8-K/A

​ UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 12, 2021

ADTALEM GLOBAL EDUCATION INC.

(Exact name of registrant as specified in its charter)

Delaware	001-13988	36-3150143
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
500 West Monroe<br><br>Chicago, **** IL		60661
(Address of principal executive offices)		(Zip Code)

​

( 866 ) (374-2678)

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

		​	​
		​	​
Title of each class		Trading Symbol	​	Name of each exchangeon which registered
Common Stock $0.01 Par Value	​	ATGE	​	New York Stock Exchange
Common Stock $0.01 Par Value	​	ATGE	​	NYSE Chicago

​

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ ​ ​

​

​ Item 2.01     Completion of Acquisition or Disposition of Assets

On August 12, 2021, Adtalem Global Education Inc. (the “Company”) filed a Current Report on Form 8-K (the “Initial Form 8-K”) reporting the Company completed the acquisition from Laureate Education, Inc. of all of the issued and outstanding equity interests in Walden e-Learning, LLC (“e-Learning”), and its subsidiary, Walden University, LLC (together with e-Learning, “Walden”), in exchange for an aggregate purchase price of approximately $1.48 billion in cash, subject to certain adjustments set forth in the purchase agreement.

This Current Report on Form 8-K/A amends the Initial Form 8-K to include the historical audited and unaudited financial statements of Walden and the unaudited combined pro forma financial information required by Items 9.01(a) and 9.01(b) of Form 8-K. The information previously reported in the Initial Form 8-K is hereby incorporated by reference into this Current Report on Form 8-K/A.

Item 9.01     Financial Statements and Exhibits

(a)	Financial Statements of Businesses Acquired.

The following audited financial statements required by Item 9.01(a) of Form 8-K are included in this report:

(i)	Audited Combined Financial Statements of the Walden Education Business of Laureate Education, Inc. as of and for the years ended December 31, 2020 and 2019 are attached hereto as Exhibit 99.1.
(ii)	Consent of PricewaterhouseCoopers LLP, independent auditors is attached as hereto as Exhibit 99.2.
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The following unaudited financial statements are included in this report:

(i)	Unaudited Condensed Combined Financial Statements of the Walden Education Business of Laureate Education, Inc. as of June 30, 2021 and December 31, 2020 and for the six-months ended June 30, 2021 and 2020 are attached hereto as Exhibit 99.3.
(b)	Pro Forma Financial Information.
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The following pro forma financial information required by Item 9.01(b) of Form 8-K is included in this report:

(i)	Unaudited Pro Forma Combined Balance Sheet as of June 30, 2021 and Unaudited Pro Forma Combined Statement of Income for the year ended June 30, 2021 of Adtalem Global Education Inc. and notes related thereto are attached hereto as Exhibit 99.4.

(c) Exhibits

Exhibit No.	****	Description
​	​	​
99.1	​	Audited Combined Financial Statements of the Walden Education Business of Laureate Education, Inc. as of and for the years ended December 31, 2020 and 2019.
​	​	​
99.2	​	Consent of PricewaterhouseCoopers LLP, independent auditors
​	​	​
99.3	​	Unaudited Condensed Combined Financial Statements of the Walden Education Business of Laureate Education, Inc. as of June 30, 2021 and December 31, 2020 and for the six-months ended June 30, 2021 and 2020
​	​	​
99.4	​	Unaudited Pro Forma Combined Balance Sheet as of June 30, 2021 and Unaudited Pro Forma Combined Statement of Income for the year ended June 30, 2021 of Adtalem Global Education Inc. and notes related thereto
​	​	​
104	​	Cover Page Interactive Data File (formatted as Inline XBRL)

​ ​

​ SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

​
​	ADTALEM GLOBAL EDUCATION INC.
​	​
​	By:	/s/ Robert J. Phelan
​	​	Robert J. Phelan
Date: October 22, 2021	​	Chief Financial Officer

​

​

​

​

​ ​

Exhibit 99.1

​

Walden Education Business

(Carve-Out Walden Operations of Laureate Education)

​

Combined Financial ReportDecember 31, 2020 and 2019

​

​

​ ​

​ Index to Financial Statements

​

​	​	​
Contents	****	Page(s)
​	​	​
Report of Independent Auditors	​	1
​	​	​
Financial Statements	​	​
​	​	​
Combined Balance Sheets as of December 31, 2020 and 2019	​	2
​	​	​
Combined Statements of Operations for the years ended December 31, 2020 and 2019	​	3
​	​	​
Combined Statements of Changes in Net Parent Investment for the years ended December 31, 2020 and 2019	​	4
​	​	​
Combined Statements of Cash Flows for the years ended December 31, 2020 and 2019	​	5
​	​	​
Notes to Combined Financial Statements	​	6-16

​

​ ​

​ Report of Independent Auditors

​

To the Management of Walden University, LLC

​

We have audited the accompanying combined financial statements of the Walden Education Business of Laureate Education, Inc., which comprise the combined balance sheets as of December 31, 2020 and 2019, and the related combined statements of operations, of changes in net parent investment and of cash flows for the years then ended.

​

Management's Responsibility for the Combined Financial Statements

​

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

​

Auditors’ Responsibility

​

Our responsibility is to express an opinion on the combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.

​

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

​

Opinion

​

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Walden Education Business of Laureate Education, Inc. as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

​

/s/ PricewaterhouseCoopers LLP

Baltimore, Maryland

April 23, 2021

​

​ ​

​ Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Combined Balance Sheets as of

December 31, 2020 and 2019

​

​	​	​	​	​	​
( in thousands)	2020		****	2019
Assets	​	​	​	​	​
Current Assets	​	​	​	​	​
Cash	$	204,723	​	$	58,414
Restricted cash	​	100,670	​	​	151,807
Student tuition and fees receivable, net	​	32,827	​	​	28,413
Prepaid expenses and other current assets	​	3,736	​	​	3,627
Total current assets	​	341,956	​	​	242,261
Property, Equipment and Leasehold Improvements, Net	​	28,845	​	​	36,335
Other Assets	​	​	​	​	​
Operating lease right-of-use assets, net	​	8,683	​	​	11,253
Deferred project costs, net	​	21,022	​	​	20,237
Prepaid expenses and other long term assets	​	14,370	​	​	7,837
Deferred tax asset	​	10,662	​	​	6,885
Goodwill	​	2,812	​	​	2,812
Total other assets	​	57,549	​	​	49,024
Total assets	$	428,350	​	$	327,620
Liabilities and Net Parent Investment	​	​	​	​	​
Current Liabilities	​	​	​	​	​
Accounts payable and accrued expenses	$	76,585	​	$	62,145
Deferred revenue and student deposits	​	81,133	​	​	73,610
Current portion of operating leases	​	2,657	​	​	2,225
Other current liabilities	​	191	​	​	412
Total current liabilities	​	160,566	​	​	138,392
Long-Term Liabilities	​	​	​	​	​
Long term portion of operating leases	​	6,633	​	​	8,969
Total long-term liabilities	​	6,633	​	​	8,969
Total liabilities	​	167,199	​	​	147,361
Commitments and Contingencies	​	​	​	​	​
Net Parent Investment	​	261,151	​	​	180,259
Total liabilities and Net Parent Investment	$	428,350	​	$	327,620

All values are in US Dollars.

​

*The accompanying notes are an integral part of these annual combined financial statements.*​

​ 2

​ Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Combined Statements of Operations

For the Years Ended December 31, 2020 and 2019

​

​	​	​	​	​	​
( in thousands)	2020		****	2019
Revenues	​	​	​	​	​
Masters programs	$	362,582	​	$	342,270
Doctoral programs	​	145,345	​	​	154,493
Undergraduate programs	​	66,873	​	​	60,908
Other revenues	​	46,589	​	​	42,121
Total revenues, net of scholarships	​	621,389	​	​	599,792
Operating Expenses	​	​	​	​	​
Direct costs	​	408,110	​	​	398,615
General and administrative	​	61,207	​	​	49,775
Total operating expenses	​	469,317	​	​	448,390
Operating income	​	152,072	​	​	151,402
Other (expense) income:	​	​	​	​	​
Interest income, net	​	158	​	​	216
Other (expense) income	​	(557)	​	​	173
Total other (expense) income	​	(399)	​	​	389
Income before income taxes	​	151,673	​	​	151,791
Provision for income taxes	​	(38,515)	​	​	(39,165)
Net income	$	113,158	​	$	112,626

All values are in US Dollars.

​

*The accompanying notes are an integral part of these annual combined financial statements.*​

​ 3

​ ​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Combined Statements of Changes in Net Parent Investment

For the Years Ended December 31, 2020 and 2019

​

​	​	​
( in thousands)	Net **** parentinvestment
Balance as of January 1, 2019	$	191,994
Adoption of accounting standard	​	(63)
Net income	​	112,626
Non-cash stock compensation	​	992
Net change in parent investment	​	(125,290)
Balance as of December 31, 2019	​	180,259
Net income	​	113,158
Non-cash stock compensation	​	1,234
Net change in parent investment	​	(33,500)
Balance as of December 31, 2020	$	261,151

All values are in US Dollars.

​

*The accompanying notes are an integral part of these annual combined financial statements.*​

​ 4

​ ​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Combined Statements of Cash Flows

For the Years Ended December 31, 2020 and 2019

​

​	​	​	​	​	​	​
($ in thousands)	​	2020		​	2019
Cash Flows From Operating Activities	​	​		​	​
Net income		$	113,158		$	112,626
Adjustment to reconcile net income to net cash provided by operating activities:	​	​	​	​	​	​
Depreciation and amortization	​	​	21,997	​	​	24,806
(Gain) / Loss on disposal of property and equipment	​	​	(44)	​	​	170
Impairment loss on deferred project costs	​	​	11	​	​	—
Amortization of operating lease right-of-use assets	​	​	3,247	​	​	2,911
Provision for doubtful accounts	​	​	19,316	​	​	18,995
Non-cash stock compensation	​	​	1,234	​	​	992
Deferred income taxes	​	​	(3,777)	​	​	(368)
Changes in operating assets and liabilities:	​	​	​	​	​	​
Student tuition and fees receivable	​	​	(23,730)	​	​	(19,775)
Prepaid expenses	​	​	(109)	​	​	655
Other long-term assets	​	​	(6,533)	​	​	(7,743)
Accounts payable and accrued expenses	​	​	14,189	​	​	16,570
Deferred student tuitions and fees	​	​	7,523	​	​	(567)
Other liabilities	​	​	(2,802)	​	​	(3,748)
Net cash provided by operating activities	​	​	143,680	​	​	145,524
Cash Flows From Investing Activities	​	​	​	​	​	​
Purchases of property and equipment	​	​	(6,425)	​	​	(8,866)
Additions to deferred project costs	​	​	(8,583)	​	​	(5,677)
Net cash used in investing activities	​	​	(15,008)	​	​	(14,543)
Cash Flows From Financing Activities	​	​	​	​	​	​
Net change in parent investment	​	​	(33,500)	​	​	(125,290)
Net cash used in financing activities	​	​	(33,500)	​	​	(125,290)
Net increase in cash and restricted cash	​	​	95,172	​	​	5,691
Cash and Restricted cash	​	​	​	​	​	​
Beginning of year	​	​	210,221	​	​	204,530
End of year	​	$	305,393	​	$	210,221
Supplemental Disclosure of Non-Cash Investing and Financing Activities	​	​	​	​	​	​
Purchases of property and equipment in accrued expenses	​	$	553	​	$	223
Reconciliation of Cash and Restricted cash	​	​	​	​	​	​
Cash	​	$	204,723	​	$	58,414
Restricted cash	​	​	100,670	​	​	151,807
Total Cash and Restricted cash shown in the Statements of Cash Flows	​	$	305,393	​	$	210,221

​

The accompanying notes are an integral part of these annual combined financial statements.

​

​ 5

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 1. **** Nature of Business

​

The Walden Education Business (“Walden”, “we”, “us” or “our”) of Laureate Education, Inc. (“Laureate”, “LEI”, or “Parent”) operates an institution of higher education under the trade name of Walden University, providing students with bachelors, masters and doctoral degrees and certificates online in a broad range of disciplines including health sciences, counseling, criminal justice, human services, management, psychology, education, public health, nursing, social work, public administration and information technology. Walden is accredited by the Higher Learning Commission in addition to a number of specialized accreditations. Walden is a registered institution in the state of Minnesota and is currently authorized, licensed, registered, exempt or not subject to approval in all states of the United States, except New York and Rhode Island. On September 11, 2020, our Parent, entered into Membership Interest Purchase Agreement with AdTalem Global Education, Inc. (“Adtalem” or the "Purchaser"), to sell all of the issued and outstanding membership interests in Walden e-Learning, LLC, and its subsidiary, Walden University, LLC, as well as carve-out operations of LEI in exchange for a purchase price of $1,480 million in cash, subject to certain adjustments set forth in the Purchase Agreement. The closing of the transaction is expected to occur toward the end of 2021 and is subject to customary closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals.

​

Note 2. **** Significant Accounting Policies

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Basis of Presentation and Use of Estimates

​

The accompanying combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The combined financial statements have been prepared on a standalone basis and included the operations, financial position, and cash flows of Walden E-Learning, LLC and Subsidiary, related Laureate Higher Education Group (LHEG) Shared Services, and certain Laureate corporate cost allocations (the “Walden Education Business”) as carved out from the historical consolidated financial statements of Laureate using both specific identification and the allocation methodologies described below. A statement of comprehensive income has not been presented as there are no differences. We believe the assumptions underlying the combined financial statements, including the assumptions regarding allocated expenses, reasonably reflect the utilization of services provided to or the benefit received by Walden. However, these shared expenses may not represent the amounts that would have been incurred had Walden operated autonomously or independently from Laureate. Actual costs that would have been incurred if Walden had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions in various areas such as information technology and infrastructure.

