LAUREATE EDUCATION, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report on Form 10-Q (this Form 10-Q) contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or similar expressions that concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results, and all statements we make relating to (i) our exploration of strategic alternatives and potential future plans, strategies or transactions that may be identified, explored or implemented as a result of such review process, (ii) our planned divestitures, the expected proceeds generated therefrom and the expected reduction in revenue resulting therefrom, and (iii) the potential impact of the COVID-19 pandemic on our business or the global economy as a whole, are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. All of these forward-looking statements are subject to risks and uncertainties that may change at any time, including, with respect to our exploration of strategic alternatives, risks and uncertainties as to the terms, timing, structure, benefits and costs of any divestiture or separation transaction and whether one will be consummated at all, and the impact of any divestiture or separation transaction on our remaining businesses. Accordingly, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-Q, are disclosed in “Item 1—Business,” and “Item 1A—Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the 2019 Form 10-K), as updated by Part II, “Item 1A—Risk Factors” of our Form 10-Q for the quarter ended March 31, 2020 and in Part II, “Item 1A—Risk Factors” of this Form 10-Q. Some of the factors that we believe could affect our results include:d • the risks and uncertainties related to the long-term effect to the Company of the COVID-19 pandemic and its resurgence, including, but not limited to, its effect on student enrollment, tuition pricing, and collections in future periods; • the risks associated with conducting our global operations, including complex business, foreign currency, political, legal, regulatory, tax and economic risks; • the risks associated with our exploration of strategic alternatives, including possible disruption to our ongoing businesses and increased transaction-related expenses; • our ability to effectively manage the growth of our business, implement common operating models within our country networks and increase our operating leverage; • the development and expansion of our operations and the effect of new technology applications in the educational services industry; • our ability to successfully complete previously announced divestitures; • the effect of existing international and U.S. laws and regulations governing our business or changes to those laws and regulations or in their application to our business; • changes in the political, economic and business climate in the international or the U.S. markets where we operate; • risks of downturns in general economic conditions and in the educational services and education technology industries that could, among other things, impair our goodwill and intangible assets; • possible increased competition from other educational service providers; • market acceptance of new service offerings by us or our competitors and our ability to predict and respond to changes in the markets for our educational services; • the effect on our business and results of operations from fluctuations in the value of foreign currencies; • our ability to attract and retain key personnel; • the fluctuations in revenues due to seasonality; • our ability to maintain proper and effective internal controls necessary to produce accurate financial statements on a timely basis; 41 • our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance; • the future trading prices of our Class A common stock and the impact of any securities analysts’ reports on these prices; and • our ability to maintain and, subsequently, increase tuition rates and student enrollments in our institutions. We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Form 10-Q may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Introduction This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the MD&A) is provided to assist readers of the financial statements in understanding the results of operations, financial condition and cash flows of Laureate Education, Inc. This MD&A should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (Form 10-Q). The consolidated financial statements included elsewhere in this Form 10-Q are presented in U.S. dollars (USD) rounded to the nearest thousand, with the amounts in MD&A rounded to the nearest tenth of a million. Therefore, discrepancies in the tables between totals and the sums of the amounts listed may occur due to such rounding. Our MD&A is presented in the following sections: • Overview; • Results of Operations; • Liquidity and Capital Resources; • Critical Accounting Policies and Estimates; and • Recently Adopted Accounting Standards. Overview Our Business We have built the largest international portfolio of degree-granting higher education institutions, primarily focused in Latin America, with 834,500 students enrolled at our 29 institutions in nine countries on more than 150 campuses included in our continuing operations as of June 30, 2020, which we collectively refer to as the Laureate International Universities network. We believe the global higher education market presents an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for quality higher education around the world. Advanced education opportunities drive higher earnings potential, and we believe the projected growth in the middle-class population worldwide and limited government resources dedicated to higher education create substantial opportunities for high-quality private institutions to meet this growing and unmet demand. Our outcomes-driven strategy is focused on enabling students to prosper and thrive in the dynamic and evolving knowledge economy. As of June 30, 2020, our international portfolio of 29 institutions comprised 28 institutions we owned or controlled, and one addition al institution that we managed through a joint venture arrangement. We have six operating segments as described below. We group our institutions by geography in: 1 ) Brazil; 2) Mexico; 3) Andean; 4) Central America ( formerly Central America & U.S. Campuses) ; and 5) Rest of World for reporting purposes. Our sixth segment, Online & Partnerships, includes fully online institutions that operate globally. COVID-19 In response to the COVID-19 pandemic, we h ave temporarily tran sitioned the educational delivery method at all of our campus-based institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting. The outbreak of COVID-19 has caused domestic and global disruption in operations for institutions of higher education. The long-term effect to the Company of the COVID-19 pandemic depends on numerous factors, including, but not limited to, the effect on student enrollment, tuition pricing, and collections in future periods, which cannot be fully quantified at this time. In 42 addition, regulatory activity that occurs in response to COVID-19 could have an adverse effect on our business if, for example, legislation was passed to suspend or reduce student tuition payments in any of the markets in which we operate. As a result, the full impact of COVID-19 and the scope of any adverse effect on the Company’s operations, including any potential impairments, which could be material, cannot be fully determined at this time. See also “Part II, Item 1A–Risk Factors–An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. The COVID-19 pandemic has affected the academic calendars at a number of our institutions, resulting in the deferral of revenue to the second half of 2020 that would otherwise have been recognized by June 30, 2020, if the academic calendars had not been changed. For the three and six months ended June 30, 2020, revenue of approximately $40 million and $80 million, respectively, was deferred to the second half of 2020, due to changes in the academic calendars of our institutions, primarily as a result of the COVID-19 pandemic. Discontinued Operations In 2017, the Company announced the divestiture of certain subsidiaries in our Rest of World and Central America segments. In August 2018, the Company announced the divestiture of additional subsidiaries located in Europe, Asia and Central America. After completing all of the announced divestitures, the Company’s remaining principal markets would be Brazil, Chile, Mexico and Peru, along with the Online and Partnerships segment and the institutions in Australia and New Zealand. At the time of the August 2018 announcement, the markets being divested by sale (the Discontinued Operations) included the institutions in Portugal and Spain, which were part of the Andean segment, all remaining institutions in the Central America segment, and all remaining institutions in the Rest of World segment, except for Australia, New Zealand and the managed institutions in the Kingdom of Saudi Arabia and China. The institutions in the Kingdom of Saudi Arabia were managed under a contract that expired at the end of August 2019 and was not renewed. Accordingly, these institutions were disposed of other than by sale on August 31, 2019, and, beginning in the third quarter of 2019, have been included in Discontinued Operations for all periods presented. The divestitures represented a strategic shift that had a major effect on the Company's operations and financial results. Accordingly, in accordance with Accounting Standard Codification (ASC) 205-20, “Discontinued Operations,” the results of the divestitures that are part of the strategic shift are presented as discontinued operations for all periods in our consolidated financial statements included elsewhere in this Form 10-Q. Since our entire Central America operating segment is included in Discontinued Operations, it no longer meets the criteria for a reportable segment under ASC 280, “Segment Reporting,” and, therefore, it is excluded from the segments information for all periods presented. In addition, the portions of the Andean and Rest of World reportable segments that are included in Discontinued Operations have also been excluded from the segment information for all periods presented. Unless indicated otherwise, the information in the MD&A relates to continuing operations. The Company began closing sale transactions in the first quarter of 2018. To date, we have completed the sales of subsidiaries in Cyprus, Italy, China, Germany, Morocco, Thailand, South Africa, India, Spain, Portugal, Turkey, Panama, and Costa Rica, as well as Kendall College, LLC (Kendall), the University of St. Augustine for Health Sciences, LLC (St. Augustine), NewSchool of Architecture and Design, LLC (NSAD) in the United States, and Centro Universitário do Norte (UniNorte), an institution in the Brazil segment that was included in continuing operations as it was not part of the strategic shift. We have not yet completed the divestitures of our subsidiaries in Honduras and Malaysia. On July 29, 2020, the Company entered into an agreement to sell its Australia and New Zealand operations, which did not meet the held-for-sale criteria as of June 30, 2020. The Company expects to reclassify Australia and New Zealand as discontinued operations in the third quarter of 2020, when the held-for-sale criteria were met. See also Note 4, Discontinued Operations and Assets Held for Sale, Note 5, Dispositions, and Note 21, Subsequent Events, in our consolidated financial statements included elsewhere in this Form 10-Q. Exploration of Strategic Alternatives On January 27, 2020, Laureate announced that its Board of Directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value. As part of this process, the Company is evaluating all potential options for its remaining businesses, including sales, spin-offs or business combinations. There can be no assurance as to the outcome of this process, including whether it will result in the completion of any transaction, as to the values that may be realized from any potential transaction or as to how long the review process will take. During the six months ended June 30, 2020, no additional entities met the held-for-sale criteria and, therefore, there were no changes to the entities classified as Discontinued Operations. 