XML 19 R10.htm IDEA: XBRL DOCUMENT
v3.8.0.1

STOCK-BASED COMPENSATION | 3 Months Ended
--- | ---
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
STOCK-BASED COMPENSATION | NOTE 4: STOCK-BASED COMPENSATION Adtalem maintains three stock-based incentive plans: the 2003 Stock Incentive Plan, the Amended and Restated Incentive Plan of 2005 and the Second Amended and Restated Incentive Plan of 2013. Under these plans, directors, key executives and managerial employees are eligible to receive incentive stock or nonqualified options to purchase shares of Adtalem’s common stock. The Second Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 also permit the granting of stock appreciation rights, RSUs, performance-based RSUs and other stock and cash-based compensation. Although options remain outstanding under the 2003 and 2005 incentive plans, no further stock-based grants will be issued from these plans. The Second Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 are administered by the Compensation Committee of the Board. Options are granted for terms of up to ten years and can vest immediately or over periods of up to five years. The requisite service period is equal to the vesting period. The option price under the plans is the fair market value of the shares on the date of the grant. Stock-based compensation expense is measured at the grant date based on the fair value of the award. Adtalem accounts for stock-based compensation granted to retirement eligible employees that fully vests upon an employee’s retirement under the non-substantive vesting period approach. Under this approach, the entire stock-based compensation expense is recognized at the grant date for stock-based grants issued to retirement eligible employees. For non-retirement eligible employees, stock-based compensation expense is recognized as expense over the employee requisite service period. With the adoption of ASU 2016-09 on July 1, 2017, we account for forfeitures of outstanding but unvested grants in the period they occur. At September 30, 2017, 5,821,647 authorized but unissued shares of common stock were reserved for issuance under Adtalem’s stock-based incentive plans. The following is a summary of options activity for the three months ended September 30, 2017:
|  |  |  |  |  | Weighted |  |  |
|  |  |  | Weighted |  | Average |  | Aggregate |
|  |  |  | Average |  | Remaining |  | Intrinsic |
|  | Number of |  | Exercise |  | Contractual |  | Value |
|  | Options |  | Price |  | Life (in Years) |  | (in thousands) |
Outstanding at July 1, 2017 |  |  | 2,794,850 |  | $ | 34.68 |  |  |  |  |  |  |
Options Granted |  |  | 491,275 |  |  | 33.90 |  |  |  |  |  |  |
Options Exercised |  |  | (88,357) |  |  | 23.33 |  |  |  |  |  |  |
Options Forfeited |  |  | (39,812) |  |  | 34.53 |  |  |  |  |  |  |
Options Expired |  |  | (33,770) |  |  | 30.41 |  |  |  |  |  |  |
Outstanding at September 30, 2017 |  |  | 3,124,186 |  |  | 34.93 |  |  | 5.27 |  | $ | 16,268 |
Exercisable at September 30, 2017 |  |  | 2,025,644 |  | $ | 38.99 |  |  | 3.18 |  | $ | 7,221 |
The following is a summary of stock appreciation rights activity for the three months ended September 30, 2017:
|  |  |  |  |  | Weighted |  |  |
|  | Number of |  | Weighted |  | Average |  | Aggregate |
|  | Stock |  | Average |  | Remaining |  | Intrinsic |
|  | Appreciation |  | Exercise |  | Contractual |  | Value |
|  | Rights |  | Price |  | Life (in Years) |  | (in thousands) |
Outstanding at July 1, 2017 |  |  | 99,500 |  | $ | 45.04 |  |  |  |  |  |  |
Rights Granted |  |  | - |  |  | - |  |  |  |  |  |  |
Rights Exercised |  |  | - |  |  | - |  |  |  |  |  |  |
Rights Canceled |  |  | - |  |  | - |  |  |  |  |  |  |
Outstanding at September 30, 2017 |  |  | 99,500 |  |  | 45.04 |  |  | 0.17 |  | $ | - |
Exercisable at September 30, 2017 |  |  | 99,500 |  | $ | 45.04 |  |  | 0.17 |  | $ | - |
The total intrinsic value of options exercised for the three months ended September 30, 2017 and 2016 was $0.9 million and $1.3 million, respectively. The fair value of Adtalem’s stock option awards was estimated using a binomial model. This model uses historical cancelation and exercise experience of Adtalem to determine the option value. It also takes into account the illiquid nature of employee options during the vesting period. The weighted average estimated grant date fair value of options granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal years 2018 and 2017 was $14.63 and $9.09, per share, respectively. The fair value of Adtalem’s stock option grants was estimated assuming the following weighted average assumptions:
