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Item 7. Management’s Discussion and Analysis

2023-02-23 compared with 2022-02-24 · 187 added, 327 removed, 518 unchanged (50% of the section changed)

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See “Forward-Looking Statements” on page 2 of this Form 10-K.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the ‘‘MD&A’’) is provided to assist readers of the financial statements in understanding the results of operations, financial condition and cash flows of Laureate Education, Inc.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided to assist readers of the financial statements in understanding the results of operations, financial condition and cash flows of Laureate Education, Inc.

This MD&A should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-K.

The consolidated financial statements included elsewhere in this Form 10-K are presented in U.S.

dollars (USD) rounded to the nearest thousand, with the amounts in MD&A rounded to the nearest tenth of a million.

dollars (USD) rounded to the nearest thousand, with the amounts in the MD&A rounded to the nearest tenth of a million.

Therefore, discrepancies in the tables between totals and the sums of the amounts listed may occur due to such rounding.

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We operate a portfolio of degree-granting higher education institutions in Mexico and Peru.

Collectively, we have approximately 388,500 students enrolled at five institutions in these two countries, which represent our Continuing Operations.

Collectively, we have approximately 423,000 students enrolled at five institutions in these two countries.

We believe that the higher education markets in Mexico and Peru present an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for affordable, quality higher education in those markets.

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We group our institutions by geography in Mexico and Peru for reporting purposes.

After the novel coronavirus (“COVID-19”) outbreak was declared a pandemic in March 2020, we closed all of our physical campuses in a matter of a few short weeks, and all of our students were effectively transitioned to an online learning environment, and our staff and faculty were effectively moved to a fully remote environment.

The vast majority of our campuses have remained closed throughout this ongoing pandemic.

We believe that our institutions have a competitive advantage in online and distance learning given the investments that we have made in digital learning platforms in prior years and believe that we are well-positioned to continue to serve our students during and after the pandemic.

We have recently commenced a return to campus where safe and appropriate to do so, implementing a range of precautions, in accordance with local laws, regulations and health guidelines, to protect the health and safety of our students, faculty and staff.

Most of our universities are expecting to adopt a phased approach, prioritizing classes that require in-person technical teaching (such as in our interactive labs).

We will continue to monitor the situation and adjust based on what is most appropriate for each market.

See also “Item 1A—Risk Factors—“An epidemic, pandemic or other public health emergency, such as the current global coronavirus (COVID-19) outbreak and the efficacy and distribution of COVID-19 vaccines in the locations in which we operate could have a material adverse effect on our business, financial condition, cash flows and results of operations.”

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, which have now been completed, 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, the sale of our operations in Brazil was completed on May 28, 2021, and the sale of Walden University was completed on August 12, 2021.

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.

Our Discontinued Operations are excluded from the segment information for all periods presented, as they no longer meet the criteria for a reportable segment under ASC 280, “Segment Reporting.” Unless indicated otherwise, the information in the MD&A relates to Continuing Operations.

As a result of the strategic review first announced in January 2020, during the third quarter of 2020, the Company completed a sale of its operations in Chile and signed agreements to sell its operations in Brazil, Australia and New Zealand, as well as Walden University in the United States.

These sales were completed during 2020 and 2021.

Additionally, prior to 2020, the Company had announced the divestiture of certain other subsidiaries in Europe, Asia and Central America, which has been completed.

These announcements represented strategic shifts that had a major effect on the Company’s operations and financial results.

Accordingly, all of the divestitures that were part of these strategic shifts were accounted for as Discontinued Operations for all periods presented in accordance with Accounting Standards Codification (ASC) 205-20, “Discontinued Operations” (ASC 205).

All planned divestitures have now been completed, and the Company has concluded its strategic review process.

The Company’s continuing operations are Mexico and Peru.

All other markets have been divested (the Discontinued Operations) .

The Discontinued Operations are excluded from the segment information for all periods presented, as they do not meet the criteria for a reportable segment under ASC 280, “Segment Reporting.” Unless indicated otherwise, the information in the MD&A relates to continuing operations.

See also Note 4, Discontinued Operations and Assets Held for Sale, and Note 5, Dispositions, in our consolidated financial statements included elsewhere in this Form 10-K.

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.

In response to the COVID-19 pandemic, we t ran sitioned the educational delivery method at all of our institutions to be online, leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting.

Our institutions are focused on planning for a safe return to campus

when appropriate to do so.

We expect our educational offerings will utilize hybrid (a combination of onli ne and in-classroom) courses and programs to deliver their curriculum .

Our educational offerings utilize campus-based, online and hybrid (a combination of online and in-classroom) courses and programs to deliver their curriculum.

The Mexico and Peru markets are characterized by what we believe is a significant imbalance between supply and demand.

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Specifics related to both of our reportable segments are discussed below:

• Private education providers in Mexico constitute 35% of the total higher-education market.

• Private education providers in Mexico constitute approximately 36% 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.

Laureate owns two nationally licensed institutions and is present throughout the country with a footprint of over 35 campuses.

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 69% of the total higher-education market.

• In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute approximately 73% of the total higher-education market.

Laureate owns three institutions in Peru.

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Its departments are responsible for establishing operational policies and internal control standards, implementing strategic initiatives, and monitoring compliance with policies and controls throughout our operations.

Our Corporate segment is an internal source of capital and provides financial, human resource, information technology, insurance, legal and tax compliance services.

Our Corporate segment provides financial, human resource, information techn olog y, insurance, le gal an d tax compliance services.

The Corporate segment also contains the eliminations of inter-segment revenues and expenses.

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5 423,000 $ 1,242.3 100 %

(1) Amounts related to Corporate, partially offset by the elimination of inter-segment revenues, totaled $9.2 million and are not separately presented.

(1) Amounts related to Corporate totaled $4.1 million and are not separately presented.

Our operations are outside of the United States and are subject to complex business, economic, legal, regulatory, political, tax and foreign currency risks, which may be difficult to adequately address.

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and compliance with a wide variety of foreign laws.

See “Item 1A—Risk Factors—Risks Relating to Our Business—We operate a portfolio of degree-granting higher education institutions in Mexico and Peru and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address.” We plan to grow our Continuing Operations organically by:

1) adding new programs and course offerings;

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These laws and regulations are subject to updates and changes.

We cannot predict the form of the rules that ultimately may be adopted in the

future or what effects they might have on our business, financial condition, results of operations and cash flows.

We cannot predict the form of the rules that ultimately may be adopted in the future or what effects they might have on our business, financial condition, results of operations and cash flows.

We will continue to develop and implement necessary changes that enable us to comply with such laws and regulations.

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Each institution has a “Primary Intake” period during each academic year in which the majority of the enrollment occurs.

Most institutions also have one or more smaller “Secondary Intake” periods.

Each institution also has a smaller “Secondary Intake” period.

Our Peruvian institutions have their Primary Intake during the first calendar quarter and a Secondary Intake during the third calendar quarter.

Institutions in our Mexico segment have their Primary Intake during the third calendar quarter and a Secondary Intake during the first calendar quarter.

Our institutions in Peru are generally out of session in January, February and July, while institutions in Mexico are generally out of session in May through July.

Our institutions in Peru are generally out of

session in January, February and July, while institutions in Mexico are generally out of session in May through July.

Revenues are recognized when classes are in session.

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Revenues are recognized net of scholarships and other discounts, refunds and waivers.

In addition to tuition revenues, we generate other revenues from student fees, dormitory/residency fees and other education-related activities.

In addition to tuition revenues, we generate other revenues from student 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.

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Factors Affecting Comparability

Our past experiences provide us with the expertise to further our mission of providing high-quality, accessible and affordable higher education to students by expanding into new markets if opportunities arise.

Acquisitions completed during one period affect the comparability to a prior period in which we did not own the acquired entity.

Therefore, changes related to such entities are considered “incremental impact of acquisitions” for the first 12 months of our ownership.

While we may consider acquisitions in the future if opportunities arise, we have not made any acquisitions in recent years, including from 2019 through 2021.

Any dispositions of our Continuing Operations affect the comparability of our financial statements from period to period.

Dispositions completed during one period impact comparability to a prior period in which we owned the divested entity.

Therefore, changes related to such entities are considered “incremental impact of dispositions” for the first 12 months subsequent to the disposition.

As discussed above, all of the divestitures that are part of the strategic shifts are included in Discontinued Operations for all periods presented.

