LAUREATE EDUCATION, INC. 10-Q

Item 1. Financial Statements (Unaudited) LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations IN THOUSANDS, except per share amounts For the three months ended September 30, 2020 2019 (Unaudited) (Unaudited) Revenues $ 243,523 $ 277,267 Costs and expenses: Direct costs 185,758 229,736 General and administrative expenses 52,602 65,942 Loss on impairment of assets 323,398 — Operating loss ( 318,235 ) ( 18,411 ) Interest income 684 912 Interest expense ( 24,703 ) ( 28,318 ) Loss on debt extinguishment — ( 200 ) Gain on derivatives — 283 Other income, net 1,301 992 Foreign currency exchange (loss) gain, net ( 2,907 ) 7,659 Gain (loss) on disposal of subsidiaries, net 621 ( 1,474 ) Loss from continuing operations before income taxes ( 343,239 ) ( 38,557 ) Income tax benefit (expense) 72,199 ( 48,092 ) Loss from continuing operations ( 271,040 ) ( 86,649 ) (Loss) income from discontinued operations, including tax (expense) benefit of $( 51,081 ) and $ 24,070 , respectively ( 169,768 ) 30,986 Loss on sales of discontinued operations, including tax expense of $ 52,712 and $ 3,591 , respectively ( 343,622 ) ( 41,131 ) Net loss ( 784,430 ) ( 96,794 ) Net (income) loss attributable to noncontrolling interests ( 12 ) 1,568 Net loss attributable to Laureate Education, Inc. $ ( 784,442 ) $ ( 95,226 ) Basic and diluted earnings (loss) per share: Loss from continuing operations $ ( 1.29 ) $ ( 0.39 ) Loss from discontinued operations ( 2.44 ) ( 0.04 ) Basic and diluted loss per share $ ( 3.73 ) $ ( 0.43 ) The accompanying notes are an integral part of these consolidated financial statements. 2 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations IN THOUSANDS, except per share amounts For the nine months ended September 30, 2020 2019 (Unaudited) (Unaudited) Revenues $ 739,698 $ 860,224 Costs and expenses: Direct costs 614,125 706,817 General and administrative expenses 140,812 174,458 Loss on impairment of assets 350,939 248 Operating loss ( 366,178 ) ( 21,299 ) Interest income 1,594 2,594 Interest expense ( 75,698 ) ( 101,548 ) Loss on debt extinguishment — ( 22,059 ) (Loss) gain on derivatives ( 626 ) 9,166 Other income, net 814 9,090 Foreign currency exchange gain, net 71,074 7,601 Loss on disposal of subsidiaries, net ( 1,178 ) ( 1,474 ) Loss from continuing operations before income taxes and equity in net income of affiliates ( 370,198 ) ( 117,929 ) Income tax benefit (expense) 293,514 ( 93,966 ) Equity in net income of affiliates, net of tax 181 219 Loss from continuing operations ( 76,503 ) ( 211,676 ) (Loss) income from discontinued operations, net of tax (expense) benefit of $( 48,214 ) and $ 17,364 , respectively ( 557,951 ) 240,373 (Loss) gain on sales of discontinued operations, including tax (expense) benefit of $( 47,353 ) and $ 31,153 , respectively ( 363,288 ) 848,390 Net (loss) income ( 997,742 ) 877,087 Net loss attributable to noncontrolling interests 5,092 522 Net (loss) income attributable to Laureate Education, Inc. $ ( 992,650 ) $ 877,609 Basic and diluted earnings (loss) per share: Loss from continuing operations $ ( 0.36 ) $ ( 0.94 ) (Loss) income from discontinued operations ( 4.36 ) 4.85 Basic and diluted (loss) earnings per share $ ( 4.72 ) $ 3.91 The accompanying notes are an integral part of these consolidated financial statements. 3 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income IN THOUSANDS For the three months ended September 30, 2020 2019 (Unaudited) (Unaudited) Net loss $ ( 784,430 ) $ ( 96,794 ) Other comprehensive income (loss): Foreign currency translation adjustment, net of tax of $ 0 for both periods 326,342 ( 82,580 ) Unrealized gain on derivative instruments, net of tax of $ 0 — 4,531 Total other comprehensive income (loss) 326,342 ( 78,049 ) Comprehensive loss ( 458,088 ) ( 174,843 ) Net comprehensive loss attributable to noncontrolling interests 62 2,078 Comprehensive loss attributable to Laureate Education, Inc. $ ( 458,026 ) $ ( 172,765 ) The accompanying notes are an integral part of these consolidated financial statements. 4 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income IN THOUSANDS For the nine months ended September 30, 2020 2019 (Unaudited) (Unaudited) Net (loss) income $ ( 997,742 ) $ 877,087 Other comprehensive income (loss): Foreign currency translation adjustment, net of tax of $ 0 for both periods 10,260 ( 22,841 ) Unrealized loss on derivative instruments, net of tax of $ 0 — ( 3,419 ) Minimum pension liability adjustment, net of tax of $ 0 ( 932 ) — Total other comprehensive income (loss) 9,328 ( 26,260 ) Comprehensive (loss) income ( 988,414 ) 850,827 Net comprehensive loss attributable to noncontrolling interests 4,475 1,089 Comprehensive (loss) income attributable to Laureate Education, Inc. $ ( 983,939 ) $ 851,916 The accompanying notes are an integral part of these consolidated financial statements. 5 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets IN THOUSANDS, except per share amounts September 30, 2020 December 31, 2019 Assets (Unaudited) (Unaudited) Current assets: Cash and cash equivalents $ 716,799 $ 61,576 Restricted cash 30,857 36,241 Receivables: Accounts and notes receivable 136,240 123,132 Other receivables 48,945 12,394 Allowance for doubtful accounts ( 73,292 ) ( 60,465 ) Receivables, net 111,893 75,061 Income tax receivable 89,326 6,833 Prepaid expenses and other current assets 21,182 29,811 Current assets held for sale 510,397 706,544 Total current assets 1,480,454 916,066 Notes receivable, net 1,430 353 Property and equipment: Land 122,260 135,813 Buildings 325,863 351,232 Furniture, equipment and software 452,893 494,713 Leasehold improvements 110,337 124,429 Construction in-progress 11,394 33,719 Accumulated depreciation and amortization ( 475,684 ) ( 499,276 ) Property and equipment, net 547,063 640,630 Operating lease right-of-use assets, net 444,679 521,764 Land use rights, net 1,379 1,628 Goodwill 518,332 606,483 Tradenames 221,143 562,137 Deferred costs, net 19,013 24,704 Deferred income taxes 295,942 49,422 Other assets 47,411 72,251 Long-term assets held for sale 1,598,303 3,100,985 Total assets $ 5,175,149 $ 6,496,423 The accompanying notes are an integral part of these consolidated financial statements. 6 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (continued) IN THOUSANDS, except per share amounts September 30, 2020 December 31, 2019 Liabilities and stockholders' equity (Unaudited) (Unaudited) Current liabilities: Accounts payable $ 35,416 $ 63,427 Accrued expenses 106,931 103,591 Accrued compensation and benefits 60,060 100,688 Deferred revenue and student deposits 62,612 54,849 Current portion of operating leases 42,919 42,039 Current portion of long-term debt and finance leases 88,885 48,139 Current portion of due to shareholders of acquired companies — 1,109 Income taxes payable 26,205 14,737 Other current liabilities 16,365 14,050 Current liabilities held for sale 594,399 602,426 Total current liabilities 1,033,792 1,045,055 Long-term operating leases, less current portion 452,111 516,979 Long-term debt and finance leases, less current portion 1,307,849 1,103,302 Deferred compensation 11,527 12,744 Income taxes payable 31,287 47,767 Deferred income taxes 105,737 75,115 Other long-term liabilities 31,064 31,300 Long-term liabilities held for sale 375,488 847,715 Total liabilities 3,348,855 3,679,977 Redeemable noncontrolling interests and equity 1,714 12,295 Stockholders' equity: Preferred stock, par value $ 0.001 per share – 49,889 shares authorized as of September 30, 2020 and December 31, 2019, respectively, no shares issued and outstanding as of September 30, 2020 and December 31, 2019 — — Class A common stock, par value $ 0.004 per share – 700,000 shares authorized, 136,897 shares issued and 119,270 shares outstanding as of September 30, 2020 and 135,583 shares issued and 119,575 shares outstanding as of December 31, 2019 547 542 Class B common stock, par value $ 0.004 per share – 175,000 shares authorized, 90,813 shares issued and outstanding as of September 30, 2020 and 90,831 shares issued and outstanding as of December 31, 2019 363 363 Additional paid-in capital 3,758,008 3,724,636 (Accumulated deficit) retained earnings ( 556,141 ) 436,509 Accumulated other comprehensive loss ( 1,065,270 ) ( 1,073,981 ) Treasury stock at cost ( 17,627 shares held at September 30, 2020 and 16,008 shares held at December 31, 2019) ( 300,309 ) ( 271,106 ) Total Laureate Education, Inc. stockholders' equity 1,837,198 2,816,963 Noncontrolling interests ( 12,618 ) ( 12,812 ) Total stockholders' equity 1,824,580 2,804,151 Total liabilities and stockholders' equity $ 5,175,149 $ 6,496,423 The accompanying notes are an integral part of these consolidated financial statements. 7 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows IN THOUSANDS For the nine months ended September 30, 2020 2019 Cash flows from operating activities (Unaudited) (Unaudited) Net (loss) income $ ( 997,742 ) $ 877,087 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 116,117 146,284 Amortization of operating lease right-of-use assets 68,229 95,566 Loss on impairment of assets 990,258 25,470 Loss (gain) on sales of subsidiaries and disposal of property and equipment, net 317,224 ( 814,202 ) Loss (gain) on derivative instruments 626 ( 8,260 ) Payments for settlement of derivative contracts ( 626 ) ( 8,233 ) Loss on debt extinguishment — 26,901 Non-cash interest expense 14,075 3,386 Interest paid on deferred purchase price for acquisitions ( 3,969 ) — Non-cash share-based compensation expense 10,277 9,581 Bad debt expense 97,662 80,957 Deferred income taxes ( 264,381 ) ( 3,107 ) Unrealized foreign currency exchange (gain) loss ( 15,355 ) 8,434 Non-cash loss from non-income tax contingencies 3,375 5,196 Other, net 1,917 ( 6,849 ) Changes in operating assets and liabilities: Receivables ( 325,106 ) ( 273,830 ) Prepaid expenses and other assets ( 47,616 ) ( 56,726 ) Accounts payable and accrued expenses ( 50,545 ) ( 14,102 ) Income tax receivable/payable, net ( 56,875 ) ( 39,734 ) Deferred revenue and other liabilities 364,210 258,449 Net cash provided by operating activities 221,755 312,268 Cash flows from investing activities Purchase of property and equipment ( 62,347 ) ( 102,147 ) Expenditures for deferred costs ( 11,955 ) ( 12,086 ) Receipts from sales of discontinued operations, net of cash sold, and property and equipment 40,148 1,141,695 Settlement of derivatives related to sale of discontinued operations and net investment hedge — 12,866 Business acquisitions, net of cash acquired — ( 1,205 ) (Payments to) receipts from related parties ( 3 ) 84 Proceeds from sale of investment — 11,473 Net cash (used in) provided by investing activities ( 34,157 ) 1,050,680 Cash flows from financing activities Proceeds from issuance of long-term debt, net of original issue discount 566,726 724,074 Payments on long-term debt ( 298,664 ) ( 2,189,779 ) Payments of deferred purchase price for acquisitions ( 5,680 ) ( 19,787 ) Payments to purchase noncontrolling interests — ( 5,761 ) Proceeds from exercise of stock options 26,697 1,714 Withholding of shares to satisfy tax withholding for vested stock awards and exercised stock options ( 1,150 ) ( 1,509 ) Payments to repurchase common stock ( 29,203 ) ( 87,921 ) Payments of debt issuance costs ( 726 ) ( 6,557 ) Distributions to noncontrolling interest holders ( 609 ) ( 2,032 ) Net cash provided by (used in) financing activities 257,391 ( 1,587,558 ) Effects of exchange rate changes on Cash and cash equivalents and Restricted cash ( 13,448 ) ( 2,961 ) Change in cash included in current assets held for sale 218,298 230,208 Net change in Cash and cash equivalents and Restricted cash 649,839 2,637 Cash and cash equivalents and Restricted cash at beginning of period 97,817 125,617 Cash and cash equivalents and Restricted cash at end of period $ 747,656 $ 128,254 The accompanying notes are an integral part of these consolidated financial statements. 8 Laureate Education, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Dollars and shares in thousands) Note 1. Description of Business Laureate Education, Inc. and subsidiaries (hereinafter Laureate, we, us, our, or the Company) provide higher education programs and services to students through licensed universities and higher education institutions (institutions). Laureate's programs are provided through institutions that are campus-based and internet-based, or through electronically distributed educational programs (online). 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. We are domiciled in Delaware as a public benefit corporation, a demonstration of our long-term commitment to our mission to benefit our students and society. The Company completed its initial public offering (IPO) on February 6, 2017 and its shares are listed on the Nasdaq Global Select Market under the symbol “LAUR.” Discontinued Operations In 2017 and 2018, the Company announced the divestiture of certain subsidiaries located in Europe, Asia and Central America, which were included in the Rest of World, Peru (formerly Andean), and Central America (formerly Central America & U.S. Campuses) segments. The goal of the divestitures was to create a more focused and simplified business model and generate proceeds to be used for further repayment of long-term debt. This represented a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, all of the divestitures that were part of this strategic shift, as well as the Company's operations in the Kingdom of Saudi Arabia that were managed under a contract that expired on August 31, 2019 and was not renewed, were accounted for as discontinued operations for all periods presented in accordance with Accounting Standards Codification (ASC) 205-20, “Discontinued Operations” (ASC 205). 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. As a result of these efforts to explore strategic alternatives, d uring the third quarter of 2020, the Company announced that it had completed a sale of its operations in Chile and had signed agreements to sell its operations in Brazil, Australia and New Zealand, as well as Walden University, its fully online higher education institution in the United States. The sale of Australia and New Zealand was subsequently completed on November 3, 2020. After completing these announced divestitures, the Company’s remaining principal markets will be Mexico and Peru. This also represented a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, Chile, Brazil, Australia and New Zealand, and Walden also have been accounted for as discontinued operations for all periods presented in accordance with ASC 205. The timing and ability to complete any of the remaining transactions is uncertain and will be subject to market and other conditions, which may include regulatory approvals and consents of third parties. See Note 4, Discontinued Operations and Assets Held for Sale, for more information. Unless indicated otherwise, the information in the footnotes to the Consolidated Financial Statements relates to continuing operations. The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, these financial statements include all adjustments considered necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with Laureate's audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the 2019 Form 10-K). 