XML 66 R16.htm IDEA: XBRL DOCUMENT

Financing Receivables

6 Months Ended

Dec. 31, 2019

9. Financing Receivables

Adtalem’s financing receivables consist of trade receivables related to institutional loan programs available to students at Chamberlain, AUC, RUSM, and RUSVM. These loan programs are designed to assist students who are unable to completely cover educational costs consisting of tuition, books, and fees, and are available only after all other student financial assistance has been applied toward those purposes. In addition, AUC, RUSM, and RUSVM loans may be used for students’ living expenses. Repayment plans for institutional loan program balances are developed to address the financial circumstances of the particular student. Interest charges at rates from 3.0% to 12.0% per annum accrue each month on the unpaid balance. Most students are required to begin repaying their loans while they are still in school with a minimum payment level designed to demonstrate their capability to repay, which reduces the possibility of over borrowing, and minimizes interest being accrued on the loan balance. Payments may increase upon completing or departing school. After a student leaves school, the student typically will have a monthly installment repayment plan. In addition, the Becker CPA Exam Review Course can be financed through Becker’s flexible payment plans with terms of up to 12-months.

Allowances for uncollectible loans are determined by analyzing the current aging of institutional loans and historical loss rates of loans at each institution. Management performs this analysis monthly and quarterly throughout the year. In evaluating the collectability of all our receivable balances, we set our bad debt reserves incorporating the most recent and updated circumstances, facts, and analytics. Changes in assumed collection rates will result in changes in the necessary reserves. Loans are considered nonperforming if they are more than 90 days past due. Since all of Adtalem’s institutional

loans are generated through the extension of credit to fund educational costs, all such receivables are considered part of the same loan portfolio.

The following table details the institutional loan balances along with the related allowances for credit losses (in thousands):


	Six Months Ended				Year Ended				Six Months Ended
	December 31, 2019				June 30, 2019				December 31, 2018
Gross institutional loans			$	50,215			$	47,937			$	46,633
Allowance for credit losses:
Balance as of July 1	$	(6,289)			$	(10,003)			$	(10,003)
Charge-offs and adjustments		71				10,777				8,570
Recoveries		(28)				(83)				(53)
Additional provision		(7,627)				(6,980)				(3,001)
Balance as of end of period				(13,873)				(6,289)				(4,487)
Net institutional loans			$	36,342			$	41,648			$	42,146

Of the net balances above, $17.9 million, $16.6 million, and $12.8 million were classified as accounts receivable, net on the Consolidated Balance Sheets as of December 31, 2019, June 30, 2019, and December 31, 2018, respectively, and $18.4 million, $25.1 million, and $29.3 million, representing amounts due beyond one year, were classified as other assets, net on the Consolidated Balance Sheets as of December 31, 2019, June 30, 2019, and December 31, 2018, respectively.

The following table details the credit risk profiles of the institutional loan balances based on an aging of past due institutional loans (in thousands):


							Greater
							Than 90						Total
	1-29 Days		30-59 Days		60-89 Days		Days		Total				Institutional
	Past Due		Past Due		Past Due		Past Due		Past Due		Current		Loans
Institutional loans:
December 31, 2019	$	3,226	$	1,601	$	566	$	13,407	$	18,800	$	31,415	$	50,215
June 30, 2019	$	3,578	$	2,458	$	687	$	9,888	$	16,611	$	31,326	$	47,937
December 31, 2018	$	5,535	$	963	$	308	$	4,336	$	11,142	$	35,491	$	46,633

The allowances for credit losses are sufficient to reserve for the majority of nonperforming loans as of December 31, 2019, June 30, 2019, and December 31, 2018.

In connection with the completion of the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of 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. The value of the DeVry University loan receivable included in other assets, net on the Consolidated Balance Sheet as of December 31, 2019, June 30, 2019, and December 31, 2018 is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 4% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep Foundation (“DePaul College Prep”). In connection with the sale, Adtalem holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The value of the DePaul College Prep loan receivable included in other assets, net on the Consolidated Balance Sheet as of December 31, 2019 is $40.8 million, which is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.