43 If the Company determines that the estimated fair value of any business is less than its carrying value, the Company will be required to record an impairment charge that could be material. See Note 8, Goodwill and Loss on Impairment of Assets, in our consolidated financial statements included elsewhere in this Form 10-Q for discussion of the impairment charge that the Company recorded during the second quarter of 2020. While the Company explores these strategic alternatives and until the held-for-sale criteria are met, the long-lived assets in these businesses continue to be classified as held and used and are evaluated for impairment under that model, based on the cash flows expected to be generated by the use of those asset groups in operations. Should the held-for-sale criteria be met, the long-lived assets will be recorded at the lower of their carrying value or fair value, less cost to sell. Because completing a sale, spin-off, or other transaction may be challenging due to the regulatory environment, market conditions and other factors, the values that may be realized from any potential transactions could be less than if these businesses remained held and used. If the Company decides to sell any of its businesses, the carrying value used to evaluate the business for potential impairment and to determine the gain or loss on sale will include any accumulated foreign currency translation (FX) losses associated with that business. In recent years, the U.S. dollar has strengthened against many international currencies, including the Brazilian Real, the Chilean Peso and the Mexican Peso. As a result, the Company has significant FX losses recorded within stockholders’ equity, as a component of accumulated other comprehensive income. As of June 30, 2020, and December 31, 2019, the Company’s consolidated FX loss totaled approximated $1.4 billion and $1.1 billion, respectively. Upon the sale of a business, any FX loss related to that business would be recognized as part of the gain or loss on sale. In addition, upon classification of a business as held-for-sale, the cumulative translation losses would be included as part of the carrying value of that business when evaluating it for potential impairment. Presented in the table below are the Company’s businesses, by asset group/reporting unit, that carry the most significant FX losses. Asset Group/ Reporting Unit Foreign Currency Translation Losses As of As of (in millions) June 30, 2020 December 31, 2019 Chile $ 249 $ 211 Brazil 488 407 Mexico 642 461 Total Chile, Brazil and Mexico $ 1,379 $ 1,079 While the Company has not agreed to divest any of the institutions in the regions shown in the table above, the substantial amounts of FX losses attributable to these businesses would have a material effect on the amount of gain or loss that would result from the sale of those businesses. Moreover, such FX losses could result in a material impairment charge (or increase it) if the held-for-sale criteria are met and the carrying value of a held-for-sale business exceeds its fair value, less cost to sell. To date, the Company has not identified impairment indicators related to its Brazil and Mexico asset groups/reporting units based on the Company’s estimates of future cash flows assuming that the businesses are held and used. The Company did, however, identify an impairment indicator related to its Chile asset group/reporting unit during the second quarter of 2020 and recorded an impairment charge. See Note 8, Goodwill and Loss on Impairment of Assets, in our consolidated financial statements included elsewhere in this Form 10-Q for further discussion. As a result of the considerations highlighted above and the significant FX losses, the Brazil and Mexico asset groups/reporting units may be at risk of impairment if the Company commits to a plan to sell its interests in any of these businesses. The Company will continue to monitor for impairment indicators as additional information becomes known. 44 Our Segments Our campus-based segments generate revenues by providing an education that emphasizes profession-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines. Our educational offerings are increasingly utilizing online and hybrid (a combination of online and in-classroom) courses and programs to deliver their curriculum. As noted above, in response to the COVID-19 pandemic we have temporarily transitioned the educational delivery method at our campus-based institutions to be online. Many of our largest campus-based operations are in developing markets which are experiencing a growing demand for higher education based on favorable demographics and increasing secondary completion rates, driving increases in participation rates and resulting in continued growth in the number of higher education students. Traditional higher education students (defined as 18-24 year olds) have historically been served by public universities, which have limited capacity and are often underfunded, resulting in an inability to meet the growing student demand and employer requirements. This supply and demand imbalance has created a market opportunity for private sector participants. Most students finance their own education. However, there are some government-sponsored student financing programs which are discussed below. These campus-based segments include Brazil, Mexico, Andean, Central America, and Rest of World. Specifics related to each of these campus-based segments and our Online & Partnerships segment are discussed below: • In Brazil, approximately 73% of post-secondary students are enrolled in private higher education institutions. While the federal government defines the national curricular guidelines, institutions are licensed to operate by city. Laureate owns 12 institutions in seven states throughout Brazil, with a particularly strong presence in the competitive São Paulo market. Many students finance their own education while others rely on the government-sponsored programs such as Prouni and Fundo de Financiamento Estudantil (FIES). • Public universities in Mexico enroll approximately two-thirds of students attending post-secondary education. However, many public institutions are faced with capacity constraints or the quality of the education is considered low. Laureate owns two institutions and is present throughout the country with a footprint of over 40 campuses. Each institution in Mexico has a national license. Students in our Mexican institutions typically finance their own education. • The Andean segment includes institutions in Chile and Peru. In Chile, private universities enroll approximately 72% of post-secondary students and there are government-sponsored student financing programs. In Peru, the public sector plays a significant role, but private universities are increasingly providing the capacity to meet growing demand. • The Central America segment includes an institution in Honduras, which is included in Discontinued Operations. Students in Central America typically finance their own education. • The Rest of World segment includes campus-based institutions in Asia Pacific with operations in Australia, Malaysia and New Zealand. Additionally, the Rest of World segment manages one institution in China through a joint venture arrangement. The institutions in Malaysia are included in Discontinued Operations. • The Online & Partnerships segment includes fully online institutions that offer profession-oriented degree programs in the United States through Walden University (Walden), a U.S.-based accredited institution, and through the University of Liverpool and the University of Roehampton in the United Kingdom. These online institutions primarily serve working adults with undergraduate and graduate degree program offerings. Students in the United States finance their education in a variety of ways, including Title IV programs. We no longer accept new enrollments at the University of Liverpool and the University of Roehampton, which are in a teach-out process. Corporate is a non-operating business unit whose purpose is to support operations. Its departments are responsible for establishing operational policies and internal control standards, implementing strategic initiatives, and monitoring compliance with policies and controls throughout our operations. Our Corporate segment is an internal source of capital and provides financial, human resource, information technology, insurance, legal and tax compliance services. The Corporate segment also contains the eliminations of intersegment revenues and expenses. 45 The following information for our reportable segments in continuing operations is presented as of June 30, 2020: Countries Institutions Enrollment 2020 YTD Revenues ($ in millions) (1) % Contribution to 2020 YTD Revenues Brazil 1 12 267,400 $ 202.2 16 % Mexico 1 2 168,400 269.1 20 % Andean 2 8 323,200 435.4 33 % Rest of World 3 4 18,600 106.1 8 % Online & Partnerships (2) 2 3 56,900 305.4 23 % Total (1) 9 29 834,500 $ 1,320.2 100 % (1) Amounts related to Corporate, partially offset by the elimination of intersegment revenues, total $2.1 million and are not separately presented. (2) We no longer accept new enrollments at the University of Liverpool and the University of Roehampton. Challenges Our international operations are subject to complex business, economic, legal, regulatory, political, tax and foreign currency risks, which may be difficult to adequately address. The majority of our operations are outside the United States. As a result, we face risks that are inherent in international operations, including: fluctuations in exchange rates, possible currency devaluations, inflation and hyper-inflation; price controls and foreign currency exchange restrictions; potential economic and political instability in the countries in which we operate; expropriation of assets by local governments; key political elections and changes in government policies; multiple and possibly overlapping and conflicting tax laws; and compliance with a wide variety of foreign laws. See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—We are a multinational business with continuing operations in nine countries around the world, predominantly in Latin America, and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address,” in our 2019 Form 10-K. There are also risks associated with our decision to divest certain operations. See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—Our exploration of strategic alternatives and our activities related to previously announced divestitures may disrupt our ongoing businesses, result in increased expenses and present certain risks to the Company,” in our 2019 Form 10-K. We plan to grow our continuing operations organically by: 1) adding new programs and course offerings; 2) expanding target student demographics; and 3) increasing capacity at existing and new campus locations. Our success in growing our business will depend on the ability to anticipate and effectively manage these and other risks related to operating in various countries. Regulatory Environment and Other Matters Our business is subject to varying laws and