4,622 |
Thereafter |  |  | 11,268 |  |  |  | 4,727 |  |  |  | 15,995 |
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 Damásio Educacional (“Damasio”) and Grupo Ibmec Educacional S.A. (“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 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. Adtalem’s annual impairment review was most recently completed as of May 31, 2018, at which time, there was no impairment loss associated with recorded goodwill or indefinite-lived intangible assets for any reporting unit. Adtalem has five reporting units that contained goodwill as of the first quarter of fiscal year 2019. 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 to goodwill is recognized. In analyzing the results of operations and business conditions of all the reporting units, as of September 30, 2018, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value. Adtalem has five reporting units that contained indefinite-lived intangible assets as of the first quarter of fiscal year 2019. For indefinite-lived intangible assets, management first analyzes qualitative factors including results of operations and business conditions of the five 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. Management does not believe the effects of Hurricanes Irma and Maria created a triggering event that would require an impairment analysis of AUC’s or RUSM’s indefinite-lived intangible assets and goodwill. Damage to physical property is being repaired with the majority of costs expected to be reimbursable by insurance proceeds. The September 2017 semesters at both institutions were completed with minimal lost students and revenue and commencement of future semesters was not impacted. Management believes it is probable that the response to the crisis and its ability to continue providing educational services demonstrates AUC’s and RUSM’s ability to generate future revenue and operating results sufficient to maintain fair values of these assets in excess of their carrying values. These interim triggering event conclusions were based on the fact that the annual impairment review of Adtalem’s reporting units and indefinite-lived intangible assets resulted in no impairment indicators as of the end of fiscal year 2018, and that no interim events or deviations from planned operating results occurred as of September 30, 2018, that would cause management to reassess these conclusions. On August 3, 2018, Adtalem announced plans to relocate RUSM to Barbados from its temporary location in Knoxville, Tennessee at facilities owned by Lincoln Memorial University (“LMU”) and a facility on St Kitts. Management believes the values of RUSM’s goodwill and indefinite-lived intangible assets will not be affected by this move. The Trade Name will continue to be used and we expect to receive the approval of the U.S. Department of Education (“ED”) to operate in Barbados prior to the move. No new accreditation is necessary, RUSM’s secondary accreditor the Caribbean Accreditation Authority for Education in Medicine and other Health Professions (“CAAM-HP”) will become its primary accreditor upon the start of the January 2019 semester, pending approval by ED. CAAM-HP is authorized by the government of Barbados to accredit medical programs. 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 or goodwill. As of September 30, 2018, intangible assets from business combinations totaled $355.6 million and goodwill totaled $805.3 million. Together, these assets equaled 49% 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):
|  | September 30, |  |  | June 30, |  |  | September 30, |
Reporting Unit |  | 2018 |  |  | 2018 |  |  | 2017 |
Chamberlain |  | $ | 4,716 |  |  | $ | 4,716 |  |  | $ | 4,716 |
AUC |  |  | 68,321 |  |  |  | 68,321 |  |  |  | 68,321 |
RUSM and RUSVM |  |  | 237,173 |  |  |  | 237,173 |  |  |  | 237,173 |
Professional Education |  |  | 317,029 |  |  |  | 317,699 |  |  |  | 306,776 |
Adtalem Brazil |  |  | 178,046 |  |  |  | 185,978 |  |  |  | 221,683 |
Total |  | $ | 805,285 |  |  | $ | 813,887 |  |  | $ | 838,669 |
The table below summarizes goodwill balances by reporting segment (in thousands):
|  | September 30, |  |  | June 30, |  |  | September 30, |
Reporting Segment |  | 2018 |  |  | 2018 |  |  | 2017 |
Medical and Healthcare |  | $ | 310,210 |  |  | $ | 310,210 |  |  | $ | 310,210 |
Professional Education |  |  | 317,029 |  |  |  | 317,699 |  |  |  | 306,776 |
Technology and Business |  |  | 178,046 |  |  |  | 185,978 |  |  |  | 221,683 |
Total |  | $ | 805,285 |  |  | $ | 813,887 |  |  | $ | 838,669 |
The table below summarizes the changes in goodwill balances by reporting segment (in thousands):
|  | Medical and ‎ Healthcare |  |  | Professional ‎ Education |  |  | Technology ‎ and Business |  |  | Total |
Balance at June 30, 2017 |  |  | 310,210 |  |  |  | 306,653 |  |  |  | 212,223 |  |  |  | 829,086 |
Foreign exchange rate changes |  |  | - |  |  |  | 123 |  |  |  | 9,460 |  |  |  | 9,583 |
Balance at September 30, 2017 |  |  | 310,210 |  |  |  | 306,776 |  |  |  | 221,683 |  |  |  | 838,669 |
Acquisitions |  |  | - |  |  |  | 11,527 |  |  |  | 5,636 |  |  |  | 17,163 |
Foreign exchange rate changes |  |  | - |  |  |  | (604 | ) |  |  | (41,341 | ) |  |  | (41,945 | )
Balance at June 30, 2018 |  |  | 310,210 |  |  |  | 317,699 |  |  |  | 185,978 |  |  |  | 813,887 |
Foreign exchange rate changes |  |  | - |  |  |  | (670 | ) |  |  | (7,932 | ) |  |  | (8,602 | )
Balance at September 30, 2018 |  | $ | 310,210 |  |  | $ | 317,029 |  |  | $ | 178,046 |  |  | $ | 805,285 |
The decrease in the goodwill balance from June 30, 2018 in the Professional Education segment is the result of a change in the value of the British Sterling Pound and Indian Rupee compared to the U.S. dollar. Since Becker’s European subsidiary’s and EduPristine’s goodwill is recorded in local currency, fluctuations in the values of the British Sterling Pound and Indian Rupee in relation to the U.S. dollar will cause changes in the balance of this asset. The decrease in the goodwill balance from June 30, 2018 in the Technology and Business segment is the result of a change in the value of the Brazilian Real compared to the U.S. dollar. Since Adtalem Brazil goodwill is recorded in local 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):
|  | September 30, |  |  | June 30, |  |  | September 30, |
Reporting Segment |  | 2018 |  |  | 2018 |  |  | 2017 |
Medical and Healthcare |  | $ | 137,500 |  |  | $ | 137,500 |  |  | $ | 137,500 |
Professional Education |  |  | 69,053 |  |  |  | 69,126 |  |  |  | 67,812 |
Technology and Business |  |  | 106,575 |  |  |  | 111,324 |  |  |  | 136,450 |
Total |  | $ | 313,128 |  |  | $ | 317,950 |  |  | $ | 341,762 |
Total indefinite-lived intangible assets decreased by $4.8 million from June 30, 2018. The decrease is the result of a change in the value of the Brazilian Real as compared to the U.S. dollar. Since Adtalem Brazil intangible assets are recorded in local 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.

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