9 Note 2. Significant Accounting Policies COVID-19 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. As of September 30, 2020 and through the date of this Form 10-Q, the Company evaluated its accounting estimates that require consideration of forecasted financial information, based on current information reasonably available to us. The forecast also includes certain estimates and assumptions around macroeconomic conditions and the timing of campuses reopening. While this evaluation did not result in a material effect to the Company’s Consolidated Financial Statements as of and for the nine months ended September 30, 2020, future evaluations could result in a material effect, including potential impairments, depending on the eventual impact to the Company of the COVID-19 pandemic and its effect on student enrollment, tuition pricing, and collections in future periods. Recently Adopted Accounting Standards Accounting Standards Update (ASU) No. 2016-13 (ASU 2016-13), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, which sets forth a “current expected credit loss” (CECL) model and requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. ASU 2016-13 applies to financial instruments that are not measured at fair value, including receivables that result from revenue transactions. This ASU was effective for Laureate beginning on January 1, 2020 and did not have a material impact on our Consolidated Financial Statements. Laureate adopted this ASU using the modified retrospective transition method. Under this transition method, the new standard is applied from January 1, 2020 without restatement of comparative period amounts. The impact of transitioning to the new standard was immaterial and no adjustment was recorded to retained earnings for the cumulative effect of adopting this ASU on January 1, 2020. Results for reporting periods beginning after January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP . ASU No. 2017-04 (ASU 2017-04), Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued ASU 2017-04 in order to simplify the test for goodwill impairment by eliminating Step 2, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. Under the amendments in this ASU, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. However, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU was effective for Laureate beginning on January 1, 2020 and the adoption of this guidance did not have a material impact on our Consolidated Financial Statements. Note 3. Revenue Revenue Recognition Laureate's revenues primarily consist of tuition and educational service revenues. We also 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. Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. These revenues are recognized net of scholarships and other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. Laureate's institutions have various billing and academic cycles. 10 We determine revenue recognition through the five-step model prescribed by ASC Topic 606, Revenue from Contracts with Customers , as follows: • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when, or as, we satisfy a performance obligation. We assess collectibility on a portfolio basis prior to recording revenue. Generally, students cannot re-enroll for the next academic session without satisfactory resolution of any past-due amounts. If a student withdraws from an institution, Laureate's obligation to issue a refund depends on the refund policy at that institution and the timing of the student's withdrawal. Generally, our refund obligations are reduced over the course of the academic term. We record refunds as a reduction of deferred revenue as applicable. The following table shows the components of Revenues by reportable segment plus the Corporate business unit, and as a percentage of total revenue for the three months ended September 30, 2020 and 2019: Mexico Peru Corporate (1) Total 2020 Tuition and educational services $ 141,897 $ 126,455 $ — $ 268,352 110 % Other 17,491 11,718 260 29,469 12 % Gross revenue 159,388 138,173 260 297,821 122 % Less: Discounts / waivers / scholarships ( 43,439 ) ( 10,859 ) — ( 54,298 ) ( 22 ) % Total $ 115,949 $ 127,314 $ 260 $ 243,523 100 % 2019 Tuition and educational services $ 156,123 $ 125,006 $ — $ 281,129 102 % Other 27,540 14,392 672 42,604 15 % Gross revenue 183,663 139,398 672 323,733 117 % Less: Discounts / waivers / scholarships ( 37,873 ) ( 8,593 ) ( 46,466 ) ( 17 ) % Total $ 145,790 $ 130,805 $ 672 $ 277,267 100 % The following table shows the components of Revenues by reportable segment and as a percentage of total net revenue for the nine months ended September 30, 2020 and 2019: Mexico Peru Corporate (1) Total 2020 Tuition and educational services $ 442,470 $ 352,949 $ — $ 795,419 108 % Other 56,845 29,456 3,264 89,565 12 % Gross revenue 499,315 382,405 3,264 884,984 120 % Less: Discounts / waivers / scholarships ( 114,294 ) ( 30,992 ) — ( 145,286 ) ( 20 ) % Total $ 385,021 $ 351,413 $ 3,264 $ 739,698 100 % 2019 Tuition and educational services $ 499,013 $ 377,235 $ — $ 876,248 102 % Other 75,202 38,791 4,460 118,453 14 % Gross revenue 574,215 416,026 4,460 994,701 116 % Less: Discounts / waivers / scholarships ( 109,506 ) ( 24,971 ) — ( 134,477 ) ( 16 ) % Total $ 464,709 $ 391,055 $ 4,460 $ 860,224 100 % (1) Includes the elimination of intersegment revenues. 11 Contract Balances The timing of billings, cash collections and revenue recognition results in accounts receivable (contract assets) and deferred revenue and student deposits (contract liabilities) on the Consolidated Balance Sheets. We have various billing and academic cycles and recognize student receivables when an academic session begins, although students generally enroll in courses prior to the start of the academic session. Receivables are recognized only to the extent that it is probable that we will collect substantially all of the consideration to which we are entitled in exchange for the goods and services that will be transferred to the student. We receive advance payments or deposits from our students before revenue is recognized, which are recorded as contract liabilities in deferred revenue and student deposits. Payment terms vary by university with some universities requiring payment in advance of the academic session and other universities allowing students to pay in installments over the term of the academic session. All of our contract assets are considered accounts receivable and are included within the Accounts and notes receivable balance in the accompanying Consolidated Balance Sheets. Total accounts receivable from our contracts with students were $ 136,240 and $ 123,132 as of September 30, 2020 and December 31, 2019, respectively. The increase in the contract assets balance at September 30, 2020 compared to December 31, 2019 was primarily driven by our enrollment cycles. The first and third calendar quarters generally coincide with the primary and secondary intakes for our larger institutions. All co ntr act asset amounts are classified as current. Contract liabilities in the amount of $ 62,612 and $ 54,849 were included within the Deferred revenue and student deposits balance in the current liabilities section of the accompanying Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively. The increase in the contract liability balance during the period ended September 30, 2020 was the result of semester billings and cash payments received in advance of satisfying performance obligations, offset by revenue recognized during that period. Revenue recognized for the nine months ended September 30, 2020 that was included in the contract liability balance at the beginning of the year was approximately $ 43,600 . Note 4. Discontinued Operations and Assets Held for Sale As discussed in Note 1, Description of Business, the Company’s remaining principal markets are Mexico and Peru (the Continuing Operations). All other remaining markets are being divested (the Discontinued Operations). As described in Note 5, Dispositions, a number of sale transactions closed during 2019 and 2020. The assets and liabilities of the Discontinued Operations, which are subject to finalization, have been classified as held for sale as of September 30, 2020 and December 31, 2019, in accordance with ASC 205. The assets and liabilities are recorded at the lower of their carrying values or their estimated “fair values less costs to sell.” Summarized operating results and cash flows of the Discontinued Operations are presented in the following tables: For the three months ended September 30, 2020 2019 Revenues $ 459,442 $ 561,748 Costs and expenses: Depreciation and amortization 13,656 28,523 Share-based compensation expense 1,045 334 Loss on impairment of assets 208,040 25,000 Other direct costs 340,657 468,573 Operating (loss) income ( 103,956 ) 39,318 Other non-operating loss ( 14,731 ) ( 32,402 ) Pretax (loss) income of discontinued operations ( 118,687 ) 6,916 Income tax (expense) benefit ( 51,081 ) 24,070 (Loss) income from discontinued operations, net of tax $ ( 169,768 ) $ 30,986 12 For the nine months ended September 30, 2020 2019 Revenues $ 1,342,298 $ 1,952,952 Costs and expenses: Depreciation and amortization 60,168 84,666 Share-based compensation expense 2,378 2,044 Loss on impairment of assets 639,319 25,222 Other direct costs 1,070,363 1,572,733 Operating (loss) income ( 429,930 ) 268,287 Other non-operating loss ( 79,807 ) ( 45,278 ) Pretax (loss) income of discontinued operations ( 509,737 ) 223,009 Income tax (expense) benefit ( 48,214 ) 17,364 (Loss) income from discontinued operations, net of tax $ ( 557,951 ) $ 240,373 Operating cash flows of discontinued operations $ 248,972 $ 313,647 Investing cash flows of discontinued operations $ ( 40,578 ) $ ( 69,653 ) Financing cash flows of discontinued operations $ 8,725 $ ( 68,824 ) Loss on Impairment of Assets Chile Impairment As described in Note 1, Description of Business, the Company is exploring strategic alternatives for each of its businesses and, as part of that process, the Company is evaluating all potential options for its remaining businesses, including sales, spin-offs or business combinations. During the second quarter of 2020, the Company received and considered information regarding the market valuation for control of its Chilean operations, which was both a reporting unit and an asset group. In a divestiture scenario, this market feedback revealed the range of values that could be expected to be offered by potential investors, and this range of values was lower than carrying value. The reasons for this included uncertainties that market participants had around operating higher education institutions in Chile related to the challenging political and regulatory environment and the possibility that a new Chilean constitution could become effective as early as the summer of 2022. These uncertainties particularly affected the views of market participants (as well as the views of the Company) about operating a not-for-profit education institution in Chile. After assessing these factors, the Company concluded that it was more likely than not that the fair value of its Chile reporting unit was less than its carrying value. Accordingly, the Company performed an impairment test of the long-lived assets that were part of the Chile reporting unit. Because Chile had not yet met the held-for-sale criteria as of June 30, 2020, the long-lived assets other than goodwill were evaluated for impairment under the held-and-used model, based on the probability-weighted cash flows expected to be generated by the asset group. Goodwill was also evaluated for impairment. The projections used in the impairment testing included key assumptions around the effect of regulatory uncertainties on the future cash flows expected to be generated, reducing the estimates of those cash flows. In addition, the projections incorporated assumptions around growth rates, tax rates and discount rates. The inputs used were not observable to active markets and were therefore deemed “Level 3” inputs in the fair value hierarchy. As a result of the impairment test, the Company determined that the carrying value of the Chile asset group exceeded its fair value by approximately $ 418,000 and recorded an impairment charge in that amount during the second quarter of 2020, as follows: Tradenames $ 90,700 Land 20,900 Buildings 59,700 Other long-lived assets 36,500 Operating lease right-of-use assets, net 62,500 Goodwill 147,700 Total Chile impairment $ 418,000 13 In addition, at the time of the sale, the Company had recorded within stockholders’ equity, as a component of accumulated other comprehensive income, approximately $ 293,000 of accumulated foreign currency translation losses associated with the Chilean operations that were sold. As discussed further in Note 5, Dispositions, the Company completed the divestiture of its Chilean operations during the third quarter of 2020 and, as a result, these accumulated foreign currency translation losses were recognized as part of the loss on sale. Honduras Impairment During the second quarter of 2020, the Company recorded an impairment charge of approximately $ 10,000 related to long-lived assets of its institution in Honduras in order to write down the carrying value of those assets to their estimated fair value at that time. During the third quarter of 2020, the Company recorded an additional impairment charge of approximately $ 10,000 related to the long-lived assets of its Honduras institution, in order to write down the carrying value of those assets to their estimated fair value based on the sale agreement for the institution that was signed in October 2020, as discussed further below and in Note 19, Subsequent Events. Brazil Impairment As discussed further below, during the third quarter of 2020, the Company signed an agreement to sell its Brazil operations and, as