regulations based on the requirements of local jurisdictions. These laws and regulations are subject to updates and changes. We cannot predict the form of the rules that ultimately may be adopted in the future or what effects they might have on our business, financial condition, results of operations and cash flows. We will continue to develop and implement necessary changes that enable us to comply with such laws and regulations. See Part II, “Item 1A—Risk Factors—Political and regulatory developments in Chile may materially adversely affect us.” See also Part II, “Item 1A—Risk Factors—An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. See also “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—Our institutions 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,” “Risk Factors—Risks Relating to Our Highly Regulated Industry in the United States,” and “Item 1—Business—Industry Regulation,” in our 2019 Form 10-K for a detailed discussion of our different regulatory environments. Chilean Regulatory Developments On May 29, 2018, a new Higher Education Law (the New Law) was enacted. Among other things, the New Law prohibits conflicts of interests and related party transactions involving universities and their controlling parties, with certain exceptions. These exceptions include the provision of services that are educational in nature or essential for the university’s purposes. The New Law established a Superintendency of Higher Education, with authority to regulate institutions of higher education and promulgate regulations and procedures implementing the New Law. On May 29, 2019, the New Law’s provisions 46 regarding related party transactions went effective and the Superintendent has since issued further interpretive guidance and regulations. Prior to the effectiveness of the provisions, each of the Chilean non-profit universities and the relevant Laureate services provider agreed to terminate their existing network services agreement in favor of an open bidding process, wherein unrelated third parties and Laureate-related providers were invited to compete in the provision of the services that are essential to the fulfillment of each of the universities’ academic missions. The Company participated in these open bid processes, conducted by a third party, who found the Company had the superior bid in many of them. Awarded contracts entered into force once the applicable university’s board approved them or in January 2020, in the case of some of the educational services. Within the ordinary regulatory course of supervision, the Company and the Chilean non-profit universities will continue to interact with the Superintendent to maintain compliance with the New Law. We do not believe that the New Law will change our relationship with our two technical-vocational institutions in Chile that are for-profit entities. Additionally, we will continue to evaluate our accounting treatment of the Chilean non-profit universities to determine whether we can continue to consolidate them. In October 2020, Chileans are scheduled to vote on whether Chile should create a new constitution; see Part II, “Item 1A—Risk Factors—Political and regulatory developments in Chile may materially adversely affect us.” Key Business Metric Enrollment Enrollment is our lead revenue indicator and represents our most important non-financial metric. We define “enrollment” as the number of students registered in a course on the last day of the enrollment reporting period. New enrollments provide an indication of future revenue trends. Total enrollment is a function of continuing student enrollments, new student enrollments and enrollments from acquisitions, offset by graduations, attrition and enrollment decreases due to dispositions. Attrition is defined as a student leaving the institution before completion of the program. To minimize attrition, we have implemented programs that involve assisting students in remedial education, mentoring, counseling and student financing. Each of our institutions has an enrollment cycle that varies by geographic region and academic program. During each academic year, each institution has a “Primary Intake” period in which the majority of the enrollment occurs. Most institutions also have one or more smaller “Secondary Intake” periods. The first calendar quarter generally coincides with the Primary Intakes for our institutions in the Brazil, Andean and Rest of World segments. The third calendar quarter generally coincides with the Primary Intakes for our institutions in the Mexico and Online & Partnerships segments. The following chart shows our enrollment cycles at our continuing operations. Shaded areas in the chart represent periods when classes are generally in session and revenues are recognized. Areas that are not shaded represent summer breaks during which revenues are not typically recognized. The large circles indicate the Primary Intake start dates of our institutions, and the small circles represent Secondary Intake start dates. 47 Principal Components of Income Statement Revenues The majority of our revenue is derived from tuition and educational services. The amount of tuition generated in a given period depends on the price per credit hour and the total credit hours or price per program taken by the enrolled student population. The price per credit hour varies by program, by market and by degree level. Additionally, varying levels of discounts and scholarships are offered depending on market-specific dynamics and individual achievements of our students. Revenues are recognized net of scholarships, other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. In addition to tuition revenues, we generate other revenues from student fees, dormitory/residency fees and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. The main drivers of changes in revenues between periods are student enrollment and price. We continually monitor market conditions and carefully adjust our tuition rates to meet local demand levels. We proactively seek the best price and content combinations to remain competitive in all the markets in which we operate. Direct Costs Our direct costs include labor and operating costs associated with the delivery of services to our students, including the cost of wages, payroll taxes and benefits, depreciation and amortization, rent, utilities, bad debt expenses, and marketing and promotional costs to grow future enrollments. In general, a significant portion of our direct costs tend to be variable in nature and trend with enrollment, and management continues to monitor and improve the efficiency of instructional delivery. Conversely, as campuses expand, direct costs may grow faster than enrollment growth as infrastructure investments are made in anticipation of future enrollment growth. General and Administrative Expenses Our general and administrative expenses primarily consist of costs associated with corporate departments, including executive management, finance, legal, business development and other departments that do not provide direct operational services. Factors Affecting Comparability Acquisitions Our past experiences provide us with the expertise to further our mission of providing high-quality, accessible and affordable higher education to students by expanding into new markets if opportunities arise, primarily through acquisitions. Acquisitions affect the comparability of our financial statements from period to period. Acquisitions completed during one period impact comparability to a prior period in which we did not own the acquired entity. Therefore, changes related to such entities are considered “incremental impact of acquisitions” for the first 12 months of our ownership. We have made no acquisitions thus far in 2020. We made only a small acquisition in 2019, which had essentially no impact on the comparability of the periods presented. Dispositions Any dispositions of our continuing operations affect the comparability of our financial statements from period to period. Dispositions completed during one period impact comparability to a prior period in which we owned the divested entity. Therefore, changes related to such entities are considered “incremental impact of dispositions” for the first 12 months subsequent to the disposition. As discussed above, all of the divestitures that are part of the strategic shift announced in August 2018 are included in Discontinued Operations for all periods presented. In November 2019, we completed the sale of UniNorte, which is part of continuing operations, and is, therefore, included in the incremental impact of dispositions. Foreign Exchange The majority of our institutions are located outside the United States. These institutions enter into transactions in currencies other than USD and keep their local financial records in a functional currency other than the USD. We monitor the impact of foreign currency movements and the correlation between the local currency and the USD. Our revenues and expenses are generally denominated in local currency. The USD is our reporting currency and our subsidiaries operate in various other 48 functional currencies, including: Australian Dollar, Brazilian Real, Chilean Peso, Euro, Mexican Peso, New Zealand Dollar, and Peruvian Nuevo Sol. The principal foreign exchange exposure is the risk related to the translation of revenues and expenses incurred in each country from the local currency into USD. See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—Our reported revenues and earnings may be negatively affected by the strengthening of the U.S. dollar and currency exchange rates” in our 2019 Form 10-K. In order to provide a framework for assessing how our business performed excluding the effects of foreign currency fluctuations, we present organic constant currency in our segment results, which is calculated using the change from prior-year average foreign exchange rates to current-year average foreign exchange rates, as applied to local-currency operating results for the current year, and then excludes the impact of acquisitions, divestitures and other items, as described in the segments results. Seasonality Most of the institutions in our network have a summer break during which classes are generally not in session and minimal revenues are recognized. In addition to the timing of summer breaks, holidays such as Easter also have an impact on our academic calendar. Operating expenses, however, do not fully correlate to the enrollment and revenue cycles, as the institutions continue to incur expenses during summer breaks. Given the geographic diversity of our institutions and differences in timing of summer breaks, our second and fourth quarters are stronger revenue quarters as the majority of our institutions are in session for most of these respective quarters. Our first and third fiscal quarters are weaker revenue quarters because the majority of our institutions have summer breaks for some portion of one of these two quarters. Due to this seasonality, revenues and profits in any one quarter are not necessarily indicative of results in subsequent quarters and may not be correlated to new enrollment in any one quarter. Additionally, seasonality may be affected due to other events, such as the COVID-19 pandemic, which changed the academic calendar at many of our institutions. See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—We experience seasonal fluctuations in our results of operations” in our 2019 Form 10-K. Income Tax Expense Our consolidated income tax provision is derived based on the combined impact of federal, state and foreign income taxes. Also, discrete items can arise in the course of our operations that can further impact the Company’s effective tax rate for the period. Our tax rate fluctuates from period to period due to changes in the mix of earnings between our tax-paying entities, our tax-exempt entities and our loss-making entities for which it is not 'more likely than not' that a tax benefit will be realized on the loss. See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—We may have exposure to greater-than-anticipated tax liabilities” in our 2019 Form 10-K. Results from the Discontinued Operations The results of operations of our Discontinued Operations for the three and six months ended June 30, 2020 and 2019 were as follows: For the three months ended For the six months ended June 30, June 30, (in millions) 2020 2019 2020 2019 Revenues $ 25.6 $ 157.3 $ 58.8 $ 380.7 Depreciation and amortization — 0.4 — 0.8 Share-based compensation expense — 0.1 — 0.3 Other direct costs 23.3 126.2 50.8 278.6 Loss on impairment of assets 10.0 — 10.0 — Operating (loss) income (7.7) 30.6 (2.0) 100.9 Other non-operating (expense) income (2.6) 3.4 (10.6) 6.5 Pretax (loss) income of discontinued operations (10.3) 34.0 (12.6) 107.5 Income tax expense (1.9) (3.7) (3.4) (13.9) (Loss) income from discontinued operations, net of tax (12.2) 30.3 (16.0) 93.6 Gain (loss) on sales of discontinued operations, net of tax 2.3 641.5 (19.7) 889.5 Net (loss) income from discontinued operations $ (9.9) $ 671.8 $ (35.6) $ 983.1 Enrollments at our discontinued operations as of June 30, 2020 and June 30, 2019 were 37,200 and 113,600, respectively. 