​

Net parent investment represents Laureate’s historical investment in us, the net effect of transactions with and allocations from Laureate. All charges and allocations of costs for facilities, functions, and services performed by Laureate have been deemed paid by the Business to Laureate in the period in which the cost was recorded in the combined statements of Changes in Net Parent Investment. While we do own and maintain separate bank accounts our Parent uses a centralized approach to cash management and funds our operating and investing activities as needed. Accordingly, cash held by our Parent at the corporate level was not allocated to us for any of the periods presented. We reflect the cash generated by our operations and expenses paid by our Parent on our behalf as a component of “Net Parent Investment” on our combined balance sheets, and as a net change in parent investment in our combined statements of cash flows. Intracompany balances and accounts within Walden have been eliminated. 2

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

​

During the periods presented, Walden functioned as part of the larger group of schools controlled by Laureate, and accordingly, utilized centralized functions, such as academic support, technology, financial services, marketing, product development, sales and other management and administrative services to support continuing operations and to help accelerate the Walden business plan. As consideration of these services, Walden is allocated a monthly management fee that is based on LEI's good faith estimate of the portion of the centralized costs incurred by the LEI shared services group attributable to Walden. Laureate also performed certain corporate functions for Walden. The corporate expenses related to Walden have been allocated from the Parent. These allocated costs are primarily related to certain governance and corporate functions such as finance, treasury, tax, human resources, legal, investor relations, and certain other costs. Where it is possible to specifically attribute such expenses to activities of Walden, these amounts have been charged or credited directly to Walden without allocation or apportionment. Allocation of other such expenses is based on a reasonable reflection of the utilization of the services provided or benefits received by Walden during the periods presented on a consistent basis, such as, but not limited to, apportioned salary and benefits based on time spent, and relative percentage of headcount. The aggregate costs allocated for these functions to Walden are included within the combined statements of operations as part of their natural functional expense groupings within direct costs and general and administrative expenses and are shown in detail within the following table.

​

	​			​
​	****	2020		****	2019
Walden shared service costs (1)	​	$	14,326	​	$	95,174
Stock compensation expense (2)	​	​	1,234	​	​	992
Laureate corporate expense allocation (3)	​	​	5,091	​	​	5,907
Laureate allocated tradename (4)	​	​	1,561	​	​	—
​	​	$	22,212	​	$	102,073

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(1)	Under an existing shared services agreement with LEI which renewed on January 1, 2020 (disclosed above) and additional Parent's Corporate shared service cost allocated to Walden. Effective January 1, 2020 approximately 800 non- faculty employees were moved to be a direct cost to Walden from Shared Services.
(2)	Stock compensation expense represents both the allocation of the Parent's Corporate stock compensation expense and the costs specifically identifiable to Walden employees.
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(3)	Represents the additional costs of the centralized functions of the Parent allocated to Walden.
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(4)	Walden is also benefiting from the use of Laureate’s tradename. As LEI incurred amortization expenses in 2020 associated with this tradename, amortization expenses have been allocated to Walden. In 2019, the tradename had an indefinite life, thus no amortization was allocated.
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Laureate used a centralized approach to cash management and financing its operations. Historically, the majority of Walden cash was transferred to the Parent on a periodic basis. This arrangement is not reflective of the manner in which Walden would have been able to finance its operations had it been a standalone business separate from the Parent during the periods presented. Transactions between Walden and Laureate and its subsidiaries are reflected in the combined balance sheets as “Net parent investment” and in the combined statements of cash flows as a financing activity in “Net change in net parent investment”.

​

Additionally Walden uses various assets paid for by Laureate as well as liabilities incurred to operate its business consisting of but not limited to the following: prepaid expenses, fixed assets (leasehold improvements, furniture and equipment, computer and software), surety bonds collateralized with restricted cash which is a requirement for Walden to operate in various states, allocable employee benefit plan costs attributable to Walden employees, accrued expenses and operating leases for the benefit of Walden which have been deemed attributable to, and reflective of the historical operations of Walden. The assets and liabilities have historically been accounted for by Laureate as contracts which are shared among the Laureate network or that Laureate was deemed the obligor. The amounts recorded in these combined financial statements may not be representative of the amounts that would have been incurred had Walden been an entity that operated independently of Laureate. Consequently, these combined financial statements may not be indicative of Walden’s future performance and do not necessarily reflect what its results of operations, financial position and cash flows would have been had Walden operated as a separate entity apart from Laureate during the periods presented.

​ 3

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

​

Our Parent’s debt and related interest expense have not been allocated to us for any of the periods presented since we are not the legal obligor of the debt, and our Parent’s borrowings were not directly attributable to us.

​

Estimates and Assumptions

​

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

​

The outbreak of COVID-19 has caused domestic and global disruption in operations for institutions of higher education. The long-term impact to Walden of the COVID-19 outbreak depends on numerous factors, including the effect on student enrollment in future periods, which cannot be fully determined at this time. As a result, the full impact of COVID-19 and the scope of any adverse impact on our finances and operations, may materially impact accounting estimates and assumptions, cannot be fully determined at this time.

​

Cash

​

Walden considers all highly liquid investments with an original maturity date of three months or less, when purchased, to be cash equivalents. No cash equivalents existed at December 31, 2020 and 2019.

​

Restricted Cash

​

Walden participates in the United States Department of Education (“DOE”) Title IV student financing assistance lending programs (“Title IV Programs”). At times, the DOE may require institutions to post standby letters of credit (“LOC”) in order to continue participation in Title IV programs. LOC requirements are based on a number of considerations including recent changes in ownership and failure to meet minimum financial ratio requirements set forth by the DOE. Walden is included within a group letter of  credit  with  other U.S.  based institutions controlled by LEI totaling $83,576 and $127,252 as of December 31, 2020 and 2019, respectively. As of December 31, 2020 Walden’s portion represents 100.0%, or $83,576, of the LOC that expires January 31, 2022. See Note 8 for renewal information on this LOC.

​

Walden is also required by various states to post a surety bond. The bonds reflect a financial guarantee of the total amount of non-title IV adjusted gross tuition and fees from the enrollment of students totaling $17,094 and $25,552 as of December 31, 2020 and 2019, respectively.

​

As of December 31, 2020 and 2019, Walden's restricted cash balance was $100,670 and $151,807, respectively, and held by the issuing banks as collateral for the LOC and surety bonds. The surety bonds collateral included a portion accounted for by Laureate as of December 31, 2019 totaling $15,843, and included in the combined financial statements as Walden is the principal on the surety bonds. During the year ended December 31, 2020 the surety bonds collateral accounted for by Laureate was transferred to Walden.

​

In addition, over the course of the years ended December 31, 2020 and 2019, Walden received Title IV program funds in advance of billing students for educational services. As a trustee of these Title IV program funds, Walden is required to maintain and restrict these funds pursuant to the terms of the institution’s program participation agreement with the DOE. As of December 31, 2020 and 2019, there was no restricted cash related to advanced payments of Title IV program funds.

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Concentration of Credit Risk

​

Financial instruments that potentially expose Walden to concentrations of credit risk consist primarily of cash and student tuition and fees receivable. Walden has cash with financial institutions in excess of federally insured limits. As of December 31, 2020 and 2019, we have not experienced losses related to amounts in excess of federally insured limits and believes it is not exposed to any significant credit risk on cash. 4

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

​

Student tuition and fees receivable are unsecured and are derived from students enrolled in Walden’s educational programs. Student receivables are not collateralized; however, credit risk is reduced as the amount owed by any individual student is small relative to the total student tuition and fees receivables.

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Revenue Recognition

​

Our revenues consist of tuition, educational product & service revenues, and student fees. Tuition revenues are recognized ratably on a straight-line basis over each academic session as the performance obligations are satisfied. Revenues from the sale of educational products are generally recognized point in time upon delivery. Educational services, such as continuing professional education, are recognized ratably as services are rendered which generally approximate one to three days in length, and collectability is probable.

​

We have elected a practical expedient portfolio approach for assessing student collectability given the large volume of homogeneous transactions and assess all students as one portfolio. Due to our high collection rate, management does not expect there to be any material differences from assessing the portfolio when compared to collectability on a student by student basis.

​

Billings on student contracts are billed at the start of each academic session and are paid over the term. Generally, students cannot re-enroll for the next academic session without satisfactory resolution of any past-due amounts.

​

Revenue is reported net of scholarships and other discounts, refunds and waivers. Management has determined that variable consideration need not be estimated at contract inception as scholarships and other discounts are usually known and taken at contract inception and refunds would not need to be accounted throughout the semester as revenue will only be recognized for the proportional amount of education provided and no amount of revenue recognized will be subject to a refund. For the years ended December 31, 2020 and 2019, our revenue was reduced by scholarships and discounts of $107,483 and $116,791 respectively, that we have offered to our students.

​

Deferred revenue and student deposits, which consist of tuition paid prior to the start of academic session and unearned tuition amounts, begins to be recognized as revenue after an academic session begins. If a student withdraws within the refund period, we are obligated to issue a refund according to the refund policy and the timing of the student’s withdrawal. The amount of refund obligations are reduced over the course of the academic term. Refunds are recorded as a reduction of deferred revenue and student deposits, as applicable. Deferred revenue and student deposits totaled $81,133 and $73,610 at December 31, 2020 and 2019, respectively.

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Student Tuition and Fees Receivable

​

Student tuition and fees receivable primarily consists of tuition and educational services and are recognized when an academic session begins, although students generally enroll in courses prior to the start of the academic session. Receivables are recognized only to the extent that amounts are due and collection is probable. The receivable balance as of December 31, 2020 and 2019 totaled $51,186 and $44,362, respectively.

​

Allowance for Doubtful Accounts

​

Walden uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce the student tuition and fees receivable to net realizable value. Walden estimates the amount of the required allowance by reviewing the status of past-due receivables, analyzing historical bad debt trends, as well as analysis of aged accounts receivable balances with allowances generally increasing as the receivable ages. The analysis of receivables is performed monthly, and allowances are adjusted accordingly. Receivables are generally due on the date on which the related class commences.

​ 5

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

​

Additionally, a substantial portion of our receivables are derived from students that participate in the Title IV programs administered by the DOE. Walden writes off receivables deemed to be uncollectible to the allowance for doubtful accounts when all collection efforts have been exhausted. Allowance for student tuition and fees was $18,359 and $15,949 as of December 31, 2020 and 2019.

​

Property, Equipment and Leasehold Improvements, and Impairment of Long-Lived Assets Property, equipment and leasehold improvements are recorded at cost, except for assets acquired using acquisition accounting, which are recorded at fair value. Depreciation is provided on the straight-line method over estimated useful lives, or the shorter of the term of the lease for leasehold improvements. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation is eliminated from the accounts and any resulting gain or loss is credited or charged to income. Assets under construction are recorded in construction-in-progress until they are available for use. Maintenance and repairs costs are charged to operating expenses as incurred. Improvements and betterments are capitalized and depreciated over the remaining useful life of the related asset.

​

Long-lived assets, which include property, equipment, and leasehold improvements are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. No impairment of long-lived depreciable assets occurred during the years ended December 31, 2020 and 2019.

​

Walden analyzes individual leases to determine whether it should be classified as finance or operating. For operating leases, right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the estimated present value of lease payments over the lease term. For finance leases, the assets and lease liabilities are initially recorded at the present value of the future minimum lease payments. As our leases do not provide an implicit rate, we use our own incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

​

Deferred Project Costs

​

Deferred project costs include the direct cost of internally developing proprietary educational products and materials or the purchase of similar costs from affiliated companies that have extended useful lives. These costs are capitalized and amortized on a straight-line basis over the estimated period that the associated products are expected to generate revenues, which generally approximates five years. Walden had $21,022 and $20,237 of capitalized deferred project costs as of December 31, 2020 and 2019, respectively.

​

Deferred costs are evaluated for impairment on a quarterly basis through review of the corresponding course catalog. If a course is no longer listed or offered in the current course catalog, then the costs associated with its development are written off. Costs that do not meet capitalization criteria are expensed as incurred.

​

Goodwill

​

Goodwill consists of the excess of cost of acquired enterprises over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. Goodwill is reviewed for impairment annually during Walden’s fourth fiscal quarter, or more frequently if impairment indicators arise. A qualitative assessment is performed to determine whether it is more likely than not that the fair value of the reporting unit is impaired. If it is more likely than not, a comparison of fair value, which is determined utilizing both a market value method and discounted projected future cash flows, to carrying value is performed for the purpose of identifying impairment. The carrying value of goodwill at December 31, 2020 and 2019 was $2,812. No impairment of goodwill occurred during the years ended December 31, 2020 and 2019.

​ 6

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

​

Stock-Based Compensation

​

Stock-based compensation expense allocated from the Parent's Stock Incentive Plan is based on the grant-date fair value, as calculated by the Black-Scholes option pricing model. Stock-based compensation expense, less estimated forfeitures, is recognized on a straight-line basis over the requisite service period for time based vesting awards and on a graded expense attribution method for performance based vesting awards to the extent that it is probable that the stated annual performance target will be achieved and awards will vest for any year. The estimated forfeitures are calculated based on historical activity, expected employee turnover, and other qualitative factors which are adjusted for changes in estimates and award vesting.

​

Income Taxes

​

Walden is included in the Parent's consolidated income tax return as a wholly-owned subsidiary. For purposes of these stand-alone financial statements, Walden applies the separate-return approach to allocate current and deferred tax as if we were a separate taxpayer rather than a member of the Parent's consolidated tax return. Accordingly, we recognize a provision for income taxes that includes federal and state income taxes using the liability method of accounting. Under the liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases including net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

​

Walden also is a party to a tax-sharing agreement with the Parent that includes provisions governing the allocation of tax liabilities that is calculated as if we were subject to income taxes as a separate stand-alone corporation.