Foreign Exchange

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See “Item 1A—Risk Factors—Risks Relating to Our Business—Our reported revenues and earnings may be negatively affected by the strengthening of the U.S.

dollar and currency exchange rates.” In order to provide a framework for assessing how our business performed excluding the effects of foreign currency fluctuations, we present organic constant currency in our segment results, which is calculated using the change from prior-year average foreign exchange rates to current-year average foreign exchange rates, as applied to local-currency operating results for the current year, and then excludes the impact of acquisitions, divestitures and other items, as described in the segments results.

dollar and currency exchange rates.” In order to provide a framework for assessing how our business performed excluding the effects of foreign currency fluctuations, we present organic constant currency in our segment results, which is calculated using the change from prior-year average foreign exchange rates to current-year average foreign exchange rates, as applied to local-currency operating results for the current year, and then excludes the impact of any acquisitions, divestitures and other items, as described in the segments results.

Our institutions have a summer break during which classes are generally not in session and minimal revenues are recognized.

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Our consolidated income tax provision is derived based on the combined impact of federal, state and foreign income taxes.

Also, discrete items can arise in the course of our operations that can further impact the Company’s effective tax rate for the period.

Also, discrete items can arise in the course of our operations that can further affect the Company’s effective tax rate for the period.

Our tax rate fluctuates from period to period due to changes in the mix of earnings between our tax-paying entities and our loss-making entities for which it is not ‘more likely than not’ that a tax benefit will be realized on the loss.

See “Item 1A—Risk Factors—Risks Relating to Our Business—We may have exposure to greater-than-anticipated tax liabilities.”

The Organization for Economic Co-operation and Development (OECD) has proposed changes to numerous long-standing tax principles.

These proposals, if finalized and adopted by the associated countries, will likely increase tax uncertainty, and may adversely affect our provision for income taxes.

The Company will continue to monitor regulatory developments to assess potential impacts to the Company.

Results of the Discontinued Operations

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Pretax income (loss) of discontinued operations 7.8 721.2 (183.8)

Income tax expense (234.3) (114.3) (33.7)

Income tax benefit (expense) 0.5 (234.3) (114.3)

Income (loss) from discontinued operations, net of tax $ 8.3 $ 486.9 $ (298.1)

Year Ended December 31, 2022

The $7.8 million gain in the table above primarily resulted from the transfer of the remaining assets and liabilities that were classified as held for sale as of December 31, 2021, which related to the divestiture of our operations in Chile.

This transfer was completed during the second quarter of 2022 and resulted in a gain of approximately $4.3 million.

Year Ended December 31, 2021

On March 8, 2021, we sold our operations in Honduras, which resulted in an after-tax loss of $1.7 million, including a working capital adjustment during the second quarter of 2021.

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Year Ended December 31, 2020

On January 10, 2020, we sold our operations in Costa Rica, which resulted in an additional pre-tax loss of approximately $18.6 million.

Together with the 2019 loss described below, the total loss on the sale of Costa Rica was approximately $43.6 million.

On January 10, 2020, we sold our operations in Costa Rica, which resulted in a pre-tax loss of approximately $18.6 million.

This loss was in addition to a previously recorded loss of approximately $25.0 million that we recognized in 2019 to write down the carrying value of the held-for-sale Costa Rica disposal group to its estimated fair value.

On March 6, 2020, we sold the operations of NewSchool of Architecture and Design, LLC (NSAD), which resulted in a pre-tax loss of approximately $5.9 million.

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This loss is included in Gain on sale of discontinued operations before taxes, net.

Year Ended December 31, 2019

On February 1, 2019, we sold the operations of St.

Augustine, which resulted in a gain of approximately $223.0 million.

On February 12, 2019, we sold our operations in Thailand, which resulted in a gain of approximately $10.8 million.

On January 25, 2018, we completed the sale of LEILY.

During the first quarter of 2019, a legal matter, for which the Company had indemnified the buyer and recorded a contingent liability, was settled with no cost to the Company.

Accordingly, the Company reversed the liability and recognized additional gain on the sale of LEILY of approximately $13.7 million.

On April 8, 2019, we sold Monash South Africa as well as the real estate associated with that institution, which resulted in a gain of approximately $2.3 million.

On May 9, 2019, we sold our operations in India, which resulted in a gain of approximately $19.5 million.

On May 31, 2019, we sold our institutions in Spain and Portugal, which resulted in a gain of approximately $615.0 million.

On August 27, 2019, we sold our operations in Turkey, which resulted in a loss of approximately $37.7 million.

During the third quarter of 2019, we recorded a loss of approximately $25.0 million on the held-for-sale Costa Rica disposal group, in order to write down its carrying value to the estimated fair value.

This loss is included in Gain on sale of discontinued operations before taxes, net.

In October 2019, we sold Universidad Interamericana de Panamá (UIP), in addition to real estate which served as the campus of UIP, and recognized a gain of approximately $21.0 million.

On November 1, 2019, we sold UniNorte, a traditional higher education institution in Manaus, Brazil, which resulted in a loss on sale of approximately $0.3 million.

During the fourth quarter of 2019, we recorded a loss of approximately $17.8 million related to the held-for-sale Honduras disposal group, in order to write down its carrying value to the estimated fair value.

This loss is included in Gain on sale of discontinued operations before taxes, net.

Results of Operations

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This loss is included in Other non-operating expense in the table below and is part of continuing operations as this entity was not part of the strategic shifts described above in Overview.

Year Ended December 31, 2019

During the first quarter of 2019, we used approximately $340.0 million of the net proceeds from the sale of St.

Augustine to repay a portion of our term loan that had a maturity date of April 2024 (the 2024 Term Loan).

In connection with this debt repayment, the Company recorded a loss on debt extinguishment of $6.3 million, primarily related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances.

This loss is included in Other non-operating expense in the table below.

During the second quarter of 2019, we fully repaid the remaining balance outstanding under our 2024 Term Loan, using the proceeds received from the sales of our operations in India, Spain and Portugal.

The remaining proceeds were used to repay borrowings outstanding under the senior secured revolving credit facility.

In connection with these debt repayments, the Company recorded a loss on debt extinguishment of $15.6 million related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances, as well as the debt discount associated with the 2024 Term Loan.

This loss is included in Other non-operating expense in the table below.

During the third and fourth quarters of 2019, we dissolved several dormant subsidiaries, resulting in the release of accumulated foreign currency translation loss of approximately $37.5 million.

This loss is included in Other non-operating expense in the table below and is part of Continuing Operations as these entities were not part of the strategic shifts described above in Overview.

Comparison of Consolidated Results for the Years Ended December 31, 2022, 2021 and 2020

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General and administrative expenses 64.8 204.4 199.8 68 % (2) %

Loss on impairment of assets 72.5 352.0 0.2 79 % nm

Operating (loss) income (4.6) (329.3) 36.0 99 % nm

Loss on impairment of assets 0.1 72.5 352.0 100 % 79 %

Operating income (loss) 270.0 (4.6) (329.3) nm 99 %

Interest expense, net of interest income (8.9) (41.9) (98.7) 79 % 58 %

Other non-operating expense (15.3) (91.0) (22.8) 83 % nm

Loss from continuing operations before income taxes and equity in net income of affiliates (137.5) (450.8) (119.7) 69 % nm

Income tax (expense) benefit (145.6) 130.1 (31.0) nm nm

Equity in net income of affiliates, net of tax — 0.2 0.2 (100) % — %

Loss from continuing operations (283.1) (320.6) (150.5) 12 % (113) %

Income (loss) from continuing operations before income taxes and equity in net income of affiliates 245.9 (137.5) (450.8) nm 69 %

Income tax (expense) benefit (185.4) (145.6) 130.1 (27) % nm

Equity in net income of affiliates, net of tax 0.3 — 0.2 nm (100) %

Income (loss) from continuing operations 60.7 (283.1) (320.6) 121 % 12 %

Income (loss) from discontinued operations, net of tax 8.3 486.9 (298.1) (98) % nm

Net income (loss) 69.0 203.8 (618.7) (66) % 133 %

Net (income) loss attributable to noncontrolling interests (11.3) 5.4 0.8 nm nm

Net loss (income) attributable to noncontrolling interests 0.6 (11.3) 5.4 (105) % nm

Net income (loss) attributable to Laureate Education, Inc.

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Revenues increased by $155.6 million to $1,242.3 million for 2022 from $1,086.7 million for 2021.

Average total organic enrollment was higher at our institutions, increasing revenues by $111.9 million compared to 2021.

The effect of changes in tuition rates and enrollments in programs at varying price points (“product mix”), pricing and timing increased revenues by $30.8 million compared to 2021.

In addition, the effect of a net change in foreign currency exchange rates increased revenues by $18.0 million, due to the strengthening of the Peruvian nuevo sol and the Mexican peso against the USD compared to 2021.

These increases in revenues were partially offset by other Corporate and Eliminations changes, which accounted for a decrease in revenues of $5.1 million.

Direct costs and general and administrative expenses combined decreased by $46.7 million to $972.2 million for 2022 from $1,018.9 million for 2021.