49 Six Months Ended June 30, 2020 On January 10, 2020, we sold our operations in Costa Rica, which resulted in a pre-tax loss of approximately $18.6 million. On March 6, 2020, we sold the operations of NSAD, which resulted in a pre-tax loss of approximately $5.7 million. During the second quarter of 2020, we recorded an impairment charge of $10.0 million related to long-lived assets of our institution in Honduras, in order to write down the carrying value of those assets to their estimated fair value. Six Months Ended June 30, 2019 On February 1, 2019, we sold the operations of St. Augustine, which resulted in a gain of approximately $223.0 million. On February 12, 2019, we sold our operations in Thailand, which resulted in a gain of approximately $10.8 million. As previously disclosed, on January 25, 2018, we completed the sale of LEI Lie Ying Limited (LEILY). During the first quarter of 2019, a legal matter, for which the Company had indemnified the buyer and recorded a contingent liability, was settled with no cost to the Company. Accordingly, the Company reversed the liability and recognized additional gain on the sale of LEILY of approximately $13.7 million. On April 8, 2019, we sold Monash South Africa as well as the real estate associated with that institution, which resulted in a gain of approximately $2.3 million. On May 9, 2019, we sold our operations in India, which resulted in a gain of approximately $19.5 million. On May 31, 2019, we sold our institutions in Spain and Portugal, which resulted in a gain of approximately $618.0 million. Results of Operations The following discussion of the results of our operations is organized as follows: • Summary Comparison of Consolidated Results; • Non-GAAP Financial Measure; and • Segment Results. Summary Comparison of Consolidated Results Discussion of Significant Items Affecting the Consolidated Results for the Six Months Ended June 30, 2020 and 2019 Six Months Ended June 30, 2020 During the first quarter of 2020, the Company recorded an impairment charge of $3.8 million primarily related to the write-off of capitalized curriculum development costs for a program that the Company decided to stop developing. During the second quarter of 2020, the Company recorded impairment charges of approximately $418.0 million related to Chile and $27.1 million related to the Brazil enrollment to graduation cycle (E2G) software assets, as described in Note 8, Goodwill and Loss on Impairment of Assets, in our consolidated financial statements included elsewhere in this Form 10-Q. Six Months Ended June 30, 2019 During the first quarter of 2019, we used approximately $340.0 million of the net proceeds from the sale of St. Augustine to repay a portion of our term loan that had a maturity date of April 2024 (the 2024 Term Loan). In addition, the Company elected to repay approximately $35.0 million of the approximately $51.7 million principal balance outstanding for certain notes payable at a real estate subsidiary in Chile. In connection with these debt repayments, the Company recorded a loss on debt extinguishment of $10.6 million, primarily related to the write off of a pro-rata portion of the unamortized deferred financing 50 costs associated with the repaid debt balances. This loss is included in other non-operating income (expense) in the year-to-date table below. During the second quarter of 2019, we fully repaid the remaining balance outstanding under the 2024 Term Loan, using proceeds received from the sale of our operations in India, Spain and Portugal. The remaining proceeds were used to repay borrowings outstanding under the senior secured revolving credit facility. In connection with these debt repayments, the Company recorded a loss on debt extinguishment of $15.6 million related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances, as well as the debt discount associated with the 2024 Term Loan. This loss is included in other non-operating (expense) income in the tables below. Comparison of Consolidated Results for the Three Months Ended June 30, 2020 and 2019 % Change Better/(Worse) (in millions) 2020 2019 2020 vs. 2019 Revenues $ 791.7 $ 992.4 (20) % Direct costs 554.1 707.4 22 % General and administrative expenses 47.2 67.4 30 % Loss on impairment of assets 445.1 0.5 nm Operating (loss) income (254.8) 217.2 nm Interest expense, net of interest income (32.8) (38.7) 15 % Other non-operating (expense) income (6.6) 3.6 nm (Loss) income from continuing operations before income taxes and equity in net income of affiliates (294.2) 182.2 nm Income tax expense (7.5) (74.6) 90 % Equity in net income of affiliates, net of tax — 0.2 (100) % (Loss) income from continuing operations (301.8) 107.8 nm (Loss) income from discontinued operations, net of tax (12.2) 30.3 (140) % Gain on sales of discontinued operations, net of tax 2.3 641.5 (100) % Net (loss) income (311.6) 779.6 (140) % Net loss attributable to noncontrolling interests 3.8 2.0 (90) % Net (loss) income attributable to Laureate Education, Inc. $ (307.8) $ 781.6 (139) % nm - percentage changes not meaningful For further details on certain discrete items discussed below, see “Discussion of Significant Items Affecting the Consolidated Results.” Comparison of Consolidated Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019 Revenues decreased by $200.7 million to $791.7 million for the three months ended June 30, 2020 (the 2020 fiscal quarter) from $992.4 million for the three months ended June 30, 2019 (the 2019 fiscal quarter). The effect of a net change in foreign currency exchange rates decreased revenues by $113.9 million, mainly driven by the weakening of the Brazilian Real, the Chilean Peso and the Mexican Peso against the USD. The incremental impact of the disposition of UniNorte during the fourth quarter of 2019 decreased revenues by $12.0 million. The effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing decreased revenues by $56.2 million compared to the 2019 fiscal quarter, attributable primarily to the effect of the COVID-19 pandemic on the academic calendar timing at a number of our institutions. Additionally, average total organic enrollment at a majority of our institutions decreased during the 2020 fiscal quarter, decreasing revenues by $20.7 million compared to the 2019 fiscal quarter. The overall decrease in organic enrollment was partially offset by an increase in our Rest of World segment. Other Corporate and Eliminations changes accounted for an increase in revenues of $2.1 million. Direct costs and general and administrative expenses combined decreased by $173.5 million to $601.3 million for the 2020 fiscal quarter from $774.8 million for the 2019 fiscal quarter. The effect of a net change in foreign currency exchange rates decreased costs by $79.9 million. The incremental impact of the disposition of UniNorte decreased direct costs by $9.4 million. The effect of operational changes decreased costs by $71.7 million, mainly driven by cost-saving initiatives to preserve 51 liquidity in the wake of the COVID-19 pandemic. Additionally, changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets resulted in a year-over-year decrease in direct costs of $0.5 million. Other Corporate and Eliminations expenses accounted for a decrease in costs of $12.0 million. Operating (loss) income changed by $472.0 million to a loss of $(254.8) million for the 2020 fiscal quarter from an income of $217.2 million for the 2019 fiscal quarter. This change was primarily a result of the impairment charges of $445.1 million during the 2020 fiscal quarter and, to a lesser extent, weakened foreign currency exchange rates compared to the 2019 fiscal quarter. These decreases in operating income were partially offset by increased operating income in our Rest of World segment, combined with lower operating charges at Corporate. Interest expense, net of interest income decreased by $5.9 million to $32.8 million for the 2020 fiscal quarter from $38.7 million for the 2019 fiscal quarter. The decrease in interest expense was primarily attributable to lower average debt balances. Other non-operating (expense) income changed by $10.2 million to expense of $(6.6) million for the 2020 fiscal quarter from income of $3.6 million for the 2019 fiscal quarter. This change was primarily attributable to: (1) a loss on foreign currency exchange for the 2020 fiscal quarter compared to a gain for the 2019 fiscal quarter, for a change of $13.8 million; (2) other non-operating expense for the 2020 fiscal quarter compared to income for the 2019 fiscal quarter, for a change of $8.1 million, primarily related to an increase in the estimated fair value of an equity security held at Corporate during the 2019 fiscal quarter; and (3) a loss on derivative instruments for the 2020 fiscal quarter compared to a gain for the 2019 fiscal quarter, for a change of $4.0 million. These decreases in other non-operating income were partially offset by a year-over-year decrease in loss on debt extinguishment of $15.6 million, related to the write off of deferred financing costs and debt discount as a result of the repayments of debt during the 2019 fiscal quarter. In addition, during the 2020 fiscal quarter, we recognized a gain on disposal of subsidiaries of $0.1 million. Income tax expense decreased by $67.1 million to $7.5 million for the 2020 fiscal quarter from $74.6 million for the 2019 fiscal quarter. This decrease in income tax expense was primarily due to changes in the mix of pre-tax book income attributable to taxable and non-taxable entities in various taxing jurisdictions and a tax benefit related to changes in reserves on uncertain tax positions due to statute expirations and divestitures. (Loss) income from discontinued operations, net of tax changed by $42.5 million to a loss of $(12.2) million for the 2020 fiscal quarter from an income of $30.3 million for the 2019 fiscal quarter. This change was the result of the sales during 2019 of discontinued operations that generated income during the 2019 fiscal quarter, combined with an impairment charge of $10.0 million during the 2020 fiscal quarter related to assets that were held for sale. Gain on sales of discontinued operations, net of tax decreased by $639.2 million to $2.3 million for the 2020 fiscal quarter, compared to $641.5 million for the 2019 fiscal quarter, related to the sales of our subsidiaries in South Africa, India, Spain and Portugal in 2019. 