​

Management evaluated Walden's tax positions and concluded there were no uncertain tax positions taken that require adjustment to the financial statements. With few exceptions, Walden is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for the tax years before 2017.

​

Financial Instruments

​

Walden’s financial instruments consist of cash, restricted cash, student tuition and fees receivable, other receivables, accounts payable and accrued expenses, and are carried at cost.

​

Advertising Costs

​

Advertising costs which are expensed as incurred totaled $124,089 and $108,067 for the years ended December 31, 2020 and 2019. Advertising expenses are included in direct costs in the accompanying combined statement of operations.

​

Contingencies

​

Walden accrues for contingent obligations when it is probable that a liability is incurred and the amount or range of amounts is reasonably estimable. As new facts become known to management, the assumptions related to a contingency are reviewed and adjustments are made, as necessary. Refer to Note 7 for further details of contingency matters.

​

Recently Adopted Accounting Pronouncements

​

In June 2016, the FASB issued ASU 2016-13, which sets forth a “current expected credit loss” (CECL) model and requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. ASU 2016-13 applies to financial instruments that are not measured at fair value, including receivables that result from revenue transactions. This ASU is effective for Walden beginning on January 1, 2023 with early adoption permitted. We adopted this standard as of January 1, 2020 and this did not have a material impact on our combined financial statements. 7

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

​

In January 2017, the FASB issued ASU 2017-04 in order to simplify the test for goodwill impairment by eliminating Step 2, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. This new guidance was be effective for Walden beginning on January 1, 2023, with early adoption permitted. We adopted this standard as of January 1, 2020 and this did not have a material impact on our combined financial statements.

​

Note 3. **** Property, Equipment and Leasehold Improvements

​

Walden's property, equipment and leasehold improvements as of December 31, 2020 and 2019 consisted of the following:

​

​	​	​	​	​	​	​	​	​
​	****	Estimated	****	​		****	​
​	​	Useful Life	​	​	2020	​	​	2019
Leasehold improvements	​	5 - 15 years	​	$	10,198	​	$	12,778
Furniture and fixtures	​	5 - 7 years	​	​	3,299	​	​	3,491
Computer hardware, software and other equipment	​	2 - 12 years	​	​	100,643	​	​	104,251
​	​	​	​	​	114,140	​	​	120,520
Less: accumulated depreciation	​	​	​	​	(87,532)	​	​	(86,783)
​	​	​	​	​	26,608	​	​	33,737
Construction in progress	​	​	​	​	2,237	​	​	2,598
Property, Equipment and Leasehold Improvements, Net	​	​	​	$	28,845	​	$	36,335

​

For the year ended December 31, 2020, Walden recorded depreciation and gain on disposal of property and equipment and leasehold improvements of $14,288 and $(44), respectively, which are reflected in the accompanying combined statement of operations.

​

For the year ended December 31, 2019, Walden recorded depreciation and loss on disposal of property and equipment and leasehold improvements of $18,446 and $170, respectively, which are reflected in the accompanying combined statement of operations.

​ 8

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 4. **** Leases

​

Walden conducts a significant portion of its operations at leased facilities. The facilities include our corporate headquarters and other office locations that support our operations. Walden analyzes each lease agreement to determine whether is should be classified as a finance lease or an operating lease. As a result of adopting ASC Topic 842 on January 1, 2019, we recorded on our balance sheet significant asset and liability balances associated with operating leases and no finance leases, as described further below.

​

Our operating lease agreements are primarily for real estate space and are included within operating lease right-of-use assets and operating lease liabilities on the combined balance sheet. The terms of our operating leases vary with certain leases containing renewal options and provide for increasing rent over the term of the lease.

​

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. As discussed in Note 2, Significant Accounting Policies, right-of-use assets and lease liabilities are recognized at the commencement date of the lease based on the estimated present value of lease payments over the lease term. Our variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Some of our lessee agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. Supplemental balance sheet information related to leases as of December 31, 2020 and 2019 was as follows:

​

​	​	​	​	​	​	​	​
​	****	2020		****	2019		****
Operating lease right-of-use assets, net	​	$	8,683	​	$	11,253	​
​	​	​	​	​	​	​	​
Current portion of operating leases	​	$	2,657	​	$	2,225	​
Long-term operating leases, less current portion	​	​	6,633	​	​	8,969	​
Total lease liabilities	​	$	9,290	​	$	11,194	​
​	​	​	​	​	​	​	​
Weighted average remaining lease terms	​	​	3.6	​	​	4.5	​
Weighted average discount rate	​	​	4.91	%	​	5.18	%
​	​	​	​	​	​	​	​
Operating lease costs	​	$	3,831	​	$	5,995	​
Short-term lease expense	​	​	—	​	​	231	​
Variable lease costs	​	​	715	​	​	1,024	​
Total Operating lease cost, including amounts allocated by parent	​	$	4,546	​	$	7,250	​
Total cash paid for operating leases	​	$	3,553	​	$	4,342	​

​

Future minimum rental payments under these leases, summarized by year, were as follows as of December 31, 2020:

​

​	​	​	​
2021		$	3,111
2022	​	​	2,496
2023	​	​	2,390
2024	​	​	2,255
Total minimum lease payments	​	​	10,252
Less: interest	​	​	(962)
Present value of lease liabilities	​	$	9,290

​ 9

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 5. **** Deferred Project Costs

​

Walden's deferred project costs as of December 31, 2020 and 2019 consisted of the following:

​

​	​	​	​	​	​	​
​	****	2020		****	2019
Deferred projects costs	​	$	98,393	​	$	94,427
Less: accumulated amortization	​	​	(81,229)	​	​	(77,922)
​	​	$	17,164	​	$	16,505
Projects in development	​	​	3,858	​	​	3,732
Deferred project costs, net	​	$	21,022	​	$	20,237

​

For the years ended December 31, 2020 and 2019 Walden recorded amortization of deferred project costs of $7,709 and $6,360, respectively, and loss on impairment of deferred projects of $11 and $0, respectively, which are reflected in the accompanying combined statement of operations.

​

Note 6. **** Income Taxes

​

The significant components of Walden's provision for income taxes for the years ended December 31, 2020 and 2019 were as follows:

​

​	​	​	​	​	​	​
​		2020			2019
Current	​	​	​	​	​	​
Federal	​	$	33,231	​	$	30,271
State	​	​	9,061	​	​	9,263
Total Current Expense	​	​	42,292	​	​	39,534
​	​	​	​	​	​	​
Deferred	​	​	​	​	​	​
Federal	​	​	(2,795)	​	​	(455)
State	​	​	(982)	​	​	86
Total Deferred Expense	​	​	(3,777)	​	​	(369)
Total provision for income taxes	​	$	38,515	​	$	39,165

​

​ 10

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 6. **** Income Taxes (continued)

​

The tax effects of the temporary differences between financial and income tax accounting that give rise to Walden's deferred tax assets and liabilities at December 31, 2020 and 2019 were as follows:

​

​	​	​	​	​	​	​
​		2020			2019
Deferred tax assets	​	​	​	​	​	​
Deferred compensation	​	$	6,962	​	$	4,627
Allowance for doubtful accounts	​	​	4,749	​	​	4,077
Nondeductible reserves	​	​	685	​	​	655
Operating lease liability	​	​	497	​	​	2,862
Unrealized Loss	​	​	182	​	​	—
Total deferred tax assets	​	​	13,075	​	​	12,221
Deferred tax liabilities	​	​	​	​	​	​
Depreciation	​	​	(1,345)	​	​	(1,666)
Amortization of intangible assets	​	​	(727)	​	​	(719)
Unrealized gain	​	​	—	​	​	(73)
Operating lease right-of-use assets, net	​	​	(340)	​	​	(2,877)
Total deferred tax liabilities	​	​	(2,412)	​	​	(5,335)
Net deferred tax assets	​	$	10,662	​	$	6,885

​

Walden files a consolidated federal income tax return with LEI, who has net operating loss carryforwards available to offset future taxable income. The statements above are prepared as if Walden filed a stand-alone tax return and was not considered part of a consolidated tax return.

​

A reconciliation of the reported income tax expense to the amount that would result by applying the U.S. federal statutory rate of 21% to income before income taxes for the year ended December 31, 2020 and 2019 was as follows:

​

​	​	​	​	​	​	​
​		2020			2019
Tax expense at U.S. statutory rate of 21%	​	$	31,851	​	$	31,876
State income tax expense, net of federal tax effect	​	​	6,382	​	​	7,386
Deferred only adjustment - Depreciation	​	​	—	​	​	(491)
Deferred only adjustment Excess Tax Benefits	​	​	—	​	​	132
Deferred Adjustments	​	​	337	​	​	—
Effect of permanent differences and other	​	​	(55)	​	​	262
Income tax expense	​	$	38,515	​	$	39,165

​

For the years ended December 31, 2020 and 2019, Walden's effective tax rate was approximately 25% and 26%, respectively.

​ 11

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 7. **** Commitments and Contingencies

​

Other Commitments

​

Walden participates in student financial aid through the Federal Department of Education’s Guaranteed Student Loan Program (the “Program”). Transfers of funds from the financial aid programs to Walden are made in accordance with the DOE requirements.

The financial aid and assistance programs are subject to political and budgetary considerations. There is no assurance that such funding will be maintained at current levels. Extensive and complex regulations govern the financial assistance programs in which Walden’s students participate. Walden’s administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for the initiation of potential adverse actions including a suspension, limitation or termination proceeding which could have a material adverse effect on us. While unlikely, if we were to lose our eligibility to participate in federal student financial aid programs, the students at that institution would lose access to funds derived from those programs and would have to seek alternative sources of funds to pay their tuition and fees. Management believes there are no matters of noncompliance that could have a material effect on the accompanying combined financial statements or our liquidity.

​

Litigation Matters

​

From time to time, Walden can be a defendant in various lawsuits. Management monitors the status of such events and accrues an estimated amount when an obligation becomes probable and estimable. As of December 31, 2020 and 2019 no amounts were accrued for such events.

​

Regulatory Matters

​

Our business is subject to regulatory oversight and from time to time we must respond to inquiries about its compliance with the various statutory requirements under which it operates. On September 14, 2020, Walden University (Walden) received a letter from the Civil Division of the United States Department of Justice (referred to herein as “DOJ”) indicating that the DOJ is examining whether Walden, in the operation of its Masters of Science in Nursing program (Nursing Program), may have violated the Federal False Claims Act by misrepresenting compliance with its program participation agreement with the DOE U.S. Department of Education, which agreement covers Walden's participation in federal student financial aid programs under Title IV of the U.S. Higher Education Act. The letter invites Walden to provide information regarding a number of specific areas primarily related to the practicum component of its Nursing Program, but it makes no allegations of any misconduct or wrongdoing by Walden. Further, on November 9, 2020, Walden received notice from the Higher Learning Commission (“HLC”) that a public “Governmental Investigation” designation would be assigned to Walden due to the DOJ inquiry and such designation became effective on November 9, 2020. On November 24, 2020, representatives of Walden met with individuals from the DOJ to present the information requested. Subsequent to that meeting Walden’s representatives have been in contact with the DOJ officials to help advance their understanding of Walden’s policies and practices. While Walden is cooperating with the DOJ’s request to voluntarily provide information, it cannot predict the timing or outcome of this matter. Walden accrues for a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed and adjusted to reflect the effect of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. At this time, Walden does not believe that this matter will have a material effect on our financial position, results of operations, or cash flows. Further, consistent with the HLC’s policies and procedures, a Governmental Investigation designation by the HLC could delay or prevent the HLC’s approval of a substantive change application to approve the pending sale of Walden. We continue to evaluate these regulatory developments and the potential impact, if any, on the pending sale of Walden.

​ 12

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 8. **** Related Party Transactions

​

Employee Benefit Plans

​

Eligible employees of Walden participate in a defined contribution plan administered by LEI under Section 401(k) of the Internal Revenue Code, up to certain annual limits. LEI matches 50% of the first 6% of eligible compensation an employee contributes to the benefit plan. Walden’s match is discretionary and based on LEI's financial performance. Additional discretionary contributions may also be made at the option of LEI. Matching contributions of $3,452 and $2,092 were funded subsequent to the 2020 and 2019 plan year respectively. No additional discretionary contributions were made by LEI. The matching contributions were included in the accompanying combined balance sheets in accounts payable and accrued expenses as of December 31, 2020 and 2019.

​

Compensation

​

Walden’s combined financial statements include an expense allocation of non-cash stock compensation from the Parent of $1,234 and $992 for the years ended December 31, 2020 and 2019. Periodically the Parent grants share-based compensation awards, including stock options, restricted stock, and restricted stock unit awards, to Walden employees under the following incentive plan:

2013 Long-Term Incentive Plan

​

In June 2013, the Board of Directors of the Parent approved the Laureate Education, Inc. 2013 Long- Term Incentive Plan (the “2013 Plan”), as a successor plan to the 2007 Plan.