|  | Fiscal Year |
|  | 2018 |  |  | 2017 |
Expected Life (in Years) |  |  | 6.68 |  |  |  | 6.88 |
Expected Volatility |  |  | 41.45 | % |  |  | 42.41 | %
Risk-free Interest Rate |  |  | 1.95 | % |  |  | 1.41 | %
Dividend Yield |  |  | 0.00 | % |  |  | 1.19 | %
Pre-vesting Forfeiture Rate |  |  | NA |  |  |  | 10.00 | %
The expected life of the options granted is based on the weighted average exercise life with age and salary adjustment factors from historical exercise behavior. Adtalem’s expected volatility is computed by combining and weighting the implied market volatility, the most recent volatility over the expected life of the option grant and Adtalem’s long-term historical volatility. On February 16, 2017, Adtalem discontinued payment of cash dividends, resulting in the elimination of a dividend yield from the assumptions. The pre-vesting stock option forfeiture rate for fiscal year 2017 was based on Adtalem’s historical stock option forfeiture experience. With the adoption of ASU 2016-09 on July 1, 2017, we account for forfeitures as they occur. Therefore, no pre-vesting stock option forfeiture rate applies for fiscal year 2018. If factors change and different assumptions are employed in the valuation of stock-based grants in future periods, the stock-based compensation expense that Adtalem records may differ significantly from what was recorded in previous periods. During the first three months of fiscal year 2018, Adtalem granted 459,780 RSUs to selected employees. Of these, 232,140 are performance-based RSUs and 227,640 are non-performance-based RSUs. Performance-based RSUs are earned by the recipients over a three-year period based on achievement of certain mission-based, academic goals, when a minimum level of Adtalem earnings before interest, taxes, depreciation and amortization (“EBITDA”) or return on invested capital (“ROIC”) is attained. Non-performance-based RSUs are subject to restrictions, which lapse ratably over one, three or four-year periods on the grant anniversary date based on the recipient’s continued service on the Board, employment with Adtalem or upon retirement. During the restriction period, the recipient of the non-performance based RSUs has the right to receive dividend equivalents, if any. This right does not pertain to performance-based RSUs. The following is a summary of RSU activity for the three months ended September 30, 2017:
|  |  |  | Weighted |
|  |  |  | Average |
|  | Number of |  | Grant Date |
|  | RSUs |  | Fair Value |
Nonvested at July 1, 2017 |  |  | 1,279,667 |  | $ | 26.14 |
RSUs Granted |  |  | 459,780 |  |  | 33.90 |
RSUs Vested |  |  | (331,184) |  |  | 32.03 |
RSUs Forfeited |  |  | (69,421) |  |  | 27.19 |
Nonvested at September 30, 2017 |  |  | 1,338,842 |  | $ | 27.71 |
The weighted average estimated grant date fair value of RSUs granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal years 2018 and 2017 was $33.90 and $23.70, per share, respectively. The following table shows total stock-based compensation expense included in the Consolidated Statements of Income (in thousands):
|  | Three Months Ended |
|  | September 30, |
|  | 2017 |  | 2016 |
Cost of Educational Services |  | $ | 1,420 |  | $ | 1,840 |
Student Services and Administrative Expense |  |  | 3,017 |  |  | 3,910 |
Restructuring Expense |  |  | 548 |  |  | - |
|  |  | 4,985 |  |  | 5,750 |
Income Tax Benefit |  |  | (2,434) |  |  | (2,072) |
Net Stock-Based Compensation Expense |  | $ | 2,551 |  | $ | 3,678 |
As of September 30, 2017, $34.0 million of total pre-tax unrecognized stock-based compensation expense related to nonvested grants is expected to be recognized over a weighted average period of 2.9 years. The total fair value of options and RSUs vested during the three months ended September 30, 2017 and 2016 was approximately $13.4 million and $11.8 million, respectively. There was no capitalized stock-based compensation cost at each of September 30, 2017, June 30, 2017 and September 30, 2016. Adtalem has an established practice of issuing new shares of common stock to satisfy stock-based grant exercises. However, Adtalem also may issue treasury shares to satisfy stock-based grant exercises under certain of its stock-based incentive plans.

X
- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration