Goodwill and Intangible Assets
The following details changes in the carrying amount of our goodwill by reportable segment during fiscal years 2013 and 2012:
|
| | | | | | | | | | | | | | | |
| University of Phoenix | | Apollo Global(1) | | Other(1) | | Total |
($ in thousands) | | | |
Goodwill as of August 31, 2011 | $ | 37,018 |
| | $ | 79,388 |
| | $ | 16,891 |
| | $ | 133,297 |
|
Goodwill acquired in Carnegie Learning acquisition | 34,794 |
| | — |
| | — |
| | 34,794 |
|
UNIACC impairment | — |
| | (11,912 | ) | | — |
| | (11,912 | ) |
Sale of MPW(2) | — |
| | (45,266 | ) | | — |
| | (45,266 | ) |
Currency translation adjustment | — |
| | (7,568 | ) | | — |
| | (7,568 | ) |
Goodwill as of August 31, 2012 | 71,812 |
| | 14,642 |
| | 16,891 |
| | 103,345 |
|
Currency translation adjustment | — |
| | 275 |
| | — |
| | 275 |
|
Goodwill as of August 31, 2013 | $ | 71,812 |
| | $ | 14,917 |
| | $ | 16,891 |
| | $ | 103,620 |
|
(1) During to fiscal year 2013, we began presenting WIU in Other in our segment reporting. As a result, we have included WIU in Other for all periods presented. WIU was previously included in our Apollo Global reportable segment. Refer to Note 19, Segment Reporting.
(2) This represented all of our BPP reporting unit’s remaining goodwill which we allocated to MPW in determining our gain on sale. Refer to Note 4, Discontinued Operations. We allocated the goodwill based on the fair values of MPW and BPP’s remaining business with consideration for how these units were operated.
The following presents the components of the net carrying amount of our goodwill by reportable segment as of August 31, 2013 and 2012:
|
| | | | | | | | | | | | | | | |
| University of Phoenix | | Apollo Global(1) | | Other | | Total |
($ in thousands) | | | |
Gross carrying amount(1) | $ | 71,812 |
| | $ | 27,185 |
| | $ | 37,096 |
| | $ | 136,093 |
|
Accumulated impairments(1) | — |
| | (8,712 | ) | | (20,205 | ) | | (28,917 | ) |
Foreign currency translation | — |
| | (3,556 | ) | | — |
| | (3,556 | ) |
Net carrying amount at August 31, 2013 | $ | 71,812 |
| | $ | 14,917 |
| | $ | 16,891 |
| | $ | 103,620 |
|
|
| | | | | | | | | | | | | | | |
| University of Phoenix | | Apollo Global(1) | | Other | | Total |
($ in thousands) | | | |
Gross carrying amount(1) | $ | 71,812 |
| | $ | 38,036 |
| | $ | 37,096 |
| | $ | 146,944 |
|
Accumulated impairments(1) | — |
| | (20,624 | ) | | (20,205 | ) | | (40,829 | ) |
Foreign currency translation | — |
| | (2,770 | ) | | — |
| | (2,770 | ) |
Net carrying amount at August 31, 2012 | $ | 71,812 |
| | $ | 14,642 |
| | $ | 16,891 |
| | $ | 103,345 |
|
(1) UNIACC’s entire goodwill balance was impaired in fiscal year 2012. Accordingly, we removed the gross carrying amount and related accumulated impairments associated with UNIACC from Apollo Global in fiscal year 2013. In addition, we have recorded $354 million of accumulated impairments associated with our BPP reporting unit, which did not have any goodwill as of August 31, 2013 and 2012.
