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DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | 3 Months Ended
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Sep. 30, 2019
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE |
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | NOTE 2: DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE On December 4, 2018, Adtalem completed the sale of Carrington to San Joaquin Valley College, Inc. (“SJVC”) for de minimis consideration. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, Carrington is presented in Adtalem’s financial reporting as a discontinued operation. Adtalem has retained certain leases associated with the Carrington operations. Adtalem remains the primary lessee on these leases and subleases to Carrington. Adtalem records the proceeds from these subleases as an offset to operating costs. Adtalem also assigned certain leases to Carrington but remains contingently liable under these leases. Adtalem recorded a pre-tax loss of $11.3 million on the sale of Carrington and transferred $9.9 million of cash and restricted cash balances to Carrington in the second quarter of fiscal year 2019, subject to post-closing adjustments to be completed in fiscal year 2020. On December 11, 2018, Adtalem completed the sale of DeVry University to Cogswell Education, LLC (“Cogswell”) for de minimis consideration. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, DeVry University is presented in Adtalem’s financial reporting as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20 million over a ten-year period payable based on DeVry University’s free cash flow. In connection with the closing of the sale, Adtalem loaned to DeVry University $10.0 million under the terms of the promissory note, dated as of December 11, 2018 (the “Note”). The Note bears interest at a rate of 4% per annum, payable annually in arrears and has a maturity date of January 1, 2022. DeVry University may make prepayments on the Note. This loan is presented as Other Assets, Net on the Consolidated Balance Sheet. Adtalem has retained certain leases associated with DeVry University operations. Adtalem remains the primary lessee on these leases and subleases to DeVry University. In addition, Adtalem owns the buildings for certain DeVry University operating and administrative office locations and leases space to DeVry University under one-year operating leases, renewable annually at DeVry University’s option. Adtalem records the proceeds from these leases and subleases as an offset to operating costs. Adtalem also assigned certain leases to DeVry University but remains contingently liable under these leases. Adtalem recorded a pre-tax loss of $22.3 million on the sale of DeVry University and transferred $40.2 million of cash and restricted cash balances to DeVry University in fiscal year 2019. On October 18, 2019, Adtalem entered into a Stock Purchase Agreement (“Purchase Agreement”) with Estácio Participações S.A. (“Estácio”) and Sociedade de Ensino Superior Estaćio de Sá Ltda, a wholly owned subsidiary of Estácio (“Purchaser”). Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, Adtalem will sell all of the issued and outstanding shares of Adtalem Brasil Holding S.A. (a/k/a Adtalem Brazil) to the Purchaser for approximately $465 million in cash. In addition, Adtalem expects to receive approximately $74 million in settlement of cash balances as of June 30, 2019 of $89 million, net of indebtedness of $15 million, resulting in total proceeds of $539 million. This transaction is expected to be completed in the first half of fiscal year 2021. This sale advances Adtalem’s strategy to become a leading workforce solutions provider in the medical and healthcare and financial services industries, aligning Adtalem’s portfolio to better address the global workforce skills gap and serve its markets in a more competitive and comprehensive way. As the potential sale represents a strategic shift that will have a major effect on Adtalem’s operations and financial results, Adtalem Brazil is presented in Adtalem’s financial reporting as a discontinued operation. All prior periods presented disclose Adtalem Brazil’s assets and liabilities as held for sale, and operations and cash flows of Adtalem Brazil, which were previously included as the only component of the Business and Law reportable segment, as discontinued operations. In connection with the announced proposed sale of Adtalem Brazil, Adtalem entered into certain deal contingent foreign exchange forward contracts to economically hedge the Brazilian Real denominated purchase price through mitigation of the currency exchange rate risk. Management does not expect this contract to qualify for hedge accounting treatment under Accounting Standards Codification (“ASC”) 815, and as a result, all changes in fair value will be recorded to the income statement. The following is a summary of balance sheet information of assets and liabilities reported as held for sale (in thousands). ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | June 30, | ​ | September 30,