52 Comparison of Consolidated Results for the Six Months Ended June 30, 2020 and 2019 % Change Better/(Worse) (in millions) 2020 2019 2020 vs. 2019 Revenues $ 1,320.2 $ 1,593.5 (17) % Direct costs 1,146.9 1,346.6 15 % General and administrative expenses 96.4 121.3 21 % Loss on impairment of assets 448.9 0.5 nm Operating (loss) income (371.9) 125.1 nm Interest expense, net of interest income (66.2) (89.7) 26 % Other non-operating income (expense) 32.7 (6.2) nm (Loss) income from continuing operations before income taxes and equity in net income of affiliates (405.4) 29.2 nm Income tax benefit (expense) 227.6 (38.7) nm Equity in net income of affiliates, net of tax 0.2 0.2 — % Loss from continuing operations (177.7) (9.2) nm (Loss) income from discontinued operations, net of tax (16.0) 93.6 (117) % (Loss) gain on sales of discontinued operations, net of tax (19.7) 889.5 (102) % Net (loss) income (213.3) 973.9 (122) % Net loss (income) attributable to noncontrolling interests 5.1 (1.0) nm Net (loss) income attributable to Laureate Education, Inc. $ (208.2) $ 972.8 (121) % nm - percentage changes not meaningful For further details on certain discrete items discussed below, see “Discussion of Significant Items Affecting the Consolidated Results.” Comparison of Consolidated Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 Revenues decreased by $273.3 million to $1,320.2 million for the six months ended June 30, 2020 (the 2020 fiscal period) from $1,593.5 million for the six months ended June 30, 2019 (the 2019 fiscal period). The effect of a net change in foreign currency exchange rates decreased revenues by $154.5 million, mainly driven by the weakening of the Brazilian Real, the Chilean Peso and the Mexican Peso against the USD. The incremental impact of dispositions decreased revenues by $19.4 million, related to the sale of UniNorte during the fourth quarter of 2019. Average total organic enrollment at a majority of our institutions decreased during the 2020 fiscal period, decreasing revenues by $15.3 million compared to the 2019 fiscal period. The overall decrease in organic enrollment was partially offset by an increase in our Rest of World segment. The effect of product mix, pricing and timing decreased revenues by $86.8 million for the 2020 fiscal period, attributable primarily to the effect of the COVID-19 pandemic on the academic calendar timing at a number of our institutions. These decreases in revenues were partially offset by other Corporate and Eliminations changes, which accounted for an increase in revenues of $2.7 million. Direct costs and general and administrative expenses combined decreased by $224.6 million to $1,243.3 million for the 2020 fiscal period from $1,467.9 million for the 2019 fiscal period. The effect of a net change in foreign currency exchange rates decreased costs by $124.6 million. The incremental impact of the disposition of UniNorte decreased direct costs by $19.2 million. The effect of operational changes decreased direct costs by $75.2 million, mainly driven by cost-saving initiatives to preserve liquidity in the wake of the COVID-19 pandemic. Other Corporate and Eliminations expenses accounted for a decrease in costs of $21.2 million in the 2020 fiscal period. Partially offsetting these decreases in direct costs were Excellence-in-Process (EiP) implementation expense, which increased costs by $15.1 million for the 2020 fiscal period compared to the 2019 fiscal period, in addition to changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets, which resulted in a year-over-year increase in direct costs of $0.5 million. Operating (loss) income changed by $497.0 million to a loss of $(371.9) million for the 2020 fiscal period from an income of $125.1 million for the 2019 fiscal period. This change was primarily a result of the impairment charges of $448.9 million during the 2020 fiscal period, partially offset by a change from operating loss to operating income in our Rest of World segment, combined with lower operating charges at Corporate. 53 Interest expense, net of interest income decreased by $23.5 million to $66.2 million for the 2020 fiscal period from $89.7 million for the 2019 fiscal period. The decrease in interest expense was primarily attributable to lower average debt balances. Other non-operating income (expense) changed by $38.9 million, to an income of $32.7 million for the 2020 fiscal period from an expense of $(6.2) million for the 2019 fiscal period. This change was primarily attributable to: (1) an increase in gain on foreign currency exchange of $26.9 million; (2) a decrease in loss on debt extinguishment of $26.2 million, related to the repayment of the 2024 Term Loan during the 2019 fiscal period; and (3) a gain on sale of subsidiaries of $2.8 million, primarily related to a sale price adjustment for UniNorte. These increases in non-operating income were partially offset by a loss on derivative instruments for the 2020 fiscal period compared to a gain for the 2019 fiscal period, for a change of $8.4 million, and other non-operating expense for the 2020 fiscal period compared to income for the 2019 fiscal period, for a change of $8.6 million, primarily related to an increase in the estimated fair value of an equity security held at Corporate during the 2019 fiscal period. Income tax benefit (expense) changed by $266.3 million to a benefit of $227.6 million for the 2020 fiscal period from an expense of $(38.7) million for the 2019 fiscal period. This change was attributable to a discrete tax benefit of approximately $222 million that was recognized during the 2020 fiscal period related to the tax-basis step up of certain intellectual property that became subject to Dutch taxation in the Netherlands. (Loss) income from discontinued operations, net of tax changed by $109.6 million to a loss of $(16.0) million for the 2020 fiscal period from income of $93.6 million for the 2019 fiscal period. This change was primarily the result of the sales during 2019 of discontinued operations that generated income during the 2019 fiscal period, combined with an impairment charge of $10.0 million during the 2020 fiscal period related to assets that were held for sale. (Loss) gain on sales of discontinued operations, net of tax changed by $909.2 million to a loss of $(19.7) million for the 2020 fiscal period, related to the sales of NSAD and our operations in Costa Rica, compared to a gain of $889.5 million for the 2019 fiscal period related to the sales of St. Augustine and our operations in Thailand, South Africa, India, Spain and Portugal, along with an adjustment to the gain on the sale of our China operation. Net loss (income) attributable to noncontrolling interests changed by $6.1 million to a loss of $5.1 million for the 2020 fiscal period, compared to income of $(1.0) million for the 2019 fiscal period. This change was primarily related to our previous joint venture in Saudi Arabia. Non-GAAP Financial Measure We define Adjusted EBITDA as income (loss) from continuing operations, before equity in net (income) loss of affiliates, net of tax, income tax expense (benefit), (gain) loss on sale or disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, loss (gain) on derivatives, loss on debt extinguishment, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to implementation of our Excellence-in-Process (EiP) initiative. When we review Adjusted EBITDA on a segment basis, we exclude inter-segment revenues and expenses that eliminate in consolidation. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, Adjusted EBITDA is a key financial measure used by the compensation committee of our board of directors and our Chief Executive Officer in connection with the payment of incentive compensation to our executive officers and other members of our management team. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. 54 The following table presents Adjusted EBITDA and reconciles (loss) income from continuing operations to Adjusted EBITDA for the three months ended June 30, 2020 and 2019: % Change Better/(Worse) (in millions) 2020 2019 2020 vs. 2019 (Loss) income from continuing operations $ (301.8) $ 107.8 nm Plus: Equity in net income of affiliates, net of tax — (0.2) (100) % Income tax expense 7.5 74.6 90 % (Loss) income from continuing operations before income taxes and equity in net income of affiliates (294.2) 182.2 nm Plus: Gain on disposal of subsidiaries, net (0.1) — nm Foreign currency exchange loss (gain), net 4.9 (8.9) (155) % Other expense (income), net 0.4 (7.7) (105) % Loss (gain) on derivatives 1.4 (2.6) (154) % Loss on debt extinguishment — 15.6 100 % Interest expense 33.8 41.5 19 % Interest income (1.0) (2.8) (64) % Operating (loss) income (254.8) 217.2 nm Plus: Depreciation and amortization 40.1 49.3 19 % EBITDA (214.7) 266.5 (181) % Plus: Share-based compensation expense (a) 4.6 4.7 2 % Loss on impairment of assets (b) 445.1 0.5 nm EiP implementation expenses (c) 24.0 27.1 11 % Adjusted EBITDA $ 259.0 $ 298.8 (13) % nm - percentage changes not meaningful (a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718, “Stock Compensation.” (b) Represents non-cash charges related to impairments of long-lived assets. For further details, see “Discussion of Significant Items Affecting the Consolidated Results for the Six Months Ended June 30, 2020.” (c) EiP implementation expenses are related to our enterprise-wide initiative to optimize and standardize Laureate’s processes, creating vertical integration of procurement, information technology, finance, accounting and human resources. It included the establishment of regional shared services organizations (SSOs) around the world, as well as improvements to the Company's system of internal controls over financial reporting. The EiP initiative also includes other back- and mid-office areas, as well as certain student-facing activities, expenses associated with streamlining the organizational structure and certain non-recurring costs incurred in connection with the planned and completed dispositions. Beginning in the third quarter of 2019, EiP also includes expenses associated with an enterprise-wide program aimed at revenue growth. Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Three Months Ended June 30, 2020 and 2019 Depreciation and amortization decreased by $9.2 million to $40.1 million for the 2020 fiscal quarter from $49.3 million for the 2019 fiscal quarter. The effects of foreign currency exchange decreased depreciation and amortization expense by $5.7 million for the 2020 fiscal quarter. Other items decreased depreciation and amortization by $3.5 million. Share-based compensation expense decreased by $0.1 million to $4.6 million for the 2020 fiscal quarter from $4.7 million for the 2019 fiscal quarter. 