a result, Brazil was classified as a Discontinued Operation for all periods presented. In connection with this decision to sell Brazil, the Company recorded a goodwill impairment charge of approximately $ 190,000 in order to write down the carrying value of Brazil to its estimated ‘fair value less costs to sell’, as required by ASC 360-10. The estimated fair value was based on an offer received from a market participant. Because the held-for-sale criteria were met during the third quarter, the carrying value used to evaluate the Brazil business for impairment included the accumulated foreign currency translation losses associated with Brazil, resulting in the impairment. The carrying amounts of the major classes of assets and liabilities that were classified as held for sale are presented in the following tables: September 30, 2020 December 31, 2019 Assets of Discontinued Operations Cash and cash equivalents $ 113,016 $ 333,455 Receivables, net 152,557 209,704 Property and equipment, net 243,030 741,119 Goodwill 648,018 1,003,765 Tradenames 438,477 665,207 Operating lease right-of-use assets, net 169,991 399,345 Other assets 336,484 446,458 Subtotal: assets of Discontinued Operations $ 2,101,573 $ 3,799,053 Other assets classified as held for sale Property and equipment, net 7,127 8,476 Total assets held for sale $ 2,108,700 $ 3,807,529 September 30, 2020 December 31, 2019 Liabilities of Discontinued Operations Deferred revenue and student deposits $ 203,865 $ 176,255 Operating leases, including current portion 185,473 388,202 Long-term debt, seller notes and finance leases, including current portion 180,112 304,355 Other liabilities 400,437 581,329 Total liabilities held for sale $ 969,887 $ 1,450,141 14 Australia and New Zealand Operations On July 29, 2020, LEI AMEA Investments B.V., a Netherlands private limited liability company (the ANZ Seller), an indirect, wholly owned subsidiary of the Company, and the Company, solely as guarantor of certain of the ANZ Seller’s obligations thereunder, entered into a Sale and Purchase Agreement (the ANZ Purchase Agreement) with SEI Newco Inc., a Delaware corporation (the ANZ Purchaser), and Strategic Education, Inc., a Maryland corporation (the ANZ Purchaser’s Guarantor). Pursuant to the ANZ Purchase Agreement, the ANZ Seller has agreed to sell to the ANZ Purchaser all of the issued and outstanding shares in the capital of (i) LEI Higher Education Holdings Pty Ltd, an Australian private company and the direct owner of Torrens University Australia, (ii) LEI Australia Holdings Pty Ltd, an Australian private company and the indirect owner of Think Education, (iii) LESA Education Services Holdings Pty Ltd, an Australian private company, and (iv) LEI New Zealand, a New Zealand company and the indirect owner of Media Design School (collectively, the ANZ Target Companies). The ANZ Purchaser’s Guarantor will guarantee the obligations of the ANZ Purchaser. The purchase price was $ 642,700 , subject to certain closing adjustments based on the aggregate working capital and indebtedness of the ANZ Target Companies and their subsidiaries and the forecasted performance of the ANZ Target Companies and their subsidiaries. The closing of the transaction occurred on November 3, 2020, following completion of the required regulatory approvals and other customary closing conditions. Brazil Operations On September 11, 2020, Laureate and Rede Internacional de Universidades Laureate Ltda., a Brazilian limited liability company and an indirect wholly owned subsidiary of Laureate (Rede), entered into a transaction agreement (the Brazil Sale Agreement) with Ser Educacional S.A., a Brazilian publicly held company (SER), and, solely for the purposes of certain provisions thereof, José Janguiê Bezerra Diniz and certain of his family members. Pursuant to the Brazil Sale Agreement, Laureate agreed to sell to SER all of the issued and outstanding equity interests of Rede, the direct or indirect owner of Laureate’s Brazilian operations, in exchange for 1,700,000 Brazilian Reals (or approximately $ 318,700 at the time of signing) in cash, subject to certain adjustments, and 101,138,369 newly issued shares of SER’s common stock (the Stock Consideration). Immediately following the closing of the transaction (the Brazil Closing), Laureate would own approximately 44 % of SER’s outstanding common stock, unless SER were to issue additional common stock prior to the Brazil Closing to the extent permitted under the Brazil Sale Agreement. The transaction value is approximately 3,862,000 Brazilian Reals (or approximately $ 724,000 at the exchange rate and share value at the time of signing), including the assumption of indebtedness, net of cash (which, at the time of signing, was approximately $ 124,900 ). The closing of this transaction was targeted to occur toward the end of 2021 and was subject to certain specified closing conditions, including receipt of regulatory approval, receipt of required approvals by SER’s shareholders, establishment of a facility to issue American Depositary Shares (ADSs), the listing of the ADSs on a U.S. securities exchange, the effectiveness of registration statements to register the issuance of the Stock Consideration and other matters under U.S. federal securities laws and other customary closing conditions. Under the terms of the Brazil Sale Agreement, during the period from September 11, 2020 and continuing until 12:01 A.M. (New York time) on October 13, 2020 (the Go-Shop Period), the Company had the right to solicit and engage in discussions with respect to a competing proposal for the acquisition of its Brazilian operations from third parties. Prior to the expiration of the Go-Shop Period, Laureate received a competing proposal from Ânima Holding S.A. (Anima), which on October 12, 2020, Laureate’s Board of Directors determined constituted a Superior Proposal as defined in the transaction agreement. On October 13, 2020, Laureate notified SER of the Superior Proposal, and SER had the right, for a period of five business days, to match Anima’s proposal. On October 20, 2020, instead of submitting a matching proposal before the expiration of the match period, SER informed the Company that it had obtained a partial and temporary injunction solely with respect to termination of the Brazil Sale Agreement and without a ruling on the merits of the superior proposal. On November 2, 2020, the Company announced that it had entered into a definitive agreement with Anima for the sale of its Brazilian operations. Net of the termination fee payable to SER to be borne by Anima, the transaction value is approximately 4,400,000 Brazilian Reals (approximately $ 765,000 at the exchange rate at the time of signing), including 3,800,000 Brazilian Reals (approximately $ 660,700 at the exchange rate at the time of signing) in cash consideration, which is subject to certain adjustments, and the assumption of net indebtedness. Under the agreement with Anima, the Company will be entitled to receive up to 203,000 Brazilian Reals (approximately $ 35,300 at the time of signing) in additional cash consideration if certain metrics are achieved following the closing. 15 The Company and SER have agreed to terminate their previously announced transaction agreement and settle all legal proceedings related to such agreement. SER and Anima have agreed that Anima will bear the 180,000 Brazilian Reals (approximately $ 31,300 at the exchange rate at the time of signing) termination fee that the Company owes Ser in connection with the termination of the transaction agreement. The transaction is targeted to close by the end of the second quarter of 2021. Walden On September 11, 2020, Laureate entered into a Membership Interest Purchase Agreement (the Walden Sale Agreement) with Adtalem Global Education Inc., a Delaware corporation (the Walden Purchaser). Pursuant to the Walden Sale Agreement, the Company has agreed to sell to the Walden Purchaser all of the issued and outstanding equity interest in Walden e-Learning, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company and its subsidiary, Walden University, LLC (Walden University), a Florida limited liability company and an indirect wholly owned subsidiary of the Company (together with Walden e-Learning, LLC, the Walden Group), in exchange for a purchase price of $ 1,480,000 in cash, subject to certain adjustments set forth in the Walden Sale Agreement. The closing of this transaction is expected to occur toward the end of 2021 and is subject to customary closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals. Under certain specified circumstances, the Walden Purchaser may be required to pay the Company a termination fee of $ 88,000 , including if the Walden Purchaser terminates the Walden Sale Agreement as a result of the imposition by the U.S. Department of Education of certain specified restrictions, or if Laureate terminates the Walden Sale Agreement as a result of the Walden Purchaser’s failure to consummate the transaction upon satisfaction of the closing conditions. Honduras On October 13, 2020, the Company entered into a definitive agreement with Fundación Nasser, a not-for-profit foundation in Honduras, to transfer control of its operations in Honduras for total cash consideration of approximately $ 29,800 , prior to closing costs. The buyer will also assume indebtedness which, as of September 30, 2020, was approximately $ 30,000 . The transaction is subject to certain closing conditions, including regulatory approval, and is expected to be completed in the first half of 2021. Note 5. Dispositions Sale of Costa Rica Operations On January 10, 2020, Laureate International B.V., a Netherlands private limited liability company (Laureate International), an indirect, wholly owned subsidiary of the Company, entered into, and consummated the transactions contemplated by, an Equity Purchase Agreement (the Costa Rica Agreement) with SP Costa Rica Holdings, LLC, a Delaware limited liability company (the Costa Rica Buyer). Pursuant to the Agreement, the Costa Rica Buyer purchased from Laureate International (i) all of the equity units of Education Holding Costa Rica, S.R.L., which owned, directly or indirectly, all of the equity units of Lusitania S.R.L., Universidad ULatina, S.R.L. (ULatina) and Universidad Americana UAM, S.R.L. (collectively, Laureate Costa Rica) and (ii) a note due from ULatina to Laureate International. Consideration for the transaction consisted of $ 15,000 paid at closing and up to $ 7,000 to be paid within the next two years if Laureate Costa Rica met certain performance metrics. One of the performance metrics was finalized during the second quarter of 2020 and did not result in any additional proceeds to the Company; the maximum additional proceeds that the Company could receive if the remaining performance metric is met is $ 5,000 . The proceeds received, net of cash sold, transaction fees and a working capital adjustment that was completed during the second quarter of 2020, were approximately $ 1,800 . Additionally, Laureate Costa Rica retained obligations to pay approximately $ 30,000 in finance lease indebtedness for which the Costa Rica Buyer has no recourse to Laureate International. During the third quarter of 2019, the Company recorded an impairment loss of approximately $ 25,000 on the long-lived assets at the Costa Rica institutions, in order to write down the carrying value of those assets to their estimated fair value, per ASC 360-10. Upon completion of the sale in January 2020 and after including the working capital adjustment, the Company recognized a pre-tax loss of approximately $ 18,600 , which related to subsequent changes in net carrying values and is included in loss on sales of discontinued operations on the Consolidated Statement of Operations for the nine months ended September 30, 2020. The Costa Rica Buyer is controlled by certain affiliates of Sterling Capital Partners II, L.P. (Sterling II). Sterling II has the right to designate a director to the Laureate Board of Directors pursuant to a securityholders agreement, and Steven Taslitz currently 16 serves as the Sterling-designated director. Mr. Taslitz did not participate in the Laureate Board of Directors’ consideration of the transaction, which was approved by Laureate's Audit Committee as a related party transaction. Sale of NewSchool of Architecture and Design, LLC (NSAD) On March 6, 2020, the Company completed the sale of NSAD. Under the terms of the membership interests purchase agreement, Exeter Street Holdings, LLC, an indirect wholly owned subsidiary of the Company, sold 100 % of the outstanding membership interests of NSAD to Ambow NSAD, Inc. and Ambow Education Holding, Ltd. (the NSAD Buyers) for a purchase price of one dollar, subject to certain adjustments. NSAD is a higher education institution located in California that offers undergraduate and graduate degrees and non-degree certificates in design and construction management. Under the terms of the agreement, the Company agreed to pay subsidies to the NSAD Buyers totaling approximately $ 7,300 , of which all but $ 2,800 was settled at the closing date. The remaining subsidy of $ 2,800 is being paid to the NSAD Buyers ratably on a quarterly basis over the next four years . The Company recognized a pre-tax loss on the sale of approximately $ 5,900 , which is included in loss on sales of discontinued operations on the Consolidated Statement of Operations for the nine months ended September 30, 2020. Sale of China Operations-Receipt of Escrow On January 25, 2018, the Company completed the sale of LEI Lie Ying Limited in China. At the closing of the sale on January 25, 2018, a portion of the total transaction value was paid into an escrow account, to be distributed to the Company pursuant to the terms and conditions of the escrow agreement. As of December 31, 2019, the Company had recorded a receivable of approximately $ 25,900 for the portion of the escrowed amount that the Company expected to receive. Per the terms of the escrow agreement, in June 2020, the Company received approximately 141,647 Hong Kong Dollars (approximately $ 18,300 at the date of receipt) from the escrow, which was offset against the receivable recorded, and is included in receipts from sales of discontinued operations within investing activities on the Consolidated Statement of Cash Flows. Under the terms of the agreement, the Company expects to receive the remaining escrow receivable amount in January 2021. Divestiture of Chilean Operations On September 10, 2020, Laureate International and Laureate I, B.V., each a Netherlands