This decrease in direct costs and administrative expenses was primarily related to:

(1) lower EiP implementation expense of $74.6 million as a result of the completion of our EiP program in 2021;

(2) lower depreciation and amortization expense of $42.6 million, mainly driven by the full amortization of the finite-lived tradename in 2021;

(3) lower other Corporate and Eliminations expenses, which accounted for a decrease in costs of $42.0 million in 2022, related to cost-reduction efforts;

and (4) changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in indemnification assets, which resulted in a year-over-year decrease in costs of $13.1 million.

These decreases in direct costs were partially offset by the effect of operational changes, which increased direct costs by $115.6 million compared to 2021, mainly attributable to the effect of higher enrollments at our institutions, as well as return-to-campus expenses.

Additionally, the effect of a net change in foreign currency exchange rates increased costs by $10.0 million compared to 2021.

Operating income (loss) changed by $274.6 million to income of $270.0 million for 2022 from loss of $(4.6) million for 2021.

This increase in operating income was primarily a result of the impairment loss related to the Laureate tradename impairment that was recognized during 2021, combined with higher operating income at our Mexico and Peru segments during 2022.

Additionally, cost-reduction efforts resulted in lower operating costs at Corporate in 2022, as compared to 2021.

Interest expense, net of interest income decreased by $33.0 million to $8.9 million for 2022 from $41.9 million for 2021.

The decrease in interest expense was primarily attributable to lower average debt balances mainly driven by the full repayment of the Senior Notes due 2025 in 2021.

Other non-operating expense decreased by $75.7 million to $15.3 million for 2022 from $91.0 million for 2021.

This decrease was attributable to:

(1) a loss on debt extinguishment of $77.9 million during 2021 in connection with the repayment of the Senior Notes due 2025;

(2) a loss on derivative instruments during 2021 of $24.5 million, driven by settlement of foreign currency swap agreements in connection with the sale of our Brazilian operations;

(3) a gain on disposal of subsidiaries during 2022, compared to a loss during 2021, for a change of $2.0 million;

and (4) other non-operating income during 2022, compared to expense during 2021, for a change of $2.5 million.

These decreases in other non-operating expense were partially offset by foreign currency exchange loss in 2022, compared to a gain in 2021, for a change of $31.2 million.

Income tax expense inc reased by $39.8 million to $185.4 million for 2022 from $145.6 million for 2021.

This increase was primarily driven by the tax effect of the increase in pretax income in 2022 compared to 2021.

Additionally, the Company recognized an income tax reserve related to the application of the high-tax exception to global intangible low-taxed income.

The increase was partially offset by a nonrecurring expense attributable to amended returns filed in 2021.

Additionally, the increase was partially offset by less tax cost associated with the Netherlands intellectual property restructuring when compared to the prior year.

Income from discontinued operations, net of tax decreased by $478.6 million to $8.3 million for 2022 from $486.9 million for 2021.

This decrease was primarily attributable to the gain on sale of Walden University during 2021.

See Overview for further detail on results of the Discontinued Operations.

Net loss (income) attributable to noncontrolling interests changed by $11.9 million to a loss of $0.6 million for 2022 from an income of $(11.3) million for 2021.

This change was primarily related to our previous joint venture in Saudi Arabia and the income effect to noncontrolling interests that resulted in 2021 from the settlement of certain intercompany transactions.

Comparison of Consolidated Results for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Revenues increased by $61.8 million to $1,086.7 million for 2021 from $1,024.9 million for 2020.

Average total enrollment at a majority of our institutions, mainly in our Peru segment, increased during 2021, increasing revenues by $75.2 million compared to 2020.

The increase in average total enrollment in Peru was attributable to a robust primary intake cycle during 2021 and increased retention rates.

Additionally, the effect of changes in tuition rates and enrollments in programs at varying price points (“product mix”), pricing and timing increased revenues by $19.6 million compared to 2020.

Additionally, the effect of product mix, pricing and timing increased revenues by $19.6 million compared to 2020.

These increases in revenues were partially offset by the effect of a net change in foreign currency exchange rates, which decreased revenues by $34.8 million, due to weakening of the Peruvian nuevo sol against the USD.

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Income tax (expense) benefit changed by $275.7 million to an expense of $(145.6) million for 2021 from a benefit of $130.1 million for 2020.

This change was attributable to tax expense recorded in 2021 of approximately $35.7 million related to amended returns filed for the Company's election to exclude certain foreign income of foreign corporations from GILTI.

In the prior year the company recorded a $70.9 million tax benefit for this item, resulting in a year-over-year change of approximately $106.6 million.

In addition, the decrease in pre-tax loss in the current year resulted in $76.9 million of less tax benefit as compared to 2020.

In addition, the decrease in pre-tax loss in the current year resulted in $76.9 million of less tax benefit compared to 2020.

Additionally, there was a year-over-year increase in state tax expense of $41.3 million and a year-over-year increase in withholding taxes of $30.0 million.

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Comparison of Consolidated Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019

Revenues decreased by $187.2 million to $1,024.9 million for 2020 from $1,212.1 million for 2019.

The effect of a net change in foreign currency exchange rates decreased revenues by $81.8 million, due to weakening of the Mexican peso and the Peruvian nuevo sol against the USD.

Average total enrollment at a majority of our institutions decreased during 2020, reducing revenues by $62.3 million compared to 2019.

The effect of product mix, pricing and timing decreased revenues by $38.0 million, mainly driven by an increase in discounts and scholarships as a percentage of revenues in 2020 compared to 2019.

Other Corporate and Eliminations changes accounted for a decrease in revenues of $5.1 million.

Direct costs and general and administrative expenses combined decreased by $173.5 million to $1,002.3 million for 2020 from $1,175.8 million for 2019.

The effect of a net change in foreign currency exchange rates decreased costs by $61.1 million.

The effect of operational changes decreased direct costs by $75.8 million compared to 2019.

Other Corporate and Eliminations expenses accounted for a decrease in costs of $50.4 million in 2020, related to cost-reduction efforts.

Changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets resulted in a year-over-year decrease in costs of $0.8 million.

These decreases in direct costs were partially offset by EiP implementation expense, which increased direct costs by $14.6 million.

Operating (loss) income changed by $365.3 million to loss of $(329.3) million for 2020 from income of $36.0 million for 2019.

This change was primarily a result of the impairment charges of $352.0 million during 2020 and operating loss at our Mexico segment for 2020 compared to operating income for 2019, partially offset by lower 2020 operating expenses at Corporate.

Interest expense, net of interest income decreased by $23.0 million to $98.7 million for 2020 from $121.7 million for 2019.

The decrease in interest expense was primarily attributable to lower average debt balances.

Other non-operating expense decreased by $11.1 million to $22.8 million for 2020 from $33.9 million for 2019.

This decrease was attributable to:

(1) a decrease in loss on debt extinguishment of $22.0 million, primarily related to the repayment of the 2024 Term Loan during 2019;

(2) a foreign currency exchange gain for 2020 compared to a loss for 2019, for a change of $21.6 million;

and (3) a decrease in loss on disposal of subsidiaries of $13.2 million.

These decreases in other non-operating expense were partially offset by a loss on derivative instruments for 2020 compared to a gain for 2019, for a change of $34.3 million, and other non-operating expense for 2020 compared to income for 2019, for a change of $11.4 million, primarily attributable to non-operating income recorded during 2019 related to the sale of an equity security held at Corporate.

Income tax benefit (expense) changed by $161.1 million to a benefit of $130.1 million for 2020 from an expense of $(31.0) million for 2019.

This change was primarily attributable to a $75.1 million benefit due to the increase in pretax loss, a tax benefit of approximately $70.9 million related to the Company's election to exclude certain foreign income of foreign corporations from GILTI, and a tax benefit for release of valuation allowances for state deferred tax assets of $32.3 million, partially offset by a tax expense of approximately $32.4 million that was recognized during 2020 related to the tax-basis step up of certain intellectual property that became subject to taxation in the Netherlands.

(Loss) income from discontinued operations, net of tax changed by $1,386.2 million to a loss of $(298.1) million for 2020, from income of $1,088.1 million for 2019, primarily driven by lower gains upon the completion of divestitures in 2020 as compared to 2019, combined with higher losses recorded during 2020 for discontinued operations due to impairments and charges to write held-for-sale disposal groups down to fair value.

See Overview for further detail on results of the Discontinued Operations.

Net loss attributable to noncontrolling interests increased by $4.6 million to $5.4 million for 2020 from $0.8 million for 2019.

This change was primarily related to our previous joint venture in Saudi Arabia.

Non-GAAP Financial Measure

We define Adjusted EBITDA as income (loss) from continuing operations, before equity in net (income) loss of affiliates, net of tax, income tax expense (benefit), (gain) loss on sale or disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, loss (gain) on derivatives, loss on debt extinguishment, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to our Excellence-in-Process (EiP) initiative.