55 EiP implementation expenses decreased by $3.1 million to $24.0 million for the 2020 fiscal quarter from $27.1 million for the 2019 fiscal quarter. The year-over-year decrease in EiP expenses is primarily attributable to lower costs of severance and retention bonuses related to our divestiture activity, and lower severance related to streamlining our organizational structure, partially offset by an increase in EiP expenses associated with an enterprise-wide program aimed at revenue growth. The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the six months ended June 30, 2020 and 2019: % Change Better/(Worse) (in millions) 2020 2019 2020 vs. 2019 Loss from continuing operations $ (177.7) $ (9.2) nm Plus: Equity in net income of affiliates, net of tax (0.2) (0.2) — % Income tax (benefit) expense (227.6) 38.7 nm (Loss) income from continuing operations before income taxes and equity in net income of affiliates (405.4) 29.2 nm Plus: Gain on disposal of subsidiaries, net (2.8) — nm Foreign currency exchange gain, net (31.0) (4.1) nm Other expense (income), net 0.5 (8.1) (106) % Loss (gain) on derivatives 0.6 (7.8) (108) % Loss on debt extinguishment — 26.2 100 % Interest expense 69.9 96.1 27 % Interest income (3.7) (6.4) (42) % Operating (loss) income (371.9) 125.1 nm Plus: Depreciation and amortization 84.3 96.6 13 % EBITDA (287.6) 221.7 nm Plus: Share-based compensation expense (a) 6.6 7.7 14 % Loss on impairment of assets (b) 448.9 0.5 nm EiP implementation expenses (c) 54.4 39.3 (38) % Adjusted EBITDA $ 222.2 $ 269.2 (17) % nm - percentage changes not meaningful (a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718, “Stock Compensation.” (b) Represents non-cash charges related to impairments of long-lived assets. For further details, see “Discussion of Significant Items Affecting the Consolidated Results for the Six Months Ended June 30, 2020.” (c) EiP implementation expenses are related to our enterprise-wide initiative to optimize and standardize Laureate’s processes, creating vertical integration of procurement, information technology, finance, accounting and human resources. It included the establishment of regional shared services organizations (SSOs) around the world, as well as improvements to the Company's system of internal controls over financial reporting. The EiP initiative also includes other back- and mid-office areas, as well as certain student-facing activities, expenses associated with streamlining the organizational structure and certain non-recurring costs incurred in connection with the planned and completed dispositions. Beginning in the third quarter of 2019, EiP also includes expenses associated with an enterprise-wide program aimed at revenue growth. Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Six Months Ended June 30, 2020 and 2019 Depreciation and amortization decreased by $12.3 million to $84.3 million for the 2020 fiscal period from $96.6 million for the 2019 fiscal period. The effects of foreign currency exchange decreased depreciation and amortization expense by $9.1 million for the 2020 fiscal period. Other items decreased depreciation and amortization by $3.2 million. 56 Share-based compensation expense decreased by $1.1 million to $6.6 million for the 2020 fiscal period from $7.7 million for the 2019 fiscal period. EiP implementation expenses increased by $15.1 million to $54.4 million for the 2020 fiscal period from $39.3 million for the 2019 fiscal period. This increase is primarily attributable to the inclusion in EiP of expenses associated with an enterprise-wide program aimed at revenue growth. Segment Results We have five reportable segments: Brazil, Mexico, Andean, Rest of World and Online & Partnerships. As discussed in “Overview,” the entire Central America segment is included in Discontinued Operations and therefore is excluded from segment results. For purposes of the following comparison of results discussion, “ segment direct costs ” represent direct costs by segment as they are included in Adjusted EBITDA, such that depreciation and amortization expense, loss on impairment of assets, share-based compensation expense and our EiP implementation expenses have been excluded. Organic enrollment is based on average total enrollment for the period. For a further description of our segments, see “Overview.” 57 The following tables, derived from our consolidated financial statements included elsewhere in this Form 10-Q, presents selected financial information of our segments: (in millions) % Change Better/(Worse) For the three months ended June 30, 2020 2019 2020 vs. 2019 Revenues: Brazil $ 118.5 $ 197.1 (40) % Mexico 114.9 162.5 (29) % Andean 345.9 423.0 (18) % Rest of World 62.6 51.2 22 % Online & Partnerships 148.9 159.7 (7) % Corporate 1.0 (1.1) 191 % Consolidated Total Revenues $ 791.7 $ 992.4 (20) % Adjusted EBITDA: Brazil $ 41.6 $ 58.9 (29) % Mexico 19.7 31.6 (38) % Andean 160.7 186.5 (14) % Rest of World 19.7 12.1 63 % Online & Partnerships 43.4 49.9 (13) % Corporate (26.0) (40.1) 35 % Consolidated Total Adjusted EBITDA $ 259.0 $ 298.8 (13) % (in millions) % Change Better/(Worse) For the six months ended June 30, 2020 2019 2020 vs. 2019 Revenues: Brazil $ 202.2 $ 307.1 (34) % Mexico 269.1 318.9 (16) % Andean 435.4 561.9 (23) % Rest of World 106.1 84.6 25 % Online & Partnerships 305.4 321.5 (5) % Corporate 2.1 (0.6) nm Consolidated Total Revenues $ 1,320.2 $ 1,593.5 (17) % Adjusted EBITDA: Brazil $ 22.4 $ 28.2 (21) % Mexico 43.0 57.4 (25) % Andean 98.5 153.3 (36) % Rest of World 24.5 8.8 178 % Online & Partnerships 86.7 98.4 (12) % Corporate (53.0) (76.9) 31 % Consolidated Total Adjusted EBITDA $ 222.2 $ 269.2 (17) % nm - percentage change not meaningful 58 Brazil Financial Overview Comparison of Brazil Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 197.1 $ 138.2 $ 58.9 Organic enrollment (1) (4.1) Product mix, pricing and timing (1) (19.2) Organic constant currency (23.3) (24.8) 1.5 Foreign exchange (43.3) (27.5) (15.8) Dispositions (2) (12.0) (9.4) (2.6) Other (3) — 0.4 (0.4) June 30, 2020 $ 118.5 $ 76.9 $ 41.6 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Relates to the sale of UniNorte during the fourth quarter of 2019. (3) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues decreased by $78.6 million, a 40% decrease from the 2019 fiscal quarter. • Organic enrollment decreased during the 2020 fiscal quarter by 3%, decreasing revenues by $4.1 million compared to the 2019 fiscal quarter. • The decrease in revenues from product mix, pricing and timing was in part due to the effect of the COVID-19 pandemic on the academic calendar timing. • Revenues represented 15% of our consolidated total revenues for the 2020 fiscal quarter compared to 20% for the 2019 fiscal quarter. Adjusted EBITDA decreased by $17.3 million, a 29% decrease from the 2019 fiscal quarter. 59 Comparison of Brazil Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 307.1 $ 278.9 $ 28.2 Organic enrollment (1) (3.4) Product mix, pricing and timing (1) (20.9) Organic constant currency (24.3) (35.2) 10.9 Foreign exchange (61.2) (44.2) (17.0) Dispositions (2) (19.4) (19.2) (0.2) Other (3) — (0.5) 0.5 June 30, 2020 $ 202.2 $ 179.8 $ 22.4 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Relates to the sale of UniNorte during the fourth quarter of 2019. (3) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues decreased by $104.9 million, a 34% decrease from the 2019 fiscal period. • Organic enrollment decreased during the 2020 fiscal period by 2%, decreasing revenues by $3.4 million compared to the 2019 fiscal period. • The decrease in revenues from product mix, pricing and timing was in part due to the effect of the COVID-19 pandemic on the academic calendar timing. • Revenues represented 16% of our consolidated total revenues for the 2020 fiscal period, compared to 20% for the 2019 fiscal period. Adjusted EBITDA decreased by $5.8 million, a 21% decrease from the 2019 fiscal period. 60 Mexico Financial Overview Comparison of Mexico Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 162.5 $ 130.9 $ 31.6 Organic enrollment (1) (7.3) Product mix, pricing and timing (1) (13.8) Organic constant currency (21.1) (13.9) (7.2) Foreign exchange (26.5) (20.9) (5.6) Dispositions — — — Other (2) — (0.9) 0.9 June 30, 2020 $ 114.9 $ 95.2 $ 19.7 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues decreased by $47.6 million, a 29% decrease from the 2019 fiscal quarter. • Organic enrollment decreased during the fiscal quarter by 5%, decreasing revenues by $7.3 million. • The decrease in revenues from product mix, pricing and timing was mainly due to the effect of the COVID-19 pandemic on the academic calendar timing. • Revenues represented 15% of our consolidated total revenues for the 2020 fiscal quarter, compared to 16% for the 2019 fiscal quarter. Adjusted EBITDA decreased by $11.9 million, a 38% decrease from the 2019 fiscal quarter. 61 Comparison of Mexico Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 318.9 $ 261.5 $ 57.4 Organic enrollment (1) (11.1) Product mix, pricing and timing (1) (6.6) Organic constant currency (17.7) (13.1) (4.6) Foreign exchange (32.1) (23.3) (8.8) Dispositions — — — Other (2) — 1.0 (1.0) June 30, 2020 $ 269.1 $ 226.1 $ 43.0 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues decreased by $49.8 million, a 16% decrease from the 2019 fiscal period. • Organic enrollment decreased during the 2020 fiscal period by 3%, decreasing revenues by $11.1 million. • The decrease in revenues from product mix, pricing and timing was mainly due to the effect of the COVID-19 pandemic on the academic calendar timing. • Revenues represented 20% of our consolidated total revenues for both the 2020 and the 2019 fiscal periods. Adjusted EBITDA decreased by $14.4 million, a 25% decrease from the 2019 fiscal period. Andean Financial Overview 62 Comparison of Andean Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 423.0 $ 236.5 $ 186.5 Organic enrollment (1) (16.8) Product mix, pricing and timing (1) (20.6) Organic constant currency (37.4) (28.5) (8.9) Foreign exchange (39.7) (22.8) (16.9) Dispositions — — — Other — — — June 30, 2020 $ 345.9 $ 185.2 $ 160.7 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues decreased by $77.1 million, an 18% decrease from the 2019 fiscal quarter. • The decrease in revenues from product mix, pricing and timing was mainly due to the effect of the COVID-19 pandemic on the academic calendar timing. • Organic enrollment decreased during the 2020 fiscal quarter by 5%, decreasing revenues by $16.8 million. • Revenue represented 44% of our consolidated total revenues for the 2020 fiscal quarter compared to 43% for the 2019 fiscal quarter. Adjusted EBITDA decreased by $25.8 million, a 14% decrease from the 2019 fiscal quarter. • Foreign exchange affected the results for the 2020 fiscal quarter, primarily due to the weakening of the Chilean Peso relative to the USD. Comparison of Andean Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 561.9 $ 408.6 $ 153.3 Organic enrollment (1) (8.4) Product mix, pricing and timing (1) (65.9) Organic constant currency (74.3) (29.9) (44.4) Foreign exchange (52.2) (41.8) (10.4) Dispositions — — — Other — — — June 30, 2020 $ 435.4 $ 336.9 $ 98.5 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues decreased by $126.5 million, a 23% decrease from the 2019 fiscal period. • The decrease in revenues from product mix, pricing and timing was mainly due to the effect of the COVID-19 pandemic on the academic calendar timing. • Organic enrollment decreased during the 2020 fiscal period by 2%, decreasing revenues by $8.4 million. • Revenue represented 33% of our consolidated total revenues for the 2020 fiscal period compared to 35% for the 2019 fiscal period. Adjusted EBITDA decreased by $54.8 million, a 36% decrease from the 2019 fiscal period. • Foreign exchange affected the results for the 2020 fiscal period, primarily due to weakening of the Chilean Peso relative to the USD. 63 Rest of World Financial Overview Comparison of Rest of World Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 51.2 $ 39.1 $ 12.1 Organic enrollment (1) 11.8 Product mix, pricing and timing (1) 4.0 Organic constant currency 15.8 6.8 9.0 Foreign exchange (4.4) (3.0) (1.4) Dispositions — — — Other — — — June 30, 2020 $ 62.6 $ 42.9 $ 19.7 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues increased by $11.4 million, a 22% increase from the 2019 fiscal quarter. • Organic enrollment increased during the 2020 fiscal quarter by 23%, increasing revenues by $11.8 million. • Revenue represented 8% of our consolidated total revenues for the 2020 fiscal quarter compared to 5% for the 2019 fiscal quarter. Adjusted EBITDA increased by $7.6 million, a 63% increase from the 2019 fiscal quarter. Comparison of Rest of World Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 84.6 $ 75.8 $ 8.8 Organic enrollment (1) 18.8 Product mix, pricing and timing (1) 11.7 Organic constant currency 30.5 12.0 18.5 Foreign exchange (9.0) (6.2) (2.8) Dispositions — — — Other — — — June 30, 2020 $ 106.1 $ 81.6 $ 24.5 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. 