private limited liability company (together, the LDES Sellers), and Servicios Regionales Universitarios LE, S.C., a Mexican company (sociedad civil) (together with the LDES Sellers, the Controlling Entities), all of which are indirect, wholly owned subsidiaries of the Company, entered into a Master Agreement (the Chile Agreement) with Fundación Educación y Cultura, a Chilean non-for-profit foundation (the Chile Buyer). Pursuant to the Chile Agreement, as of September 11, 2020, Laureate completed the divestiture of its operations in Chile through the transfer of control of its not-for-profit institutions, Universidad Andrés Bello, Universidad de Las Américas and Universidad Viña del Mar, to the Chile Buyer, and the sale of its for-profit operations, which includes the sale of Instituto Profesional AIEP to Universidad Andrés Bello. The not-for-profit institutions were consolidated by Laureate under the variable interest entity model. The cash proceeds received at closing, prior to transaction fees, were approximately $ 195,300 . In addition, the purchase price includes a note receivable of $ 21,500 that is payable one year from the date of divestiture. At the closing date, the Chilean operations had a cash balance (cash sold) of approximately $ 288,000 that was transferred to the Chile Buyer as part of the transaction. This divestiture resulted in a pre-tax loss of approximately $ 344,500 , which relates primarily to the accumulated foreign currency translation losses associated with the Chilean operations. The loss is recorded in loss on sales of discontinued operations in the Consolidated Statements of Operations for the three and nine months ended September 30, 2020. As discussed in Note 4, Discontinued Operations and Assets Held for Sale, during the second quarter of 2020, the Company recorded an impairment charge of approximately $ 418,000 related to the long-lived assets, indefinite-lived intangible assets and goodwill of the Chilean operations, in order to write down the carrying value of the Chilean operations assets to its estimated fair value. Inti Education Holdings Sdn. Bhd. (Inti Holdings) On February 28, 2020, Exeter Street Holdings Sdn. Bhd., a Malaysia corporation (the Malaysia Seller), and LEI Holdings, LTD., a Hong Kong corporation (the Malaysia Seller Guarantor), each of which is an indirect wholly owned subsidiary of Laureate, entered into a Share Sale & Purchase Agreement (the Malaysia Sale Agreement) with HOPE Education Group (Hong Kong) Company Limited (the Malaysia Purchaser) and HOPE Education Group Co. Ltd. (the Malaysia Purchaser Guarantor). 17 Pursuant to the Malaysia Sale Agreement, the Malaysia Purchaser would purchase from the Malaysia Seller all of the issued and outstanding shares in the capital of Inti Education Holdings Sdn. Bhd., a Malaysia corporation (Inti Holdings), the Malaysia Seller’s Guarantor would guarantee certain obligations of the Malaysia Seller and the Malaysia Purchaser’s Guarantor would guarantee certain obligations of the Malaysia Purchaser. Inti Holdings was the indirect owner of INTI University and Colleges, a higher education institution with five campuses in Malaysia. In connection with the Malaysia Sale Agreement, the Malaysia Seller entered into a separate agreement with the current minority owner of the equity of Inti Holdings relating to the purchase by the Malaysia Seller of the minority owner’s 10.10 % interest in Inti Holdings, the closing of which was a precondition to the closing of the transaction under the Malaysia Sale Agreement. The sale of Inti Holdings was completed on September 29, 2020. The total purchase price, including the payment to the current minority owner, was $ 140,000 . The closing of the transaction was subject to customary closing conditions, including approval by regulators in Malaysia. At the time of the signing of the Malaysia Sale Agreement in February 2020, the Malaysia Purchaser paid to the Malaysia Seller a cash deposit of $ 5,000 , which the Company initially recorded as a liability pending the closing of the sale, and which was recognized as part of the gain on sale upon the closing of the transaction in September 2020. The cash proceeds received, prior to transaction fees and net of approximately $ 19,500 of cash sold, were approximately $ 116,300 and are included in Receipts from sales of discontinued operations, net of cash sold, and property and equipment within investing activities in the Consolidated Statement of Cash Flows for the nine months ended September 30, 2020. In addition, the Malaysia Purchaser withheld $ 4,200 for taxes that the Company expects to receive during the fourth quarter of 2020. The payment to the minority owner for their 10.10 % interest in Inti Holdings, which totaled approximately $ 13,700 , was made in early October 2020. An additional $ 420 , which represents the minority owner’s share of the taxes that were withheld as noted above, will be paid to the minority owner once received by the Company. The Company recognized a pre-tax gain on sale of approximately $ 45,200 , which is included in the total gain/loss on sales of discontinued operations in the Consolidated Statements of Operations for the three and nine months ended September 30, 2020. Divestiture of Turkey Operations: Receipt of Portion of Deferred Consideration As previously disclosed, in August 2019, the Company completed the divestiture of its operations in Turkey. The total consideration included a deferred payment of $ 15,000 in the form of an instrument that was payable one year after closing. At the time of the divestiture, the Company determined that this deferred amount would be recognized if collected. In early October 2020, the Company received $ 8,436 of the deferred consideration. Accordingly, as of September 30, 2020, the Company recorded a receivable of $ 8,436 , through a reduction to the loss on the sale of control of the Turkish operations. The outstanding amount is due in January 2021. Note 6. Business and Geographic Segment Information Laureate’s educational services are offered through six operating segments: Brazil, Mexico, Peru (formerly Andean), Central America, Rest of World and Online & Partnerships. Following the March 2020 sale of NSAD, Laureate’s last remaining U.S. campus-based institution, the Central America & U.S. Campuses segment is now called the Central America segment. Following the September 2020 sale of Chile, the former Andean segment is now called the Peru segment. Laureate determines its operating segments based on information utilized by the chief operating decision maker to allocate resources and assess performance. 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 onli ne and in-classroom) courses and programs to deliver their curriculum. In response to the COVID-19 pandemic, we have temporarily transitioned 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. 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, Peru, Central America, and Rest of World. Specifics related to each of these campus-based segments and our Online & Partnerships segment are discussed below. 18 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 11 institutions in seven states throughout Brazil, with a particularly strong presence in the competitive São Paulo market. Most students finance their own education, while others rely on the government-sponsored programs such as Prouni and Fundo de Financiamento Estudantil (FIES). The entire Brazil segment is included in Discontinued Operations. 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 35 campuses. Each institution in Mexico has a national license. Students in our Mexican institutions typically finance their own education. The Peru segment includes three institutions, where 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 and New Zealand. Additionally, the Rest of World segment manages one institution in China through a joint venture arrangement. The entire Rest of World segment is 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. The entire Online & Partnerships segment is included in Discontinued Operations. As discussed in Note 1, Description of Business, and Note 4, Discontinued Operations and Assets Held for Sale, several of our subsidiaries have met the requirements to be classified as discontinued operations. As a result, the operations of the Brazil, Central America, Rest of World and Online & Partnerships segments have been excluded from the segment information for all periods presented. Intersegment transactions are accounted for in a similar manner as third-party transactions and are eliminated in consolidation. The Corporate amounts presented in the following tables include corporate charges that were not allocated to our reportable segments and adjustments to eliminate intersegment items. We evaluate segment performance based on Adjusted EBITDA, which is a non-GAAP performance measure defined as Income (loss) from continuing operations before income taxes and equity in net income of affiliates, adding back the following items: Gain (loss) on sale or disposal of subsidiaries, Foreign currency exchange gain, net, Other income, net, (Loss) gain on derivatives, Loss on debt extinguishment, Interest expense, Interest income, Depreciation and amortization expense, Loss on impairment of assets, Share-based compensation expense and expenses related to our Excellence-in-Process (EiP) initiative. EiP is an 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 dispositions described in Note 4, Discontinued Operations and Assets Held for Sale, and the completed dispositions described in Note 5, Dispositions. Beginning in the third quarter of 2019, EiP also includes expenses associated with an enterprise-wide program aimed at revenue growth. When we review Adjusted EBITDA on a segment basis, we exclude intercompany revenues and expenses related to network fees and royalties between our segments, which eliminate in consolidation. We use total assets as the measure of assets for reportable segments. 19 The following tables provide financial information for our reportable segments, including a reconciliation of Adjusted EBITDA to Loss from continuing operations before income taxes and equity in net income of affiliates, as reported in the Consolidated Statements of Operations: For the three months ended For the nine months ended September 30, September 30, 2020 2019 2020 2019 Revenues Mexico $ 115,949 $ 145,790 $ 385,021 $ 464,709 Peru 127,314 130,805 351,413 391,055 Corporate 260 672 3,264 4,460 Revenues $ 243,523 $ 277,267 $ 739,698 $ 860,224 Adjusted EBITDA of reportable segments Mexico $ 15,530 $ 23,064 $ 58,544 $ 80,476 Peru 56,474 45,232 128,975 133,783 Total Adjusted EBITDA of reportable segments 72,004 68,296 187,519 214,259 Reconciling items: Corporate ( 21,636 ) ( 37,832 ) ( 72,439 ) ( 110,033 ) Depreciation and amortization expense ( 18,186 ) ( 20,368 ) ( 55,949 ) ( 61,618 ) Loss on impairment of assets ( 323,398 ) — ( 350,939 ) ( 248 ) Share-based compensation expense ( 2,627 ) ( 1,244 ) ( 7,899 ) ( 7,537 ) EiP expenses ( 24,392 ) ( 27,263 ) ( 66,471 ) ( 56,122 ) Operating loss ( 318,235 ) ( 18,411 ) ( 366,178 ) ( 21,299 ) Interest income 684 912 1,594 2,594 Interest expense ( 24,703 ) ( 28,318 ) ( 75,698 ) ( 101,548 ) Loss on debt extinguishment — ( 200 ) — ( 22,059 ) Gain (loss) on derivatives — 283 ( 626 ) 9,166 Other income, net 1,301 992 814 9,090 Foreign currency (loss) gain, net ( 2,907 ) 7,659 71,074 7,601 Gain (loss) on disposal of subsidiaries, net 621 ( 1,474 ) ( 1,178 ) ( 1,474 ) Loss from continuing operations before income taxes and equity in net income of affiliates $ ( 343,239 ) $ ( 38,557 ) $ ( 370,198 ) $ ( 117,929 ) September 30, 2020 December 31, 2019 Assets Mexico $ 1,121,783 $ 1,315,377 Peru 716,745 643,473 Corporate and Discontinued Operations 3,336,621 4,537,573 Total assets $ 5,175,149 $ 6,496,423 20 Note 7. Goodwill and Loss on Impairment of Assets The change in the net carrying amount of Goodwill from December 31, 2019 through September 30, 2020 was composed of the following items: Mexico Peru Total Balance at December 31, 2019 $ 525,256 $ 81,227 $ 606,483 Dispositions — — — Impairments — — — Currency translation adjustments ( 81,862 ) ( 6,289 ) ( 88,151 ) Balance at September 30, 2020 $ 443,394 $ 74,938 $ 518,332 Impairment of Laureate Tradename During the third quarter of 2020, the Company recognized an impairment charge of $ 320,000 on the Laureate tradename, an intangible asset. As described in Note 1, Description of Business, the Company had previously announced that it would explore strategic alternatives for each of its businesses and, during the third quarter, the Company announced that it had completed a sale of its operations in Chile and that it had signed agreements to sell its operations in Brazil, Australia and New Zealand, as well as Walden University. Because of these events, the Company determined that the useful life of the Laureate tradename asset was no longer indefinite and, in accordance with ASC 350-30-35-17, the Company tested the asset for impairment. The Company estimated the fair value of the tradename asset using the relief-from-royalty method, based on the projected revenues for each business over the estimated period that each business would remain part of the Laureate network. As a result of the impairment test, the Company concluded that the estimated fair value of the Laureate tradename was less than its carrying value by approximately $ 320,000 and recorded an impairment charge for that amount. The significant assumptions used in estimating the fair value included: (1) the revenue growth rates; (2) the discount rates; and (3) the estimated royalty rates. The inputs used were not observable to active markets and are therefore deemed “Level 3” inputs in the fair value hierarchy. The decrease in the fair value of the tradename was primarily caused by the shortened duration of the estimated future revenues. The remaining carrying value of the tradename asset of $ 82,000 will be amortized prospectively over five years , its estimated useful life. New events or changes in circumstances, such as the signing of additional sale agreements, may be indicators of impairment that would require the Company to perform additional impairment tests. Impairment of Brazil E2G Software Assets As part of a transformation initiative for the enrollment to graduation cycle (E2G) that started several years ago, the Company began developing a solution to standardize the information systems and processes in Brazil. During development, those costs that qualified for capitalization as internal-use software were classified within Construction in-progress on our Consolidated Balance Sheets. In addition, a portion of the Brazil E2G project costs were deemed to be implementation costs of a hosting arrangement and were capitalized within Other assets on our Consolidated Balance Sheets. These capitalized costs were recorded on our Brazil and Corporate segments, as most of the Brazil E2G expenditures were made by Corporate. During the second qu arter of 2020, the Company determined that it was no longer probable that the Brazil E2G project would be completed and placed into service, and that the likelihood that a potential buyer of the Brazil business would utilize this system was low due to its cost and associated complexities. As stated in ASC 350-40-35-3, there is a presumption that uncompleted software has a fair value of $ 0 . Accordingly, during the second quarter of 2020, the Company recorded an impairment charge to fully write off the Brazil E2G project assets. Approximately $ 23,800 of the impairment charge was related to assets recorded on the Corporate segment and is therefore included in Continuing Operations. The remaining portion of the impairment charge, approximately $ 3,300 , related to assets recorded on the Brazil segment and is therefore included in Discontinued Operations. 