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Discontinued Operations and Assets Held for Sale | 6 Months Ended
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Dec. 31, 2019
Discontinued Operations and Assets Held for Sale |
Discontinued Operations and Assets Held for Sale | 4. 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 $11.1 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 recorded as other assets, net on the Consolidated Balance Sheets. 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 $21.7 million on the sale of DeVry University and transferred $39.0 million of cash and restricted cash balances to DeVry University in the second quarter of 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 R$1,920 million (approximately $465 million as of October 18, 2019). 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. In connection with the announced proposed sale of Adtalem Brazil, Adtalem entered into a deal-contingent foreign currency hedge arrangement to economically hedge the Brazilian Real denominated sales price through mitigation of the currency exchange rate risk. The hedge agreement has a total notional amount of R$2,154 million (approximately $536 million as of December 31, 2019). Fees associated with this arrangement are payable upon closing of the sale, only if the sale closes, and will vary based on the closing date, based on a pre-defined schedule in the hedge agreement. The derivative associated with the hedge agreement does not qualify for hedge accounting treatment under Accounting Standards Codification (“ASC”) 815, and as a result, all changes in fair value are recorded within the income statement. Adtalem recorded a pre-tax unrealized loss on the hedge agreement derivative based on the foreign exchange forward spot rate as of December 31, 2019 of $28.0 million in the second quarter of fiscal year 2020 (see Note 18 “Fair Value Measurements” for additional information) and is included within accrued liabilities on the December 31, 2019 Consolidated Balance Sheet. 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. The following is a summary of balance sheet information of assets and liabilities reported as held for sale, which includes only Adtalem Brazil balances as Carrington and DeVry University were sold as of each period presented below (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, | ​ | June 30, | ​ | December 31,
​ |  | 2019 |  | 2019 |  | 2018
Assets: |  | ​ |  |  | ​ |  |  | ​ |
Current assets: |  | ​ |  |  | ​ |  |  | ​ |
Cash and cash equivalents | ​ | $ | 104,040 | ​ | $ | 95,243 | ​ | $ | 86,506
Accounts receivable, net | ​ |  | 60,494 | ​ |  | 74,269 | ​ |  | 56,718
Prepaid expenses and other current assets | ​ |  | 6,750 | ​ |  | 8,411 | ​ |  | 9,795
Total current assets held for sale | ​ |  | 171,284 | ​ |  | 177,923 | ​ |  | 153,019
Noncurrent assets: | ​ |  | ​ | ​ |  |  | ​ |  |
Property and equipment, net | ​ | ​ | 74,939 | ​ | ​ | 81,250 | ​ | ​ | 82,753
Operating lease assets | ​ |  | 72,665 | ​ |  | — | ​ |  | —
Intangible assets, net | ​ |  | 114,296 | ​ |  | 120,108 | ​ |  | 119,802
Goodwill | ​ |  | 179,199 | ​ |  | 187,195 | ​ |  | 185,582
Other assets, net | ​ |  | 12,108 | ​ |  | 10,338 | ​ |  | 8,900
Total noncurrent assets held for sale | ​ |  | 453,207 | ​ |  | 398,891 | ​ |  | 397,037
Total assets held for sale | ​ | $ | 624,491 | ​ | $ | 576,814 | ​ | $ | 550,056
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: | ​ |  | ​ | ​ |  |  | ​ |  |
Current liabilities: | ​ |  | ​ | ​ |  |  | ​ |  |
Accounts payable | ​ | $ | 2,936 | ​ | $ | 4,242 | ​ | $ | 2,083
Accrued salaries, wages and benefits | ​ |  | 13,273 | ​ |  | 17,828 | ​ |  | 15,074
Accrued liabilities | ​ |  | 6,484 | ​ |  | 10,193 | ​ |  | 7,721
Deferred revenue | ​ |  | 3,096 | ​ |  | 3,846 | ​ |  | 4,076
Current operating lease liabilities | ​ |  | 10,905 | ​ |  | — | ​ |  | —
Total current liabilities held for sale | ​ |  | 36,694 | ​ |  | 36,109 | ​ |  | 28,954
Noncurrent liabilities: | ​ |  | ​ | ​ |  |  | ​ |  | ​
Long-term operating lease liabilities | ​ |  | 62,345 | ​ |  | — | ​ |  | —
Other liabilities | ​ |  | 13,488 | ​ |  | 16,146 | ​ |  | 20,804
Total noncurrent liabilities held for sale | ​ |  | 75,833 | ​ |  | 16,146 | ​ |  | 20,804
Total liabilities held for sale | ​ | $ | 112,527 | ​ | $ | 52,255 | ​ | $ | 49,758
​ The following is a summary of income statement information of operations reported as discontinued operations, which includes Adtalem Brazil operations and includes Carrington’s and DeVry University’s operations through the date of each respective sale (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Six Months Ended | ​
​ | ​ | December 31, | ​ | December 31, | ​
​ |  | 2019 |  | 2018 |  | 2019 |  | 2018 | ​
Revenue | ​ | $ | 55,153 | ​ | $ | 146,046 | ​ | $ | 100,805 | ​ | $ | 305,600 | ​
Operating cost and expense: | ​ |  |  | ​ |  |  | ​ |  | ​ | ​ |  |  | ​
Cost of educational services | ​ |  | 35,717 | ​ |  | 88,231 | ​ |  | 69,665 | ​ |  | 186,690 | ​
Student services and administrative expense | ​ |  | 15,706 | ​ |  | 54,658 | ​ |  | 30,079 | ​ |  | 119,363 | ​
Restructuring expense (gain) | ​ |  | 391 | ​ |  | 129 | ​ |  | 426 | ​ |  | (313) | ​
Asset impairment charge - building and equipment | ​ |  | — | ​ |  | (289) | ​ |  | — | ​ |  | 1,953 | ​
Total operating cost and expense | ​ |  | 51,814 | ​ |  | 142,729 | ​ |  | 100,170 | ​ |  | 307,693 | ​
Operating income (loss) from discontinued operations | ​ |  | 3,339 | ​ |  | 3,317 | ​ |  | 635 | ​ |  | (2,093) | ​
Other income (expense): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest and dividend income | ​ | ​ | 761 | ​ | ​ | 1,001 | ​ | ​ | 1,739 | ​ | ​ | 1,976 | ​
Interest expense | ​ | ​ | (806) | ​ | ​ | (550) | ​ | ​ | (1,963) | ​ | ​ | (1,834) | ​
Net other (expense) income | ​ |  | (45) | ​ |  | 451 | ​ |  | (224) | ​ |  | 142 | ​
Income (loss) from discontinued operations before income taxes | ​ | ​ | 3,294 | ​ | ​ | 3,768 | ​ | ​ | 411 | ​ | ​ | (1,951) | ​
Loss on disposal of discontinued operations before income taxes | ​ | ​ | — | ​ | ​ | (32,714) | ​ | ​ | — | ​ | ​ | (32,714) | ​
Income tax benefit | ​ |  | 823 | ​ |  | 4,595 | ​ |  | 550 | ​ |  | 5,580 | ​
Income (loss) from discontinued operations | ​ | ​ | 4,117 | ​ | ​ | (24,351) | ​ | ​ | 961 | ​ | ​ | (29,085) | ​
Net income attributable to redeemable noncontrolling interest | ​ | ​ | — | ​ | ​ | (299) | ​ | ​ | — | ​ | ​ | (308) | ​
Income (loss) from discontinued operations attributable to Adtalem | ​ | $ | 4,117 | ​ | $ | (24,650) | ​ | $ | 961 | ​ | $ | (29,393) | ​
​

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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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