​

Under the 2013 Plan, LEI may grant stock options, stock appreciation rights, unrestricted common stock or restricted stock (collectively, "stock awards"), restricted stock units, and other stock-based awards, to eligible Walden individuals on the terms and subject to the conditions set forth in the 2013 Plan. Stock options awards under the 2013 Plan generally have a contractual term of 10 years and are granted with an exercise price equal to the fair market value of Laureate’s stock at the date of grant. Restricted stock and restricted stock units awards under 2013 Plan are measured using the fair value of Laureate’s common stock on the date of grant or the most recent modification date, whichever is later. Stock options and restricted stock units awards are split into two tranches: a time- based vesting and a performance-based vesting tranche. The time-based vesting tranche typically vest over a five-year or three-year period. The performance-based vesting tranche are eligible for vesting based on achieving annual pre-determined performance targets, as defined in the plan, and the continued service of the employee. Certain performance based awards include a catch-up provision, allowing the grantee to vest in any year in which a target is missed if a following year's target is achieved as long as the following year is within the catch up periods as defined in the award agreements. Stock options and restricted stock units granted under the 2013 Plan have provisions for accelerated vesting if there is a change in control of Laureate, as defined by the 2013 Plan.

​

For Time Options, expense is recognized ratably over the five-year or three-year vesting period. For Performance Options, expense is recognized to the extent that it is probable that the stated annual earnings target will be achieved. Laureate assesses the probability of each performance tranche vesting throughout the life of each grant. For the year ended December 31, 2020, Walden recorded $164 of stock option and $1,070 of restricted stock and restricted stock unit expenses, respectively. For the year ended December 31, 2019, the Company recorded $272 of stock option and $720 of restricted stock and restricted stock unit expenses, respectively.

​

​ 13

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Notes to Combined Financial Statements

(Dollars in thousands)

​

Note 8. **** Related Party Transactions (continued)

​

Pledged Assets

​

Pursuant to a Second Amended and Restated Collateral Agreement dated as of April 26, 2017 between Walden and Citibank, N.A., as collateral agent (in such capacity, the “Collateral Agent”), Walden has pledged specific assets as collateral for a revolving credit facility and term loans from various lenders to the Parent. These assets include all of our receivables (except Title IV student loans) as well as our copyrights, patents and trademarks.

Standby Letters of Credit

​

During the year ended December 31, 2020, the Parent’s LOC in favor of the DOE, which allows Walden and certain other LEI subsidiaries to participate in Title IV programs, decreased by $43,676, to a total of $83,576. Walden comprised 100.0% of the total 2019 Title IV HEA program funds. As of December 31, 2020, $83,576 was held as collateral in a money market account held by the Parent and is included in restricted cash in the accompanying combined balance sheet as the collateral is required for us to participate in the DOE Title IV program.

​

During the year ended December 31, 2019, the Parent’s LOC in favor of the DOE, which allows Walden and certain other LEI subsidiaries to participate in Title IV programs, decreased by $11,751, to a total of $127,252. The percentage attributable to Walden of 99.2% was calculated based on our portion of the total 2018 Title IV HEA program funds. As of December 31, 2019, $126,255 was held as collateral in a money market account by us and is included in restricted cash in the accompanying combined balance sheet.

​

Note 9. **** Title IV Program Participation

​

Walden derives a substantial portion of its revenues from Student Financial Aid (“SFA”) received by its students under the Title IV programs administered by the DOE, pursuant to the HEA. To continue to participate in the SFA programs, Walden must comply with the regulations promulgated under the HEA. The regulations restrict the proportion of cash receipts for tuition and fees from eligible programs to be not more than 90 percent from Title IV programs. If an institution fails to satisfy the test for one year, its participation status becomes provisional for two consecutive fiscal years. If the test is not satisfied for two consecutive years, eligibility to participate in Title IV programs is lost for at least two fiscal years. For the years ended December 31, 2020 and 2019, Walden derived 75.97% and 75.87% of cash receipts for tuition and fees from Title IV funds.

​

Note 10. **** Subsequent Events

​

Management has performed an evaluation of subsequent events through April 23, 2021, which is the date the combined financial statements were available to be issued, noting no additional events which would affect the combined financial statements as of December 31, 2020. 14

Exhibit 99.2

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No’s. 333-234732, 333-224645, 333-198409, 333-198407, 333-193201, 333-169222, 333-188499, and 333-130604) of Adtalem Global Education Inc. of our report dated April 23, 2021 relating to the financial statements of the Walden Education Business, which appears in this Current Report on Form 8-K/A.

/s/ PricewaterhouseCoopers LLP

Baltimore, MD

October 22, 2021

Table of Contents Exhibit 99.3

​

​

​

​

​

​

​

​

Walden Education Business

(Carve-Out Walden Operations of Laureate Education)

​

Combined Financial Report

Condensed Combined Financial Statements as of June 30, 2021 and

December 31, 2020 and for the six months ended June 30, 2021 and 2020

​

​ ​

Table of Contents Index to Financial Statements

​

​	​	​
Contents		Page(s)
​	​	​
Financial Statements	​	​
​	​	​
Condensed Combined Balance Sheets as of June 30, 2021 and December 31, 2020 (unaudited)	​	1
​	​	​
Condensed Combined Statements of Operations for the six months ended June 30, 2021 and 2020 (unaudited)	​	2
​	​	​
Condensed Combined Statements of Changes in Net Parent Investment for the six months ended June 30, 2021 and 2020 (unaudited)	​	3
​	​	​
Condensed Combined Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	​	4
​	​	​
Notes to Combined Financial Statements	​	5 - 11

​

​ ​

Table of Contents ​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Condensed Combined Balance Sheets as of

June 30, 2021 and December 31, 2020 (Unaudited)

​

​	​	​	​	​	​
( in thousands)	June 2021		****	December 2020
Assets	​	​	​	​	​
Current Assets	​	​	​	​	​
Cash	$	84,135	​	$	204,723
Restricted cash	​	100,622	​	​	100,670
Student tuition and fees receivable, net	​	33,068	​	​	32,827
Prepaid expenses and other current assets	​	9,996	​	​	3,736
Total current assets	​	227,821	​	​	341,956
​	​	​	​	​	​
Property, Equipment and Leasehold Improvements, Net	​	28,171	​	​	28,845
Other Assets	​	​	​	​	​
Operating lease right-of-use assets, net	​	5,896	​	​	8,683
Deferred project costs, net	​	20,626	​	​	21,022
Other long term assets	​	16,576	​	​	14,370
Deferred tax asset	​	10,635	​	​	10,662
Goodwill	​	2,812	​	​	2,812
Total other assets	​	56,545	​	​	57,549
​	​	​	​	​	​
Total assets	$	312,537	​	$	428,350
​	​	​	​	​	​
Liabilities and Net Parent Investment	​	​	​	​	​
Current Liabilities	​	​	​	​	​
Accounts payable and accrued expenses	$	64,500	​	$	76,585
Deferred revenue and student deposits	​	82,207	​	​	81,133
Current portion of operating leases	​	1,797	​	​	2,657
Other current liabilities	​	197	​	​	191
Total current liabilities	​	148,701	​	​	160,566
​	​	​	​	​	​
Long-Term Liabilities	​	​	​	​	​
Long term portion of operating leases	​	4,416	​	​	6,633
Total long-term liabilities	​	4,416	​	​	6,633
​	​	​	​	​	​
Total liabilities	​	153,117	​	​	167,199
​	​	​	​	​	​
Commitments and Contingencies	​	​	​	​	​
​	​	​	​	​	​
Net Parent Investment	​	159,420	​	​	261,151
​	​	​	​	​	​
Total liabilities and Net Parent Investment	$	312,537	​	$	428,350

All values are in US Dollars.

​

The accompanying notes are an integral part of these interim combined financial statements.

​ 1

Table of Contents Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Condensed Combined Statements of Operations

For the Six Months Ended June 30, 2021 and 2020 (Unaudited)

​

( in thousands)	2021		****	2020
Revenues	​	​	​	​	​
Masters programs	$	183,633	​	$	169,301
Doctoral programs	​	68,573	​	​	70,068
Undergraduate programs	​	33,352	​	​	31,308
Other revenues	​	21,192	​	​	22,840
Total revenues, net of scholarships	​	306,750	​	​	293,517
​	​	​	​	​	​
Operating Expenses	​	​	​	​	​
Direct costs	​	214,732	​	​	204,010
General and administrative	​	22,966	​	​	19,994
Total operating expenses	​	237,698	​	​	224,004
​	​	​	​	​	​
Operating income	​	69,052	​	​	69,513
​	​	​	​	​	​
Other income:	​	​	​	​	​
Interest income, net	​	2	​	​	100
Other income, net	​	(39)	​	​	(212)
Total other income	​	(37)	​	​	(112)
​	​	​	​	​	​
Income before income taxes	​	69,015	​	​	69,401
Provision for income taxes	​	(17,632)	​	​	(17,849)
Net income	$	51,383	​	$	51,552

All values are in US Dollars.

​

The accompanying notes are an integral part of these interim combined financial statements.

​

​ 2

Table of Contents Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Condensed Combined Statements of Changes in Net Parent Investment

For the Six Months Ended June 30, 2021 and 2020 (Unaudited)

​

​	​	​
( in thousands)	Net parentinvestment
Balance as of January 1, 2020	$	180,259
Net income	​	51,552
Non-cash stock compensation	​	423
Net change in parent investment	​	(106,972)
Balance as of June 30, 2020	​	125,262
​	​	​
Balance as of January 1, 2021	$	261,151
Net income	​	51,383
Non-cash stock compensation	​	574
Net change in parent investment	​	(153,688)
Balance as of June 30, 2021	$	159,420

All values are in US Dollars.

​

The accompanying notes are an integral part of these interim combined financial statements.

​ 3

Table of Contents Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

Condensed Combined Statements of Cash Flows

For the Six Months Ended June 30, 2021 and 2020 (Unaudited)

​

​	​	​	​	​	​
( in thousands)	2021		****	2020
Cash Flows From Operating Activities	​	​	​	​	​
Net income	$	51,383	​	$	51,552
Adjustment to reconcile net income to net cash provided by operating activities:	​	​	​	​	​
Depreciation and amortization	​	8,696	​	​	10,578
(Gain) Loss on disposal of property and equipment	​	(24)	​	​	25
Impairment loss on deferred project costs	​	67	​	​	11
Amortization of operating lease right-of-use assets	​	1,157	​	​	1,717
Provision for doubtful accounts	​	5,295	​	​	8,181
Lease termination	​	250	​	​	—
Non-cash stock compensation	​	574	​	​	423
Deferred income taxes	​	27	​	​	14
Changes in operating assets and liabilities:	​	​	​	​	​
Student tuition and fees receivable	​	(5,536)	​	​	(21,922)
Prepaid expenses and other current assets	​	(6,253)	​	​	(2,696)
Other long-term assets	​	(2,206)	​	​	(3,528)
Accounts payable and accrued expenses	​	(12,305)	​	​	(12,903)
Deferred student tuition and fees	​	1,074	​	​	30,094
Other liabilities	​	(1,698)	​	​	(1,206)
Net cash provided by operating activities	​	40,501	​	​	60,340
​	​	​	​	​	​
Cash Flows From Investing Activities	​	​	​	​	​
Purchases of property and equipment	​	(4,565)	​	​	(2,629)
Additions to deferred project costs	​	(2,884)	​	​	(4,095)
Net cash used in investing activities	​	(7,449)	​	​	(6,724)
​	​	​	​	​	​
Cash Flows From Financing Activities	​	​	​	​	​
Net change in parent investment	​	(153,688)	​	​	(106,972)
Net cash used in financing activities	​	(153,688)	​	​	(106,972)
​	​	​	​	​	​
Net decrease in cash and restricted cash	​	(120,636)	​	​	(53,356)
Cash and Restricted cash	​	​	​	​	​
Beginning of year	​	305,393	​	​	210,221
End of year	$	184,757	​	$	156,865
​	​	​	​	​	​
Supplemental Disclosure of Cash Flow Information	​	​	​	​	​
Cash paid for interest	$	—	​	$	1
​	​	​	​	​	​
Supplemental Disclosure of Non-Cash Investing and Financing Activities	​	​	​	​	​
Purchases of property and equipment in accrued expenses	$	701	​	$	470
​	​	​	​	​	​
Reconciliation of Cash and Restricted Cash	​	​	​	​	​
Cash	$	84,135	​	$	14,055
Restricted cash	​	100,622	​	​	142,810
Total Cash and Restricted cash shown in the Statements of Cash Flows	$	184,757	​	$	156,865

All values are in US Dollars.

​

The accompanying notes are an integral part of these interim combined financial statements.

​

​ 4

Table of Contents

​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

​

Notes to Condensed Combined Financial Statements (Unaudited)

(Dollars in thousands)

​

Note 1. **** Nature of Business

The Walden Education Business (“Walden”, “we”, “us”, “our” or the “Business”) of Laureate Education, Inc. (“Laureate”, “LEI”, or “Parent”) operates an institution of higher education under the trade name of Walden University, providing students with bachelors, masters and doctoral degrees and certificates online in a broad range of disciplines including health sciences, counseling, criminal justice, human services, management, psychology, education, public health, nursing, social work, public administration and information technology. Walden is accredited by the Higher Learning Commission in addition to a number of specialized accreditations. Walden is a registered institution in the state of Minnesota and is currently authorized, licensed, registered, exempt or not subject to approval in all states of the United States, except New York and Rhode Island. On September 11, 2020, our Parent, entered into Membership Interest Purchase Agreement (the “Purchase Agreement”) with AdTalem Global Education, Inc. (“Adtalem” or the “Purchaser”), to sell all of the issued and outstanding membership interests in Walden e-Learning, LLC, and its subsidiary, Walden University, LLC, as well as carve-out operations of LEI in exchange for a purchase price of $1,480 million in cash, subject to certain adjustments set forth in the Purchase Agreement. The closing of the transaction is expected to occur in the third quarter of 2021 and is subject to customary closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals.

Note 2. **** Significant Accounting Policies

Fiscal Year – Walden’s fiscal year consists of twelve months ending December 31.

Basis of Presentation and Use of Estimates

The accompanying condensed combined financial statements are unaudited. The financial statements include condensed combined balance sheets, condensed combined statements of operations, condensed combined statements of changes in net parent investment and condensed combined statements of cash flows. A statement of condensed comprehensive income has not been presented as there are no differences. In the opinion of management, all adjustments, which consist of normal recurring adjustments, except as otherwise disclosed, necessary to fairly state the financial position, results of operations, net parent investment and cash flows for all periods presented have been made.

The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”). The results of the operations are not necessarily indicative of the results to be expected for the full calendar year. Therefore, these financial statements should be read in conjunction with the audited combined financial statements and notes thereto. Certain footnote disclosures included in the annual combined financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

The accompanying condensed combined financial statements have been prepared in accordance with U.S. GAAP. The condensed combined financial statements have been prepared on a standalone basis and included the operations, financial position, and cash flows of Walden E-Learning, LLC and Subsidiary, related Laureate Higher Education Group (“LHEG”) Shared Services, and certain Laureate corporate cost allocations (the “Walden Education Business”) as carved out from the historical consolidated financial statements of Laureate using both specific identification and the allocation methodologies described below. We believe the assumptions underlying the condensed combined financial statements, including the assumptions regarding allocated expenses, reasonably reflect the utilization of services provided to or the benefit received by Walden. However, these shared expenses may not represent the amounts that would have been incurred had the Walden operated autonomously or independently from Laureate.

Actual costs that would have been incurred if Walden had been a standalone company would depend on multiple factors, including organizational structure and strategic decisions in various areas such as information technology and infrastructure. 5

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​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

​

Notes to Condensed Combined Financial Statements (Unaudited)

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

Net parent investment represents Laureate’s historical investment in us, the net effect of transactions with and allocations from Laureate. All charges and allocations of costs for facilities, functions, and services performed by Laureate have been deemed paid by the Business to Laureate in the period in which the cost was recorded in the condensed combined statements of Changes in Net Parent Investment. While we do own and maintain separate bank accounts our Parent uses a centralized approach to cash management and funds our operating and investing activities as needed. Accordingly, cash held by our Parent at the corporate level was not allocated to us for any of the periods presented. We reflect the cash generated by our operations and expenses paid by our Parent on our behalf as a component of “Net Parent Investment” on our condensed combined balance sheets, and as a net change in parent investment in our condensed combined statements of cash flows. Intracompany balances and accounts within the Walden Business have been eliminated.

During the periods presented, Walden functioned as part of the larger group of schools controlled by Laureate, and accordingly, utilized centralized functions, such as academic support, technology, financial services, marketing, product development, sales and other management and administrative services to support continuing operations and to help accelerate the Walden business plan. As consideration of these services, Walden is allocated a monthly management fee that is based on LEI’s good faith estimate of the portion of the centralized costs incurred by the LEI shared services group attributable to Walden. Laureate also performed certain corporate functions for Walden. The corporate expenses related to Walden have been allocated from the Parent. These allocated costs are primarily related to certain governance and corporate functions such as finance, treasury, tax, human resources, legal, investor relations, and certain other costs. Where it is possible to specifically attribute such expenses to activities of Walden, these amounts have been charged or credited directly to Walden without allocation or apportionment. Allocation of other such expenses is based on a reasonable reflection of the utilization of the services provided or benefits received by Walden during the periods presented on a consistent basis, such as, but not limited to apportioned salary and benefits based on time spent, and relative percentage of headcount. The aggregate costs allocated for these functions to Walden are included within the condensed combined statements of operations as part of their natural functional expense groupings within direct costs and general and administrative expenses and are shown in detail within the following table.

​	​	​	​	​	​	​
​	​	Six Months Ended June 30,
​	​	2021		​	2020
Walden shared service costs (1)		$	1,806		$	6,363
Stock compensation expense (2)	​	​	574	​	​	423
Laureate Corporate expense allocation (3)	​	​	2,174	​	​	2,127
Laureate allocated tradename (4)	​	​	2,669	​	​	—
​	​	$	7,223	​	$	8,913

---

(1)	Under an existing shared services agreement with LEI which renewed on January 1, 2020 (disclosed above) and additional Parent’s Corporate shared service cost allocated to Walden.
(2)	Stock compensation expense represents both the allocation of the Parent’s Corporate stock compensation expense and the costs specifically identifiable to Walden employees
---	---
(3)	Represents the additional costs of the centralized functions of the Parent allocated to Walden
---	---
(4)	Walden is also benefiting from the use of Laureate’s tradename. As LEI incurred amortization expenses in 2021 associated with this tradename, amortization expenses have been allocated to Walden. Prior to September 30, 2020 the tradename had an indefinate life, thus no amortization was allocated.
---	---

Laureate used a centralized approach to cash management and financing its operations. Historically, the majority of Walden cash was transferred to the Parent on a periodic basis. This arrangement is not reflective of the manner in which Walden would have been able to finance its operations had it been a standalone business separate from the Parent during the periods presented. Transactions between Walden and Laureate and its subsidiaries are reflected in the condensed combined balance sheets as “Net parent investment” and in the condensed combined statements of cash flows as a financing activity in “Net change in net parent investment”. 6

Table of Contents

​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

​

Notes to Condensed Combined Financial Statements (Unaudited)

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

Additionally Walden uses various assets paid for by Laureate as well as liabilities incurred to operate its business consisting of but not limited to the following: prepaid expenses, fixed assets (leasehold improvements, furniture and equipment, computer and software), surety bonds collateralized with restricted cash which is a requirement for Walden to operate in various states, allocable employee benefit plan costs attributable to Walden employees, accrued expenses and operating leases for the benefit of Walden which have been deemed attributable to, and reflective of the historical operations of Walden. The assets and liabilities have historically been accounted for by Laureate as contracts which are shared among the Laureate network or that Laureate was deemed the obligor. The amounts recorded in these condensed combined financial statements may not be representative of the amounts that would have been incurred had Walden been an entity that operated independently of Laureate. Consequently, these condensed combined financial statements may not be indicative of Walden’s future performance and do not necessarily reflect what its results of operations, financial position and cash flows would have been had Walden operated as a separate entity apart from Laureate during the periods presented.

Our Parent’s debt and related interest expense have not been allocated to us for any of the periods presented since we are not the legal obligor of the debt, and our Parent’s borrowings were not directly attributable to us.

Estimates and Assumptions

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

The outbreak of COVID-19 has caused domestic and global disruption in operations for institutions of higher education. The long-term impact to Walden of the COVID-19 outbreak depends on numerous factors, including the effect on student enrollment in future periods, which cannot be fully determined at this time. As a result, the full impact of COVID-19 and the scope of any adverse impact on our finances and operations, may materially impact accounting estimates and assumptions, cannot be fully determined at this time.

Cash

Walden considers all highly liquid investments with an original maturity date of three months or less, when purchased, to be cash equivalents. No cash equivalents existed at June 30, 2021 and December 31, 2020.

Restricted Cash

Walden participates in the United States Department of Education (“DOE”) Title IV student financing assistance lending programs (“Title IV Programs”). At times, the DOE may require institutions to post standby letters of credit (“LOC”) in order to continue participation in Title IV programs. LOC requirements are based on a number of considerations including recent changes in ownership and failure to meet minimum financial ratio requirements set forth by the DOE. Walden is included within a group letter of credit with other U.S. based institutions controlled by LEI (See note 5).

Walden is also required by various states to post a surety bond. The bonds reflect a financial guarantee of the total amount of non-title IV adjusted gross tuition and fees from the enrollment of students totaling $17,046 and $17,094 as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021 and December 31, 2020, Walden’s restricted cash balance was $100,622 and $100,670, respectively, and held by the issuing banks as collateral for the LOC and surety bonds. The DOE LOC collateral is accounted for by Laureate as of June 30, 2021 and December 31, 2020 totaled $83,576, respectively, and included in the condensed combined financial statements as Walden is the primary beneficiary of the LOC. 7

Table of Contents

​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

​

Notes to Condensed Combined Financial Statements (Unaudited)

(Dollars in thousands)

​

Note 2. **** Significant Accounting Policies (continued)

In addition, over the course of the six months ended June 30, 2021 and the year ended December 31, 2020, Walden received Title IV program funds in advance of billing students for educational services. As a trustee of these Title IV program funds, Walden is required to maintain and restrict these funds pursuant to the terms of the institution’s program participation agreement with the DOE. As of June 30, 2021 and December 31, 2020, there was no restricted cash related to advanced payments of Title IV program funds.

Revenue Recognition

Our revenues consist of tuition, educational product & service revenues, and student fees. Tuition revenues are recognized ratably on a straight-line basis over each academic session as the performance obligations are satisfied. Revenues from the sale of educational products are generally recognized point in time upon delivery. Educational services, such as continuing professional education, are recognized ratably as services are rendered which generally approximate one to three days in length, and collectability is probable.

We have elected a practical expedient portfolio approach for assessing student collectability given the large volume of homogeneous transactions and assess all students as one portfolio. Due to our high collection rate, management does not expect there to be any material differences from assessing the portfolio when compared to collectability on a student by student basis.

Billings on student contracts are billed at the start of each academic session and are paid over the term. Generally, students cannot re-enroll for the next academic session without satisfactory resolution of any past-due amounts.

Revenue is reported net of scholarships and other discounts, refunds and waivers. Management has determined that variable consideration need not be estimated at contract inception as scholarships and other discounts are usually known and taken at contract inception and refunds would not need to be accounted throughout the semester as revenue will only be recognized for the proportional amount of education provided and no amount of revenue recognized will be subject to a refund. For the six months ended June 30, 2021 and 2020, our revenue was reduced by scholarships and discounts of $51,863 and $53,101, respectively, that we have offered to our students.

Deferred revenue and student deposits, which consist of tuition paid prior to the start of academic session and unearned tuition amounts, begins to be recognized as revenue after an academic session begins. If a student withdraws within the refund period, we are obligated to issue a refund according to the refund policy and the timing of the student’s withdrawal. The amount of refund obligations are reduced over the course of the academic term. Refunds are recorded as a reduction of deferred revenue and student deposits, as applicable. Deferred revenue and student deposits totaled $82,207 and $81,133 at June 30, 2021 and December 31, 2020, respectively.

Student Tuition and Fees Receivable

Student tuition and fees receivable primarily consists of tuition and educational services and are recognized when an academic session begins, although students generally enroll in courses prior to the start of the academic session. Receivables are recognized only to the extent that amounts are due and collection is probable. The receivable balance totaled $49,411 and $51,186 as of June 30, 2021 and December 31, 2020, respectively.

Allowance for Doubtful Accounts

Walden uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduce the student tuition and fees receivable to net realizable value. Walden estimates the amount of the required allowance by reviewing the status of past-due receivables, analyzing historical bad debt trends, as well as analysis of aged accounts receivable balances with 8

Table of Contents

​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

​

Notes to Condensed Combined Financial Statements (Unaudited)

(Dollars in thousands)

​

allowances generally increasing as the receivable ages. The analysis of receivables is performed monthly, and allowances are adjusted accordingly. Receivables are generally due on the date on which the related class commences.

Note 2. **** Significant Accounting Policies (continued)

Additionally, a substantial portion of our receivables are derived from students that participate in the Title IV programs administered by the DOE. Walden writes off receivables deemed to be uncollectible to the allowance for doubtful accounts when all collection efforts have been exhausted. Allowance for student tuition and fees was $16,343 and $18,359 as of June 30, 2021 and December 31, 2020, respectively.

Advertising Costs

Advertising costs which are expensed as incurred totaled $69,815 and $62,711 for the six months ended June 30, 2021 and 2020, respectively. Advertising expenses are included within direct costs in the accompanying condensed combined statement of operations.

Contingencies

Walden accrues for contingent obligations when it is probable that a liability is incurred and the amount or range of amounts is reasonably estimable. Refer to Note 4 for further details of contingency matters.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. Walden adopted ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to our condensed combined financial statements.

Note 3. **** Income Taxes

The significant components of Walden’s provision for income taxes for the six months ended June 30, 2021 and 2020 were as follows:

​	​	​	​	​	​	​
​	​	Six Months Ended June 30, 2021
​	​	2021		​	2020
Current		​			​
Federal	​	$	13,756	​	$	14,526
State	​	​	3,849	​	​	3,309
Total Current Expense	​	​	17,605	​	​	17,835
Deferred	​	​	​	​	​	​
Federal	​	​	21	​	​	—
State	​	​	6	​	​	14
Total Deferred Expense	​	​	27	​	​	14
Total provision for income taxes	​	$	17,632	​	$	17,849

​

For the six months ended June 30, 2021 and 2020 Walden’s effective tax rate was approximately 26% for both periods. 9

Table of Contents

​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

​

Notes to Condensed Combined Financial Statements (Unaudited)

(Dollars in thousands)

​

Note 4. **** Commitments and Contingencies

Other Commitments

Walden participates in student financial aid through the Federal Department of Education’s Guaranteed Student Loan Program (the “Program”). Transfers of funds from the financial aid programs to Walden are made in accordance with the DOE requirements.

Note 4. **** Commitments and Contingencies (continued)

The financial aid and assistance programs are subject to political and budgetary considerations. There is no assurance that such funding will be maintained at current levels. Extensive and complex regulations govern the financial assistance programs in which Walden’s students participate. Walden’s administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for the initiation of potential adverse actions including a suspension, limitation or termination proceeding which could have a material adverse effect on us.

While unlikely, if we were to lose our eligibility to participate in federal student financial aid programs, the students at that institution would lose access to funds derived from those programs and would have to seek alternative sources of funds to pay their tuition and fees. Management believes there are no matters of noncompliance that could have a material effect on the accompanying combined financial statements or our liquidity.

Litigation Matters

Walden is subject to legal proceedings arising in the ordinary course of business. In management’s opinion, we have adequate legal defenses, insurance coverage, and/or accrued liabilities with respect to the eventuality of these actions. Management believes that any settlement would not have a material impact on our financial position, results of operations, or cash flows.

Management monitors the status of such events and accrues an estimated amount when an obligation becomes probable and estimable. Any amount recorded is based on the status of current activity and the advice from legal counsel. As of June 30, 2021 and December 31, 2020, $150 and $0, respectively, were accrued for such events.

Regulatory Matters

We are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations. In recent years, the DOE has proposed or promulgated a substantial number of new regulations that impact Walden, including, but not limited to, borrower defense to repayment, state authorization and financial responsibility. Changes in or new interpretations of applicable laws, DOE rules, or regulations could have a material adverse effect on Walden’s eligibility to participate in the Title IV programs.

On April 28, 2021, we were notified that the Civil Division of the United States Department of Justice (the “DOJ”), on behalf of the United States, had filed a Notice of Election to Decline Intervention (the “Notice”) with respect to a civil qui tam action filed by third-party relators (the “Relators”) against Walden. It was this action that prompted the DOJ’s examination of Walden University’s Masters of Science in Nursing program. The DOJ’s investigation into this matter has now concluded. Further, as previously disclosed by us, the Higher Learning Commission (“HLC”) had informed us that a public “Governmental Investigation” designation would be assigned to us due to the DOJ inquiry; such designation became effective November 9, 2020.   Effective as of May 3, 2021, the HLC removed such designation.

The Relators filed on July 23, 2021 a voluntary Motion to Dismiss (the “Motion”) the complaint and the DOJ filed a concurring motion. We have no reason to believe that the district court judge will not grant the Motion. Although such Motion would 10

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​

Walden Education Business

(Carve-Out of Walden Operations of Laureate Education)

​

Notes to Condensed Combined Financial Statements (Unaudited)

(Dollars in thousands)

​

permit the relators to refile at a later date, we consider the matter closed. If the Relators take the extraordinary step to re-file, we will vigorously defend our interests. We maintain that we have not engaged in any unlawful conduct or other wrongdoing that would serve as a basis for any liability or damages claimed in the complaint.

Walden accrues for a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed and adjusted to reflect the effect of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. At this time, Walden does not believe that this matter will have a material effect on our financial position, results of operations, or cash flows.

Note 5. **** Related Party Transactions

Pledged Assets

Pursuant to a Second Amended and Restated Collateral Agreement dated as of April 26, 2017 between the Walden and Citibank, N.A., as collateral agent (in such capacity, the “Collateral Agent”), Walden has pledged specific assets as collateral for a revolving credit facility and term loans from various lenders to the Parent. These assets include all of our receivables (except Title IV student loans) as well as our copyrights, patents and trademarks.

Standby Letters of Credit

During the year ended December 31, 2020, the Parent’s LOC in favor of the DOE, which allows Walden and certain other LEI subsidiaries to participate in Title IV programs, was renewed and decreased by $43,676, to a total of $83,576. Walden comprised 100% of the total 2019 Title IV HEA program funds. As of both June 30, 2021 and December 31, 2020, $83,576 was held as collateral in a money market account by the Parent and is included in restricted cash in the accompanying condensed combined balance sheet as the collateral is required for us to participate in the DOE Title IV program.

Note 6. **** Subsequent Events

On August 12, 2021, Laureate closed the previously disclosed transaction pursuant to the Purchase Agreement. The total purchase price was $1,480 million in cash, subject to certain closing adjustments. 11

Exhibit 99.4

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF ADTALEM AND WALDEN

On August 12, 2021, Adtalem Global Education Inc. (the “Company”) completed its acquisition from Laureate Education. Inc. (“Seller”) of all of the issued and outstanding equity interests in Walden e-Learning, LLC (“e-Learning”), and its subsidiary, Walden University, LLC (together with e-Learning, “Walden”), in exchange for an aggregate purchase price of approximately $1.48 billion in cash, subject to certain adjustments set forth in the purchase agreement (the “Walden Acquisition”).

The Company funded the purchase price with a combination of (i) the proceeds from a term loan issued under a credit facility entered into on August 12, 2021, (ii) the proceeds from the issuance of senior secured notes by a subsidiary of the Company on March 1, 2021 and (iii) cash on hand (the “Acquisition Financing and Refinancing”).

The unaudited pro forma combined financial information has been derived from:

●	Audited consolidated financial statements and accompanying notes of the Company as of and for the fiscal year ended June 30, 2021 (as contained in its Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on August 19, 2021);
●	Audited combined financial statements and accompanying notes of Walden as of and for the year ended December 31, 2020 and unaudited condensed combined financial statements and accompanying notes of Walden as of June 30, 2021 and for the six month periods ended June 30, 2021 and 2020, each of which are attached to this filing as exhibits 99.1 and 99.3.
---	---

The unaudited pro forma combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The unaudited pro forma combined financial information is based on the historical consolidated financial statements of the Company and the historical combined financial statements of Walden, as adjusted to give effect to the Walden Acquisition and the Acquisition Financing and Refinancing. The unaudited pro forma combined balance sheet as of June 30, 2021 gives effect to the Walden Acquisition and the Acquisition Financing and Refinancing as if they occurred or had become effective on June 30, 2021. The unaudited pro forma combined statement of income for the fiscal year ended June 30, 2021, gives effect to the Walden Acquisition and the Acquisition Financing and Refinancing as if they occurred or had become effective on July 1, 2020. Further information about this basis of presentation is provided in Note 1 to this unaudited pro forma combined financial information.

The following unaudited pro forma combined financial information provides for pro forma adjustments giving effect to the following transactions:

●	The Walden Acquisition
●	The Acquisition Financing and Refinancing
---	---

The unaudited pro forma combined financial information has been prepared by us using the acquisition method of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). We have been treated as the acquirer in the Walden Acquisition for accounting purposes. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The unaudited pro forma combined financial information are provided for illustrative and informational purposes only and do not purport to represent or be indicative of the consolidated results of operations or financial condition of the Company had the Walden Acquisition been completed as of the dates presented, and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.

An updated determination of the fair value of Walden’s assets acquired and liabilities assumed will be performed within one year of the closing of the Walden Acquisition. The final purchase price allocation may be materially different than the preliminary purchase consideration allocation presented in the unaudited pro forma combined financial information. Any changes in the fair values of the net assets or total purchase consideration as compared with the information shown in the unaudited pro forma combined financial information may change the amount of the total purchase price allocated to goodwill and other assets and liabilities and may impact the combined company’s balance sheet and statement of income. As a result of the foregoing, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma combined financial information. Differences between these preliminary estimates and the final acquisition accounting may arise, and these differences could have a material impact on the accompanying unaudited pro forma combined financial information and the combined company’s future results of operations and financial position.

The unaudited pro forma combined financial information does not reflect any expected cost savings, operating synergies or revenue enhancements that the combined entity may achieve as a result of the acquisition or the costs necessary to achieve any such cost savings, operating synergies or revenue enhancements.

​

ADTALEM GLOBAL EDUCATION INC.

​

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF JUNE 30, 2021

(IN THOUSANDS, EXCEPT PAR VALUE)

​

​	​	​		​	​		​	Transaction Accounting Adjustments									​	​
​	****	Adtalem Global Education Inc. historical		****	Walden Education Business historical		****	Acquisition Financing and Refinancing adjustments		****	****	****	Walden Acquisition adjustments		****	****	****	Pro forma combined
​	​	​	​	​	​	​	​	​	Note 2	​	​	​	​	Note 3	​	​	​	​	​
Assets:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Current assets:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cash and cash equivalents	​	$	494,613	​	$	84,135	​	$	488,552	​	(b)	​	$	(768,903)	​	(c)	​	$	298,397
Restricted cash	​	​	819,003	​	​	100,622	​	​	—	​	​	​	​	(818,607)	​	(d)	​	​	17,442
​	​	​	​	​	​	​	​	​	​	​	​	​	​	(83,576)	​	(e)	​	​	​
Accounts receivable, net	​	​	67,996	​	​	33,068	​	​	—	​	​	​	​	—	​	​	​	​	101,064
Prepaid expenses and other current assets	​	​	133,341	​	​	9,996	​	​	—	​	​	​	​	—	​	​	​	​	143,337
Total current assets	​	​	1,514,953	​	​	227,821	​	​	488,552	​	​	​	​	(1,671,086)	​	​	​	​	560,240
Noncurrent assets:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Property and equipment, net	​	​	297,237	​	​	28,171	​	​	—	​	​	​	​	—	​	​	​	​	325,408
Operating lease assets	​	​	168,943	​	​	5,896	​	​	—	​	​	​	​	—	​	​	​	​	174,839
Deferred income taxes	​	​	22,479	​	​	10,635	​	​	—	​	​	​	​	(10,635)	​	(e)	​	​	22,479
Intangible assets, net	​	​	276,249	​	​	—	​	​	—	​	​	​	​	833,351	​	(b)	​	​	1,109,600
Goodwill	​	​	686,374	​	​	2,812	​	​	—	​	​	​	​	616,005	​	(a)	​	​	1,305,191
Other assets, net	​	​	87,601	​	​	37,202	​	​	6,778	​	(a)	​	​	(20,626)	​	(b)	​	​	110,955
Total assets	​	$	3,053,836	​	$	312,537	​	$	495,330	​	​	​	$	(252,991)	​	​	​	$	3,608,712
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Liabilities and shareholders’ equity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Current liabilities:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Accounts payable, accrued payroll and benefits, accrued liabilities, and other current liabilities	​	$	249,781	​	$	64,697	​	$	(12,112)	​	(a)	​	$	—	​	​	​	$	302,366
Deferred revenue and student deposits	​	​	100,697	​	​	82,207	​	​	—	​	​	​	​	(71,249)	​	(b)	​	​	111,655
Current operating lease liabilities	​	​	55,329	​	​	1,797	​	​	—	​	​	​	​	—	​	​	​	​	57,126
Current portion of long-term debt	​	​	3,000	​	​	—	​	​	3,375	​	(a)	​	​	—	​	​	​	​	6,375
Total current liabilities	​	​	408,807	​	​	148,701	​	​	(8,737)	​	​	​	​	(71,249)	​	​	​	​	477,522
Noncurrent liabilities:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Long-term debt	​	​	1,067,711	​	​	—	​	​	531,288	​	(a)	​	​	—	​	​	​	​	1,598,999
Long-term operating lease liabilities	​	​	167,855	​	​	4,416	​	​	—	​	​	​	​	—	​	​	​	​	172,271
Deferred income taxes	​	​	26,991	​	​	—	​	​	2,231	​	(c)	​	​	—	​	​	​	​	29,222
Other liabilities	​	​	79,612	​	​	—	​	​	(8,926)	​	(c)	​	​	—	​	​	​	​	70,686
Total liabilities	​	​	1,750,976	​	​	153,117	​	​	515,856	​	​	​	​	(71,249)	​	​	​	​	2,348,700
Commitments and contingencies	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Redeemable noncontrolling interest	​	​	1,790	​	​	—	​	​	—	​	​	​	​	—	​	​	​	​	1,790
Shareholders’ equity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Common stock, $0.01 par value per share, 200,000 shares authorized; 49,253 shares outstanding	​	​	811	​	​	—	​	​	—	​	​	​	​	—	​	​	​	​	811
Additional paid-in capital	​	​	519,826	​	​	—	​	​	—	​	​	​	​	—	​	​	​	​	519,826
Retained earnings	​	​	2,005,105	​	​	—	​	​	(27,221)	​	(d)	​	​	(22,322)	​	(f)	​	​	1,955,562
Accumulated other comprehensive loss	​	​	(7,365)	​	​	—	​	​	6,695	​	(c)	​	​	—	​	​	​	​	(670)
Treasury stock, at cost, 31,846 shares	​	​	(1,217,307)	​	​	—	​	​	—	​	​	​	​	—	​	​	​	​	(1,217,307)
Net parent investment	​	​	—	​	​	159,420	​	​	—	​	​	​	​	(159,420)	​	(g)	​	​	—
Total shareholders’ equity	​	​	1,301,070	​	​	159,420	​	​	(20,526)	​	​	​	​	(181,742)	​	​	​	​	1,258,222
Total liabilities and shareholders’ equity	​	$	3,053,836	​	$	312,537	​	$	495,330	​	​	​	$	(252,991)	​	​	​	$	3,608,712

​

See accompanying notes to unaudited pro forma combined financial information.