21 Note 8. Debt Outstanding long-term debt was as follows: September 30, 2020 December 31, 2019 Senior long-term debt: Senior Secured Credit Facility (stated maturity date October 2024) $ 409,147 $ 202,400 Senior Notes (stated maturity date May 2025) 800,000 800,000 Total senior long-term debt 1,209,147 1,002,400 Other debt: Lines of credit 58,958 14,542 Notes payable and other debt 153,043 169,308 Total senior and other debt 1,421,148 1,186,250 Finance lease obligations and sale-leaseback financings 31,892 28,102 Total long-term debt and finance leases 1,453,040 1,214,352 Less: total unamortized deferred financing costs 56,306 62,911 Less: current portion of long-term debt and finance leases 88,885 48,139 Long-term debt and finance leases, less current portion $ 1,307,849 $ 1,103,302 In March 2020, we fully drew down the $ 410,000 revolving credit facility under our Senior Secured Credit Facility, in order to increase our cash position and preserve financial flexibility in light of the COVID-19 pandemic. Estimated Fair Value of Debt The estimated fair value of our debt was determined using observable market prices as the majority of our securities, including the Senior Secured Credit Facility and the Senior Notes due 2025, are traded in a brokered market. The fair value of our remaining debt instruments approximates carrying value based on their terms. As of September 30, 2020 and December 31, 2019, our long-term debt was classified as Level 2 within the fair value hierarchy, based on the frequency and volume of trading in the brokered market. The estimated fair value of our debt was as follows: September 30, 2020 December 31, 2019 Carrying amount Estimated fair value Carrying amount Estimated fair value Total senior and other debt $ 1,421,148 $ 1,471,148 $ 1,186,250 $ 1,248,110 Certain Covenants As of September 30, 2020, our senior long-term debt contained certain negative covenants including, among others: (1) limitations on additional indebtedness; (2) limitations on dividends; (3) limitations on asset sales, including the sale of ownership interests in subsidiaries and sale-leaseback transactions; and (4) limitations on liens, guarantees, loans or investments. The Third Amended and Restated Credit Agreement (the Third A&R Credit Agreement) provides, solely with respect to the revolving credit facility, that the Company shall not permit its Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Third A&R Credit Agreement, to exceed 3.50 x as of December 31, 2019 and thereafter. The agreement also provides that if (i) the Company’s Consolidated Total Debt to Consolidated EBITDA ratio, as defined in the Third A&R Credit Agreement, is not greater than 4.75 x as of such date and (ii) less than 25 % of the revolving credit facility is utilized as of that date, then such financial covenant shall not apply. As of September 30, 2020, we were in compliance with the leverage ratio covenant. In addition, notes payable at some of our locations contain financial maintenance covenants. We are in compliance with these covenants. Note 9. Leases Laureate conducts a significant portion of its operations at leased facilities. These facilities include our corporate headquarters, other office locations, and many of Laureate's higher education facilities. Laureate analyzes each lease agreement to determine whether it should be classified as a finance lease or an operating lease. As a result of adopting ASC Topic 842 on January 1, 22 2019, we recorded on our balance sheet significant asset and liability balances associated with the operating leases, as described further below. Finance Leases Our finance lease agreements are for property and equipment. The lease assets are included within buildings as well as furniture, equipment and software and the related lease liability is included within debt and finance leases on the consolidated balance sheet. Operating Leases Our operating lease agreements are primarily for real estate space and are included within operating lease right-of-use (ROU) assets and operating lease liabilities on the Consolidated Balance Sheets. The terms of our operating leases vary and generally contain renewal options. Certain of these operating leases provide for increasing rent over the term of the lease. Laureate also leases certain equipment under noncancellable operating leases, which are typically for terms of 60 months or less. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Our variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Many of our lessee agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. On occasion, Laureate has entered into sublease agreements for certain leased office space; however, the sublease income from these agreements is immaterial. Rent Concessions The Company has taken actions with respect to certain of its existing leases, including engaging with landlords to discuss rent deferrals, as well as other rent concessions. Consistent with the updated guidance from the Financial Accounting Standards Board (FASB) in April 2020, the Company has elected the practical expedient for rent concessions where the total payments required by the modified contract are substantially the same or less than the total payments required by the original contract. In those cases, the Company treated the rent concessions as if there were no modification to the lease contract and accounted for these rent concessions as variable lease payments. Note 10. Commitments and Contingencies Loss Contingencies Laureate is subject to legal actions arising in the ordinary course of its business. In management's opinion, we have adequate legal defenses, insurance coverage and/or accrued liabilities with respect to the eventuality of such actions. We do not believe that any settlement would have a material impact on our Consolidated Financial Statements. Contingent Liabilities for Taxes As of September 30, 2020 and December 31, 2019, Laureate has recorded cumulative liabilities totaling $ 35,038 and $ 44,595 , respectively, for taxes other-than-income tax, principally payroll-tax-related uncertainties recorded at the time of an acquisition, of which $ 34,214 and $ 41,560 , respectively, were classified as held for sale. The changes in this recorded liability are related to acquisitions, interest and penalty accruals, changes in tax laws, expirations of statutes of limitations, settlements and changes in foreign currency exchange rates. The terms of the statutes of limitations on these contingencies vary but can be up to 10 years. These liabilities were included in current and long-term liabilities on the Consolidated Balance Sheets. Changes in the recorded values of non-income tax contingencies impact operating income and interest expense, while changes in the related indemnification assets impact only operating income. The total decrease to operating income for adjustments to non-income tax 23 contingencies and indemnification assets was $ 3,375 and $ 5,196 , respectively, for the nine months ended September 30, 2020 and 2019. In addition, as of September 30, 2020 and December 31, 2019, Laureate has recorded cumulative liabilities for income tax contingencies of $ 36,602 and $ 51,442 , respectively, of which $ 11,746 and $ 21,429 , respectively, were classified as held for sale. As of September 30, 2020 and December 31, 2019, indemnification assets primarily related to acquisition contingencies were $ 50,949 and $ 69,040 , respectively, of which $ 37,536 and $ 46,284 , respectively, were classified as held for sale. These indemnification assets primarily cover contingencies for income taxes and taxes other-than-income taxes. We have also recorded receivables, which are classified as held for sale, of approximately $ 16,000 and $ 19,000 as of September 30, 2020 and December 31, 2019, respectively, from the former owner of one of our Brazil institutions which is guaranteed by future rental payments to the former owner. We have identified certain contingencies, primarily tax-related, that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on the Company’s results of operations if the outcomes are unfavorable. In most cases, Laureate has received indemnifications from the former owners and/or noncontrolling interest holders of the acquired businesses for contingencies, and therefore, we do not believe we will sustain an economic loss even if we are required to pay these additional amounts. In cases where we are not indemnified, the unrecorded contingencies are not individually material and are primarily in Brazil, which is now classified in Discontinued Operations. In the aggregate, we estimate that the reasonably possible loss for these unrecorded contingencies in Brazil could be up to approximately $ 45,000 if the outcomes were unfavorable in all cases. Other Loss Contingencies Laureate has accrued liabilities for certain civil actions against our institutions, a portion of which existed prior to our acquisition of these entities. Laureate intends to vigorously defend against these matters. As of September 30, 2020 and December 31, 2019, approximately $ 7,700 and $ 5,800 , respectively, of loss contingencies were included in Other long-term liabilities and Other current liabilities on the Consolidated Balance Sheets. In addition, as of September 30, 2020 and December 31, 2019, approximately $ 20,900 and $ 26,300 , respectively, of loss contingencies were classified as held for sale. Material Guarantees Laureate acquired the remaining 49 % ownership interest in UAM Brazil in April 2013. As part of the agreement to purchase the 49% ownership interest, Laureate pledged 49 % of its total shares in UAM Brazil as a guarantee of our payment obligations under the purchase agreement. In the event that we default on any payment, the agreement provides for a forfeiture of the pledged shares. In connection with the purchase of Faculdades Metropolitanas Unidas Educacionais Ltda. (FMU) Education Group on September 12, 2014, Laureate pledged its acquired shares to third-party lenders as a guarantee of our payment obligations under the loans that financed a portion of the purchase price. The shares are pledged until full repayment of the loans, which mature in April 2021. In connection with a loan agreement entered into by a Laureate subsidiary in Peru, all of the shares of Universidad Privada del Norte, one of our universities, were pledged to the third-party lender as a guarantee of the payment obligations under the loan. Standby Letters of Credit, Surety Bonds and Other Commitments As of September 30, 2020 and December 31, 2019, Laureate's outstanding letters of credit (LOCs) and surety bonds primarily consisted of the items discussed below. As of September 30, 2020 and December 31, 2019, we had approximately $ 125,800 and $ 127,300 , respectively, posted as LOCs in favor of the DOE. These LOCs were required to allow Walden and NSAD, until it was sold in March 2020, to continue participating in the DOE Title IV program. These LOCs are recorded almost entirely on Walden and are fully collateralized with cash equivalents and certificates of deposit. Because Walden is classified as a Discontinued Operation, these balances are recorded as current assets held for sale on our September 30, 2020 and December 31, 2019 Consolidated Balance Sheets. As of September 30, 2020 and December 31, 2019, we had EUR 9,443 (approximately $ 11,000 at September 30, 2020) and EUR 5,036 (approximately $ 5,500 at December 31, 2019), respectively, posted as cash collateral for LOCs related to the 24 Spanish tax audits. This was recorded in Continuing Operations and classified as Restricted cash on our September 30, 2020 and December 31, 2019 Consolidated Balance Sheets. The cash collateral is related to final assessments issued by the Spanish Taxing Authority (STA) in October 2018 and January 2020 to Iniciativas Culturales de España, S.L. (ICE). In addition, on March 11, 2020, ICE received a preliminary assessment of approximately EUR 21,600 (approximately $ 25,100 at September 30, 2020), related to the STA’s extension of their audit to review withholding taxes on income earned by nonresidents. This assessment is not final, and ICE intends to challenge the assessment before the STA. ICE was formerly our Spanish holding company; during the second quarter of 2020, ICE was migrated to the Netherlands and its name was changed to Laureate Netherlands Holding B.V. As part of our normal operations, our insurers issue surety bonds on our behalf, as required by various state education authorities in the United States. We are obligated to reimburse our insurers for any payments made by the insurers under the surety bonds. As of September 30, 2020 and December 31, 2019, the total face amount of these surety bonds was $ 17,360 and $ 25,582 , respectively. In June 2020, a state bond in the amount of approximately $ 9,000 was deemed unnecessary and was canceled. These bonds are fully collateralized with cash, which was classified as Restricted cash on our September 30, 2020 and December 31, 2019 Consolidated Balance Sheets. In November 2016, in order to continue participating in Prouni, a federal program that offers tax benefits designed to increase higher education participation rates in Brazil, UAM Brazil posted a guarantee in the amount of $ 15,300 . In connection with the issuance of the guarantee, UAM Brazil obtained a non-collateralized surety bond from a third party in order to secure the guarantee. The cost of the surety bond was $ 1,400 , of which half was reimbursed by the former owner of UAM Brazil, and is being amortized over a five -year term. The Company believes that this matter will not have a material impact on our Consolidated Financial Statements. Note 11. Share-based Compensation Share-based compensation expense was as follows: For the three months ended September 30, For the nine months ended September 30, 2020 2019 2020 2019 Continuing operations Stock options, net of estimated forfeitures $ 297 $ 581 $ 1,024 $ 2,411 Restricted stock awards 2,330 663 6,875 5,126 Total continuing operations $ 2,627 $ 1,244 $ 7,899 $ 7,537 Discontinued operations Share-based compensation expense for discontinued operations 1,045 334 2,378 2,044 Total continuing and discontinued operations $ 3,672 $ 1,578 $ 10,277 $ 9,581 25 Note 12. Stockholders’ Equity The components of net changes in stockholders’ equity for the fiscal quarters of 2020 are as follows: Laureate Education, Inc. Stockholders Class A Common Stock Class B Common Stock Additional paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive (loss) income Treasury stock at cost Non-controlling interests Total stockholders’ equity Shares Amount Shares Amount Balance at December 31, 2019 119,575 $ 542 90,831 $ 363 $ 3,724,636 $ 436,509 $ ( 1,073,981 ) $ ( 271,106 ) $ ( 12,812 ) $ 2,804,151 Non-cash stock compensation — — — — 1,984 — — — — 1,984 Conversion of Class B shares to Class A shares 18 — ( 18 ) — — — — — — — Purchase of treasury stock at cost ( 1,619 ) — — — — — — ( 29,203 ) — ( 29,203 ) Exercise of stock options and vesting of restricted stock, net of shares withheld to satisfy tax withholding 1,101 4 — — 25,610 — — — — 25,614 Accretion of redeemable noncontrolling interests and equity — — — — ( 44 ) — — — — ( 44 ) Reclassification of redeemable noncontrolling interests and equity — — — — — — — — 38 38 Net income — — — — — 99,615 — — ( 1,299 ) 98,316 Foreign currency translation adjustment, net of tax of $ 0 — — — — — — ( 330,875 ) — 759 ( 330,116 ) Minimum pension liability adjustment, net of tax of $ 0 — — — — — — ( 932 ) — — ( 932 ) Balance at March 31, 2020 119,075 $ 546 90,813 $ 363 $ 3,752,186 $ 536,124 $ ( 1,405,788 ) $ ( 300,309 ) $ ( 13,314 ) $ 2,569,808 Non-cash stock compensation — — — — 4,621 — — — — 4,621 Exercise of stock options and vesting of restricted stock, net of shares withheld to satisfy tax withholding 132 1 — — ( 33 ) — — — — ( 32 ) Change in noncontrolling interests — — — — — — — — 3,471 3,471 Accretion of redeemable noncontrolling interests and equity — — — — 201 — — — — 201 Reclassification of redeemable noncontrolling interests and equity — — — — — — — — ( 414 ) ( 414 ) Net loss — — — — — ( 307,823 ) — — ( 3,805 ) ( 311,628 ) Foreign currency translation adjustment, net of tax of $ 0 — — — — — — 14,102 — ( 68 ) 14,034 Balance at June 30, 2020 119,207 $ 547 90,813 $ 363 $ 3,756,975 $ 228,301 $ ( 1,391,686 ) $ ( 300,309 ) $ ( 14,130 ) $ 2,280,061 Non-cash stock compensation — $ — — $ — $ 3,672 $ — $ — $ — $ — $ 3,672 Exercise of stock options and vesting of restricted stock, net of shares withheld to satisfy tax withholding 63 — — — ( 35 ) — — — — ( 35 ) Change in noncontrolling interests — — — — ( 2,610 ) — — — — ( 2,610 ) Accretion of redeemable noncontrolling interests and equity — — — — 6 — — — — 6 Reclassification of redeemable noncontrolling interests and equity — — — — — — — — 1,574 1,574 Net loss — — — — — ( 784,442 ) — — 12 ( 784,430 ) Foreign currency translation adjustment, net of tax of $0 — — — — — — 326,416 — ( 74 ) 326,342 Balance at September 30, 2020 119,270 $ 547 90,813 $ 363 $ 3,758,008 $ ( 556,141 ) $ ( 1,065,270 ) $ ( 300,309 ) $ ( 12,618 ) $ 1,824,580 26 The components of net changes in stockholders’ equity for the fiscal quarters of 2019 are as follows: Laureate Education, Inc. Stockholders Class A Common Stock Class B Common Stock Additional paid-in capital (Accumulated deficit) retained earnings Accumulated other comprehensive (loss) income Treasury stock at cost Non-controlling interests Total stockholders’ equity Shares Amount Shares Amount Balance at December 31, 2018 107,450 $ 430 116,865 $ 467 $ 3,703,796 $ ( 530,919 ) $ ( 1,112,695 ) $ — $ ( 10,133 ) $ 2,050,946 Adoption of accounting standards — — — — — 28,944 — — — 28,944 Balance at January 1, 2019 107,450 $ 430 116,865 $ 467 $ 3,703,796 $ ( 501,975 ) $ ( 1,112,695 ) $ — $ ( 10,133 ) $ 2,079,890 Non-cash stock compensation — — — — 3,149 — — — — 3,149 Conversion of Class B shares to Class A shares 8 — ( 8 ) — — — — — — — Vesting of restricted stock, net of shares withheld to satisfy tax withholding 325 1 — — ( 1,421 ) — — — — ( 1,420 ) Distributions to noncontrolling interest holders — — — — — — — — ( 625 ) ( 625 ) Accretion of redeemable noncontrolling interests and equity — — — — 263 — — — — 263 Reclassification of redeemable noncontrolling interests and equity — — — — — — — — 224 224 Net income — — — — — 191,243 — — 3,022 194,265 Foreign currency translation adjustment, net of tax of $ 0 — — — — — — 49,521 — 30 49,551 Unrealized gain on derivatives, net of tax of $ 0 — — — — — — 2,609 — — 2,609 Balance at March 31, 2019 107,783 $ 431 116,857 $ 467 $ 3,705,787 $ ( 310,732 ) $ ( 1,060,565 ) $ — $ ( 7,482 ) $ 2,327,906 Non-cash stock compensation — — — — 4,854 — — — — 4,854 Conversion of Class B shares to Class A shares 10,991 44 ( 10,991 ) ( 44 ) — — — — — — Exercise of stock options and vesting of restricted stock, net of shares withheld to satisfy tax withholding 32 — — — 170 — — — — 170 Distributions to noncontrolling interest holders — — — — — — — — ( 731 ) ( 731 ) Change in noncontrolling interests — — — — ( 3,700 ) — — — — ( 3,700 ) Accretion of redeemable noncontrolling interests and equity — — — — 194 — — — — 194 Reclassification of redeemable noncontrolling interests and equity — — — — — — — — ( 855 ) ( 855 ) Net income — — — — — 781,592 — — ( 1,976 ) 779,616 Foreign currency translation adjustment, net of tax of $ 0 — — — — — — 10,275 — ( 87 ) 10,188 Unrealized gain on derivatives, net of tax of $ 0 — — — — — — ( 10,559 ) — — ( 10,559 ) Balance at June 30, 2019 118,806 $ 475 105,866 $ 423 $ 3,707,305 $ 470,860 $ ( 1,060,849 ) $ — $ ( 11,131 ) $ 3,107,083 Non-cash stock compensation — — — — 1,578 — — — — 1,578 Conversion of Class B shares to Class A shares 15,002 60 ( 15,002 ) ( 60 ) — — — — — — Exercise of stock options and vesting of restricted stock, net of shares withheld to satisfy tax withholding 96 — — — 1,455 — — — — 1,455 Purchases of treasury stock at cost ( 6,150 ) — — — — — — ( 104,849 ) — ( 104,849 ) Accretion of redeemable noncontrolling interests and equity — — — — ( 193 ) — — — — ( 193 ) Reclassification of redeemable noncontrolling interests and equity — — — — — — — — 649 649 Net loss — — — — — ( 95,226 ) — — ( 1,568 ) ( 96,794 ) Foreign currency translation adjustment, net of tax of $0 — — — — — — ( 82,070 ) — ( 510 ) ( 82,580 ) Minimum pension liability adjustment, net of tax of $0 — — — — — — 4,531 — — 4,531 Balance at September 30, 2019 127,754 $ 535 90,864 $ 363 $ 3,710,145 $ 375,634 $ ( 1,138,388 ) $ ( 104,849 ) $ ( 12,560 ) $ 2,830,880 27 Stock Repurchase Program On August 8, 2019, the Company announced that its board of directors had authorized a stock repurchase program to acquire up to $ 150,000 of the Company’s Class A common stock. In early October 2019, the Company’s stock repurchases reached the authorized limit of $ 150,000 . On October 14, 2019, the Company’s board of directors approved the increase of its existing authorization to repurchase shares of the Company’s Class A common stock by $ 150,000 for a total authorization (including the previously aut horized repurchases) of up to $ 300,000 of the Company’s Class A common stock. The Company’s repurchases were made in a block trade, as well as on the open market at prevailing market prices and pursuant to a Rule 10b5-1 stock repurchase plan, in accordance with applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). In January 2020, the Company repurchased 1,619 shares of its outstanding Class A common stock for a total purchase price of $ 29,203 and reached the total authorized limit of $ 300,000 . As discussed in Note 19, Subsequent Events, the Company announced an additional stock repurchase program in November 2020. Accumulated Other Comprehen sive Income (Loss) Accumulated other comprehensive income (loss) (AOCI) in our Consolidated Balance Sheets includes the accumulated translation adjustments arising from translation of foreign subsidiaries’ financial statements, the unrealized gains on derivatives designated as cash flow hedges, and the accumulated net gains or losses that are not recognized as components of net periodic benefit cost for our minimum pension liability. The change in AOCI includes the removal of the cumulative translation adjustment related to subsidiaries that were sold during the period, which consisted primarily of the Chile balance of $ 293,000 . The components of these balances were as follows: September 30, 2020 December 31, 2019 Laureate Education, Inc. Noncontrolling Interests Total Laureate Education, Inc. Noncontrolling Interests Total Foreign currency translation adjustment $ ( 1,075,008 ) $ 943 $ ( 1,074,065 ) $ ( 1,084,651 ) $ 326 $ ( 1,084,325 ) Unrealized gain on derivatives 10,416 — 10,416 10,416 — 10,416 Minimum pension liability adjustment ( 678 ) — ( 678 ) 254 — 254 Accumulated other comprehensive loss $ ( 1,065,270 ) $ 943 $ ( 1,064,327 ) $ ( 1,073,981 ) $ 326 $ ( 1,073,655 ) Note 13. Derivative Instruments In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes. We may seek to control a portion of these risks through a risk management program that includes the use of derivative instruments. The interest and principal payments for Laureate’s senior long-term debt arrangements are to be paid primarily in USD. Our ability to make debt payments is subject to fluctuations in the value of the USD against foreign currencies, since a majority of our operating cash used to make these payments is generated by subsidiaries with functional currencies other than USD. As part of our overall risk management policies, Laureate has at times entered into foreign currency swap contracts and floating-to-fixed interest rate swap contracts. In addition, we occasionally enter into foreign exchange forward contracts to reduce the impact of other non-functional currency-denominated receivables and payables. We do not enter into speculative or leveraged transactions, nor do we hold or issue derivatives for trading purposes. We generally intend to hold our derivatives until maturity. Laureate reports all derivatives at fair value. These contracts are recognized as either assets or liabilities, depending upon the derivative’s fair value. Gains or losses associated with the change in the fair value of these swaps are recognized in our Consolidated Statements of Operations on a current basis over the term of the contracts, unless designated and effective as a hedge. For swaps that are designated and effective as cash flow hedges, gains or losses associated with the change in fair value of the swaps are recognized in our Consolidated Balance Sheets as a component of AOCI and amortized into earnings as a component of Interest expense over the term of the related hedged items. Upon early termination of an effective interest rate swap designated as a cash flow hedge, unrealized gains or losses are deferred in our Consolidated Balance Sheets as a component of AOCI and are amortized as an adjustment to Interest expense over the period during which the hedged forecasted 28 transaction affects earnings. For derivatives that are both designated and effective as net investment hedges, gains or losses associated with the change in fair value of the derivatives are recognized on our Consolidated Balance Sheets as a component of AOCI. Laureate did not hold any derivatives as of September 30, 2020 and December 31, 2019. Derivatives Designated as Hedging Instruments Net Investment Hedge - Cross Currency Swaps In December 2017, Laureate entered into two EUR-USD cross currency swaps (net investment hedges) to hedge the foreign currency exchange volatility on operations of our Euro functional currency subsidiaries and better match our cash flows with the currencies in which our debt obligations are denominated. Both swaps had an effective date of December 22, 2017 and a maturity date of November 2, 2020, and were designated at inception as effective net investment hedges. In April 2019, the Company terminated both EUR-USD cross currency swaps for a net settlement received of $ 7,679 , which is included in Settlement of derivatives related to sale of discontinued operations and net investment hedge on the Consolidated Statement of Cash Flows for the nine months ended September 30, 2019. The terms of the swaps specified that at maturity on the first swap, Laureate would deliver the notional amount of EUR 50,000 and receive USD $ 59,210 at an implied exchange rate of 1.1842 and at maturity on the second swap, Laureate would deliver the notional amount of EUR 50,000 and receive USD $ 59,360 at an implied exchange rate of 1.1872 . Semiannually until maturity, Laureate was obligated to pay 5.63 % and receive 8.25 % on EUR 50,000 and USD $ 59,210 , respectively, on the first swap and pay 5.6675 % and receive 8.25 % on EUR 50,000 and USD $ 59,360 , respectively, on the second swap. The swaps were determined to be 100 % effective; therefore, the amount of gain or loss recognized in income on the ineffective portion of derivative instruments designated as hedging instruments was $ 0 . The accumulated gain recognized in AOCI will be deferred from earnings until the sale or liquidation of the hedged investee. Cash Flow Hedge - 2024 Term Loan Interest Rate Swaps In May 2017, Laureate entered into, and designated as cash flow hedges, four pay-fixed, receive-floating amortizing interest rate swaps with notional amounts of $ 100,000 , $ 100,000 , $ 200,000 and $ 300,000 , respectively. These notional amounts matched the corresponding principal of the 2024 Term Loan borrowings of which these swaps were effectively hedging the interest payments. As such, the notional values amortized annually based on the terms of the agreements to match the principal borrowings as they were repaid. These swaps effectively fixed the floating interest rate on the term loan to reduce exposure to variability in cash flows attributable to changes in the USD-LIBOR-BBA swap rate. All four swaps were fully settled on August 21, 2018, prior to their May 31, 2022 maturity date, with the remaining AOCI to be ratably reclassified into income through Interest expense over the remaining maturity period of the 2024 Term Loans. The cash received at settlement from the swap counterparties was $ 14,117 . During the second quarter of 2019, the Company accelerated the reclassification of amounts in AOCI to earnings as a result of the hedged forecasted transactions becoming probable not to occur, due to the full repayment of the 2024 Term Loan in June 2019 using proceeds from the sale of our institutions in Portugal and Spain. The accelerated amounts were a gain of approximately $ 9,800 and were recorded as a decrease to Interest expense. Prior to settlement of the swaps, they were determined to be 100 % effective; therefore, the amount of gain or loss recognized in income on the ineffective portion was $ 0 . The table below shows the total recorded unrealized (loss) gain in Comprehensive income for the derivatives designated as hedging instruments. For the three months ended September 30, 2020 and 2019, there was no impact of derivative instruments, and for the nine months ended September 30, 2020 and 2019, the impact of these derivative instruments on Comprehensive income, Interest expense and AOCI was as follows: (Loss) Gain Recognized in Comprehensive Income (Effective Portion) Income Statement Location Gain Reclassified from AOCI to Income (Effective Portion) Total Consolidated Interest Expense 2020 2019 2020 2019 2020 2019 Cash flow hedge Interest rate swaps $ — $ ( 11,818 ) Interest expense $ — $ 11,818 Net investment hedge Cross currency swaps — 3,868 N/A — — Total $ — $ ( 7,950 ) $ — $ 11,818 $ ( 75,698 ) $ ( 101,548 ) 29 Derivatives Not Designated as Hedging Instruments AUD to USD Foreign Currency Swaps In March 2020, Laureate entered into an AUD to USD swap agreement with a maturity date of April 15, 2020, in connection with an intercompany funding transaction. The terms of the swap stated that on the maturity date, Laureate would deliver the notional amount of AUD 21,000 and receive USD $ 13,713 at a rate of exchange of 0.6530 USD per 1 AUD. On April 8, 2020, Laureate entered into a net settlement agreement for this swap to deliver USD $ 12,999 and receive the notional amount of AUD 21,000 at a rate of exchange of 0.6190 USD per 1 AUD. This net settlement was executed on April 15, 2020, which resulted in a realized gain and proceeds received of $ 714 . This amount is included in Gain on derivatives on the Consolidated Statement of Operations for the nine months ended September 30, 2020, and is included in Payments for settlement of derivative contracts on the Consolidated Statement of Cash Flows for the nine months ended September 30, 2020. This swap was not designated as a hedge for accounting purposes. On April 8, 2020, Laureate entered into a new AUD to USD swap agreement with a notional amount of AUD 21,000 . On the maturity date of June 15, 2020, Laureate delivered the notional amount and received USD $ 12,921 at a rate of exchange of 0.6153 USD per 1 AUD, resulting in a realized loss of $ 1,340 . This amount is included in Gain on derivatives on the Consolidated Statements of Operations for the nine months ended September 30, 2020 and is included in Payments for settlement of derivative contracts on the Consolidated Statement of Cash Flows for the nine months ended September 30, 2020. This swap was not designated as a hedge for accounting purposes. EUR to USD Foreign Currency Swaps—Spain and Portugal In December 2018, Laureate entered into two EUR to USD swap agreements in connection with the signing of the sale agreement for the subsidiaries in Spain and Portugal. The purpose of the swaps was to mitigate the risk of foreign currency exposure on the sale proceeds. The first swap was deal contingent, with the settlement date occurring on the second business day following the completion of the sale. On the settlement date, Laureate delivered the notional amount of EUR 275,000 and received USD $ 314,573 at a rate of exchange of 1.1439 , which resulted in a realized gain of $ 5,088 . The second swap was a put/call option with a maturity date of April 8, 2019, where Laureate could put the notional amount of EUR 275,000 and call the USD amount of $ 310,750 at an exchange rate of 1.13 . Based on expected timing of the sale transaction, the swap was terminated on April 2, 2019, resulting in a payment to the counterparty of $ 980 that included a deferred premium payment net of proceeds received. These swaps were not designated as hedges for accounting purposes. In addition to the swaps above, in order to continue to mitigate the risk of foreign currency exposure on the expected sale proceeds for Spain and Portugal in advance of the May 31, 2019 sale closing date, in April 2019, Laureate also entered into seven EUR to USD swap agreements with a combined notional amount of EUR 375,000 . On the maturity date of May 15, 2019, Laureate paid the EUR notional amount and received a combined total of USD $ 423,003 at a rate of exchange of 1.128007 , resulting in a gain of $ 1,644 . In May 2019, Laureate entered into nine EUR to USD swap agreements with a combined notional amount of EUR 532,000 . On the maturity date of June 4, 2019, Laureate paid the EUR notional amount and received a combined total of $ 597,149 at a rate of exchange of 1.122461 , resulting in a realized loss of approximately $ 565 . These swaps were not designated as hedges for accounting purposes. CLP to Unidad de Fomento (UF) Cross Currency and Interest Rate Swaps The cross currency and interest rate swap agreements are intended to provide a better correlation between our debt obligations and operating currencies. In 2010, one of our subsidiaries in Chile entered into four cross currency and interest rate swap agreements with an aggregate notional amount of approximately $ 31,000 , and convert CLP-denominated, floating-rate debt to fixed-rate UF-denominated debt. The UF is a Chilean inflation-adjusted unit of account. One of the swaps was scheduled to mature on December 1, 2024, and the remaining three were scheduled to mature on July 1, 2025 (the CLP to UF cross currency and interest rate swaps); however, during the first quarter 2019, the Company elected to settle all four swaps for a net cash payment of approximately USD $ 8,200 . In addition, at that time, Chile also elected to repay a portion of the principal balance outstanding for certain notes payable. This payment is included in Payments for settlement of derivative contracts on the Consolidated Statement of Cash Flows for the nine months ended September 30, 2019. The CLP to UF cross currency and interest rate swaps were not designated as hedges for accounting purposes. 30 Components of the reported Gain (loss) on derivatives not designated as hedging instruments in the Consolidated Statements of Operations were as follows: For the three months ended September 30, For the nine months ended September 30, 2020 2019 2020 2019 Cross currency and interest rate swaps Unrealized gain $ — $ 283 $ — $ 4,305 Realized (loss) gain — — ( 626 ) 4,861 Gain (loss) on derivatives, net $ — $ 283 $ ( 626 ) $ 9,166 Credit Risk and Credit-Risk-Related Contingent Features Laureate’s derivatives expose us to credit risk to the extent that the counterparty may possibly fail to perform its contractual obligation. The amount of our credit risk exposure is equal to the fair value of the derivative when any of the derivatives are in a net gain position. Laureate limits its credit risk by only entering into derivative transactions with highly rated major financial institutions. We have not entered into collateral agreements with our derivatives’ counterparties. As of September 30, 2020 and December 31, 2019, we did not hold any derivatives in a net gain position, and thus had no credit risk. Laureate’s agreements with its derivative counterparties contain a provision under which we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to a default on the indebtedness. As of September 30, 2020 and December 31, 2019, we did not hold any derivatives in a net loss position, and thus had no derivative obligations. Note 14. Income Taxes Laureate uses the liability me thod to account for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. For interim purposes, we also apply ASC 740-270, “Income Taxes—Interim Reporting.” Laureate's income tax provisions for all periods consist of federal, state and foreign income taxes. The tax provisions for the three and nine months ended September 30, 2020 and 2019 were based on estimated full-year effective tax rates, after giving effect to significant items related specifically to the interim periods, including the mix of income for the period between higher-taxed and lower-taxed jurisdictions. Laureate has operations in multiple countries at various statutory tax rates or which are tax-exempt entities, and other operations that are loss-making entities for which it is not more likely than not that a tax benefit will be realized on the loss. Laureate records interest and penalties related to uncertain tax positions as a component of Income tax expense. During the nine months ended September 30, 2020, Laureate recognized interest and penalties related to income taxes of $ 995 . Laureate had $ 11,563 of accrued interest and penalties as of September 30, 2020. During the nine months ended September 30, 2020, Laureate derecognized $ 4,340 of previously accrued interest and penalties. Approximately $ 10,685 of unrecognized tax benefits, if recognized, will affect the effective income tax rate. It is reasonably possible that Laureate’s unrecognized tax benefits may decrease within the next 12 months by up to approximately $ 12,000 as a result of the lapse of statutes of limitations and as a result of the final settlement and resolution of outstanding tax matters in various jurisdictions. As of January 1, 2020, the Company amended the partnership agreement of one of its subsidiaries that owned intellectual property, such that the subsidiary became subject to tax in the Netherlands. The result was a net discrete tax benefit of approximately $ 222,000 that represented the book-and-tax basis difference of the intellectual property, measured based on the intellectual property’s current fair value and applicable Dutch statutory tax rate. Determining the fair value of the intellectual property, which serves as the tax basis of the deferred tax asset, required management to make assumptions and estimates that are inherently uncertain. This net tax benefit decreased by $ 81,000 during the third quarter as compared to the first quarter of 2020 as a result of certain entities being reclassified as Discontinued Operations during the third quarter of 2020. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. The CARES Act did not have a significant impact on Laureate’s consolidated financial statements for the three and nine months ended September 30, 2020. We continue to monitor any effects 31 that may result from the CARES Act as well as any similar stimulus legislation enacted in other jurisdictions where Laureate has material operations. In July 2020, the U.S. Treasury Department released final regulations addressing global intangible low-taxed income (GILTI). Among other changes, these regulations provide an election to exclude certain foreign income of foreign corporations from GILTI if such income is deemed high-taxed in a foreign jurisdiction. These elective provisions may be applied retroactively and accordingly require significant analysis of the potential financial statement impacts. During the third quarter of 2020, the Company recorded a discrete tax benefit of approximately $ 70,900 related to 2018 and 2019. The Company assesses the realizability of deferred tax assets by examining all available evidence, both positive and negative. A valuation allowance is recorded if negative evidence outweighs positive evidence. A company’s three-year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable. Accounting guidance restricts the amount of reliance the Company can place on projected taxable income to support the recovery of the deferred tax assets. During the third quarter of 2020, valuation allowances were released at entities in Australia and the United States of approximately $ 19,200 and $ 12,200 , respectively, due to the change from a three-year cumulative loss position to a three-year cumulative income position, as well as other positive factors including projections of future profitability. 