​ |  | 2019 |  | 2019 |  | 2018
ASSETS: |  | ​ |  |  | ​ |  |  | ​ |
Current Assets: |  | ​ |  |  | ​ |  |  | ​ |
Cash and Cash Equivalents | ​ | $ | 96,902 | ​ | $ | 95,243 | ​ | $ | 94,423
Restricted Cash | ​ |  | — | ​ |  | — | ​ |  | 15,967
Accounts Receivable, Net | ​ |  | 64,915 | ​ |  | 74,269 | ​ |  | 98,089
Prepaid Expenses and Other Current Assets | ​ |  | 8,056 | ​ |  | 8,411 | ​ |  | 19,162
Total Current Assets Held for Sale | ​ |  | 169,873 | ​ |  | 177,923 | ​ |  | 227,641
Land, Building and Equipment Held for Sale, Net | ​ | ​ | 73,763 | ​ | ​ | 81,250 | ​ | ​ | 81,029
Noncurrent Assets: | ​ |  | ​ | ​ |  |  | ​ |  |
Operating Lease Assets | ​ |  | 72,261 | ​ |  | — | ​ |  | —
Intangible Assets, Net | ​ |  | 110,711 | ​ |  | 120,108 | ​ |  | 115,429
Goodwill | ​ |  | 173,064 | ​ |  | 187,195 | ​ |  | 178,046
Perkins Program Fund, Net | ​ |  | — | ​ |  | — | ​ |  | 13,450
Other Assets, Net | ​ |  | 9,972 | ​ |  | 10,338 | ​ |  | 8,465
Total Noncurrent Assets Held for Sale | ​ |  | 366,008 | ​ |  | 317,641 | ​ |  | 315,390
Total Assets Held for Sale | ​ | $ | 609,644 | ​ | $ | 576,814 | ​ | $ | 624,060
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
LIABILITIES: | ​ |  | ​ | ​ |  |  | ​ |  |
Current Liabilities: | ​ |  | ​ | ​ |  |  | ​ |  |
Accounts Payable | ​ | $ | 2,857 | ​ | $ | 4,242 | ​ | $ | 25,896
Accrued Salaries, Wages and Benefits | ​ |  | 16,239 | ​ |  | 17,828 | ​ |  | 22,526
Accrued Liabilities | ​ |  | 9,800 | ​ |  | 10,193 | ​ |  | 14,580
Deferred Revenue | ​ |  | 11,104 | ​ |  | 3,846 | ​ |  | 58,494
Current Operating Lease Liabilities | ​ |  | 10,174 | ​ |  | — | ​ |  | —
Total Current Liabilities Held for Sale | ​ |  | 50,174 | ​ |  | 36,109 | ​ |  | 121,496
Noncurrent Liabilities: | ​ |  | ​ | ​ |  |  | ​ |  | ​
Long-Term Operating Lease Liabilities | ​ |  | 62,367 | ​ |  | — | ​ |  | —
Deferred Income Taxes | ​ |  | — | ​ |  | — | ​ |  | 216
Other Liabilities | ​ |  | 14,101 | ​ |  | 16,146 | ​ |  | 21,196
Total Noncurrent Liabilities Held for Sale | ​ |  | 76,468 | ​ |  | 16,146 | ​ |  | 21,412
Total Liabilities Held for Sale | ​ | $ | 126,642 | ​ | $ | 52,255 | ​ | $ | 142,908
​ The following is a summary of income statement information of operations reported as discontinued operations (in thousands). The results include Carrington's and DeVry University's operations through the date of each respective sale. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | September 30, | ​
​ |  | 2019 |  | 2018 | ​
REVENUE | ​ | $ | 45,652 | ​ | $ | 159,554 | ​
OPERATING COST AND EXPENSE: | ​ |  |  | ​ |  |  | ​
Cost of Educational Services | ​ |  | 33,948 | ​ |  | 98,460 | ​
Student Services and Administrative Expense | ​ |  | 14,373 | ​ |  | 64,706 | ​
Restructuring Expense (Gain) | ​ |  | 35 | ​ |  | (443) | ​
Asset Impairment Charge - Building and Equipment | ​ |  | — | ​ |  | 2,242 | ​
Total Operating Cost and Expense | ​ |  | 48,356 | ​ |  | 164,965 | ​
Operating Loss from Discontinued Operations | ​ |  | (2,704) | ​ |  | (5,411) | ​
OTHER INCOME (EXPENSE): | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest and Dividend Income | ​ | ​ | 978 | ​ | ​ | 976 | ​
Interest Expense | ​ | ​ | (1,157) | ​ | ​ | (1,284) | ​
Net Other Expense | ​ |  | (179) | ​ |  | (308) | ​
Loss from Discontinued Operations Before Income Taxes | ​ | ​ | (2,883) | ​ | ​ | (5,719) | ​
Income Tax (Provision) Benefit | ​ |  | (273) | ​ |  | 985 | ​
Loss from Discontinued Operations | ​ | ​ | (3,156) | ​ | ​ | (4,734) | ​
Net Income Attributable to Noncontrolling Interest | ​ | ​ | — | ​ | ​ | (9) | ​
Loss from Discontinued Operations Attributable to Adtalem Global Education | ​ | $ | (3,156) | ​ | $ | (4,743) | ​
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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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