When we review Adjusted EBITDA on a segment basis, we exclude inter-segment revenues and expenses that eliminate in consolidation.

We define Adjusted EBITDA as income (loss) from continuing operations, before equity in net (income) loss of affiliates, net of tax, income tax expense (benefit), (gain) loss on disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, loss (gain) on derivatives, loss on debt extinguishment, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to our Excellence-in-Process (EiP) initiative.

Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures.

Adjusted EBITDA is a key measure used by our management and Board of Directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational

In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business.

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Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors.

The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the years ended December 31, 2021 , 2020 and 2019:

The following table presents Adjusted EBITDA and reconciles income (loss) from continuing operations to Adjusted EBITDA for the years ended December 31, 2022 , 2021 and 2020:

Better/(Worse)

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2021 2021 vs.

Loss from continuing operations $ (283.1) $ (320.6) $ (150.5) 12 % (113) %

Equity in net income of affiliates, net of tax — (0.2) (0.2) (100) % — %

Income tax expense (benefit) 145.6 (130.1) 31.0 nm nm

Loss from continuing operations before income taxes and equity in net income of affiliates (137.5) (450.8) (119.7) 69 % nm

Loss on disposal of subsidiaries, net 0.6 7.3 20.4 92 % 64 %

Foreign currency exchange (gain) loss, net (13.8) (13.5) 8.1 2 % nm

Other expense (income), net 1.7 2.4 (8.9) 29 % (127) %

Loss (gain) on derivatives 24.5 26.0 (8.3) 6 % nm

Income (loss) from continuing operations $ 60.7 $ (283.1) $ (320.6) 121 % 12 %

Equity in net income of affiliates, net of tax (0.3) — (0.2) nm (100) %

Income tax expense (benefit) 185.4 145.6 (130.1) (27) % nm

Income (loss) from continuing operations before income taxes and equity in net income of affiliates 245.9 (137.5) (450.8) nm 69 %

(Gain) loss on disposal of subsidiaries, net (1.4) 0.6 7.3 nm 92 %

Foreign currency exchange loss (gain), net 17.4 (13.8) (13.5) nm 2 %

Other (income) expense, net (0.8) 1.7 2.4 147 % 29 %

Loss on derivatives — 24.5 26.0 100 % 6 %

Loss on debt extinguishment — 77.9 0.6 100 % nm

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Interest income (7.6) (4.4) (2.2) 73 % 100 %

Operating (loss) income (4.6) (329.3) 36.0 99 % nm

Operating income (loss) 270.0 (4.6) (329.3) nm 99 %

Depreciation and amortization 59.1 101.2 83.1 42 % (22) %

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Loss on impairment of assets (b)

72.5 352.0 0.2 79 % nm

0.1 72.5 352.0 100 % 79 %

EiP implementation expenses (c)

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It included the establishment of regional shared services organizations (SSOs), 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 dispositions.

As of December 31, 2021, the EiP initiative had been completed.

The only EiP expenses expected in 2022 are those related to the run out of programs that began in prior periods.

Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Years Ended December 31, 2021 and 2020

The EiP initiative also included 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 dispositions.

The EiP initiative was completed as of December 31, 2021, except for certain EiP expenses related to the run out of programs that began in prior periods.

Comparison of Depreciation and Amortization and EiP Implementation Expenses for the Years Ended December 31, 2022 and 2021

Depreciation and amortization decreased by $42.1 million to $59.1 million for 2022 from $101.2 million for 2021.

This decrease was primarily attributable to the finite-lived Laureate tradename, which was fully amortized in 2021, combined with a lower depreciable asset base at Corporate following the outsourcing of a majority of our information technology activities to a third-party service provider during 2021.

EiP implementation expenses decreased by $74.6 million to $0.8 million for 2022 from $75.4 million for 2021.

This decrease resulted from the completion of our EiP program in 2021, with the exception of certain EiP expenses related to the run out of programs that began in prior periods.

Comparison of Depreciation and Amortization and EiP Implementation Expenses for the Years Ended December 31, 2021 and 2020

Depreciation and amortization increased by $18.1 million to $101.2 million for 2021 from $83.1 million for 2020.

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Partially offsetting this increase was the effect of foreign currency exchange, which decreased depreciation and amortization expense by $1.2 million for 2021, as compared to 2020.

Share-based compensation expense decreased by $1.3 million to $8.9 million for 2021 from $10.2 million for 2020.

EiP implementation expenses decreased by $14.2 million to $75.4 million for 2021 from $89.6 million for 2020.

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The decreases in EiP costs were partially offset by the cost associated with the lease buyout for our Kendall property in Chicago, Illinois, and lease termination for our previous Corporate headquarters in 2021.

Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Years Ended December 31, 2020 and 2019

Depreciation and amortization increased by $1.1 million to $83.1 million for 2020 from $82.0 million for 2019.

This increase was primarily attributable to amortization of Laureate's tradename which, during 2020, changed from being an indefinite-lived intangible asset to being a finite-lived intangible asset.

When combined with other items, this increased depreciation and amortization expense by $5.5 million.

Partially offsetting this increase was the effect of foreign currency exchange, which decreased depreciation and amortization expense by $4.4 million for 2020, as compared to 2019.

Share-based compensation expense decreased by $0.1 million to $10.2 million for 2020 from $10.3 million for 2019.

EiP implementation expenses increased by $14.6 million to $89.6 million for 2020 from $75.0 million for 2019.

This increase was primarily attributable to higher legal and consulting fees related to our divestiture activity and the inclusion in EiP of expenses associated with an enterprise-wide program aimed at revenue growth.

Segment Results

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Foreign exchange 6.3 4.2 2.1

Dispositions — — —

— (13.1) 13.1

December 31, 2022 $ 613.9 $ 490.5 $ 123.4

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Revenues increased by $73.5 million, a 14% increase from 2021.

• The Mexican peso strengthened against the USD during 2021 compared to 2020, increasing revenue by $27.0 million.

• Organic enrollment during 2021 remained relatively flat compared to 2020.

• The decrease in revenues from product mix, pricing and timing was mainly due to an increase in discounts and scholarships as a percentage of revenues.

• Revenues represented 50% of our consolidated total revenues for 2021, compared to 53% for 2020.

Adjusted EBITDA decreased by $17.1 million, a 15% decrease from 2020.

• The decrease in Adjusted EBITDA includes the year-over-year effect of a gain of $5.8 million from the sale of land and buildings at one of our campuses in 2020, which is included in Organic constant currency.

• Organic enrollment increased during 2022 by 9%, increasing revenues by $41.8 million.

• Revenues from our Mexico segment represented 50% of our consolidated total revenues for both 2022 and 2021.

Adjusted EBITDA increased by $27.6 million, a 29% increase from 2021.

• The increase in Adjusted EBITDA included a year-over-year benefit from the $13.1 million charge recorded during 2021 related to acquisition-related contingencies.

Comparison of Mexico Results for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

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Foreign exchange 27.0 20.6 6.4

Dispositions — — —

December 31, 2021 $ 540.4 $ 444.6 $ 95.8

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(2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues decreased by $118.2 million, an 18% decrease from 2019.

• Organic enrollment decreased during 2020 by 4%, which decreased revenues by $28.8 million, mainly due to impacts from the COVID-19 pandemic.

Revenues increased by $5.8 million, a 1% increase from 2020.

• The Mexican peso strengthened against the USD during 2021 compared to 2020, increasing revenue by $27.0 million.

• Organic enrollment during 2021 remained relatively flat compared to 2020.

• The decrease in revenues from product mix, pricing and timing was mainly due to an increase in discounts and scholarships as a percentage of revenues.

• Revenues represented 53% of our consolidated total revenues for 2020 compared to 54% for 2019.

• Revenues from our Mexico segment represented 50% of our consolidated total revenues for 2021 compared to 53% for 2020.

Adjusted EBITDA decreased by $17.1 million, a 15% decrease from 2020.

• The overall decrease in Adjusted EBITDA was partially offset by a gain of $5.8 million from the sale of land and buildings at one of our campuses in 2020.

This gain is included in Organic constant currency.

• The decrease in Adjusted EBITDA included a year-over-year effect of a gain of $5.8 million from the sale of land and buildings at one of our campuses in 2020, which is included in Organic constant currency.

Financial Overview

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Foreign exchange 11.7 5.3 6.4

Dispositions — — —

Other — (0.1) 0.1

December 31, 2022 $ 624.2 $ 357.5 $ 266.7

(1) Organic enrollment and Product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA.

(2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues increased by $54.2 million, an 11% increase from 2020.

