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 March 31, 2021 2020 (Unaudited) (Unaudited) Revenues $ 194,701 $ 192,319 Costs and expenses: Direct costs 181,848 220,568 General and administrative expenses 42,594 45,069 Loss on impairment of assets 56,650 3,768 Operating loss ( 86,391 ) ( 77,086 ) Interest income 711 622 Interest expense ( 23,518 ) ( 25,290 ) Loss on debt extinguishment ( 13 ) — Gain on derivatives 29,330 802 Other income (expense), net 34 ( 81 ) Foreign currency exchange gain, net 28,183 78,716 Loss on disposal of subsidiaries, net — ( 1,800 ) Loss from continuing operations before income taxes and equity in net income of affiliates ( 51,664 ) ( 24,117 ) Income tax (expense) benefit ( 112,861 ) 230,028 Equity in net income of affiliates, net of tax — 185 (Loss) income from continuing operations ( 164,525 ) 206,096 Loss from discontinued operations, net of tax (expense) benefit of $( 9,665 ) and $ 5,183 , respectively ( 418 ) ( 107,780 ) Net (loss) income ( 164,943 ) 98,316 Net loss attributable to noncontrolling interests 15 1,299 Net (loss) income attributable to Laureate Education, Inc. $ ( 164,928 ) $ 99,615 Basic and diluted earnings (loss) per share: (Loss) income from continuing operations $ ( 0.82 ) $ 0.98 Loss from discontinued operations — ( 0.51 ) Basic and diluted (loss) earnings per share $ ( 0.82 ) $ 0.47 The accompanying notes are an integral part of these consolidated financial statements. 2 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income IN THOUSANDS For the three months ended March 31, 2021 2020 (Unaudited) (Unaudited) Net (loss) income $ ( 164,943 ) $ 98,316 Other comprehensive loss: Foreign currency translation adjustment, net of tax of $ 0 for both periods ( 59,761 ) ( 330,116 ) Minimum pension liability adjustment, net of tax of $ 0 for both periods ( 168 ) ( 932 ) Total other comprehensive loss ( 59,929 ) ( 331,048 ) Comprehensive loss ( 224,872 ) ( 232,732 ) Net comprehensive loss attributable to noncontrolling interests 33 540 Comprehensive loss attributable to Laureate Education, Inc. $ ( 224,839 ) $ ( 232,192 ) The accompanying notes are an integral part of these consolidated financial statements. 3 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets IN THOUSANDS, except per share amounts March 31, 2021 December 31, 2020 Assets (Unaudited) Current assets: Cash and cash equivalents $ 561,330 $ 750,147 Restricted cash 106,633 117,151 Receivables: Accounts and notes receivable 110,504 138,738 Other receivables 70,223 49,835 Allowance for doubtful accounts ( 65,602 ) ( 76,694 ) Receivables, net 115,125 111,879 Income tax receivable 14,801 14,564 Derivative instruments 21,800 — Prepaid expenses and other current assets 23,795 15,079 Current assets held for sale 467,786 434,966 Total current assets 1,311,270 1,443,786 Notes receivable, net 1,197 1,321 Property and equipment: Land 121,699 126,228 Buildings 338,961 351,480 Furniture, equipment and software 479,551 494,079 Leasehold improvements 118,463 121,683 Construction in-progress 5,070 7,254 Accumulated depreciation and amortization ( 520,782 ) ( 522,240 ) Property and equipment, net 542,962 578,484 Operating lease right-of-use assets, net 428,183 462,767 Land use rights, net 1,485 1,548 Goodwill 551,753 574,832 Tradenames 164,059 225,573 Deferred costs, net 16,271 17,623 Deferred income taxes 90,649 130,567 Other assets 37,959 51,924 Long-term assets held for sale 1,338,260 1,482,469 Total assets $ 4,484,048 $ 4,970,894 The accompanying notes are an integral part of these consolidated financial statements. 4 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (continued) IN THOUSANDS, except per share amounts March 31, 2021 December 31, 2020 Liabilities and stockholders' equity (Unaudited) Current liabilities: Accounts payable $ 30,013 $ 41,073 Accrued expenses 103,171 95,743 Accrued compensation and benefits 45,496 64,089 Deferred revenue and student deposits 85,881 47,180 Current portion of operating leases 45,095 44,631 Current portion of long-term debt and finance leases 62,805 95,818 Income taxes payable 72,829 29,682 Derivative instruments — 17,680 Other current liabilities 16,252 15,109 Current liabilities held for sale 335,964 353,550 Total current liabilities 797,506 804,555 Long-term operating leases, less current portion 430,950 474,507 Long-term debt and finance leases, less current portion 888,181 899,898 Deferred compensation 13,493 13,425 Income taxes payable 48,775 36,078 Deferred income taxes 99,601 86,368 Derivative instruments — 8,144 Other long-term liabilities 32,563 33,555 Long-term liabilities held for sale 277,746 348,706 Total liabilities 2,588,815 2,705,236 Redeemable noncontrolling interests and equity 1,744 1,724 Stockholders' equity: Preferred stock, par value $ 0.001 per share – 49,889 shares authorized as of March 31, 2021 and December 31, 2020, respectively, no shares issued and outstanding as of March 31, 2021 and December 31, 2020 — — Class A common stock, par value $ 0.004 per share – 700,000 shares authorized, 154,657 shares issued and 122,213 shares outstanding as of March 31, 2021 and 137,162 shares issued and 115,119 shares outstanding as of December 31, 2020 618 548 Class B common stock, par value $ 0.004 per share – 175,000 shares authorized, 73,544 shares issued and outstanding as of March 31, 2021 and 90,792 shares issued and outstanding as of December 31, 2020 294 363 Additional paid-in capital 3,760,362 3,760,029 Accumulated deficit ( 341,851 ) ( 176,822 ) Accumulated other comprehensive loss ( 1,001,897 ) ( 941,986 ) Treasury stock at cost ( 32,444 shares held at March 31, 2021 and 22,043 shares held at December 31, 2020) ( 511,122 ) ( 365,316 ) Total Laureate Education, Inc. stockholders' equity 1,906,404 2,276,816 Noncontrolling interests ( 12,915 ) ( 12,882 ) Total stockholders' equity 1,893,489 2,263,934 Total liabilities and stockholders' equity $ 4,484,048 $ 4,970,894 The accompanying notes are an integral part of these consolidated financial statements. 