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Leases

9 Months Ended

Mar. 31, 2021

10. Leases

We determine if a contract contains a lease at inception. We have entered into operating leases for academic sites, housing facilities, and office space which expire at various dates through January 2031, most of which include options to terminate for a fee or extend the leases for an additional five-year period. The lease term includes the noncancelable period of the lease, as well as any periods for which we are reasonably certain to exercise extension options. We elected to account for lease and non-lease components (e.g., common-area maintenance costs) as a single lease component for all operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We have not entered into any financing leases.

Operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets represent our right to use an underlying asset during the lease term. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. Operating lease assets are adjusted for any prepaid or accrued lease payments, lease incentives, initial direct costs, and impairments. Our incremental borrowing rate is utilized in determining the present value of the lease payments based upon the information available at the commencement date. Our incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease. Operating lease expense is recognized on a straight-line basis over the lease term.

As of March 31, 2021, we entered into one additional operating lease that has not yet commenced. The operating lease will commence during the first quarter of fiscal year 2022, has an 11-year lease term, and will result in an additional lease asset and lease liability of approximately $21.3 million.

The components of lease cost were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Operating lease cost	$	13,782	$	14,121	$	40,526	$	43,129
Sublease income		(4,025)		(4,757)		(12,401)		(14,943)
Total lease cost	$	9,757	$	9,364	$	28,125	$	28,186

Maturities of lease liabilities by fiscal year as of March 31, 2021 were as follows (in thousands):


	Operating
Fiscal Year	Leases
2021 (remaining)	$	16,622
2022		65,084
2023		52,122
2024		38,330
2025		28,420
Thereafter		52,970
Total lease payments		253,548
Less: imputed interest		(34,251)
Present value of lease liabilities	$	219,297

Lease term and discount rate were as follows:


	March 31,
	2021
Weighted-average remaining operating lease term (years)		5.1
Weighted-average operating lease discount rate		5.5%

Supplemental disclosures of cash flow information related to leases were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2021		2020		2021		2020
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)	$	12,040	$	12,559	$	34,939	$	36,576
Operating lease assets obtained in exchange for operating lease liabilities	$	(15,801)	$	12,532	$	29,275	$	18,187

During the second quarter of fiscal year 2021, we recorded an increase in our operating lease asset and operating lease liability for an existing operating lease location because we were reasonably certain to extend the lease. Due to a change in circumstances, we are no longer extending the lease. Therefore, we recorded a reversal of the increase in the operating lease asset and operating lease liability during the third quarter of fiscal year 2021, which resulted in the negative value in the table above.

Adtalem maintains agreements to lease either a portion or the full space of three facilities owned by Adtalem to DeVry University with various expiration dates through December 2023. Adtalem maintains agreements to sublease either a portion or the full leased space at 16 of its operating lease locations. Most of these subleases are a result of Adtalem retaining leases associated with restructured lease activities at DeVry University and Carrington prior to their divestitures during fiscal year 2019. All sublease expirations with DeVry University and Carrington coincide with Adtalem’s original head lease expiration dates. At that time, Adtalem will be relieved of its obligations. In addition, Adtalem has entered into subleases with non-affiliated entities for vacated or partially vacated space from restructuring activities. Adtalem’s sublease agreements expire at various dates through December 2025. We record sublease income as an offset against our lease expense recorded on the head lease. For leases which Adtalem vacated or partially vacated space, we recorded

estimated restructuring charges in prior periods. Actual results may differ from these estimates, which could result in additional restructuring charges or reversals. Future minimum lease and sublease rental income under these agreements as of March 31, 2021, were as follows (in thousands):


Fiscal Year	Amount
2021 (remaining)	$	4,634
2022		17,311
2023		16,078
2024		10,261
2025		5,121
Thereafter		2,038
Total lease and sublease rental income	$	55,443