32 Note 15. Earnings (Loss) Per Share We have two classes of common stock, Class A common stock and Class B common stock. Other than voting rights, the Class B common stock has the same rights as the Class A common stock and therefore both are treated as the same class of stock for purposes of the earnings per share calculation. Laureate computes basic earnings per share (EPS) by dividing income available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted EPS reflects the potential dilution that would occur if share-based compensation awards, contingently issuable shares, or convertible securities were exercised or converted into common stock. To calculate the diluted EPS, the basic weighted average number of shares is increased by the dilutive effect of stock options, restricted stock, restricted stock units, and any contingently issuable shares determined using the treasury stock method, and any convertible securities using the if-converted method. The following tables summarize the computations of basic and diluted earnings (loss) per share: For the three months ended September 30, 2020 2019 Numerator used in basic and diluted earnings (loss) per common share for continuing operations: Loss from continuing operations $ ( 271,040 ) $ ( 86,649 ) Net income attributable to noncontrolling interests ( 7 ) ( 12 ) Loss from continuing operations attributable to Laureate Education, Inc. ( 271,047 ) ( 86,661 ) Accretion of redemption value of redeemable noncontrolling interests and equity 6 ( 193 ) Net loss from continuing operations for basic and diluted earnings (loss) per share $ ( 271,041 ) $ ( 86,854 ) Numerator used in basic and diluted earnings (loss) per common share for discontinued operations: (Loss) income from discontinued operations, net of tax $ ( 169,768 ) $ 30,986 Loss on sales of discontinued operations, net of tax ( 343,622 ) ( 41,131 ) (Income) loss attributable to noncontrolling interests ( 5 ) 1,580 Net loss from discontinued operations for basic and diluted earnings (loss) per share $ ( 513,395 ) $ ( 8,565 ) Denominator used in basic and diluted earnings (loss) per common share: Basic and diluted weighted average shares outstanding 210,033 224,193 Basic and diluted earnings (loss) per share: Loss from continuing operations $ ( 1.29 ) $ ( 0.39 ) Loss from discontinued operations ( 2.44 ) ( 0.04 ) Basic and diluted loss per share $ ( 3.73 ) $ ( 0.43 ) 33 For the nine months ended September 30, 2020 2019 Numerator used in basic and diluted earnings (loss) per common share for continuing operations: Loss from continuing operations $ ( 76,503 ) $ ( 211,676 ) Net loss (income) attributable to noncontrolling interests 27 ( 61 ) Loss from continuing operations attributable to Laureate Education, Inc. ( 76,476 ) ( 211,737 ) Accretion of redemption value of redeemable noncontrolling interests and equity 163 264 Net loss from continuing operations for basic and diluted earnings (loss) per share $ ( 76,313 ) $ ( 211,473 ) Numerator used in basic and diluted earnings (loss) per common share for discontinued operations: (Loss) income from discontinued operations, net of tax $ ( 557,951 ) $ 240,373 (Loss) gain on sales of discontinued operations, net of tax ( 363,288 ) 848,390 Loss attributable to noncontrolling interests 5,065 583 Net (loss) income from discontinued operations for basic and diluted earnings (loss) per share $ ( 916,174 ) $ 1,089,346 Denominator used in basic and diluted earnings (loss) per common share: Basic and diluted weighted average shares outstanding 209,920 224,498 Basic and diluted earnings (loss) per share: Loss from continuing operations $ ( 0.36 ) $ ( 0.94 ) (Loss) income from discontinued operations ( 4.36 ) 4.85 Basic and diluted (loss) earnings per share $ ( 4.72 ) $ 3.91 The following table summarizes the number of stock options, shares of restricted stock and restricted stock units (RSUs) that were excluded from the diluted EPS calculations because the effect would have been antidilutive: For the three months ended September 30, For the nine months ended September 30, 2020 2019 2020 2019 Stock options 3,838 8,650 4,205 8,956 Restricted stock and RSUs 727 733 732 854 Note 16. Legal and Regulatory Matters Laureate is subject to legal proceedings arising in the ordinary course of business. In management’s opinion, we have adequate legal defenses, insurance coverage, and/or accrued liabilities with respect to the eventuality of these actions. Management believes that any settlement would not have a material impact on Laureate’s financial position, results of operations, or cash flows. 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. Except as set forth below, there have been no material changes to the laws and regulations affecting our higher education institutions that are described in our Annual Report on Form 10-K for the year ended December 31, 2019, as updated in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. Australian Regulation Courses at our two post-secondary educational institutions in Australia continue to be delivered primarily online and are in compliance with all local regulations. In certain limited situations, dependent on state-by-state COVID-19 regulatory responses, plans to permit physical access to campuses and face-to-face course delivery are being implemented. 34 Brazilian Regulation In response to the transition from face-to-face classes to online classes due to the COVID-19 pandemic, legislative assemblies in several Brazilian states have passed laws requiring schools to discount tuition. To date, with respect to the states in which we operate, only Rio de Janeiro, Bahia and Paraiba have passed such laws. However, because injunctions were granted to suspend the effects of such laws in Rio de Janeiro and Paraiba, we currently are applying the mandatory discount only to classes taken at our Bahia campuses. The constitutionality of the aforementioned laws is being questioned both in state courts and the Supreme Court. As of August 2020, Provisional Presidential Act n. 934/2020 has been converted to Law n. 14,040. Accordingly, institutions remain authorized to substitute face-to-face classes with remote activities and adjust the academic calendar and degree anticipation for specific health undergraduate programs. Government measures to resume face-to-face educational activities in Brazil are being implemented on a state-by-state and city-by-city basis. Laboratory and professional practice activities have resumed at the vast majority of our Brazilian campuses. Despite being authorized to gradually return to face-to-face classes in some locations, academic planners consider remote activities to be the most suitable option given the current circumstances. Mexican Regulation Administrative activities have resumed at all but two of our campuses. Face-to-face educational activities will not be permitted to resume at any campus until the region (municipality or state) in which it is located is assigned a green color code under the country’s color-coded sanitary alert system. Peruvian Regulation While Peru’s national sanitary emergency has been extended until November 30, 2020, effective September 1, 2020, Peru entered phase four of its economic reactivation plan. The government has announced that face-to-face classes may resume next year; however, the actual resumption of classes will depend upon COVID-19 infection rates at such time. U.S. Regulation Department of Education Rulemaking Activities On August 24, 2020, the U.S. Department of Education (the DOE) issued final regulations making changes to regulations that impact distance education programs in particular. The final regulations provide new definitions for, among other terms, correspondence courses, distance education, and academic engagement. Walden University offers both course-based distance education programs and direct assessment distance education programs through its Tempo Learning offerings. Under these new regulations, it is possible that students eligible for Title IV federal student aid funds who are enrolled in Walden University’s Tempo Learning programs will receive their funds on a more regular disbursement pattern that is better aligned with their individualized progression. The final regulations have an effective date of July 1, 2021, but the DOE will allow institutions to opt for early implementation of portions of these regulations. Department of Justice Voluntary Information Request for Walden University Our institutions are subject to regulatory oversight and from time to time must respond to inquiries about their compliance with the various statutory requirements under which they operate. On September 14, 2020, Walden University (Walden) received a letter from the Civil Division of the United States Department of Justice (DOJ) indicating that the DOJ is examining whether Walden, in the operation of its Masters of Science in Nursing program (Nursing Program), may have violated the Federal False Claims Act by misrepresenting compliance with its program participation agreement with the U.S. Department of Education, which agreement covers Walden University’s participation in federal student financial aid programs under Title IV of the U.S. Higher Education Act. The letter invites Walden to provide information regarding a number of specific areas primarily related to the practicum component of its Nursing Program, but it makes no allegations of any misconduct or wrongdoing by Walden. While the Company is cooperating with the DOJ’s request to voluntarily provide information, it cannot predict the timing or outcome of this matter. Further, on October 12, 2020, Walden received notice from the Higher Learning Commission (HLC) of its intent to assign a public “Governmental Investigation” designation to Walden due to the DOJ inquiry. While the HLC has complete discretion in whether to issue such a public designation, Walden has requested that such a designation not be imposed, 35 as there has been no governmental allegation of any misconduct or illegal acts. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed and adjusted to reflect the effect of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. At this time, the Company does not believe that this matter will have a material effect on the Company’s financial position, results of operations, or cash flows. Note 17. Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants at the measurement date. Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, which are described below: • Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets; • Level 2 – Observable inputs other than quoted prices that are either directly or indirectly observable for the asset or liability; • Level 3 – Unobservable inputs that are supported by little or no market activity. These levels are not necessarily an indication of the risk of liquidity associated with the financial assets or liabilities disclosed. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement, as required under ASC 820-10, “Fair Value Measurement.” Derivative instruments Laureate uses derivative instruments as economic hedges for bank debt, foreign exchange fluctuations and interest rate risk. Their values are derived using valuation models commonly used for derivatives. These valuation models require a variety of inputs, including contractual terms, market prices, forward-price yield curves, notional quantities, measures of volatility and correlations of such inputs. Our valuation models also reflect measurements for credit risk. Laureate concluded that the fair values of our derivatives are based on unobservable inputs, or Level 3 assumptions. The significant unobservable input used in the fair value measurement of the Company's derivative instruments is our own credit risk. Holding other inputs constant, a significant increase (decrease) in our own credit risk would result in a significantly lower (higher) fair value measurement for the Company's derivative instruments. As of September 30, 2020 and December 31, 2019, Laureate did not hold any financial assets or liabilities that are measured at fair value on a recurring basis. The changes in our Level 3 Derivative instruments measured at fair value on a recurring basis for the nine months ended September 30, 2020 were as follows: Balance at December 31, 2019 $ — Loss included in earnings: Realized loss, net ( 626 ) Settlements 626 Balance at September 30, 2020 $ — Laureate had no fair value measurements classified as Level 3 as of September 30, 2020. 36 Note 18. Supplemental Cash Flow Information Reconciliation of Cash and cash equivalents and Restricted cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets, as well as the September 30, 2019 balance. The September 30, 2020 and September 30, 2019 balances sum to the amounts shown in the Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019: September 30, 2020 September 30, 2019 December 31, 2019 Cash and cash equivalents $ 716,799 $ 93,153 $ 61,576 Restricted cash 30,857 35,101 36,241 Total Cash and cash equivalents and Restricted cash shown in the Consolidated Statements of Cash Flows $ 747,656 $ 128,254 $ 97,817 Restricted cash includes cash equivalents held to collateralize standby letters of credit. In addition, Laureate may at times hold a United States deposit for a letter of credit in lieu of a surety bond, or otherwise have cash that is not immediately available for use in current operations. See also Note 10, Commitments and Contingencies. Note 19. Subsequent Events Agreement to Sell Honduras Operations As discussed in Note 4, Discontinued Operations and Assets Held for Sale, on October 13, 2020, the Company entered into a definitive agreement with Fundación Nasser, a not-for-profit foundation in Honduras, to transfer control of its operations in Honduras for total cash consideration of approximately $ 29,800 , prior to closing costs. Asset Sale Offer to Purchase Up to $300 Million of Senior Notes On October 13, 2020, the Company announced that it was commencing a cash tender offer (the Asset Sale Offer) to purchase up to $ 300,000 aggregate principal amount (the Offer Amount) of its 8.250 % Senior Notes due 2025 (the Senior Notes), at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest to, but not including, the purchase date. The Asset Sale Offer is being made pursuant to the indenture governing the Senior Notes (the Indenture) as a result of the Company’s sale of its operations in Chile and Malaysia. Those sales constituted Asset Sales, as defined in the Indenture. The source of funds is cash on hand from the proceeds of the Asset Sales. The Asset Sale Offer will expire at 11:59 p.m., New York City time, on November 10, 2020, unless extended by the Company, in its sole discretion (the Expiration Time). If the aggregate principal amount of Senior Notes validly tendered (and not validly withdrawn) in the Asset Sale Offer exceeds the Offer Amount, only the Offer Amount will be accepted for purchase, and the Senior Notes will be purchased on a pro rata basis (with such adjustments as may be needed so that only Senior Notes in minimum amounts of $ 2,000 and integral multiples of $ 1,000 in excess thereof will be so purchased). Tenders of the Senior Notes must be made on or prior to the Expiration Time and may be validly withdrawn at any time on or prior to the Expiration Time. In the event that the aggregate principal amount of tendered and accepted Senior Notes is less than the Offer Amount, any amount less than the Offer Amount not used for the purchase of Senior Notes pursuant to the Asset Sale Offer will be available for use in any manner permitted under the Indenture. 37 Stock Repurchase Program Laureate’s board of directors has approved a new stock repurchase program to acquire up to $ 300,000 of the Company’s Class A common stock. The Company’s proposed repurchases may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Repurchases may be effected pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act. The Company’s board of directors will review the share repurchase program periodically and may authorize adjustment of its terms and size or suspend or discontinue the program. The Company intends to finance the repurchases with free cash flow and excess cash and liquidity on-hand. Completion of Sale of Australia and New Zealand As discussed in Note 4, Discontinued Operations and Assets Held for Sale, on November 3, 2020, the Company completed the sale of Australia and New Zealand. At closing, the Company received proceeds of approximately $ 650,000 , net of transaction costs. 38