5 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows IN THOUSANDS For the three months ended March 31, 2021 2020 Cash flows from operating activities (Unaudited) (Unaudited) Net (loss) income $ ( 164,943 ) $ 98,316 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,672 44,161 Amortization of operating lease right-of-use assets 15,688 23,257 Loss on impairment of assets 57,714 3,768 Loss on sales and disposal of subsidiaries and property and equipment, net 16,461 21,175 Gain on derivative instruments ( 29,330 ) ( 802 ) Loss on debt extinguishment 73 — Non-cash interest expense 4,592 5,091 Non-cash share-based compensation expense 1,576 1,984 Bad debt expense 3,273 22,912 Deferred income taxes 84,409 ( 248,701 ) Unrealized foreign currency exchange gain ( 23,687 ) ( 29,720 ) Non-cash loss from non-income tax contingencies 11,995 6,514 Other, net 1,909 3,982 Changes in operating assets and liabilities: Receivables 5,111 ( 173,760 ) Prepaid expenses and other assets ( 14,133 ) ( 32,084 ) Accounts payable and accrued expenses ( 30,733 ) ( 64,924 ) Income tax receivable/payable, net ( 16,731 ) 2,709 Deferred revenue and other liabilities 65,367 312,593 Net cash provided by (used in) operating activities 11,283 ( 3,529 ) Cash flows from investing activities Purchase of property and equipment ( 11,743 ) ( 24,582 ) Expenditures for deferred costs ( 1,896 ) ( 3,500 ) Receipts from sales of discontinued operations, net of cash sold, and property and equipment 30,845 4,032 Payments on derivatives related to sale of discontinued operations ( 18,294 ) — Receipts from related parties — 87 Net cash used in investing activities ( 1,088 ) ( 23,963 ) Cash flows from financing activities Proceeds from issuance of long-term debt, net of original issue discount 996 499,479 Payments on long-term debt ( 53,670 ) ( 226,505 ) Payments of deferred purchase price for acquisitions — ( 1,488 ) Proceeds from exercise of stock options — 26,754 Withholding of shares to satisfy tax withholding for vested stock awards and exercised stock options ( 1,222 ) ( 1,140 ) Payments to repurchase common stock ( 145,244 ) ( 29,203 ) Payments of debt issuance costs ( 14 ) — Net cash (used in) provided by financing activities ( 199,154 ) 267,897 Effects of exchange rate changes on Cash and cash equivalents and Restricted cash ( 6,850 ) ( 7,706 ) Change in cash included in current assets held for sale ( 3,526 ) 10,092 Net change in Cash and cash equivalents and Restricted cash ( 199,335 ) 242,791 Cash and cash equivalents and Restricted cash at beginning of period 867,298 97,817 Cash and cash equivalents and Restricted cash at end of period $ 667,963 $ 340,608 The accompanying notes are an integral part of these consolidated financial statements. 6 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 following segments: Peru (formerly Andean), Central America (formerly Central America & U.S. Campuses), and Rest of World. 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, we announced that our board of directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value. As a result of these efforts to explore strategic alternatives, during 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. This also represented a strategic shift that had a major effect on the Company’s operations and financial results. As such, 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 sale of our operations in Australia and New Zealand was completed on November 3, 2020. For Laureate’s institutions in Mexico and Peru, the board decided after a thorough evaluation of all strategic options, including a potential sale, to continue to operate these assets under Laureate management. Accordingly, Mexico and Peru represent our Continuing Operations. The decision to focus on a regional operating model in Mexico and Peru at this time does not preclude further engagement with potential buyers for those businesses. See Note 4, Discontinued Operations and Assets Held for Sale, and Note 5, Dispositions, 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, 2020 (the 2020 Form 10-K). 7 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 March 31, 2021 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 three months ended March 31, 2021, 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. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to 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. 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. 8 The following table shows the components of Revenues by reportable segment and as a percentage of total revenue for the three months ended March 31, 2021 and 2020: Mexico Peru Corporate (1) Total 2021 Tuition and educational services $ 166,024 $ 51,452 $ — $ 217,476 112 % Other 23,522 9,583 1,806 34,911 18 % Gross revenue 189,546 61,035 1,806 252,387 130 % Less: Discounts / waivers / scholarships ( 54,149 ) ( 3,537 ) — ( 57,686 ) ( 30 ) % Total $ 135,397 $ 57,498 $ 1,806 $ 194,701 100 % 2020 Tuition and educational services $ 164,165 $ 31,295 $ — $ 195,460 101 % Other 27,217 7,382 1,585 36,184 19 % Gross revenue $ 191,382 $ 38,677 $ 1,585 $ 231,644 120 % Less: Discounts / waivers / scholarships ( 37,175 ) ( 2,150 ) — ( 39,325 ) ( 20 ) % Total $ 154,207 $ 36,527 $ 1,585 $ 192,319 100 % (1) Includes the elimination of intersegment revenues. 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 $ 110,504 and $ 138,738 as of March 31, 2021 and December 31, 2020, respectively. The decrease in the contract assets balance at March 31, 2021 compared to December 31, 2020 was primarily driven by collections, in particular the repayment of past-due amounts by students re-enrolling for the next academic session. The first and third calendar quarters generally coincide with the primary and secondary intakes for our larger institutions. All contract asset amounts are classified as current. Contract liabilities in the amount of $ 85,881 and $ 47,180 were included within the Deferred revenue and student deposits balance in the current liabilities section of the accompanying Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, respectively. The increase in the contract liability balance during the period ended March 31, 2021 was the result of semester billings and cash payments received in advance of satisfying performance obligations, partially offset by revenue recognized during that period. Revenue recognized for the three months ended March 31, 2021 that was included in the contract liability balance at the beginning of the year was approximately $ 30,948 . 