64 Revenues increased by $21.5 million, a 25% increase from the 2019 fiscal period. • Organic enrollment increased during the 2020 fiscal period by 23%, increasing revenues by $18.8 million. • Revenues represented 8% of our consolidated total revenues for the 2020 fiscal period compared to 5% for the 2019 fiscal period. Adjusted EBITDA increased by $15.7 million, a 178% increase from the 2019 fiscal period. Online & Partnerships Financial Overview Comparison of Online & Partnerships Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 159.7 $ 109.8 $ 49.9 Organic enrollment (1) (4.3) Product mix, pricing and timing (1) (6.5) Organic constant currency (10.8) (4.3) (6.5) Foreign exchange — — — Dispositions — — — Other — — — June 30, 2020 $ 148.9 $ 105.5 $ 43.4 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues decreased by $10.8 million, a 7% decrease from the 2019 fiscal quarter. • Organic enrollment decreased during the 2020 fiscal quarter by 5%, decreasing revenues by $4.3 million. This decrease was primarily attributable to a decrease in organic enrollment at the University of Liverpool and the University of Roehampton, as we no longer accept new enrollments at those institutions. • Revenues represented 19% of our consolidated total revenues for the 2020 fiscal quarter, compared to 16% for the 2019 fiscal quarter. Adjusted EBITDA decreased by $6.5 million, a 13% decrease compared to the 2019 fiscal quarter. 65 Comparison of Online & Partnerships Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA June 30, 2019 $ 321.5 $ 223.1 $ 98.4 Organic enrollment (1) (11.2) Product mix, pricing and timing (1) (4.9) Organic constant currency (16.1) (4.4) (11.7) Foreign exchange — — — Dispositions — — — Other — — — June 30, 2020 $ 305.4 $ 218.7 $ 86.7 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues decreased by $16.1 million, a 5% decrease from the 2019 fiscal period. • Organic enrollment decreased during the 2020 fiscal period by 6%, decreasing revenues by $11.2 million. This decrease was primarily attributable to a decrease in organic enrollment at the University of Liverpool and the University of Roehampton, as we no longer accept new enrollments at those institutions. • Revenues represented 23% of our consolidated total revenues for the 2020 fiscal period, compared to 20% for the 2019 fiscal period. Adjusted EBITDA decreased by $11.7 million, a 12% decrease compared to the 2019 fiscal period. Corporate Corporate revenues represent amounts from our consolidated joint venture with the University of Liverpool, as well as centralized IT costs charged to various segments, offset by the elimination of intersegment revenues. Comparison of Corporate Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019 % Change Better/(Worse) (in millions) 2020 2019 2020 vs. 2019 Revenues $ 1.0 $ (1.1) 191 % Expenses 27.0 39.0 31 % Adjusted EBITDA $ (26.0) $ (40.1) 35 % Adjusted EBITDA increased by $14.1 million, a 35% increase from the 2019 fiscal quarter. • Labor costs and other professional fees decreased by $14.8 million for the 2020 fiscal quarter compared to the 2019 fiscal quarter, related to cost-reduction efforts. • Other items accounted for a decrease in Adjusted EBITDA of $0.7 million. 66 Comparison of Corporate Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 % Change Better/(Worse) (in millions) 2020 2019 2020 vs. 2019 Revenues $ 2.1 $ (0.6) nm Expenses 55.1 76.3 28 % Adjusted EBITDA $ (53.0) $ (76.9) 31 % Adjusted EBITDA increased by $23.9 million, a 31% increase from the 2019 fiscal period. • Labor costs and other professional fees decreased expenses by $25.6 million for the 2020 fiscal period compared to the 2019 fiscal period, related to cost-reduction efforts. • Other items accounted for a decrease in Adjusted EBITDA of $1.7 million. Liquidity and Capital Resources Liquidity Sources We anticipate that cash flow from operations and available cash will be sufficient to meet our current operating requirements and manage our liquidity needs, including any effects on the Company’s business operations that arise from the COVID-19 pandemic, for at least the next 12 months from the date of issuance of this report. In addition, we are controlling discretionary expenses and reviewing our capital spending projects, as well as engaging with landlords to negotiate rent deferrals or other rent concessions. However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to liquidity sources, particularly our cash flows from operations, as well as our financial condition and capitalization. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions, such as obtaining additional financing. The Company will continue to evaluate its financial position in light of future developments, particularly those relating to the COVID-19 pandemic. Our primary source of cash is revenue from tuition charged to students in connection with our various education program offerings. The majority of our students finance the cost of their own education and/or seek third-party financing programs. We anticipate generating sufficient cash flow from operations in the majority of countries where we operate to satisfy the working capital and financing needs of our organic growth plans for each country. If our educational institutions within one country were unable to maintain sufficient liquidity, we would consider using internal cash resources or reasonable short-term working capital facilities to accommodate any short- to medium-term shortfalls. As of June 30, 2020, our secondary source of liquidity was cash and cash equivalents of $629.6 million, which does not include $34.2 million of cash recorded at subsidiaries that are classified as held for sale at June 30, 2020. Our cash accounts are maintained with high-quality financial institutions with no significant concentration in any one institution. The Company also maintains a revolving credit facility with a syndicate of financial institutions as a source of liquidity. The revolving credit facility provides for borrowings of $410.0 million and a maturity date of October 7, 2024. If certain conditions are satisfied, the Third Amended and Restated Credit Agreement (the Third A&R Credit Agreement) also provides for an incremental revolving and term loan facilities not to exceed $565.0 million plus additional amounts so long as both immediately before and after giving effect to such incremental facilities the Company’s Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Third A&R Credit Agreement, on a pro forma basis, does not exceed 2.75x. From time to time, we draw down on the revolver and, in accordance with the terms of the credit agreement, any proceeds drawn on the revolving credit facility may be used for general corporate purposes. In March 2020, we fully drew down our $410.0 million revolving credit facility in order to increase our cash position and preserve financial flexibility in light of the COVID-19 pandemic. 67 Completed Sale Transactions On January 10, 2020, we completed the sale of our Costa Rica operations and received net proceeds of approximately $15.0 million. The proceeds received net of cash sold, transaction fees and the working capital adjustment completed during the second quarter of 2020, were approximately $1.8 million. The Company will also receive up to $5.0 million within two years after the sale if Laureate Costa Rica meets certain performance metrics. On March 6, 2020, we completed the sale of NSAD, a higher education institution located in California. At closing, the Company paid subsidies to the buyers of approximately $4.5 million. Under the terms of the sale agreement, the Company will pay additional subsidies to the buyers of approximately $2.8 million ratably on a quarterly basis over the next four years, beginning on March 31, 2020. In June 2020, we received 141.6 million Hong Kong Dollars (approximately $18.3 million at the date of receipt), related to the portion of the transaction value from the January 2018 sale of our China operations that was paid into escrow by the buyer. As of December 31, 2019, the Company had recorded a receivable of approximately $25.9 million for the portion of the escrowed amount that we expected to receive. Under the terms of the sale agreement, we expect to receive the remaining escrow receivable amount in January 2021. Pending Sale Transactions On February 28, 2020, the Company entered into an agreement to sell its operations in Malaysia for a total purchase price of $140.0 million. The closing of the transaction is subject to customary closing conditions, including approval by regulators in Malaysia. On July 29, 2020, the Company entered into an agreement to sell its Australia and New Zealand operations for a purchase price of $642.7 million. The closing of the transaction is expected to occur by the first quarter of 2021 and is subject to customary closing conditions, including regulatory approvals in Australia and New Zealand and a mutual right of termination based on the occurrence of a material adverse change in certain forecasted results of the Australia and New Zealand operations. Liquidity Restrictions Our liquidity is affected by restricted cash balances, which totaled $185.7 million and $186.9 million as of June 30, 2020 and December 31, 2019, respectively. Indefinite Reinvestment of Foreign Earnings We earn a significant portion of our income from subsidiaries located in countries outside the United States. As part of our business strategies, we have determined that, except for one of our institutions in Peru, all earnings from our foreign continuing operations will be deemed indefinitely reinvested outside of the United States. As of June 30, 2020, $454.1 million of our total $629.6 million of cash and cash equivalents were held by foreign subsidiaries, including $215.9 million held by VIEs. These amounts above do not include $34.2 million of cash recorded at subsidiaries that are classified as held for sale at June 30, 2020, almost all of which was held by foreign subsidiaries. As of December 31, 2019, $275.6 million of our total $339.6 million of cash and cash equivalents were held by foreign subsidiaries, including $157.0 million held by VIEs. These amounts above do not include $55.4 million of cash recorded at subsidiaries that were classified as held for sale at December 31, 2019, of which $49.5 million was held by foreign subsidiaries. The VIEs' cash and cash equivalents balances are generally required to be used only for the operations of these VIEs. Liquidity Requirements Our short-term liquidity requirements include: funding for debt service (including finance leases); operating lease obligations; payments due to shareholders of acquired companies; payments of deferred compensation; working capital; operating expenses; capital expenditures; and business development activities. Long-term liquidity requirements include: payments on long-term debt (including finance leases); operating lease obligations; payments of long-term amounts due to shareholders of acquired companies; payments of deferred compensation; and payments of other third-party obligations. 68 Debt As of June 30, 2020, senior long-term borrowings totaled $1,209.1 million and consisted of $409.1 million of borrowings under our revolving credit facility and $800.0 million in Senior Notes due 2025 that mature in May 2025. As discussed above, in March 2020, we fully drew down our $410.0 million revolving credit facility in order to increase our cash position and preserve financial flexibility in light of the COVID-19 pandemic. As of June 30, 2020, other debt balances totaled $356.4 million and our finance lease obligations and sale-leaseback financings were $85.3 million. Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries, mortgages payable and notes payable. Approximately $31.8 million of long-term debt, including the current portion, is included in the held-for-sale liabilities recorded on the consolidated balance sheet as of June 30, 2020. For further description of the held-for-sale amounts see Note 4, Discontinued Operations and Assets Held for Sale, in our consolidated financial statements included elsewhere in this Form 10-Q. Senior Secured Credit Facility As of June 30, 2020 and December 31, 2019, the outstanding balance under our Senior Secured Credit Facility was $409.1 million and $202.4 million, respectively, which consisted entirely of balances outstanding under our $410.0 million revolving credit facility. Covenants Under the Third A&R Credit Agreement, we are subject to a Consolidated Senior Secured Debt to Consolidated EBITDA financial maintenance covenant, as defined in the Third A&R Credit Agreement, unless certain conditions are satisfied. As of June 30, 2020, we were in compliance with the leverage ratio covenant. The maximum ratio, as defined, is 3.50x as of June 30, 2020 and thereafter. In addition, notes payable at some of our locations contain financial maintenance covenants and we were in compliance with those covenants. Senior Notes As of both June 30, 2020 and December 31, 2019, the outstanding balance under our Senior Notes due 2025 was $800.0 million. Leases We conduct a significant portion of our operations from leased facilities. These facilities include our corporate headquarters, other office locations, and many of our higher education facilities. As discussed in Note 10, Leases, in our consolidated financial statements included elsewhere in this Form 10-Q, we have significant liabilities recorded related to our leased facilities, which will require future cash payments. Due to Shareholders of Acquired Companies In the past, one method of payment for acquisitions was the use of promissory notes payable to the sellers of acquired companies. As of June 30, 2020 and December 31, 2019, we recorded $16.0 million and $21.5 million, respectively, for these liabilities. See also Note 6, Due to Shareholders of Acquired Companies, in our consolidated financial statements included elsewhere in this Form 10-Q. Capital Expenditures Capital expenditures consist of purchases of property and equipment and expenditures for deferred costs. Our capital expenditure program is a component of our liquidity and capital management strategy. This program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment, to grow our network through the following: (1) capacity expansion at institutions to support enrollment growth; (2) new campuses for institutions in our existing markets; (3) information technology to increase efficiency and controls; and (4) online content development. Our non-discretionary spending includes the maintenance of existing facilities. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital 69 expenditures, our long-term growth strategy could be significantly affected. We believe that our internal sources of cash and our ability to obtain additional third-party financing, subject to market conditions, will be sufficient to fund our investing activities. Our total capital expenditures for our continuing and discontinued operations, excluding receipts from the sale of subsidiaries and property equipment, were $57.5 million and $70.8 million during the six months ended June 30, 2020 and 2019, respectively. The 19% decrease in capital expenditures for the 2020 fiscal period compared to the 2019 fiscal period was primarily a result of the divestitures. Derivatives In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes. We mitigate a portion of these risks through a risk-management program that includes the use of derivatives. For further information on our derivatives, see Note 15, Derivative Instruments, in our consolidated financial statements included elsewhere in this Form 10-Q. Redeemable Noncontrolling Interests and Equity In connection with certain acquisitions, we have entered into put/call arrangements with certain minority shareholders, and we may be required or elect to purchase additional ownership interests in the associated entities within a specified timeframe. In certain cases, call rights may contain minimum payment provisions. If we exercise such call rights, or negotiate the purchase of additional ownership interests, the consideration required could be higher than the estimated put values. Cash Flows In the consolidated statements of cash flows, the changes in operating assets and liabilities are presented excluding the effects of exchange rate changes, acquisitions, and reclassifications, as these effects do not represent operating cash flows. Accordingly, the amounts in the consolidated statements of cash flows do not agree with the changes of the operating assets and liabilities as presented in the consolidated balance sheets. The effects of exchange rate changes on cash are presented separately in the consolidated statements of cash flows. The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2020 and 2019: (in millions) 2020 2019 Cash provided by (used in): Operating activities $ 61.4 $ 32.5 Investing activities (35.0) 1,102.4 Financing activities 263.4 (1,396.1) Effects of exchange rates changes on cash (23.3) 8.7 Change in cash included in current assets held for sale 22.2 64.3 Net change in cash and cash equivalents and restricted cash $ 288.7 $ (188.2) Comparison of Cash Flows for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019 Operating Activities Cash provided by operating activities increased by $28.9 million to $61.4 million for the 2020 fiscal period from $32.5 million for the 2019 fiscal period. This increase in operating cash was attributable to: (1) a decrease in cash paid for interest of $53.7 million, from $115.8 million for the 2019 fiscal period to $62.1 million for the 2020 fiscal period, attributable to lower average debt balances; (2) a decrease in cash paid for taxes of $11.1 million, from $58.5 million for the 2019 fiscal period to $47.4 million for the 2020 fiscal period; and (3) a positive year-over-year effect to operating cash of $7.6 million primarily related to a cash payment during the 2019 fiscal period to settle cross currency and interest rate swaps in Chile. These increases in operating cash were partially offset by lower operating income as well as the year-over-year effect of the divestitures that occurred in 2019, as certain of the divested institutions, such as St. Augustine, contributed positive operating cash flows during the first quarter of 2019. When combined with changes in working capital, these factors accounted for a decrease in operating cash flows of approximately $43.5 million. 70 Investing Activities Cash flows from investing activities decreased by $1,137.4 million to an investing cash outflow of $(35.0) million for the 2020 fiscal period from an investing cash inflow of $1,102.4 million for the 2019 fiscal period. This decrease was primarily attributable to lower cash receipts from the sales of discontinued operations of $1,138.9 million, from $1,161.4 million during the 2019 fiscal period (for the sales of St. Augustine and our operations in Thailand, South Africa, India, Spain and Portugal) to $22.5 million, net, during the 2020 fiscal period (for the sales of NSAD and our operations in Costa Rica, the receipt of a deposit for INTI Malaysia, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations). In addition, during the 2019 fiscal period, we received $12.9 million from derivative settlements related to foreign exchange swap agreements associated with the sale of the Spain and Portugal institutions. These decreases in investing cash were partially offset by a decrease in capital expenditures of $13.3 million, and the year-over-year effect of a payment of $1.2 million during the 2019 fiscal period for a small acquisition in Brazil. Other items accounted for the remaining change of $0.1 million. Financing Activities Cash flows from financing activities increased by $1,659.5 million to a financing cash inflow of $263.4 million for the 2020 fiscal period from a financing cash outflow of $(1,396.1) million for the 2019 fiscal period. This increase in financing cash inflows was primarily attributable to: (1) net proceeds from long-term debt during the 2020 fiscal period, related to the full draw down on our $410.0 million revolving credit facility in order to increase our cash position and preserve financial flexibility in response to the COVID-19 pandemic, compared to net payments of long-term debt during the 2019 fiscal period, for a change of $1,638.5 million; (2) proceeds from exercise of common stock options of $26.7 million during the 2020 fiscal period; (3) lower payments of deferred price for acquisitions during the 2020 fiscal period by $10.2 million, primarily due to the full repayment of the St. Augustine seller note during the 2019 fiscal period; (4) a payment for a debt redemption in Chile during the 2019 fiscal period of $5.9 million; and (5) a payment of $5.8 million during the 2019 fiscal period to acquire the remaining 10% noncontrolling interest of one of our operations in India, immediately prior to the sale of those operations. These increases in financing cash inflows were partially offset by payments of $29.2 million made during the 2020 fiscal period to repurchase shares of our Class A common stock under our stock repurchase program. Other items accounted for the remaining difference of $1.6 million. Critical Accounting Policies and Estimates The preparation of the consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Our significant accounting policies are discussed in Note 2, Significant Accounting Policies, of the audited consolidated financial statements included in our 2019 Form 10-K. Our critical accounting policies require the most significant judgments and estimates about the effect of matters that are inherently uncertain. As a result, these accounting policies and estimates could materially affect our financial statements and are critical to the understanding of our results of operations and financial condition. For a complete discussion of our critical accounting policies, see the “Critical Accounting Policies and Estimates” section of the MD&A in our 2019 Form 10-K. During the six months ended June 30, 2020, there were no significant changes to our critical accounting policies. We will continue to monitor the effect to the Company of the COVID-19 pandemic and assess whether any changes to our accounting estimates are warranted as additional information becomes available. Recently Adopted Accounting Standards Refer to Note 2, Significant Accounting Policies, in our consolidated financial statements included elsewhere in this Form 10-Q for recently adopted accounting standards. Item 3. Quantitative and Qualitative Disclosures About Market Risk For information regarding our exposure to certain market risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 2019 Form 10-K. There have been no significant changes in our market risk exposures since our December 31, 2019 fiscal year end. 71