• Organic enrollment increased during 2021 by 16%, increasing revenues by $75.2 million, mainly driven by a robust primary intake cycle during 2021 and increased retention rates.

• Revenue represented 50% of our consolidated total revenues for 2021 compared to 47% for 2020.

Revenues increased by $87.1 million, a 16% increase from 2021.

• Organic enrollment increased during 2022 by 14%, increasing revenues by $70.1 million.

• Revenues from our Peru segment represented 50% of our consolidated total revenues for both 2022 and 2021.

Adjusted EBITDA increased by $21.0 million, a 9% increase from 2021.

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Foreign exchange (61.8) (31.6) (30.2)

Dispositions — — —

December 31, 2021 $ 537.1 $ 291.4 $ 245.7

Revenues decreased by $63.9 million, a 12% decrease from 2019.

• Organic enrollment decreased during 2020 by 7%, decreasing revenues by $33.5 million, mainly due to impacts from the COVID-19 pandemic.

• The decrease in revenues from product mix, pricing and timing was mainly due to an increase in discounts and scholarships as a percentage of revenues.

• Revenues represented 47% of our consolidated total revenues for 2020 compared to 46% for 2019.

Adjusted EBITDA decreased by $8.3 million, a 4% decrease from 2019.

Corporate revenues primarily include our transition services agreements related to divestitures and centralized IT costs charged to other business units, partially offset by the elimination of inter-segment revenues.

(2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues increased by $54.2 million, an 11% increase from 2020.

• Organic enrollment increased during 2021 by 16%, increasing revenues by $75.2 million, mainly driven by a robust primary intake cycle during 2021 and increased retention rates.

• Revenues from our Peru segment represented 50% of our consolidated total revenues for 2021 compared to 47% for 2020.

Adjusted EBITDA increased by $56.2 million, a 30% increase from 2020, primarily driven by higher enrollments.

Corporate revenues primarily include our transition services agreements related to divestitures, which were mostly completed in 2022.

Operating results for Corporate for the years ended December 31, 2022, 2021 and 2020 were as follows:

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Comparison of Corporate Results for the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Adjusted EBITDA increased by $8.6 million, a 9% increase from 2020.

• Labor costs and other professional fees decreased expenses by $23.3 million for 2021 compared to 2020, related to cost-reduction efforts.

Other items accounted for a decrease in Adjusted EBITDA of $14.7 million.

Adjusted EBITDA increased by $36.9 million, a 42% increase from 2021, mainly driven by a decrease in labor costs and other professional fees, related to cost-reduction efforts.

Comparison of Corporate Results for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

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• Labor costs and other professional fees decreased expenses by $23.3 million for 2021 compared to 2020, related to cost-reduction efforts.

• Other items accounted for a decrease in Adjusted EBITDA of $10.2 million, primarily related to a reduction in revenues from the joint venture with the University of Liverpool.

This increase in Adjusted EBITDA was partially offset by other items, which accounted for a decrease in adjusted EBITDA of $14.7 million.

Liquidity and Capital Resources

Liquidity Sources

We anticipate that cash flow from operations and available cash will be sufficient to meet our current operating requirements and manage our liquidity needs, including any effects on the Company’s business operations that arise from the COVID-19 pandemic, for at least the next 12 months from the date of issuance of this report.

We continue to assess our liquidity needs as a result of the COVID-19 pandemic.

A continued worldwide disruption could materially affect our future access to liquidity sources, particularly our cash flows from operations, as well as our financial condition and capitalization.

In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions, such as obtaining additional financing.

The Company will continue to evaluate its financial position in light of future developments, particularly those relating to the COVID-19 pandemic.

We anticipate that cash flow from operations and available cash will be sufficient to meet our current operating requirements and manage our liquidity needs for at least the next 12 months from the date of issuance of this report.

Our primary source of cash is revenue from tuition charged to students in connection with our various education program offerings.

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As of December 31, 2022, our secondary source of liquidity was cash and cash equivalents of $85.2 million.

Our cash accounts are maintained with high-quality financial institutions with no significant concentration in any one institution.

The Company also maintains a revolving credit facility with a syndicate of financial institutions as a source of liquidity.

Our cash accounts are maintained with high-quality financial institutions.

The Company also maintains a revolving credit facility (the Senior Secured Credit Facility) with a syndicate of financial institutions as a source of liquidity.

The revolving credit facility provides for borrowings of $410.0 million and has a maturity date of October 7, 2024.

From time to time, we draw down on the revolver, and, in accordance with the terms of the credit agreement, any proceeds drawn on the revolving credit facility may be used for general corporate purposes.

As of December 31, 2022, the Company had borrowed $100.0 million of the $410.0 million of available capacity.

In addition to the Senior Secured Credit Facility, our subsidiaries had approximately $63.7 million of available borrowing capacity under lines of credit and short-term borrowing arrangements as of December 31, 2022.

If certain conditions are satisfied, the Third Amended and Restated Credit Agreement (the Third A&R Credit Agreement) also provides for incremental revolving and term loan facilities, at the request of the Company, not to exceed (i) the greater of (a) $565.0 million and (b) 100% of the consolidated EBITDA of the Company, plus (ii) additional amounts so long as both immediately before and after giving effect to such incremental facilities the Company’s Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Third A&R Credit Agreement, on a pro forma basis, does not exceed 2.75x, plus, (iii) the aggregate amounts of any voluntary repayments of term loans, if any, and aggregate amount of voluntary repayments of revolving credit facilities that are accompanied by a corresponding termination or reduction of revolving credit commitments.

Completed Sale Transactions

On March 8, 2021, we completed the divestiture of our operations in Honduras and received proceeds of approximately $24.0 million, net of cash sold and closing costs.

In 2018, we completed the sale of LEI Lie Ying Limited in China.

At the closing of the sale, 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 April 2021, the Company received the final balance from the escrow account, which was approximately $21.7 million at the date of receipt.

On May 28, 2021, we completed the sale of our operations in Brazil and received proceeds of approximately $625.0 million, net of cash sold, transaction fees and settlement of foreign currency swaps.

The Company used a portion of the proceeds to repay the remaining balance outstanding under its Senior Notes due 2025.

On August 12, 2021, we completed the sale of Walden University and received proceeds of approximately $1,403.5 million, net of cash sold, transaction fees, and certain closing adjustments.

At closing, the Company also recorded a receivable of $74.0 million, representing a portion of the transaction value that was paid into an escrow account, to be released to the Company one year following the closing of the transaction pursuant to the terms and conditions of the escrow agreement.

In addition, approximately $83.6 million of restricted cash on the Company's balance sheet related to collateralized regulatory obligations was released during the fourth quarter of 2021.

As described in Note 11, Share-based Compensation and Equity, in our consolidated financial statements included elsewhere in this Form 10-K, in connection with the adoption of a plan of partial liquidation providing for the distribution of the net proceeds from the sale of Walden University, on October 29, 2021, the Company paid a special cash distribution to shareholders of approximately $1,270.0 million, and, on December 28, 2021, the Company paid a special cash distribution to shareholders of approximately $105 million, which primarily consisted of the cash that was released during the fourth quarter of 2021 related to the collateralized regulatory obligations.

In addition, in December 2021, the Company paid approximately $150 million in estimated taxes and fees due on prior sales (including Walden University).

On September 10, 2020, we completed the divestiture of our operations in Chile.

Under the terms of the agreement, the purchase price included a note receivable of $21.5 million that was payable one year from the date of divestiture.

We collected this receivable in September 2021.

Liquidity Restrictions

Our liquidity is affected by restricted cash balances, which totaled $8.6 million and $20.8 million as of December 31, 2022 and 2021, respectively.

As of December 31, 2021, restricted cash consisted of cash equivalents held to collateralize LOCs related to the Spanish Tax Audits and cash equivalents held as assets for a supplemental employment retention agreement for a former executive.

As of December 31, 2022, restricted cash consisted of cash equivalents held as assets for a supplemental employment retention agreement for a former executive.

Indefinite Reinvestment of Foreign Earnings

We earn a significant portion of our income from subsidiaries located in countries outside the United States.

As part of our business strategies, we have determined that all earnings from our foreign continuing operations will be deemed indefinitely reinvested outside of the United States.

As of December 31, 2022, $77.3 million of our total $85.2 million of cash and cash equivalents were held by foreign subsidiaries.

As of December 31, 2021, $272.6 million of our total $324.8 million of cash and cash equivalents were held by foreign subsidiaries.

These amounts above do not include $270.2 million of cash recorded at subsidiaries that are classified as held for sale at December 31, 2020, of which $66.4 million was held by foreign subsidiaries.

As part of our business strategies, we have determined that the undistributed historical earnings of our foreign operations for which we have not already recorded taxes will be deemed indefinitely reinvested outside of the United States.