9 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 remaining markets are being divested (the Discontinued Operations). In the tables below, certain classification changes have been made to the prior year amounts in order to conform to the current year presentation. On the Consolidated Statements of Operations, the results from the Discontinued Operations, which in the prior year were presented in two lines, have been combined into one line labeled Loss from discontinued operations, net of tax, for all periods presented. Summarized operating results and cash flows of the Discontinued Operations are presented in the following tables: For the three months ended March 31, 2021 2020 Revenues $ 239,750 $ 369,484 Depreciation and amortization expense — ( 24,511 ) Share-based compensation expense ( 242 ) ( 445 ) Other direct costs ( 201,197 ) ( 378,881 ) Loss on impairment of assets ( 1,064 ) — Other non-operating expense ( 11,163 ) ( 55,057 ) Loss on sale of discontinued operations before taxes, net ( 16,837 ) ( 23,553 ) Pretax income (loss) of discontinued operations 9,247 ( 112,963 ) Income tax (expense) benefit ( 9,665 ) 5,183 Loss from discontinued operations, net of tax $ ( 418 ) $ ( 107,780 ) Operating cash flows of discontinued operations $ 31,117 $ 47,381 Investing cash flows of discontinued operations $ ( 4,858 ) $ ( 14,158 ) Financing cash flows of discontinued operations $ ( 13,559 ) $ 20,797 Loss Recognized on Brazil Held-For-Sale Disposal Group During the first quarter of 2021, the Company recorded a loss of approximately $ 32,400 related to the Brazil disposal group, which was classified as a Discontinued Operation, in order to write down the carrying value of those assets to their estimated fair value less costs to sell as of March 31, 2021, in accordance with ASC 360-10, “Impairment and Disposal of Long-lived Assets” (ASC 360-10). The estimated fair value was based on the sale agreement for the disposal group that was announced on November 2, 2020, as discussed further below. The assets and liabilities of the Discontinued Operations, which are subject to finalization, have been classified as held for sale as of March 31, 2021 and December 31, 2020, 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. The carrying amounts of the major classes of assets and liabilities that were classified as held for sale are presented in the following tables: March 31, 2021 December 31, 2020 Assets of Discontinued Operations Cash and cash equivalents $ 272,108 $ 270,164 Receivables, net 101,962 113,386 Property and equipment, net 171,840 259,471 Goodwill and Tradenames 1,163,536 1,202,496 Operating lease right-of-use assets, net 101,572 136,806 Other assets 217,545 183,742 Valuation allowance on held-for-sale disposal groups ( 222,517 ) ( 248,630 ) Total assets held for sale $ 1,806,046 $ 1,917,435 10 March 31, 2021 December 31, 2020 Liabilities of Discontinued Operations Deferred revenue and student deposits $ 116,489 $ 87,793 Operating leases, including current portion 114,582 151,413 Long-term debt, seller notes and finance leases, including current portion 116,646 171,451 Other liabilities 265,993 291,599 Total liabilities held for sale $ 613,710 $ 702,256 Discontinued Operations with Signed Sale Agreements Pending Closure at March 31, 2021 Brazil Operations On November 2, 2020, the Company announced that it had entered into a definitive agreement with Ânima Holding S.A. (Anima) for the sale of its Brazilian operations. The transaction value is approximately 4,400,000 Brazilian Reals (approximately $ 765,000 at the time of signing), including 3,800,000 Brazilian Reals (approximately $ 660,700 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. The transaction is targeted to close during the second quarter of 2021, subject to regulatory approval. 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, 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. Note 5. Dispositions Honduras Divestiture On March 8, 2021, the Company completed the divestiture of its operations in Honduras to Fundación Nasser, a not-for-profit foundation in Honduras. In connection with the transaction, the Company transferred control of Fundaempresa, which manages Universidad Tecnológica Centroamericana (UNITEC), including Centro Universitario Tecnológico (CEUTEC), and received proceeds of approximately $ 26,000 , net of cash sold and closing costs. Under the transaction terms, additional consideration of $ 2,000 was paid into an escrow account at closing and, assuming certain conditions are met, will be released to the Company based on the following schedule: 50 % after 18 months, 25 % after 24 months and 25 % after 36 months. At closing, the Company recognized an after-tax gain of approximately $ 500 , which is included in Loss from discontinued operations, net of tax in the Consolidated Statement of Operations for the three months ended March 31, 2021. Receipt of Remaining Escrow Receivable from Sale of China Operations 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. In June 2020, the Company received approximately one-half of the escrow account, and the remainder was due in January 2021. In April 2021, the Company received 168,284 Hong Kong Dollars 11 (approximately $ 21,650 at the date of receipt), which represented payment in full for the remainder of the escrow account. Accordingly, the Company recognized a gain of approximately $ 13,600 , which is included in Loss from discontinued operations, net of tax in the Consolidated Statement of Operations for the three months ended March 31, 2021. Note 6. Business and Geographic Segment Information Laureate’s educational services are offered through two reportable segments: Mexico and Peru (formerly Andean). Following the September 2020 sale of Chile, the former Andean segment is now called the Peru segment. Laureate determines its segments based on information utilized by the chief operating decision maker to allocate resources and assess performance. Our 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 h ave temporarily tran sitioned the educational delivery method at all of our institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting. The Mexico and Peru markets are characterized by what we believe is a significant imbalance between supply and demand. The demand for higher education is large and growing and is fueled by several demographic and economic factors, including a growing middle class, global growth in services and technology-related industries and recognition of the significant personal and economic benefits gained by graduates of higher education institutions. The target demographics are primarily 18- to 24-year-olds in the countries in which we compete. We compete with other private higher education institutions on the basis of price, educational quality, reputation and location. We believe that we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by our network. There are a number of private and public institutions in both of the countries in which we operate, and it is difficult to predict how the markets will evolve and how many competitors there will be in the future. We expect competition to increase as the Mexican and Peruvian markets mature. Essentially all of our revenues were generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru. Specifics related to both of our reportable segments are discussed below. Private education providers in Mexico constitute 35% of the total higher-education market. The private sector plays a meaningful role in higher education, bridging supply and demand imbalances created by a lack of capacity at public universities. 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. In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute 72% of the total higher-education market. Laureate owns three institutions in Peru. As discussed in Note 1, Description of Business, and Note 4, Discontinued Operations and Assets Held for Sale, a number of our subsidiaries have met the requirements to be classified as Discontinued Operations. As a result, the Discontinued Operations 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: Loss on disposal of subsidiaries, net, Foreign currency exchange gain, net, Other income (expense), net, 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, an enterprise-wide program aimed at revenue growth, 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. When we review Adjusted EBITDA on a segment basis, we exclude intercompany revenues and expenses related to network 12 fees and royalties between our segments, which eliminate in consolidation. We use total assets as the measure of assets for reportable segments. 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 March 31, 2021 2020 Revenues Mexico $ 135,397 $ 154,207 Peru 57,498 36,527 Corporate 1,806 1,585 Revenues $ 194,701 $ 192,319 Adjusted EBITDA of reportable segments Mexico $ 17,269 $ 23,310 Peru 11,594 ( 26,667 ) Total Adjusted EBITDA of reportable segments 28,863 ( 3,357 ) Reconciling items: Corporate ( 19,202 ) ( 25,993 ) Depreciation and amortization expense ( 22,761 ) ( 19,650 ) Loss on impairment of assets ( 56,650 ) ( 3,768 ) Share-based compensation expense ( 1,334 ) ( 1,539 ) EiP expenses ( 15,307 ) ( 22,779 ) Operating loss ( 86,391 ) ( 77,086 ) Interest income 711 622 Interest expense ( 23,518 ) ( 25,290 ) Loss on debt extinguishment ( 13 ) — Gain on derivatives 29,330 802 Other income (expense), net 34 ( 81 ) Foreign currency gain, net 28,183 78,716 Loss on disposal of subsidiaries, net — ( 1,800 ) Loss from continuing operations before income taxes and equity in net income of affiliates $ ( 51,664 ) $ ( 24,117 ) March 31, 2021 December 31, 2020 Assets Mexico $ 1,186,678 $ 1,278,198 Peru 623,988 623,294 Corporate and Discontinued Operations 2,673,382 3,069,402 Total assets $ 4,484,048 $ 4,970,894 Note 7. Goodwill and Loss on Impairment of Assets The change in the net carrying amount of Goodwill from December 31, 2020 through March 31, 2021 was composed of the following items: Mexico Peru Total Balance at December 31, 2020 $ 500,250 $ 74,582 $ 574,832 Currency translation adjustments ( 20,522 ) ( 2,557 ) ( 23,079 ) Balance at March 31, 2021 $ 479,728 $ 72,025 $ 551,753 13 Impairment of Laureate Tradename During the three months ended March 31, 2021, the Company recognized an impairment charge of $ 51,400 on the Laureate tradename, a finite-lived intangible asset. In March 2021, the Company decided that, during 2021, it would wind down certain support functions related to the Laureate network and would no longer invest in and support the tradename beyond 2021. As a result, the Company tested the asset for impairment and 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 remaining useful life of the asset. 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 $ 51,400 and recorded an impairment charge for that amount. The significant assumptions used in estimating the fair value included: (1) the revenue growth rates; and (2) 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 attributable to the shortened duration of the estimated future revenues. The remaining carrying value of the tradename asset of $ 18,700 will be amortized prospectively over the remainder of 2021, which is its estimated useful life. Note 8. Debt Outstanding long-term debt was as follows: March 31, 2021 December 31, 2020 Senior long-term debt: Senior Secured Credit Facility (stated maturity date October 2024) $ — $ — Senior Notes (stated maturity date May 2025) 798,725 798,725 Total senior long-term debt 798,725 798,725 Other debt: Lines of credit 23,016 59,014 Notes payable and other debt 129,480 138,630 Total senior and other debt 951,221 996,369 Finance lease obligations and sale-leaseback financings 50,357 52,639 Total long-term debt and finance leases 1,001,578 1,049,008 Less: total unamortized deferred financing costs 50,592 53,292 Less: current portion of long-term debt and finance leases 62,805 95,818 Long-term debt and finance leases, less current portion $ 888,181 $ 899,898 The Company maintains a revolving credit facility under our Senior Secured Credit Facility that has a borrowing capacity of $ 410,000 and has a maturity date of October 7, 2024. As of March 31, 2021 and December 31, 2020, no amounts were borrowed on this facility. As described in Note 19, Subsequent Events, o n May 4, 2021, the Company redeemed $ 500,000 aggregate principal amount of its 8.250 % Senior Notes due 2025 (the Senior Notes) at a redemption price of 104.125 % of the principal amount thereof plus accrued and unpaid interest thereon to, but excluding the redemption date. Additionally, the Company has notified the holders of its Senior Notes of its election to redeem the remaining $ 298,725 aggregate principal amount of the Senior Notes. Among other conditions, the redemption is contingent on the sale of Brazil operations, which is targeted to close during the second quarter of 2021. As of March 31, 2021 , the amount of unamortized deferred financing costs associated with the Senior Notes was approximately $ 45,700 . Following completion of these redemptions, the Company will have repaid the entire outstanding principal amount of the Senior Notes. 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 March 31, 2021 and December 31, 2020, 14 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: March 31, 2021 December 31, 2020 Carrying amount Estimated fair value Carrying amount Estimated fair value Total senior and other debt $ 951,221 $ 988,162 $ 996,369 $ 1,043,294 Certain Covenants As of March 31, 2021, 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 the last day of each quarter commencing with the quarter ending 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 March 31, 2021, these conditions were satisfied and, therefore, we were not subject to the leverage ratio. In addition, indebtedness at some of our locations contain financial maintenance covenants. We were in compliance with these covenants as of March 31, 2021. 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. In accordance with ASC Topic 842, “Leases,” Laureate analyzes each lease agreement to determine whether it should be classified as a finance lease or an operating lease. 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 Sheets. 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. Corporate Office Lease Termination In March 2021, the Company exercised its one-time right under the operating lease agreement for its corporate headquarters in Baltimore, Maryland to terminate the lease effective June 30, 2022. In connection with the exercise of this early termination option, the Company is required to pay an early termination fee of approximately $ 1,200 , half of which was paid in March 2021, and half of which is due by June 30, 2022. Accordingly, during the first quarter of 2021, the Company remeasured the 15 operating lease liability, including the early termination fee, and recorded a reduction in the ROU asset and the operating lease liability of approximately $ 14,900 . 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 March 31, 2021 and December 31, 2020, Laureate has recorded cumulative liabilities totaling $ 35,030 and $ 38,355 , respectively, for taxes other-than-income tax, principally payroll-tax-related uncertainties recorded at the time of an acquisition, of which $ 34,514 and $ 37,794 , 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. For Continuing Operations, the total decrease to operating income for adjustments to non-income tax contingencies and indemnification assets was $ 13,349 and $ 6,607 , respectively, for the three months ended March 31, 2021 and 2020. In addition, as of March 31, 2021 and December 31, 2020, Laureate has recorded cumulative liabilities for income tax contingencies of $ 53,162 and $ 40,668 , respectively, of which $ 9,493 and $ 11,752 , respectively, were classified as held for sale. As of March 31, 2021 and December 31, 2020, indemnification assets primarily related to acquisition contingencies were $ 38,471 and $ 55,940 , respectively, of which $ 37,340 and $ 40,877 , 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 $ 13,000 and $ 14,000 as of March 31, 2021 and December 31, 2020, 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 $ 50,000 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 March 31, 2021 and December 31, 2020, approximately $ 8,000 and $ 8,300 , respectively, of loss contingencies were included in Other long-term liabilities and Other current liabilities on the Consolidated Balance Sheets. In addition, as of March 31, 2021 and December 31, 2020, approximately $ 22,200 and $ 23,800 , respectively, of loss contingencies were classified as held for sale. 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. 16 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. During the first quarter of 2021, one of our Peruvian institutions issued a bank guarantee in the amount of PEN 23,764 (approximately $ 6,364 at March 31, 2021) in order to appeal a preliminary tax assessment received related to tax audits of 2014 and 2015. Standby Letters of Credit, Surety Bonds and Other Commitments As of March 31, 2021 and December 31, 2020, Laureate's outstanding letters of credit (LOCs) and surety bonds primarily consisted of the items discussed below. As of both March 31, 2021 and December 31, 2020, we had approximately $ 83,600 posted as an LOC in favor of the DOE. This LOC was required to allow Walden to participate in the DOE Title IV program. The restricted cash used to collateralize this letter of credit was held by a corporate entity. 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 March 31, 2021 and December 31, 2020, the total face amount of these surety bonds, which are fully collateralized with cash, was $ 16,929 and $ 17,094 , respectively. 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. Spanish Tax Audits As of March 31, 2021 and December 31, 2020, we had approximately $ 11,100 and $ 11,500 , respectively, posted as cash collateral for LOCs related to the Spanish tax audits. This was recorded in Continuing Operations and classified as Restricted cash on our March 31, 2021 and December 31, 2020 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). 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. In addition, on March 11, 2020, ICE received a preliminary assessment of approximately EUR 21,600 (approximately $ 25,500 at March 31, 2021), related to the STA’s extension of their audit to review withholding taxes on income earned by nonresidents. This assessment was not final, and ICE challenged the assessment. On March 30, 2021, in response to our allegations, the STA issued a final assessment to Laureate Netherlands Holding B.V. in which the Chief Tax Auditor challenged the preliminary assessment and found that the STA could not claim the withholding tax obligation in this case. At this time, we consider the matter resolved. 