Intangible assets consist of the following as of August 31:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 |
($ in thousands) | Gross Carrying Amount | | Accumulated Amortization | | Effect of Foreign Currency Translation Loss | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Effect of Foreign Currency Translation Loss | | Net Carrying Amount |
Software and technology | $ | 42,389 |
| | $ | (16,673 | ) | | $ | — |
| | $ | 25,716 |
| | $ | 42,389 |
| | $ | (8,197 | ) | | $ | — |
| | $ | 34,192 |
|
Student and customer relationships | 12,026 |
| | (7,727 | ) | | (1,363 | ) | | 2,936 |
| | 14,109 |
| | (6,731 | ) | | (1,395 | ) | | 5,983 |
|
Copyrights | 20,891 |
| | (18,706 | ) | | (777 | ) | | 1,408 |
| | 20,891 |
| | (16,277 | ) | | (741 | ) | | 3,873 |
|
Other(1) | — |
| | — |
| | — |
| | — |
| | 12,878 |
| | (10,556 | ) | | (1,196 | ) | | 1,126 |
|
Total finite-lived intangibles | 75,306 |
| | (43,106 | ) | | (2,140 | ) | | 30,060 |
| | 90,267 |
| | (41,761 | ) | | (3,332 | ) | | 45,174 |
|
Trademarks | 100,736 |
| | — |
| | (5,347 | ) | | 95,389 |
| | 100,736 |
| | — |
| | (3,778 | ) | | 96,958 |
|
Accreditations and designations | 7,260 |
| | — |
| | (517 | ) | | 6,743 |
| | 7,260 |
| | — |
| | (358 | ) | | 6,902 |
|
Total indefinite-lived intangibles | 107,996 |
| | — |
| | (5,864 | ) | | 102,132 |
| | 107,996 |
| | — |
| | (4,136 | ) | | 103,860 |
|
Total intangible assets, net | $ | 183,302 |
| | $ | (43,106 | ) | | $ | (8,004 | ) | | $ | 132,192 |
| | $ | 198,263 |
| | $ | (41,761 | ) | | $ | (7,468 | ) | | $ | 149,034 |
|
(1) The decrease in gross carrying amount as of August 31, 2013 compared to August 31, 2012 was due to the removal intangibles that were fully amortized during fiscal year 2013.
Finite-lived intangibles are amortized on either a straight-line basis or using an accelerated method to reflect the pattern in which the benefits of the asset are consumed. Amortization expense for intangibles for fiscal years 2013, 2012 and 2011 was $15.1 million, $20.2 million and $14.7 million, respectively. The weighted average original useful life of our finite-lived intangibles as of August 31, 2013 is 4.9 years and estimated future amortization expense of finite-lived intangibles is as follows:
|
| | | |
($ in thousands) | |
2014 | $ | 11,670 |
|
2015 | 9,605 |
|
2016 | 8,502 |
|
2017 | 283 |
|
Total estimated amortization expense(1) | $ | 30,060 |
|
(1) Estimated future amortization expense may vary as acquisitions and dispositions occur in the future and as a result of foreign currency translation adjustments.
We perform our annual goodwill and indefinite-lived intangibles impairment tests, as applicable, for our reporting units on the following dates:
| |
• | University of Phoenix - May 31 |
| |
• | Western International University - May 31 |
| |
• | Carnegie Learning - May 31 |
We completed our fiscal year 2013 annual goodwill and indefinite-lived intangibles impairment tests for applicable reporting units and assets and determined there was no impairment.
During fiscal year 2012, UNIACC was advised by the National Accreditation Commission of Chile that its institutional accreditation would not be renewed and therefore had lapsed. The loss of accreditation reduced new enrollment in UNIACC’s degree programs and, accordingly, we revised our cash flow estimates and performed an interim goodwill impairment analysis. Based on our estimated fair value of the UNIACC reporting unit and a hypothetical purchase price allocation, we determined that the UNIACC reporting unit would have no implied goodwill. We also tested UNIACC’s trademark and accreditation intangibles and determined they had minimal or no fair value. Accordingly, we determined UNIACC’s entire goodwill balance and the trademark and accreditation indefinite-lived intangibles totaling $11.9 million and $3.9 million, respectively, were impaired. We also recorded a $1.0 million impairment for certain finite-lived intangibles. We did not record an income tax benefit associated with these charges as UNIACC’s goodwill and other intangibles are not deductible for tax purposes.
During fiscal year 2011, BPP experienced lower than expected rates of enrollment for its accounting and finance professional training programs. As a result, we revised our outlook for BPP and reduced forecasted revenues and operating cash flows for the remainder of fiscal year 2011 and reduced our forecasts for future years from what we had previously anticipated. For these reasons, we performed an interim goodwill impairment analysis and determined BPP’s fair value was lower than its carrying value. Using the estimated fair value of BPP in a hypothetical purchase price allocation, we recorded impairment charges during fiscal year 2011 for BPP’s goodwill and trademark of $197.7 million and $22.2 million, respectively. These impairment charges aggregated to $213.9 million (net of $6.0 million benefit for income taxes associated with the other intangibles impairment charge). As BPP’s goodwill is not deductible for tax purposes, we did not record a tax benefit associated with the goodwill impairment charge.