Our plans to indefinitely reinvest certain earnings are supported by projected working capital and long-term capital requirements in each foreign subsidiary location in which the earnings are generated.

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If our expectations change based on future developments such that some or all of the undistributed earnings of our foreign subsidiaries may be remitted to the United States in the foreseeable future, we will be required to recognize deferred tax expense and liabilities and pay additional taxes on any amounts that we are unable to repatriate in a tax-free manner.

For Peru, we have recognized deferred tax liabilities of approximately $0.1 million for the portion of the undistributed foreign earnings that are not expected to be indefinitely reinvested outside the United States.

Liquidity Requirements

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capital expenditures;

repurchase of the Company's common stock;

and business development activities.

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and payments of other third-party obligations.

As of December 31, 2021, our debt obligations included lines of credit and short-term borrowing arrangements of subsidiaries and notes payable, which totaled $112.1 million.

Our debt obligations consisted of $100.0 million of borrowings under the Senior Secured Credit Facility and $86.0 million of other debt as of December 31, 2022.

In addition, our finance lease obligations and sale-leaseback financings were $48.2 million.

Senior Secured Credit Facility

Our senior secured revolving credit facility (the Senior Secured Credit Facility) provides for borrowings of $410.0 million and has a maturity date of October 7, 2024.

As of December 31, 2021 and 2020, there was no balance outstanding under our Senior Secured Credit Facility.

Under the Third A&R Credit Agreement, we are subject to a Consolidated Senior Secured Debt to Consolidated EBITDA financial maintenance covenant that applies only to the revolving credit facility (a leverage ratio covenant), as defined in the Third A&R Credit Agreement, unless certain conditions are satisfied.

As of December 31, 2021, these conditions were satisfied and, therefore, we were not subject to the leverage ratio.

The maximum ratio, as defined, is 3.50x as of the last day of each quarter commencing with the quarter ending December 31, 2019 and thereafter.

In addition, indebtedness at some of our locations contain financial maintenance covenants.

We were in compliance with these covenants as of December 31, 2021.

Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries and notes payable.

As of December 31, 2022 and 2021, there was $100.0 million and no balance outstanding under our Senior Secured Credit Facility, respectively.

During the fourth quarter of 2022, the Company borrowed on our Senior Secured Credit Facility primarily to fund the repurchase of shares in connection with the secondary offering that the Company completed in November 2022.

For more detail on the secondary offering, see Note 11, Share-based Compensation and Equity, in our consolidated financial statements included elsewhere in this Form 10-K.

Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries and notes payable, the significant components of which are described below.

As of December 31, 2022 and 2021, the aggregate outstanding balances on our lines of credit were $13.8 million and $10.1 million, respectively.

In December 2017, UVM Mexico entered into an agreement with a bank for a loan of MXN 1,700.0 million (approximately $89.0 million at the time of the loan).

The loan matures in June 2024 and carries a variable interest rate based on TIIE, plus an applicable margin, which is established based on the ratio of debt to EBITDA, as defined in the agreement (8.12% as of December 31, 2021).

The current quarterly payments on the loan total MXN 68.0 million ($3.3 million at December 31, 2021) and increasing over the remaining term of the loan to MXN 76.5 million ($3.7 million at December 31, 2021), with a balloon payment of MXN 425.0 million ($20.5 million at December 31, 2021) due at maturity.

In 2019, this loan was reassigned to another wholly owned Mexican subsidiary of the Company.

In 2021, the loan was again reassigned to another wholly owned Mexican subsidiary of the Company, following a merger.

In December 2017, one of our subsidiaries in Mexico entered into an agreement with a bank for a loan of MXN 1,700.0 million (approximately $89.0 million at the time of the loan).

The loan matures in June 2024 and carries a variable interest rate, plus an applicable margin, which is established based on the ratio of debt to EBITDA, as defined in the agreement (12.26% as of December 31, 2022).

The current quarterly payments on the loan total MXN 72.3 million ($3.7 million at December 31, 2022)

and increase over the remaining term of the loan to MXN 76.5 million ($3.9 million at December 31, 2022), with a balloon payment of MXN 425.0 million ($21.9 million at December 31, 2022) due at maturity.

As of December 31, 2022 and 2021, the outstanding balance of this loan was $41.4 million and $52.5 million, respectively.

The Company obtained financing to fund the construction of two new campuses at one of our institutions in Peru, Universidad Peruana de Ciencias Aplicadas.

In 2019, the Company repaid the loans except for one, which, as of December 31, 2021, carried an interest rate of 5.09% and is scheduled to mature in November 2025.

Over the remaining term of the loan, principal payments, plus accrued and unpaid interest, of approximately $1.4 million are made semi-annually in April and October.

As of December 31, 2021 and 2020, the outstanding balance on the loan was $10.3 million and $13.4 million, respectively.

In December 2017, one of our subsidiaries in Peru entered into an agreement to borrow PEN 247.5 million (approximately $76.0 million at the agreement date).

The loan bears interest at a fixed rate of 6.62% per annum and is scheduled to mature in December 2023.

The loan bears interest at a fixed rate of 6.62% per annum and matures in December 2023.

Over the remaining term of the loan, quarterly payments of PEN 14.4 million ($3.8 million at December 31, 2022) are due.

As of December 31, 2022 and 2021, this loan had a balance of $15.1 million and $29.0 million, respectively.

As of December 31, 2022, these conditions were satisfied and, therefore, we were not subject to the leverage ratio.

The maximum ratio, as defined, is 3.50x as of the last day of each quarter commencing with the quarter ending December 31, 2019 and thereafter.

In addition, indebtedness at some of our locations contain financial maintenance covenants.

We were in compliance with these covenants as of December 31, 2022.

We conduct a significant portion of our operations from leased facilities, including many of our higher education facilities and other office locations.

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As of December 31, 2022 and 2021, the present value of operating lease liabilities was $415.9 million and $415.3 million, respectively.

These amounts exclude operating lease liabilities for our discontinued operations of $10.8 million and $151.4 million as of December 31, 2021 and 2020, respectively.

As of December 31, 2021, the minimum lease payments required during 2022 for our Continuing Operations is $77.1 million.

Based on the leases outstanding at December 31, 2022, $83.6 million of minimum lease payments will be required during 2023.

Capital Expenditures

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Our total capital expenditures for our continuing and discontinued operations, excluding receipts from the sale of subsidiaries and property and equipment, were $53.1 million, $56.3 million and $89.2 million during 2022, 2021 and 2020, respectively.

The 6% decrease in capital expenditures for 2022 compared to 2021 was primarily due to the year-over-year effect of divestitures completed in 2021 combined with lower spending in Peru and Corporate, partially offset by higher spending in health science programs in Mexico.

The 37% decrease in capital expenditures for 2021 compared to 2020 was primarily due to the completed divestitures.

The 49% decrease in capital expenditures for 2020 compared to 2019 was driven mainly by a targeted reduction and deferral across all business lines to preserve cash amid the COVID-19 pandemic, as well as a result of the executed divestitures.

Laureate Education, Inc.

Deferred Compensation Plan

During the first quarter of 2021, the Company's Board of Directors approved the termination of a deferred compensation plan for certain executive employees and members of our Board of Directors, with such termination effective April 1, 2021.

The Company expects that the participants will receive a distribution payout of their account balances under the terms of the plan in April 2022.

The plan allowed participants to defer their salaries, bonuses, and Board of Directors' retainers and fees in order to accumulate funds for retirement on a pre-tax basis.

Participants are 100% vested in their respective deferrals and the earnings thereon.

As of December 31, 2021 and 2020, plan assets included in Other assets in our Consolidated Balance Sheets were $1.9 million and $3.1 million, respectively.

As of December 31, 2021 and 2020, the plan liabilities reported in our Consolidated Balance Sheets were $5.1 million and $6.2 million, respectively.

As of December 31, 2021 and 2020, $5.1 million and $1.2 million, respectively, of the total plan liability was classified as a current liability;

the remainder was noncurrent and recorded in Other long-term liabilities.

The Company plans to fund the difference between the assets and the liabilities with operating cash flows.

Stock Repurchase Program

On November 5, 2020, Laureate’s Board of Directors approved a new stock repurchase program to acquire up to $300 million of the Company’s common stock.

On April 30, 2021, the Company’s Board of Directors approved an increase of the above authorization to repurchase shares of the Company’s common stock by $200 million, and, on December 14, 2021, the Company’s Board of Directors approved an increase of the above authorization to repurchase shares of the Company’s common stock by $100 million, for a total authorization (including the above authorized repurchases) of up to $600 million of the Company’s 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 expects to finance the remaining repurchases with cash on-hand or from its revolving credit facility, or a combination thereof.

The Company also expects to complete the repurchase program in the first half of 2022, dependent on market conditions.