17 Note 11. Share-based Compensation Share-based compensation expense was as follows: For the three months ended March 31, 2021 2020 Continuing operations Stock options, net of estimated forfeitures $ 176 $ 345 Restricted stock awards 1,158 1,194 Total continuing operations $ 1,334 $ 1,539 Discontinued operations Share-based compensation expense for discontinued operations 242 445 Total continuing and discontinued operations $ 1,576 $ 1,984 Note 12. Stockholders’ Equity The components of net changes in stockholders’ equity for the three months ended March 31, 2021 are as follows: Laureate Education, Inc. Stockholders Class A Common Stock Class B Common Stock Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss Treasury stock at cost Non-controlling interests Total stockholders’ equity Shares Amount Shares Amount Balance at December 31, 2020 115,119 $ 548 90,792 $ 363 $ 3,760,029 $ ( 176,822 ) $ ( 941,986 ) $ ( 365,316 ) $ ( 12,882 ) $ 2,263,934 Beginning retained earnings adjustment — — — — — ( 101 ) — — — ( 101 ) Non-cash stock compensation — — — — 1,576 — — — — 1,576 Conversion of Class B shares to Class A shares 17,248 69 ( 17,248 ) ( 69 ) — — — — — — Purchase of treasury stock at cost ( 10,401 ) — — — — — — ( 145,806 ) — ( 145,806 ) Exercise of stock options and vesting of restricted stock, net of shares withheld to satisfy tax withholding 247 1 — — ( 1,223 ) — — — — ( 1,222 ) Accretion of redeemable noncontrolling interests and equity — — — — ( 20 ) — — — — ( 20 ) Net loss — — — — — ( 164,928 ) — — ( 15 ) ( 164,943 ) Foreign currency translation adjustment, net of tax of $ 0 — — — — — — ( 59,743 ) — ( 18 ) ( 59,761 ) Minimum pension liability adjustment, net of tax of $ 0 — — — — — — ( 168 ) — — ( 168 ) Balance at March 31, 2021 122,213 $ 618 73,544 $ 294 $ 3,760,362 $ ( 341,851 ) $ ( 1,001,897 ) $ ( 511,122 ) $ ( 12,915 ) $ 1,893,489 18 The components of net changes in stockholders’ equity for the three months ended March 31, 2020 are as follows: Laureate Education, Inc. Stockholders Class A Common Stock Class B Common Stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss 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 Stock Repurchase Program On November 5, 2020, Laureate’s board of directors announced a new stock repurchase program to acquire up to $ 300,000 of the Company’s Class A common stock. The Company’s repurchases may be made 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 expects to finance the repurchases with free cash flow and excess cash and liquidity on-hand. During the first quarter of 2021, the Company repurchased 10,401 shares of its outstanding Class A common stock for a total purchase price of $ 145,806 . As discussed in Note 19, Subsequent Events, on April 30, 2021, the Company’s board of directors approved an increase of its existing authorization to repurchase shares of the Company’s Class A common stock by $ 200,000 , for a total authorization (including the previously authorized repurchases) of up to $ 500,000 of the Company’s Class A common stock. 19 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. The components of these balances were as follows: March 31, 2021 December 31, 2020 Laureate Education, Inc. Noncontrolling Interests Total Laureate Education, Inc. Noncontrolling Interests Total Foreign currency translation adjustment $ ( 1,011,199 ) $ 941 $ ( 1,010,258 ) $ ( 951,456 ) $ 958 $ ( 950,498 ) Unrealized gain on derivatives 10,416 — 10,416 10,416 — 10,416 Minimum pension liability adjustment ( 1,114 ) — ( 1,114 ) ( 946 ) — ( 946 ) Accumulated other comprehensive loss $ ( 1,001,897 ) $ 941 $ ( 1,000,956 ) $ ( 941,986 ) $ 958 $ ( 941,028 ) 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 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. 20 The reported fair values of our derivatives, which are classified in Derivative instruments on our Consolidated Balance Sheets, were as follows: March 31, 2021 December 31, 2020 Derivatives not designated as hedging instruments: Current assets: Cross currency swaps $ 21,800 $ — Current liabilities: Cross currency swaps — 17,680 Long-term liabilities: Cross currency swaps — 8,144 Total derivative instrument assets $ 21,800 $ — Total derivative instrument liabilities $ — $ 25,824 BRL to USD Foreign Currency Swaps In November 2020, in connection with the signing of the sale agreement for its Brazilian operations, Laureate entered into six BRL-to-USD swap agreements. The purpose of these swaps is to mitigate the risk of foreign currency exposure on the expected proceeds from the sale. Four of the swaps are put/call options with a maturity date of May 13, 2021, where Laureate can put the combined notional amount of BRL 1,875,000 and call a combined USD amount of $ 343,783 at an exchange rate of 5.4540 BRL per 1 USD. The terms of these options include deferred premium payments from Laureate to the counterparties of $ 18,294 , which were paid in full in January 2021. The remaining two swaps are deal contingent, with the settlement date occurring on the second business day following the completion of the aforementioned sale. On the settlement date, Laureate will deliver the combined notional amount of BRL 1,900,000 (BRL 950,000 for each swap) and receive an amount in USD equal to each swap's notional amount multiplied by each swap's contract rate of exchange at the settlement date. For one of the swaps, the contract rate of exchange has a possible range of 5.484143 - 5.678624 BRL per 1 USD, and the maturity date is December 31, 2021. For the other swap, the contract rate of exchange has a possible range of 5.44706 - 5.63255 BRL per 1 USD, and the maturity date is January 3, 2022. As of March 31, 2021, these swaps were in an asset position and had an aggregate fair value of $ 21,800 , which was recorded in Derivative instruments as a current asset. As of December 31, 2020, these swaps were in a liability position and had an aggregate fair value of $ 25,824 , of which $ 17,680 was recorded in Derivative instruments as a current liability and $ 8,144 was recorded in Derivative instruments as a long-term liability. These swaps are not designated as hedges for accounting purposes. AUD to USD Foreign Currency Swap 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 swap was not designated as a hedge for accounting purposes. Components of the reported Gain on derivatives not designated as hedging instruments in the Consolidated Statements of Operations were as follows: For the three months ended March 31, 2021 2020 Cross currency swaps Unrealized gain $ 47,624 $ 802 Realized loss ( 18,294 ) — Gain on derivatives, net $ 29,330 $ 802 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 21 a net gain position. As of March 31, 2021 and December 31, 2020, the estimated fair values of derivatives in a gain position were $ 21,800 and $ 0 , respectively. Laureate has limited 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. At March 31, 2021, two institutions which were rated A1 and one institution which was rated A2 by the global rating agency of Moody's Investors Service accounted for all of Laureate's derivative credit risk exposure. Laureate’s agreements with its derivative counterparties contain a provision under which the Company 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 March 31, 2021 and December 31, 2020, the Company had not breached any default provisions and had not posted any collateral related to these agreements. If the Company had breached any of these provisions, it could have been required to settle the obligations under the derivative agreements for an amount that, at a maximum, the Company believes would approximate their estimated fair values as of March 31, 2021 and December 31, 2020 of $ 0 and $ 25,824 , respectively. Note 14. Income Taxes Laureate's income tax provisions for all periods consist of federal, state and foreign income taxes. The tax provisions for the three months ended March 31, 2021 and 2020 are based on estimated full-year effective tax rates, adjusted for discrete income tax items related specifically to the interim periods. Laureate has operations in multiple countries at various statutory tax rates 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. For the three months ended March 31, 2021 , the Company recognized income t ax (expense) from continuing operations of $( 112,861 ), as compared to income tax benefit from continuing operations of $ 230,028 in the prior year period. Income tax expense for the three months ended March 31, 2021 was primarily driven by changes in income tax reserves, withholding taxes and jurisdictional mix of earnings offset by the benefit for pretax loss for the period. Income tax benefit for the three months ended March 31, 2020 was primarily driven by the benefit recorded due to the change in tax status of a Netherlands subsidiary, the pretax loss for the period and jurisdictional mix of earnings. During the three months ended March 31, 2021 , Laureate recognized additional tax expense of $ 46,493 related to prior year tax positions and tax expense for interest and penalties related to income taxes of $ 802 . During the three months ended March 31, 2021, the Company recorded an out-of-period adjustment of approximately $ 12,400 for income tax expense that should have been recorded during 2016 through 2020. The Company concluded that the adjustment was immaterial to the consolidated financial statements for both the current and prior-periods. 22 Note 15. Earnings (Loss) Per Share Our common stock has a dual class structure, consisting of 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 March 31, 2021 2020 Numerator used in basic and diluted earnings (loss) per common share for continuing operations: (Loss) income from continuing operations $ ( 164,525 ) $ 206,096 Net loss attributable to noncontrolling interests 24 12 (Loss) income from continuing operations attributable to Laureate Education, Inc. ( 164,501 ) 206,108 Accretion of redemption value of redeemable noncontrolling interests and equity ( 20 ) ( 44 ) Net (loss) income from continuing operations for basic and diluted earnings (loss) per share $ ( 164,521 ) $ 206,064 Numerator used in basic and diluted earnings (loss) per common share for discontinued operations: Loss from discontinued operations, net of tax $ ( 418 ) $ ( 107,780 ) (Income) loss attributable to noncontrolling interests ( 9 ) 1,287 Net loss from discontinued operations for basic and diluted earnings (loss) per share $ ( 427 ) $ ( 106,493 ) Denominator used in basic and diluted earnings (loss) per common share: Basic weighted average shares outstanding 200,224 209,801 Dilutive effect of stock options — 83 Dilutive effect of restricted stock units — 342 Diluted weighted average shares outstanding 200,224 210,226 Basic and diluted earnings (loss) per share: (Loss) income from continuing operations $ ( 0.82 ) $ 0.98 Loss from discontinued operations — ( 0.51 ) Basic and diluted (loss) earnings per share $ ( 0.82 ) $ 0.47 The following table summarizes the number of stock options and shares of restricted stock units that were excluded from the diluted EPS calculations because the effect would have been antidilutive: For the three months ended March 31, 2021 2020 Stock options 3,394 4,167 Restricted stock units 586 — 23 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, 2020. Continuing Operations Mexican Regulation A new higher education bill was enacted into law effective April 21, 2021. The new law, which, among other things, confirms the guaranteed right to higher education, is not expected to materially impact the business. COVID-19 Update Administrative activities have resumed at most of our campuses. Limited face-to-face educational activities have resumed at 10 campuses (in seven states), but such activities will not be permitted to resume at any other campus until the region (municipality or state) in which such campus is located is assigned a green color code under the country’s color-coded sanitary alert system, which is updated on a biweekly basis. Peruvian Regulation – COVID-19 Update Peru’s national sanitary emergency has been extended until June 2021, and may be extended again after the second round of presidential elections on June 6, 2021. Due to the more aggressive and deadly second wave of COVID-19, Peru has extended its region-by-region confinement plan until May 9, 2021, subject to continuing review. Lima has been qualified as “in extreme status,” which severely limits or prohibits economic activities, including presential gatherings like in-person instruction. Nevertheless, the government has announced that face-to-face classes may resume this year, initially semi-presential. The actual resumption of classes will depend upon COVID-19 infection rates at such time. Discontinued Operations Brazilian Regulation – COVID-19 Update 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. By the end of 2020, the National Board of Education had issued an opinion concerning the continuity of remote activities for an additional year. While the Ministry of Education originally had insisted on a gradual return to face-to-face classes, beginning on March 1, 2021, for higher education, this effort was affected by a second wave of COVID-19 infections and the consequent increase of local sanitary restrictive measures. As such, remote activities will continue until either a safety standard is sustained or mass vaccination reaches the students’ main age groups. As of now, decisions 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, with short interruptions due to local sanitary statistics, at most of our Brazilian campuses. Despite being authorized to gradually return to face-to-face classes in some locations, academic planners still consider a larger contingent of remote activities to be the most suitable option given the current circumstances. 