​

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

YEAR ENDED JUNE 30, 2021

(IN THOUSANDS, EXCEPT PER SHARE DATA)

​

​	​	​		​	​		​	Transaction Accounting Adjustments									​	​
​	****	Adtalem Global Education Inc. historical		****	Walden Education Business historical		****	Acquisition Financing and Refinancing adjustments		****	​	****	Walden Acquisition adjustments		​	****	****	Pro forma combined
​	​	​		​	​		​	Note 2		​	​	​	Note 4		​	​	​	​
Revenue	​	$	1,112,380	​	$	634,622	​	$	—	​	​	​	$	—	​	​	​	$	1,747,002
Operating cost and expense:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Cost of educational services	​	​	489,233	​	​	418,832	​	​	—	​	​	​	​	16,430	​	(b)	​	​	924,495
Student services and administrative expense	​	​	420,267	​	​	64,179	​	​	—	​	​	​	​	106,537	​	(a)	​	​	574,553
​	​	​	—	​	​	​	​	​	​	​	​	​	​	(16,430)	​	(b)	​	​	​
Restructuring expense	​	​	9,804	​	​	—	​	​	—	​	​	​	​	—	​	​	​	​	9,804
Business acquisition and integration expense	​	​	31,593	​	​	—	​	​	—	​	​	​	​	22,322	​	(c)	​	​	53,915
Total operating cost and expense	​	​	950,897	​	​	483,011	​	​	—	​	​	​	​	128,859	​	​	​	​	1,562,767
Operating income (loss)	​	​	161,483	​	​	151,611	​	​	—	​	​	​	​	(128,859)	​	​	​	​	184,235
Other income (expense):	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Interest and dividend income	​	​	4,094	​	​	60	​	​	—	​	​	​	​	—	​	​	​	​	4,154
Interest expense	​	​	(41,365)	​	​	—	​	​	(77,277)	​	(a)	​	​	—	​	​	​	​	(123,167)
​	​	​	​	​	​	​	​	​	(4,525)	​	(c)	​	​	—	​	​	​	​	​
Investment gain and other income (expense), net	​	​	2,638	​	​	(384)	​	​	—	​	​	​	​	—	​	​	​	​	2,254
Net other expense	​	​	(34,633)	​	​	(324)	​	​	(81,802)	​	​	​	​	—	​	​	​	​	(116,759)
Income (loss) from continuing operations before income taxes	​	​	126,850	​	​	151,287	​	​	(81,802)	​	​	​	​	(128,859)	​	​	​	​	67,476
(Provision for) benefit from income taxes	​	​	(25,248)	​	​	(38,298)	​	​	20,123	​	(e)	​	​	31,699	​	(d)	​	​	(11,724)
Income (loss) from continuing operations	​	​	101,602	​	​	112,989	​	​	(61,679)	​	​	​	​	(97,160)	​	​	​	​	55,752
Net loss attributable to redeemable noncontrolling interest from continuing operations	​	​	434	​	​	—	​	​	—	​	​	​	​	—	​	​	​	​	434
Net income (loss) from continuing operations	​	$	102,036	​	$	112,989	​	$	(61,679)	​	​	​	$	(97,160)	​	​	​	$	56,186
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Earnings per share from continuing operations:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Basic	​	$	1.99	​	​	​	​	​	​	​	​	​	​	​	​	​	​	$	1.09
Diluted	​	$	1.98	​	​	​	​	​	​	​	​	​	​	​	​	​	​	$	1.09
Weighted-average shares outstanding:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Basic shares	​	​	51,322	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	51,322
Diluted shares	​	​	51,645	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	51,645

​

See accompanying notes to unaudited pro forma combined financial information.

​

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Note 1 – Basis of pro forma presentation

The unaudited pro forma combined financial information has been prepared by Adtalem in connection with the Company’s acquisition of Walden, a leading online healthcare education provider, from Laureate Education, Inc.

The unaudited pro forma combined financial information is based on the historical consolidated financial statements of the Company and the historical combined financial statements of Walden prepared on a carve-out basis, as adjusted to give effect to the pro forma adjustments.

Adtalem and Walden’s historical financial statements were prepared in accordance with U.S. GAAP. There were no material transactions and balances between Adtalem and Walden as of and for the year ended June 30, 2021.

The Company and Walden have different fiscal years ending June 30^th^ and December 31^st^, respectively. Consequently, Walden’s historical statements of income have been aligned to the fiscal year of the Company for the fiscal year ended June 30, 2021 by adjusting (i) Walden’s audited combined statement of operations for the year ended December 31, 2020 to (ii) include Walden’s unaudited combined statement of operations data for the six months ended June 30, 2021 and to (iii) exclude Walden’s unaudited combined statement of operations data for the six months ended June 30, 2020. The audited combined financial statements and accompanying notes of Walden as of and for the year ended December 31, 2020 and the unaudited combined financial statements and accompanying notes of Walden as of June 30, 2021 and for the six-month periods ended June 30, 2021 and 2020, are attached to this filing as exhibits 99.1 and 99.3.

The accompanying unaudited pro forma combined financial information and related notes were prepared using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, (“ASC 805”), with Adtalem considered the accounting acquirer of Walden. ASC 805 requires, among other things, that the assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma combined balance sheet, the purchase price consideration has been allocated to the assets acquired and liabilities assumed of Walden based upon management’s preliminary estimate of their fair values as of August 12, 2021. The excess of the purchase price consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill. Accordingly, the purchase price allocation and related adjustments reflected in the unaudited pro forma combined financial information are preliminary and subject to adjustment based on a final determination of fair value. The purchase price consideration as well as the estimated fair values of the assets and liabilities will be updated and finalized as soon as practicable, but no later than one year from the closing of the acquisition.

The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. Management is not aware of any material differences between the accounting policies of the two companies that would continue to exist subsequent to the application of purchase accounting. Management has included certain reclassification adjustments for consistency in presentation as indicated in the subsequent notes (see Note 4 for further details). The unaudited pro forma combined financial information is provided for informational purposes only and do not purport to represent or be indicative of the consolidated results of operations or financial condition of the Company had the Walden Acquisition or the Acquisition Financing and Refinancing been completed as of the dates presented and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.

Note 2 – Acquisition Financing and Refinancing

Credit Facility

On February 12, 2021, Adtalem placed an $850 million senior secured term loan into the loan market to provide future funding for the Walden Acquisition. For 30 days beginning on March 15, 2021, the Company incurred ticking fees at 50% of the applicable 4.5% margin and from April 14, 2021 through to August 12, 2021 the Company incurred ticking fees at a rate equal to LIBOR plus a 4.5% margin, subject to a LIBOR floor of 0.75%.

On August 12, 2021, the Company entered into a new credit agreement (the “Credit Agreement”) among the Company, as borrower, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent. The Credit Agreement provides for senior secured credit facilities in the form of $850.0 million in aggregate principal amount of the term loan (the “Term Facility”) and $400.0 million of revolving capacity (with a $400.0 million sublimit for letters of credit and a $50.0 sublimit for swingline loans) (the “Revolving Facility, and together with the Term Facility, the “New Credit Facility”). The proceeds from the Term Facility, together with cash on hand and the senior secured notes discussed below, were used to (i) prepay in full all amounts outstanding under that certain credit agreement, dated as of April 13, 2018 (as amended from time to time, the “Prior Facility”), among the Company, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, (ii) consummate the Walden Acquisition and (iii) pay fees and expenses related to the prepayment of the Prior Facility and the consummation of the Walden Acquisition. The

proceeds from the Revolving Facility will be used to finance ongoing working capital needs and for general corporate purposes. As a result of such prepayment, the Prior Facility was terminated and the guarantees and all liens granted thereunder were released.

​

Borrowings under the Term Facility bear interest at the Company’s option at a rate per annum equal to LIBOR, subject to a LIBOR floor of 0.75%, plus an applicable margin ranging from 4.00% to 4.50% for eurocurrency term loan borrowings or 3.00% to 3.50% for alternative base rate (“ABR”) borrowings and borrowings under the Revolving Facility bear interest at a rate per annum equal to LIBOR, subject to a LIBOR floor of 0.75%, plus an applicable margin ranging from 3.75% to 4.25% for LIBOR borrowings or 2.75% to 3.25% for ABR borrowings, in each case depending on the Company’s net first lien leverage ratio for such period. Undrawn commitments under the Revolving Facility are subject to a commitment fee at a rate per annum of 0.25% of the undrawn revolving commitments and letters of credit are subject to a 4.25% interest rate, a 0.125% fronting fee, and other customary administrative charges. Borrowings may be made and letters of credit may be issued in U.S. dollars and certain other permitted currencies. The New Credit Facility contains customary Alternative Reference Rate Committee (“ARRC”) hardwired benchmark replacement language.

​

On the last day of each fiscal quarter commencing on the last day of the second full fiscal quarter after August 12, 2021, the Company is required to make amortization payments equal to 0.25% of the aggregate principal amount of the Term Facility outstanding. The Company is permitted to make voluntary prepayments of the loans, without premium or penalty, from time to time, and is obligated to make mandatory prepayments out of the proceeds of certain asset sales and other recovery events and debt issuances. Borrowings under the Term Facility mature seven years after August 12, 2021, and borrowings under the Revolving Facility mature, and the commitments thereunder terminate, five years after August 12, 2021.

Senior Secured Notes Offering

As previously disclosed, on March 1, 2021, Adtalem Escrow Corporation (the “Escrow Issuer”), a wholly owned subsidiary of the Company, entered into an Indenture, dated March 1, 2021 (the “Indenture”), by and between the Escrow Issuer and U.S. Bank National Association, as trustee and notes collateral agent, pursuant to which the Escrow Issuer issued $800.0 million aggregate principal amount of 5.500% Senior Secured Notes due 2028 (the “Notes”).

Upon issuance of the Notes, the net proceeds of the offering, along with certain additional funds (the “Escrowed Funds”), were deposited into a segregated escrow account.

In connection with the Walden Acquisition, the Escrowed Funds were released from escrow and were used, along with proceeds from the Term Facility and cash on hand, to finance the purchase price payable in connection with the Walden Acquisition, to pay off the Prior Facility, and to pay related fees and expenses.

In connection with the release of the Escrowed Funds from escrow, the Escrow Issuer merged with and into the Company, with the Company as the surviving entity in the merger. By entry into a supplemental indenture to the Indenture (the “Supplemental Indenture”), along with the Subsidiary Guarantors, the Company assumed all of the Escrow Issuer’s obligations as the issuer under the Indenture and the Notes and the Subsidiary Guarantors became guarantors under the Indenture.

​

Pro forma adjustments

We incurred debt discounts and fees of $49.5 million in connection with securing the New Credit Facility, (a) $29.1 million of which was related to the Term Facility (including debt issuance costs of $20.6 million and an original issue discount of $8.5 million), (b) $10.1 million of which was related to the Revolving Facility, and (c) $10.3 million of which was related to an unused bridge facility. For the Term Facility and Revolving Facility, $1.9 million of these costs were paid to rating agencies which were recorded in other assets, net on the balance sheet as of June 30, 2021. The deferred debt issuance costs and original issue discount related to the Term Facility are presented as a direct deduction from the face amount of the debt, while the deferred debt issuance costs related to the Revolving Facility are classified as other assets, net. The deferred debt issuance costs relating to the Term Facility are amortized using the effective interest rate method, whereas those relating to the Revolving Facility are amortized on a straight-line basis over the term of the debt facilities and recorded in interest expense in the unaudited pro forma combined statement of income. As the bridge facility was unused, the deferred debt issuance costs associated with the bridge facility have been written off and reflected as an adjustment to the unaudited pro forma combined statement of income as a one-time expense incurred within twelve months of the Acquisition Financing and Refinancing. Additionally, $16.3 million of deferred debt issuance costs were recognized as part of the Notes when issued on March 1, 2021. As such, an adjustment related to the amortization of the debt issuance costs has been made to the unaudited pro forma combined statement of income as if the issuance took place on July 1, 2020.

The effective interest rate used in calculating pro forma adjustments under the Term Facility is 5.87%, which is based on nominal rate of 5.25% (0.75% LIBOR floor plus 4.5% margin), contemplating amortization of the 1.0% original issue discount and deferred debt issuance costs. Interest expense as reflected within the unaudited pro forma combined statement of income have been calculated based on agreed upon terms, contemplating mandatory principal payments.

In connection with the senior secured term loan placed into the loan market on February 12, 2021, the Company had accrued and paid total ticking fees of $16.6 million through August 12, 2021.  Of this total, $11.3 million was recorded within accrued liabilities in Adtalem’s historical balance sheet as of June 30, 2021 and reflected in interest expense in the historical statement of income of Adtalem for the year ended June 30, 2021. As the ticking fees are representative of the historical interest expense incurred by the Company on the senior secured term loan from the period of February 12, 2021 to August 12, 2021 and the unaudited pro forma combined statement of income has been adjusted to include a full year of interest expense assuming the New Credit Facility had been entered into as of July 1, 2020, we have made a further adjustment to the unaudited pro forma combined statement of income to remove the $11.3 million of ticking fees recognized for the year ended June 30, 2021. Had the Term Facility been drawn upon on July 1, 2020 none of the ticking fees would have been incurred and, accordingly, the inclusion of such amounts would be duplicative to the interest expense incurred by the Company on a pro forma basis.

(a)	Pro forma adjustments to recognize the new credit facilities and remove the existing credit facilities, including amounts capitalized at the time of the original debt issuance and any related interest expense and amortization of related financing costs classified as interest expense are summarized below. The repayment of the existing credit facilities has been treated as a debt

extinguishment due to the lending group and the corresponding debt amounts being substantially different with the New Credit Facility.