As of December 31, 2021, the approximate dollar value of shares yet to be purchased under this stock repurchase program is $156.7 million.

In the consolidated statements of cash flows, the changes in operating assets and liabilities are presented excluding the effects of exchange rate changes, acquisitions, and reclassifications, as these effects do not represent operating cash flows.

In the consolidated statements of cash flows, the changes in operating assets and liabilities are presented excluding the effects of exchange rate changes and reclassifications, as these effects do not represent operating cash flows.

Accordingly, the amounts in the consolidated statements of cash flows do not agree with the changes of the operating assets and liabilities as presented in the consolidated balance sheets.

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(in millions) 2022 2021 2020

Cash (used in) provided by:

Cash provided by (used in):

Operating activities $ 178.2 $ (156.1) $ 259.6

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Financing activities (461.6) (2,683.2) (272.7)

Effects of exchange rates changes on cash (14.7) (0.5) 5.1

Effects of exchange rate changes on cash 1.2 (14.7) (0.5)

Change in cash included in current assets held for sale — 288.1 195.8

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Operating activities

Cash flows from operating activities changed by $415.7 million to cash outflow of $(156.1) million for 2021, compared to a cash inflow of $259.6 million for 2020.

Cash flows from operating activities changed by $334.3 million to a cash inflow of $178.2 million for 2022, compared to a cash outflow of $(156.1) million for 2021.

This increase in operating cash flows was attributable to:

(1) increased operating income combined with the net effect of changes in operating assets and liabilities, which increased operating cash by $143.8 million compared to 2021;

(2) lower cash paid for taxes of $97.3 million, from $251.1 million in 2021 to $153.8 million in 2022, a decrease primarily driven by the payment of estimated taxes related to the sale of Walden University in 2021 and payment of withholding taxes for intercompany loans that were capitalized during 2021;

(3) the year-over-year effect of $46.8 million of payments for lease termination agreements in 2021;

and (4) a decrease in cash paid for interest of $46.4 million, from $63.2 million in 2021 to $16.8 million in 2022, attributable to lower average debt balances.

Investing activities

Cash provided by investing activities decreased by $2,013.9 million to $30.3 million for 2022 from $2,044.2 million in 2021.

This decrease was primarily attributable to lower cash receipts from the sales of discontinued operations of $2,067.4 million, from $2,150.8 million, net, in 2021 (primarily for the sale of Walden University, our operations in Honduras and Brazil, the receipt of the note receivable related to the 2020 divestiture of our Chilean operations, and the receipt of a portion of the purchase prices that were withheld in connection to the 2018 sale of our China operations and the 2020 sale of our Malaysia operations) to $83.4 million, net, in 2022 (primarily related to the receipt of the escrow receivable related the 2021 sale of Walden University, and the collection of certain receivables from the sale of our Brazilian operations).

This decrease in investing cash flows was partially offset by the year-over-year effect of $50.3 million of payments made in 2021 for derivative instruments related to foreign exchange swap agreements associated with the sale of our Brazil operations.

Additionally, cash used for capital expenditures decreased by $3.2 million compared to 2021.

Financing activities

Cash used in financing activities decreased by $2,221.6 million to $461.6 million for 2022 from $2,683.2 million for 2021.

This decrease in financing cash outflows was attributable to:

(1) lower cash distributions to shareholders of $1,121.7 million, from $1,374.9 million in 2021 following the sale of Walden University, to $253.2 million in 2022;

(2) net proceeds from issuance of long-term debt in 2022 as compared to net payments of long-term debt in 2021, primarily related to the repayment in full of the balance outstanding under the Senior Notes due 2025, for a change of $958.1 million;

(3) lower year-over-year payments to repurchase shares of our common stock of $98.3 million;

(4) the year-over-year effect of $33.0 million in payments made in 2021 for call premiums associated with the redemption of the Senior Notes due 2025;

and (5) higher proceeds from the exercises of common stock options of $9.8 million during 2022, as compared to 2021.

Other items accounted for the remaining difference of $0.7 million.

Comparison of Cash Flows for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Operating activities

Cash flows from operating activities changed by $415.7 million to cash outflow of $(156.1) million for 2021, compared to a cash inflow $259.6 million for 2020.

This decrease in operating cash was primarily attributable to:

(1) changes in working capital and divestiture of subsidiaries that contributed positive operating cash flows during 2020, which accounted for $266.6 million of the decrease;

(1) changes in working capital and divestitures of subsidiaries that contributed positive operating cash flows during 2020, which accounted for $266.6

million of the decrease;

(2) higher cash paid for taxes of $159.7 million, from $91.4 million in 2020 to $251.1 million in 2021, primarily due to the payment of estimated taxes related to the sale of Walden University in 2021 and payment of withholding taxes for intercompany loans that were capitalized during 2021;

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Cash provided by investing activities increased by $1,456.8 million to $2,044.2 million for 2021 from $587.4 million in 2020.

This increase was primarily attributable to higher cash receipts from the sales of discontinued operations of $1,474.2 million,

from $676.6 million in 2020 (for the net effect of the sales of NSAD and our operations in Costa Rica, Chile, Malaysia, Australia and New Zealand, net of cash sold, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations) to $2,150.8 million, net, in 2021 (primarily for the sale of Walden University, our operations in Honduras and Brazil, the receipt of the note receivable related to the 2020 divestiture of our Chilean operations, and the receipt of a portion of the purchase prices that were withheld in connection to the 2018 sale of our China operations and the 2020 sale of our Malaysia operations).

This increase was primarily attributable to higher cash receipts from the sales of discontinued operations of $1,474.2 million, from $676.6 million in 2020 (for the net effect of the sales of NSAD and our operations in Costa Rica, Chile, Malaysia, Australia and New Zealand, net of cash sold, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations) to $2,150.8 million, net, in 2021 (primarily for the sale of Walden University, our operations in Honduras and Brazil, the receipt of the note receivable related to the 2020 divestiture of our Chilean operations, and the receipt of a portion of the purchase prices that were withheld in connection to the 2018 sale of our China operations and the 2020 sale of our Malaysia operations).

In addition, cash used for capital expenditures decreased by $32.9 million compared to 2020.

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Other items accounted for the remaining difference of $0.9 million.

Comparison of Cash Flows for the Year Ended December 31, 2020 to the Year Ended December 31, 2019

Operating activities

Cash provided by operating activities decreased by $80.2 million to $259.6 million for 2020, compared to $339.8 million for 2019.

This decrease in operating cash was primarily attributable to changes in working capital, as well as the year-over-year effect of the divestitures that occurred, as certain of the divested institutions contributed positive operating cash flows during 2019 prior to divestiture.

These factors accounted for a decrease in operating cash flows of approximately $184.7 million.

This decrease was partially offset by:

(1) a decrease in cash paid for interest of $68.1 million, prior to interest income, that is attributable to the lower average debt balances, from $188.7 million of cash paid for interest in 2019 to $120.6 million in 2020;

(2) a decrease in cash paid for taxes of $28.3 million, from $119.7 million in 2019 to $91.4 million in 2020;

and (3) a positive year-over-year effect to operating cash of $8.1 million primarily related to a cash payment in 2019 to settle cross currency and interest rate swaps in Chile.

Investing activities

Cash provided by investing activities decreased by $529.4 million to $587.4 million for 2020 from $1,116.8 million in 2019.

This decrease was primarily attributable to:

(1) lower cash receipts from the sales of discontinued operations of $589.4 million, from $1,266.0 million in 2019 (for the sales of St.

Augustine and our Thailand, South Africa, India, Spain, Portugal, Turkey, Panama, and UniNorte operations) to $676.6 million, net, in 2020 (for the net effect of the sales of NSAD and our operations in Costa Rica, Chile, Malaysia, Australia and New Zealand, net of cash sold, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations);

(2) the year-over-year negative effect of cash receipt from derivative settlements of $12.9 million, related to the foreign exchange swap agreements associated with the sale of the Spain and Portugal institutions in 2019;

and (3) the year-over-year effect of proceeds of $0.9 million in 2019 from the sale of shares of a preferred stock investment in a private education company.

These decreases in investing cash were partially offset by a decrease in capital expenditures of $84.2 million, and the year-over-year effect of a payment of $1.2 million in 2019 for a small acquisition in Brazil.

Other items accounted for the remaining change of $11.6 million.

Financing activities

Cash used in financing activities decreased by $1,401.3 million to $272.7 million for 2020 from $1,674.0 million for 2019.

This decrease in financing cash outflows was primarily attributable to:

(1) higher net payments of long-term debt in 2019 as compared to 2020 of $1,207.6 million, primarily related to the use of divestiture proceeds for debt repayment;

(2) lower payments in 2020 of $164.6 million to repurchase shares of our common stock under our stock repurchase program;

(3) lower payments of deferred purchase price for acquisitions of $14.5 million, due primarily to the full repayment of the St.