24 U.S. Regulation The “90/10 Rule.” As part of the American Rescue Plan Act of 2021 (“ARPA”) signed into law on March 11, 2021, Congress amended certain provisions of the U.S. Higher Education Act (the “HEA”) pertaining to a requirement of the HEA commonly referred to as the “90/10 Rule”. Specifically, the 90/10 Rule currently provides that a for-profit educational institution loses its eligibility to participate in federal student financial aid programs under Title IV of the HEA (“Title IV programs”) if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenues, the institution derives more than 90% of its revenues from Title IV program funds for any two consecutive fiscal years. The ARPA amended the HEA to require that all “federal education assistance funds,” rather than only Title IV program funds, be included in the numerator of the 90/10 Rule. While the phrase “federal education assistance funds” was not defined by the statutory change, it presumably will include funds derived from student assistance programs administered by the U.S. Department of Veteran’s Affairs and the U.S. Department of Defense, among others. The ARPA requires the U.S. Department of Education to conduct a negotiated rulemaking to develop regulations needed to implement the revisions to the 90/10 Rule, with such negotiated rulemaking not permitted to begin before October 1, 2021. The revision to the 90/10 Rule to include all “federal education assistance funds” will take effect with institutional fiscal years beginning on or after January 1, 2023. Department of Justice Notice of Election to Decline Intervention On April 28, 2021, the Company was notified that the Civil Division of the United States Department of Justice (the “DOJ”), on behalf of the United States, had filed a Notice of Election to Decline Intervention (the “Notice”) with respect to a civil qui tam action filed by third-party relators (the “Relators”) against Walden University and the Company. It was this action that prompted the DOJ’s examination of Walden University’s Masters of Science in Nursing program. The DOJ’s investigation into this matter has now concluded. Further, as previously disclosed by the Company, the Higher Learning Commission (“HLC”) had informed Walden University that a public “Governmental Investigation” designation would be assigned to Walden University due to the DOJ inquiry; such designation became effective on November 9, 2020. Effective as of May 3, 2021, the HLC removed such designation. Per the court order related to the Notice, the Relators may elect to continue to pursue the action. The Company cannot predict how long it may take to resolve this matter. The Company believes that the Relators’ claims are without merit and intends to defend vigorously against them. 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. In instances where the determination of fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety, as required under ASC 820-10, "Fair Value Measurement." Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. 25 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. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourself and our counterparties. We have determined that the significance of the impact of the credit valuation adjustments made to our derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of our derivatives held as of March 31, 2021 and December 31, 2020 were classified as Level 2 of the fair value hierarchy. Laureate's financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 were as follows: Total Level 1 Level 2 Level 3 Assets Derivative instruments $ 21,800 $ — $ 21,800 $ — Liabilities Derivative instruments $ — $ — $ — $ — Laureate's financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020 were as follows: Total Level 1 Level 2 Level 3 Assets Derivative instruments $ — $ — $ — $ — Liabilities Derivative instruments $ 25,824 $ — $ 25,824 $ — 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 March 31, 2020 balance. The March 31, 2021 and March 31, 2020 balances sum to the amounts shown in the Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020: March 31, 2021 March 31, 2020 December 31, 2020 Cash and cash equivalents $ 561,330 $ 299,686 $ 750,147 Restricted cash 106,633 40,922 117,151 Total Cash and cash equivalents and Restricted cash shown in the Consolidated Statements of Cash Flows $ 667,963 $ 340,608 $ 867,298 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. 26 Note 19. Subsequent Events Redemption of Senior Notes On May 4, 2021, the Company redeemed $ 500,000 aggregate principal amount of its 8.250 % Senior Notes due 2025 (the Senior Notes), at a redemption price of 104.125 % of the principal amount thereof plus accrued and unpaid interest thereon to, but excluding the redemption date. The total payment made was $ 520,969 . The redemption of the Senior Notes was made pursuant to the indenture governing the Senior Notes as a result of the Company’s decision to exercise its right to optionally redeem any part of the Senior Notes. The source of the funds was cash on hand from the proceeds of the sale of the Company’s operations in Australia and New Zealand. The Company has also notified the holders of its Senior Notes of its election to redeem the remaining $ 298,725 aggregate principal amount of the Senior Notes at a price of 104.125 % of the principal amount thereof plus accrued and unpaid interest thereon to, but excluding the redemption date. Among other conditions, the redemption is contingent on the sale of our operations in Brazil, which is targeted to close during the second quarter of 2021. Following completion of the above redemptions, the Company will have repaid the entire outstanding principal amount of the Senior Notes. Stock Repurchase Program On April 30, 2021, the Company’s board of directors approved an increase of its existing authorization to repurchase shares of the Company’s Class A common stock by $ 200,000 , for a total authorization (including the previously authorized repurchases) of up to $ 500,000 of the Company’s Class A common stock. 27