​

​	​	​	​	​	​	​
Description <br>Amounts in thousands	****	Balance as of June 30, 2021		****	Interest expense <br>Year ended June 30, 2021
New Credit Facilities:	​	​	​	​	​	​
Term Facility (5.25%; 7 years)	​	$	850,000	​	$	44,541
Deferred debt issuance costs paid at closing – Term Facility	​	​	(19,310)	​	​	​
Deferred debt issuance costs paid prior to closing – Term Facility	​	​	(1,268)	​	​	​
Original issue discount (1.0%) – Term Facility	​	​	(8,500)	​	​	​
Amortization of deferred debt issuance costs and original issue discount	​	​	3,610	​	​	​
Write-off of deferred debt issuance costs on unused bridge facility	​	​	10,329	​	​	​
Additional interest expense associated with the Notes	​	​	29,333	​	​	​
Additional deferred debt issuance costs associated with the Notes	​	​	1,554	​	​	​
Ticking fees	​	​	(11,263)	​	​	​
Letters of credit	​	​	6,710	​	​	​
Acquisition financing, net	​	​	820,922	​	​	84,814
Current portion of long-term debt	​	​	6,375	​	​	​
Noncurrent portion of long-term debt	​	​	814,547	​	​	​
Ticking fees payable (within accrued liabilities)	​	​	(11,263)	​	​	​
​	​	​	​	​	​	​
Revolving Facility (0.25% unused commitment fee, 5 years)	​	​	—	​	​	617
Deferred debt issuance costs paid at closing – Revolving Facility	​	​	9,549	​	​	1,910
Deferred debt issuance costs paid prior to closing – Revolving Facility	​	​	597	​	​	119
Rating agency fees reclassified to deferred debt issuance costs	​	​	(1,866)	​	​	​
Other assets, net	​	​	8,280	​	​	2,646
​	​	​	​	​	​	​
Existing Credit Facilities:	​	​	​	​	​	​
Existing Term Loan B	​	$	(291,000)	​	$	(9,311)
Deferred debt issuance costs	​	​	4,741	​	​	(1,159)
Write-off of unamortized deferred debt issuance costs	​	​	4,596	​	​	​
Interest expense associated with the interest rate swap agreement	​	​	(2,405)	​	​	​
Letters of credit	​	​	(1,648)	​	​	​
Existing Credit Facilities	​	​	(286,259)	​	​	(9,927)
Current portion of long-term debt	​	​	(3,000)	​	​	​
Noncurrent portion of long-term debt	​	​	(283,259)	​	​	​
Interest payable (within accrued liabilities)	​	​	(849)	​	​	​
​	​	​	​	​	​	​
Existing Revolver	​	​	—	​	​	(939)
Deferred debt issuance costs	​	​	(1,502)	​	​	(721)
Write-off of unamortized deferred debt issuance costs	​	​	1,404	​	​	​
Other assets, net	​	​	(1,502)	​	​	(256)
​	​	​	​	​	​	​
Pro forma adjustments to:	​	​	​	​	​	​
Current portion of long-term debt	​	​	3,375	​	​	​
Noncurrent portion of long-term debt	​	​	531,288	​	​	​
Other assets, net	​	​	6,778	​	​	​
Interest payable and ticking fees payable (within accrued liabilities)	​	​	(12,112)	​	​	​
Interest expense	​	​	​	​	​	77,277

​

​

A change in nominal interest rates of 1/8% relating to the Term Facility would result in an increase or decrease in interest expense of $0.9 million for the year ended June 30, 2021.

(b)	Changes in the pro forma cash and cash equivalents balance is calculated as follows:

​

​	​	​	​
Description	****	Amounts in thousands
Sources of funds:	​	​	​
Term Facility	​	$	850,000
Deferred debt issuance costs (Term Facility and Revolving Facility)	​	​	(28,858)
Original issue discount of 1.0% (Term Facility)	​	​	(8,500)
Net cash inflow from financing	​	$	812,642
​	​	​	​
Uses of funds:	​	​	​
Extinguishment of existing debt	​	$	(291,000)
Interest payable and ticking fees payable related to debt instruments	​	​	(12,112)
Deferred debt issuance costs on the unused bridge facility	​	​	(10,329)
Incremental ticking fees incurred between July 1, 2021 and August 12, 2021	​	​	(5,330)
One-time fees associated with the New Credit Facility	​	​	(794)
Interest rate swap settlement payment	​	​	(4,525)
Net cash outflow from financing	​	$	(324,090)
​	​	​	​
Pro forma adjustment to cash and cash equivalents	​	$	488,552

​

(c)

In anticipation of the Acquisition Financing and Refinancing, the Company settled its outstanding interest rate swap on July 29, 2021 and was required to pay $4.5 million to terminate the agreement. Accordingly, the following adjustment was included to adjust for the impacts of interest rate swap termination as a one-time expense incurred within twelve months of the Acquisition Financing and Refinancing:

​

​	​	​	​
Description	****	Amounts in thousands
Adjustment to the unaudited pro forma combined balance sheet:	​	​	​
Deferred income taxes	​	$	2,231
Other liabilities	​	​	(8,926)
Accumulated other comprehensive loss	​	​	6,695
​	​	​	​
Adjustment to the unaudited pro forma combined statement of income:	​	​	​
Interest expense	​	$	(4,525)

​

(d)	Adjustments to record the following impacts relating to the Acquisition Financing and Refinancing on retained earnings:

​

​	​	​	​
Description	****	Amounts in thousands
Write-off of deferred debt issuance costs on the existing Term Loan B (see tickmark 2(a))	​	$	(4,741)
Write-off of deferred debt issuance costs on the existing Revolver (see tickmark 2(a))	​	​	(1,502)
Write-off of deferred debt issuance costs on the unused bridge facility (see tickmark 2(b))	​	​	(10,329)
Incremental ticking fees incurred between July 1, 2021 and August 12, 2021 (see tickmark 2(b))	​	​	(5,330)
One-time fees associated with the New Credit Facility (see tickmark 2(b))	​	​	(794)
Settlement of the interest rate swap (see footnote 2(c))	​	​	(4,525)
Pro forma adjustment to retained earnings	​	$	(27,221)

​

(e)

The adjustment to record the impact on income tax expense with regard to each pro forma adjustment, as appropriate, is based on a composite tax rate of 24.6%, adjusted by jurisdictional earnings mix and discrete tax benefits. The composite tax rate represents the mix of jurisdictional statutory tax rates in which the adjustments are expected to occur. Based on the 24.6% tax rate, the adjustment to income tax expense related to the Acquisition Financing and Refinancing pro forma adjustments was a benefit of $20.1 million.

Note 3 – Walden Acquisition Balance Sheet Adjustments

The unaudited pro forma combined financial information have been prepared using the acquisition method of accounting in accordance with ASC 805, with Adtalem as the accounting acquirer. Accordingly, consideration to be paid by the Company to complete the Walden Acquisition has been assigned to identifiable assets and liabilities of Walden based on estimated fair values as of the most recent year

end of June 30, 2021. Management’s assignment of the consideration was based on preliminary estimates of the fair value of assets acquired and liabilities assumed. The estimates and underlying assumptions will be revised as additional information becomes available and those changes could be material. Management expects to finalize accounting for the business combination as soon as practicable, but in no event later than one year from closing (in accordance with ASC 805). Prior to the end of the measurement period, if information becomes available that requires material adjustment to the purchase price assignment, such adjustments will be included prospectively.

(a)	The table below presents the preliminary estimate of fair value of Walden’s net assets to be acquired, excluding assets and liabilities that will not transfer to the Company, and the corresponding adjustment to goodwill.

​

​	​	​	​	​	​
Description Amounts in thousands	****	Preliminary estimate of fair value	****	Total
Purchase price consideration, net of cash received	​	​	​	$	1,464,007
Walden’s net assets to be acquired:	​	​	​	​	​
Current assets	​	43,064	​	​	​
Property and equipment, net	​	28,171	​	​	​
Operating lease assets	​	5,896	​	​	​
Intangible assets, net	​	833,351	​	​	​
Current liabilities, excluding deferred revenue	​	(66,494)	​	​	​
Deferred revenue	​	(10,958)	​	​	​
Other assets and liabilities, net	​	12,160	​	​	​
Net assets acquired	​	​	​	​	845,190
Less: Walden Historical Goodwill	​	​	​	​	(2,812)
Pro forma adjustment to Goodwill	​	​	​	$	616,005

​

Goodwill represents the excess of the purchase price of an acquired business over the fair value of assets acquired and liabilities assumed. Goodwill will not be amortized but instead will be tested for impairment at least annually (or more frequently if indicators of impairment arise). In the event that management determines that goodwill has become impaired, the Company will incur an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made. Goodwill is deductible for tax purposes.

The unaudited pro forma combined financial information include certain assets that are currently reported at historical amounts, including but not limited to operating lease assets and property and equipment, as the Company has not yet assessed whether any adjustment to fair value would be material. The Company expects to complete these assessments within the measurement period.

​

(b)	The table below presents Walden’s assets and liabilities based on preliminary assessments of fair value and the corresponding pro forma adjustment:

​

​	​	​	​	​	​	​	​	​	​
Description <br>Amounts in thousands	****	Historical <br>basis		****	Preliminary <br>estimate of <br>fair value		****	Pro forma Adjustment
Assets:	​	​	​	​	​	​	​	​	​
Trade name	​	$	—	​	$	119,560	​	$	119,560
Title IV eligibility and accreditation	​	​	—	​	​	495,800	​	​	495,800
Student relationships	​	​	—	​	​	161,900	​	​	161,900
Curriculum	​	​	—	​	​	56,091	​	​	56,091
Intangible assets, net	​	​	​	​	​	​	​	$	833,351
​	​	​	​	​	​	​	​	​	​
Curriculum	​	$	20,626	​	$	—	​	$	(20,626)
Other assets, net	​	$	(20,626)	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​
Liabilities:	​	​	​	​	​	​	​	​	​
Deferred revenue	​	$	82,207	​	$	10,958	​	$	(71,249)

​

(c)	Changes in the pro forma cash and cash equivalents balance is calculated as follows:

​

​	​	​	​
Description	****	Amounts in thousands
Purchase price consideration for Walden	​	​	(1,565,188)
One-time transaction costs	​	​	(18,421)
Insurance for representations and warranties	​	​	(3,901)
Net cash outflow for the Walden Acquisition	​	$	(1,587,510)
​	​	​	​
Release of funds from restricted cash that were required to be used for the Walden Acquisition	​	​	818,607
​	​	​	​
Pro forma adjustment to cash and cash equivalents	​	$	(768,903)

​

(d)	Funds received from the issuance of the Notes on March 1, 2021 were held in escrow to be used for the Walden Acquisition and as such, recorded as restricted cash in the historical balance sheet. Accordingly, an adjustment to release the restriction of $818.6 million was made for purposes of the unaudited pro forma combined balance sheet.
(e)	As part of the Walden Acquisition, $83.6 million of Walden’s restricted cash and $10.6 million of Walden’s deferred taxes did not transfer to the Company. Accordingly, these were removed from the unaudited pro forma combined balance sheet.
---	---
(f)	Adjustments to record the following impacts relating to the acquisition on retained earnings:
---	---

​

​	​	​	​
Description	****	Amounts in thousands
One-time transaction costs	​	​	(18,421)
Insurance for representations and warranties	​	​	(3,901)
Pro forma adjustment to retained earnings	​	$	(22,322)

​

(g)	Adjustment to remove Walden’s $159.4 million of net parent investment as it will become a wholly-owned subsidiary of Adtalem.

Note 4 – Walden Acquisition Statement of Income Adjustments

(a)

The fair value of Walden’s trade name and student relationship assets were determined using an income-based approach of either the multi-period excess earnings method or relief from royalty method, the Title IV eligibility and accreditation was determined using the with or without method, and the curriculum asset was determined using a cost-based methodology. Indefinite-lived intangible assets related to trade name and Title IV eligibility and accreditation are not amortized, as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets to the reporting entity. The student relationships asset is amortized based on the estimated retention of the students, giving consideration to the revenue and cash flow associated with these existing students and the curriculum asset is amortized on a straight-line basis.

​

​	​	​	​	​	​	​	​	​	​
Intangible assets <br>Amounts in thousands	****	Amount		****	Useful life <br>(years)		****	Adjustment to Amortization <br>Year ended June 30, 2021
Trade name	​	$	119,560	​	​	Indefinite	​	$	—
Title IV eligibility and accreditation	​	​	495,800	​	​	Indefinite	​	​	—
Student relationships	​	​	161,900	​	​	3	​	​	95,319
Curriculum	​	​	56,091	​	​	5	​	​	11,218
Total	​	$	833,351	​	​	​	​	$	106,537

​

The fair value of deferred revenue was determined with regard to cost to fulfill the underlying obligation plus a normal margin. The normal margin represents a cost-based earnings before interest and taxes (“EBIT”) margin (attributable to intangible assets) for each discrete period. Deferred revenue consists of tuition paid prior to the start of the academic session and unearned tuition amounts and begins to be recognized as  revenue after an academic session begins. The difference between the deferred revenue as of June 30, 2021 and the preliminary fair value as of August 12, 2021 is primarily due to the timing of the academic session. Further, the difference between the historical value of the deferred revenue as of August 12, 2021 and the preliminary fair value as of August 12, 2021 is not material. Accordingly, no amortization related to the fair value adjustment to deferred revenue has been reflected in the unaudited pro forma combined statement of income since the adjustment is not anticipated to have a material impact on the results of operations.

(b)	Walden historically records its provision for bad debts in student services and administrative expense, while Adtalem records the provision in cost of education services. Accordingly, a pro forma reclassification adjustment of $16.4 million was included in the unaudited pro forma combined statement of income to align Walden’s historical classification and presentation with that of Adtalem.
(c)	Subsequent to June 30, 2021, the Company incurred an additional $22.3 million of transaction costs in connection with the Walden Acquisition. Accordingly, an adjustment for this amount was recorded within business acquisition and integration expense in the unaudited pro forma combined statement of income as a one-time expense incurred within twelve months of the Walden Acquisition.
---	---
(d)	The adjustment to record the impact on income tax expense with regard to each pro forma adjustment, as appropriate, is based on a composite tax rate of 24.6%, adjusted by jurisdictional earnings mix and discrete tax benefits. The composite tax rate represents the mix of jurisdictional statutory tax rates in which the adjustments are expected to occur. Based on the 24.6% tax rate, the adjustment to income tax expense related to the Walden Acquisition pro forma adjustments was a benefit of $31.7 million.
---	---

The unaudited pro forma combined statement of income for the year ended June 30, 2021 includes business acquisition and integration expenses of $53.9 million that are not expected to have a recurring effect on the results of operations beyond one year.