Augustine seller note in 2019;

(4) higher proceeds from stock option exercises of $11.7 million during 2020, as compared to 2019;

and (5) lower payments for debt issuance costs and redemption and call premiums of $8.3 million, mostly related to a debt repayment in Chile in 2019.

These decreases in financing cash outflows were partially offset by higher year-over-year payments to purchase noncontrolling interests of $7.9 million, from a $5.8 million payment in 2019 to acquire the remaining noncontrolling interest of one of our operations in India, immediately prior to the sale of those operations, to a $13.7 million payment in 2020 to the minority owner of our Malaysia operations in connection with the sale of those operations.

Other items accounted for the remaining difference of $2.5 million.

Critical Accounting Policies and Estimates

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We estimate the fair value of each reporting unit, and, if the carrying amount of the reporting unit is less than the reporting unit’s estimated fair value, then there is no goodwill impairment.

If the carrying amount of the reporting unit exceeds its estimated fair value, then goodwill is

impaired and the difference between the reporting unit's carrying amount and its fair value is recognized as a loss on impairment of assets in the consolidated statements of operations.

If the carrying amount of the reporting unit exceeds its estimated fair value, then goodwill is impaired and the difference between the reporting unit's carrying amount and its fair value is recognized as a loss on impairment of assets in the Consolidated Statements of Operations.

We completed our annual impairment testing, and no impairments of goodwill were identified.

Our valuation approach to estimate the fair value of a reporting unit utilizes a weighted combination of a discounted cash flow analysis and a market multiples analysis.

Our valuation approach to estimate the fair value of a reporting unit has historically utilized a weighted combination of a discounted cash flow analysis and a market multiples analysis.

The discounted cash flow analysis relies on historical data and internal estimates, which are developed as a part of our long-range plan process, and includes an estimate of terminal value based on these expected cash flows using the generally accepted Gordon Dividend Growth formula, which derives a valuation using an assumed perpetual annuity based on the reporting unit’s residual cash flows.

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(1) the revenue and profitability growth rates and (2) the discount rate.

We also evaluate the sensitivity of a change in assumptions related to goodwill impairment, assessing whether a 10% reduction in our estimates of revenue or a 1% increase in our estimated discount rates would result in impairment of goodwill.

Using the current estimated cash flows and discount rates, each reporting unit's estimated fair value exceeds its carrying value by at least 15% in instances where we performed fair value-based impairment testing.

We have determined that none of our reporting units with material goodwill were at risk of failing the goodwill impairment test as of December 31, 2021.

If we perform a quantitative impairment test, we also evaluate the sensitivity of a change in assumptions related to goodwill impairment, assessing whether a 10% reduction in our estimates of revenue or a 1% increase in our estimated discount rates would result in impairment of goodwill.

We have determined that neither of our reporting units with material goodwill were at risk of failing the goodwill impairment test as of December 31, 2022.

We completed our initial public offering (IPO) on February 6, 2017 at an initial public offering price that was below the expected range, and since then our stock price at times has traded below the initial public offering price.

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As a result, the Company recognized an impairment charge of $320.0 million, in accordance with ASC 350-30-35-17.

Additionally, the Company determined that the remaining Laureate tradename asset no longer had an indefinite life and was fully amortized as of December 31, 2021

Additionally, the Company determined that the remaining Laureate tradename asset no longer had an indefinite life.

During the first quarter of 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 Laureate tradename, a finite-lived intangible asset, beyond 2021.

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The remaining carrying value of the tradename asset was fully amortized as of December 31, 2021.

Long-Lived Assets and Finite-Lived Intangible Assets

We evaluate our long-lived assets, including property and equipment and finite-lived intangible assets, to determine whether events or changes in circumstances indicate that the remaining estimated useful lives of such assets may warrant revision or that their carrying values may not be fully recoverable.

Long-Lived Assets

We evaluate our long-lived assets, including property and equipment, to determine whether events or changes in circumstances indicate that the remaining estimated useful lives of such assets may warrant revision or that their carrying values may not be fully recoverable.

Indicators of impairment include, but are not limited to:

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Changes in our judgments could result in impairments in future periods.

We recorded impairment losses on long-lived assets for the years ended December 31, 2021, 2020, and 2019.

See Note 7, Goodwill and Other Intangible Assets, in our consolidated financial statements included elsewhere in this Form 10-K for further details.

Deferred Costs

Deferred costs on the Consolidated Balance Sheets consist primarily of direct costs associated with online course development, accreditation and costs to obtain a contract.

Deferred costs associated with the development of online educational programs are capitalized after technological feasibility has been established.

Deferred online course development costs are amortized to direct costs on a straight-line basis over the estimated period that the associated products are expected to generate revenues.

Deferred online course development costs are evaluated on a quarterly basis through review of the corresponding course catalog.

If a course is no longer listed or offered in the current course catalog, then the costs associated with its development are written off.

As of December 31, 2021 and 2020, the unamortized balances of online course development costs were $3.1 million and $15.3 million, respectively.

We defer direct and incremental third-party costs incurred for obtaining initial accreditation and for the renewal of accreditations.

These accreditation costs are amortized to direct costs over the life of the accreditation on a straight-line basis.

As of both December 31, 2021 and 2020, the unamortized balances of accreditation costs were $0.2 million.

Laureate also defers certain commissions and bonuses earned by third party agents and our employees that are considered incremental and recoverable costs of obtaining a contract with a customer.

These costs are amortized over the period of benefit, which ranges from two to four years.

As of December 31, 2021 and 2020, the unamortized balances of contract costs were $2.7 million and $2.1 million, respectively.

At December 31, 2021 and 2020, our total deferred costs were $27.1 million and $33.4 million, respectively, with accumulated amortization of $(21.1) million and $(15.7) million, respectively.

See Note 7, Goodwill and Other Intangible Assets, in our consolidated financial statements included elsewhere in this Form 10-K for further details on impairments.

We record the amount of income taxes payable or refundable for the current year, as well as deferred tax assets and liabilities for the expected future tax consequences of events that we have recognized in our consolidated financial statements or tax returns.

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We apply a more-likely-than-not threshold for tax positions, under which we must conclude that a tax position is more likely than not to be sustained in order for us to continue to recognize the benefit.

This assumes that the position will be examined by the appropriate taxing authority and

that full knowledge of all relevant information is available.

This assumes that the position will be examined by the appropriate taxing authority and that full knowledge of all relevant information is available.

In determining the provision for income taxes, judgment is used, reflecting estimates and assumptions, in applying the more-likely-than-not threshold.

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Our 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.

We also generate other revenues from student 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.

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In the event that current collection trends differ from historical trends, an adjustment is made to the allowance account and bad debt expense.

In the normal course of business, our operations have significant exposure to fluctuations in foreign currency values and interest rate changes.

Accordingly, we mitigate a portion of these risks through a risk-management program that includes the use of derivative financial instruments (derivatives).

Laureate selectively enters into foreign exchange forward contracts to reduce the earnings impact related to receivables and payables that are denominated in foreign currencies.

In addition, in certain cases Laureate uses interest rate swaps to mitigate certain risks associated with floating-rate debt arrangements.

We do not engage in speculative or leveraged transactions, nor do we hold or issue derivatives for trading purposes.

We report all derivatives on the consolidated balance sheets at fair value.

The 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 fair value models incorporate the measurement of our own nonperformance risk into our calculations.

Our derivatives expose us to credit risk to the extent that the counterparty may possibly fail to perform its contractual obligation when we are in a net gain position.

As a result, our valuation models reflect measurements for counterparty credit risk.

We also actively monitor counterparty credit ratings for any significant changes that could impact the nonperformance risk calculation for our fair value.

We value derivatives using management's best estimate of inputs we believe market participants would use in pricing the asset or liability at the measurement date.

Derivative and hedge accounting requires judgment in the use of estimates that are inherently uncertain and that may change in subsequent periods.

External factors, such as economic conditions, will impact the inputs to the valuation model over time.

The effect of changes in assumptions and estimates could materially impact our financial statements.

See Note 12, Derivative Instruments, in our consolidated financial statements included elsewhere in this Form 10-K for details of our derivatives.

Share-Based Compensation

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We use this method to estimate the expected term because we do not have sufficient historical exercise data.

We have granted restricted stock, restricted stock units, stock options, and performance awards for which the vesting is based on our annual performance metrics.

We have granted restricted stock, restricted stock units and performance awards for which the vesting is based on our annual performance metrics.

For interim periods, we use our year-to-date actual results, financial forecasts, and other available information to estimate the probability of the award vesting based on the performance metrics.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis